JP Morgan reviews Florida mine-shut down implications

JP Morgan reviews Florida mine-shut down implications
Published: 17 July 2007

As we reported on CemNet yesterday (Environmental News), limestone mining has to cease this week at a number of important quarries in the Florida Lake Belt region namely: White Rock Quarries, Tarmac, which is owned by Titan, and the Florida Rock quarries, for which Vulcan has made a recommended offer.

Analysts at JP Morgan estimate that around 15 per cent of Titan’s profits are at risk. Titan generated 38% of its EBITDA last year in the US. The analysts estimate that Florida accounted for more than half of the US total.

In Florida at the Pennsuco quarry, Titan has a 2Mta cement plant and produces over 6Mt of aggregates a year. This suggests sales of around $250m pa, 28% of its US total, but a higher proportion of profits.

Cement has a higher margin than aggregates and accounts for the majority of the $250m of sales. Overall JP Morgan therefore estimates that the decision will impact around 15% of Titan’s profits.

Analysts at JP Morgan  also estimate that around 3% of Florida Rock’s profits are at risk. Florida Rock is being acquired for an enterprise value of $4.7bn, around 50% of Vulcan’s. Florida Rock will therefore
account for around one-third of the combined group when the acquisition is completed. Florida accounted for 65.6% of Florida Rock’s 2006 sales, but the analysts estimate a higher proportion of its profits.

All three producers will need to try to source the lost aggregate and cement from elsewhere, increasing costs. However, as all three producers are affected they may be able to recoup part of the increased costs through price increases. However, they maylose some market share to other companies who have a closer source of supply.