Pit & Quarry, December 2014

cant lot absorption higher multi family rental rates and rising housing prices Total annual housing starts are anticipated to exceed 1 million units for the first time since 2007 Heritage aggregates product line shipments to increase by 6 to 8 percent compared with 2013 levels Heritage aggregates product line pricing to increase by 3 to 5 percent for the year compared with 2013 Positive outlook Tom Hill president and CEO of Vulcan Materials Co says Strong growth in aggregates volumes and solid operating performance in our aggregates businesses led to significant earnings growth for the company Our third quarter results continued to demonstrate the earnings leverage of volume growth in our aggregates business We are also seeing the benefit of our continuing efforts to grow unit profitability and leverage our overhead structure Over the past 12 months aggregates shipments for Vulcan Materials increased 9 percent or 13 million tons During the same period aggregates segment gross profit increased 30 percent or 117 million The overall pricing outlook for our aggregates products continues to improve with the recovery in demand for construction materials Hill says Our aggregates shipments THE OVERALL PRICING OUTLOOK for our aggregates products continues to improve with the recovery in demand for construction materials TOM HILL President CEO Vulcan Materials Co have grown for six consecutive quarters and we expect this demand momentum to lead to accelerating price growth This lead lag relationship between growing volumes followed by accelerating price growth is typical for our business We already see price increases between 5 and 10 percent in certain markets particularly where the recovery in construction activity is further along As we look ahead we believe price momentum will increase with continued volume growth Aggregates sales were 689 million up 15 percent from the prior years third quarter due largely to strong volume growth across most of the companys footprint Third quarter aggregates shipments increased 12 percent compared to the prior year Shipments in Illinois and Texas increased 31 and 21 percent respectively owing in part to large project work Other markets including Florida Georgia North Carolina and Virginia reported volume growth of 10 to 15 percent versus the prior year During the third quarter the company completed several bolt on acquisitions Excluding shipments from these new operations same store aggregates shipments increased 105 percent from the prior year The freight adjusted average sales price for aggregates increased 2 percent or 23 cents per ton versus the prior years third quarter as almost all of the companys markets realized price improvement It marks the 13th consecutive quarter of year over year price improvement The sharp volume increase in Illinois negatively impacted the overall increase in average selling price by 1 percent Additionally several large shipments of base material and other lower priced products also impacted the reported average selling price for the quarter by about 1 percent 2015 and beyond Regarding the companys outlook for the remainder of the year Hill says Growth in private end markets continues to drive increased construction activity and demand for our products Leading indicators such as housing starts nonresidential contract awards and employment levels continue to show favorable above average growth trends in Vulcan served markets and Vulcan markets continue to grow faster than U S markets as a whole Hill says the company will continue to convert these higher volumes into higher unit margins by operating efficiently at the plant level This strong execution has resulted in a 19 percent increase in our trailing 12 month unit profitability as measured by aggregates segment gross profit per ton from what are already industry leading profitability levels This improved unit profitability coupled with above average demand growth positions us well for significant future earnings growth Based on these market trends the company expects the following Strong full year aggregates volume growth near the top end of guidance range of between 7 and 9 percent assuming normal weather patterns in the fourth quarter Full year pricing growth at the low end of guidance range of between 3 and 5 percent with positive impact from current pricing actions benefiting price growth in 2015 Capital spending for 2014 to be about 240 million to support the increased level of shipments and to further improve production costs and operating efficiencies Hill says Our business continues to improve Our employees remain focused on increasing unit profitability delivering expected incremental earnings and improving our valuable aggregates franchise Our confidence in the prospects for a sustained multi year recovery in aggregates demand continues to grow Our markets are recovering from trough levels of demand and are outpacing the rest of the U S P Q SPECIAL REPORT 18 PIT QUARRY December 2014 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