Pit & Quarry, May 2015
ECONOMICS BY GEORGE REDDIN Construction materials update T he first quarter of 2015 brought four areas of interest to the construction materials sector yearend earnings reports the first initial public offering in the sector in more than a decade continued anticipation of the industrys merger of its two largest players and the continued ineptitude of Congress to act on federal funding for highways Public company performance The Construction Materials Index CMI in Figure 1 for a 10 year period Figure 2 for the 12 months ended March 31 2015 and Figure 3 for 2015 year todate shows the performance of CMI versus the market as a whole for the relative period The CMI underperformed the market as a whole over the 10 year and 12 month periods but significantly outperformed the overall market in the first quarter of 2015 The sector is coming off modest improvements in 2014 and a sense of improved optimism for 2015 Figure 4 presents select operating metrics for the CMI companies for the 12 months ended Dec 31 2014 while Figure 5 presents the composite EBIT and EBITDA for the CMI While volumes stabilized in recent years and showed improvement in 2014 there is still pressure on pricing and throughput costs as many operators continue to operate at inefficient plant volumes We anticipate improved margins as volumes continue to increase Figure 6 shows the stock performance of the CMI companies for 2014 and the 12 months ended March 31 2015 It is difficult to look at the stock gains losses in 2014 and draw conclusions as seven of the 12 had losses or single digit gains and five had double digit gains with U S Figure 1 10 Year CM Index Change from 2005 CM Index 403 DJIA 709 S P 500 763 S P Capital IQ as of March 31 2015 Figure 2 CM Index April 1 2014 to Mar 31 2015 Change from April 2014 CM Index 33 DJIA 75 S P 500 97 S P Capital IQ as of March 31 2015 Figure 3 CM Index Q1 2015 Change from Jan 2015 125 DJIA 03 S P 500 04 S P Capital IQ as of March 31 2015 40 PIT QUARRY May 2015 www pitandquarry com
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