Summit Materials reports rise in 2Q net income

Summit Materials reported a 15.9 per cent YoY rise in 2Q17 net revenue to US$478.4m, primarily attributable to acquisition-related contributions, increased organic sales volumes across all lines of business, together with improved organic average selling prices in cement and ready-mix concrete.

Operating income increased by 75.6 per cent to US$82.4m in the second quarter 2017, when compared to the prior year period. Adjusted EBITDA increased 17.9 per cent YoY to US$135.2m, versus US$114.7m in the prior year period supported by favourable market conditions in the company's West Region and in its Cement segment.

For the three months ended 1 July 2017, Summit reported basic earnings per share of US$0.47 on net income of US$50m, compared to basic earnings per share of US$0.21 on net income of US$13.4m in the prior-year period.

“We delivered exceptional growth in net revenue, operating income and net income during the second quarter, driven by a combination of strong seasonal demand across all lines of business, together with contributions from recently completed acquisitions,” stated Tom Hill, CEO of Summit Materials.

"Organic growth contributed one-third of the year-over-year improvement in Adjusted EBITDA, as supported by ongoing price, volume and cost optimisation initiatives at each of our operating companies,” he added.

Cement segment
In the Cement segment, operating income increased 18.1 per cent to US$33.7m in the second quarter 2017, when compared to the prior year period. The increase in operating income was primarily due to increased organic growth in sales volumes and pricing. Adjusted EBITDA increased by 16.5 per cent to US$43.8m in the second quarter 2017, when compared to the prior year period, resulting primarily from pricing improvements and operational efficiencies. Adjusted EBITDA margin increased to 52 per cent in the second quarter 2017, versus 47.2 per cent in the prior year period. A YoY increase in average selling prices, organic sales volumes, improved production efficiencies and cost reductions all contributed to improved results.

Cement segment net revenues increased 5.8 per cent to US$84.2m in the second quarter 2017, when compared to the prior-year period. Cement adjusted cash gross profit margin was 57.4 per cent in the second quarter 2017, versus 52.2 per cent in the prior-year period. Organic sales volumes and average selling prices of cement increased 7.1 per cent and three per cent, respectively, when compared to the same period of last year. Strong regional demand in the company’s northern markets drove organic volume growth in the second quarter, while continued organic growth in sales prices was attributable to previously announced price increases.

Acquisition update
The company has completed 10 acquisitions on a year-to-date basis, including four transactions that have closed since May 2017. Total investment spend across the 10 acquisitions is approximately US$309m, including US$130m for the four acquisitions completed since May 2017. "Together, these bolt-on transactions expand and enhance our vertically-integrated materials-based businesses in Texas, Kentucky, Colorado and South Carolina," Mr Hill noted.

Adjusted EBITDA outlook revised upward
The company is raising its full-year 2017 Adjusted EBITDA guidance from a range of US$430m-445m to a range of US$440m-455m. The upwardly revised adjusted EBITDA outlook assumes the partial-year impact of the four acquisitions completed since May 2017. No additional potential acquisitions are included within the company’s full-year 2017 adjusted EBITDA guidance.