Summit Materials has a strong first quarter with revenues up 12%

North American aggregates, cement, ready-mixed concrete and asphalt supplier Summit Materials grew its revenues by 12% year-on-year in the first quarter of 2020, and shrank its losses.

According to a company statement on the New York Stock Exchange this week, Summit Materials saw its net revenues increase by 11.9% in the first quarter of 2020 compared to the first quarter of 2019 with “ready-mix and aggregates contributing the largest proportion of incremental net revenue.”

Despite this, the Company still reported an operating loss of $(41.7) million in Q1, compared with $(57.7) million in the first quarter of 2019.

According to Summit: “Operating margins improved to (12.2)% in the three months ended March 28, 2020 from (18.8)% in the comparable prior year period on net revenue gains in excess of our cost of revenue, partially offset by increases in general and administrative expenses. Adjusted EBITDA increased 149.1% in the first quarter to $16.4 million as compared to $6.6 million in 2019.”

And, for the three months ended March 28, 2020, “organic sales volumes increased 9.7% in aggregates, 0.7% in cement and 14.0% in ready-mix concrete and decreased (2.9)% in asphalt, relative to the same period last year, while Q1 2020 organic average selling prices increased 2.2% in aggregates, 2.6% in cement, 6.0% in ready-mix concrete, and 4.1% in asphalt relative to the prior year period.”

According to chief executive Tom Hill: “We experienced strong demand and favorable pricing conditions in our East and West regions throughout the first quarter, resulting in record Q1 net revenue.

“More importantly, we implemented safety and distancing protocols at all of our operations in early March in response to the COVID-19 outbreak and we are committed to the continuous improvement of those safety measures.

“Construction has been deemed essential in all of Summit’s markets, and the health and safety of our workforce, customers and local communities is our highest priority.”

The NYSE statement goes on to say: As of March 28, 2020, the Company had $199.1 million in cash and $1.9 billion in debt outstanding. The Company’s $345 million revolving credit facility has $329 million available after consideration of committed letters of credit.

For the three months ended March 28, 2020, cash flow used in operations was $(38.9) million while cash paid for capital equipment was $61.8 million.

Brian Harris, CFO (chief financial officer) of Summit Materials added, “While we’ve only seen a limited impact from COVID-19 to date, we have been proactively engaging in contingency planning.

“We are conducting regular reviews of our capital spending, cost structure, receivables, and working capital under various demand scenarios.

“Summit has over $500 million in available liquidity and is in a strong financial position.”

Summit is withdrawing its previously announced 2020 Adjusted EBITDA guidance of $460 million to $500 million, says Hill.

“While demand for our products and services has not yet been materially impacted by COVID-19, the near term impact to construction activity is less clear.

“We believe that it is prudent to withdraw guidance at this time, pending better visibility into the extent of economic disruption related to COVID-19 and the ultimate resumption of normal business conditions.”

The Company is reducing its 2020 capital expenditure guidance to $145 to $160 million, including $50 million to $60 million for greenfield projects, from its prior 2020 capital expenditure guidance of $185 to $205 million, which included $65 to $80 million for greenfield projects, as certain items have been deferred at Summit’s option to later periods.

Summit’s approximately 6,000 employees continue to work as construction has been deemed essential in its markets. Extensive safety, hygiene, and distancing protocols have been implemented.

Summit has been continuously improving its safety measures and following CDC guidelines. Employees in office-related functions have been working from home since early March.

When the company is broken down into its functional divisions, Summit Materials says:

Aggregates Business: Aggregates net revenues increased by 9.4% to $96.2 million in the first quarter 2020 when compared to the prior year period. Aggregates adjusted cash gross profit margin increased to 47.7% in the first quarter 2020 compared to 43.2% on higher volumes, increased average selling prices and product mix. Aggregates sales volumes increased 9.7% in the first quarter 2020, when compared to the prior-year period on higher organic volume growth, particularly in Missouri, Kansas, Utah, and Virginia. Average selling prices for aggregates increased 2.2% in the first quarter 2020 when compared to the prior year period.

Cement Business: Cement segment net revenues increased 1.7% to $37.9 million in the first quarter 2020, when compared to the prior-year period. Cement adjusted cash gross profit margin decreased to (10.0)% in the first quarter, compared to 3.1% in the prior year period, as the Company incurred higher maintenance and winter storage costs. Organic sales volume of cement increased 0.7% in the first quarter and organic average selling prices increased 2.6% when compared to the prior year period.

Products Business: Products net revenues were $176.3 million in the first quarter 2020, compared to $151.3 million in the prior year period. Products adjusted cash gross profit margin increased to 18.4% in the first quarter, versus 13.5% in the prior year period. Our organic average sales price for ready-mix concrete increased 6.0%, coupled with a 14.0% increase in organic sales volumes of ready-mix concrete, led by higher volumes in Kansas, Utah, and Arkansas. Our organic average sales price for asphalt increased 4.1% while we had a 2.9% decrease in asphalt organic sales volumes as volume growth in Virginia was partially offset by maintenance activity in parts of Texas.

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