Vulcan Materials (VMC) has reported fourth quarter earnings, delivering 15% year-over-year growth. In the current low interest, global slowing environment, earnings were aided by a surprising development. Rising prices.
The Asphalt and Aggregates company was able to improve its pricing power, which dropped directly to the bottom line. Tom Hill, Vulcan Chairman and CEO stated, “Widespread improvements in pricing helped drive 8 percent growth in our industry-leading unit profitability and double-digit growth in adjusted EBITDA.”
Full year 2019 revenues increased 12% to $4.9 billion, while net earnings increased an impressive 20%, and came in at $619 million. Q4 EPS was $1.08, $.09 better than the $.99 Vulcan posted in Q4 2018.
Diving into the company’s two business segments, Aggregates led the way in the fourth quarter, with 7% volume growth and 5.6% price increases. Vulcan said the segment should continue its positive run into 2020 given current bookings, and a renewed customer confidence in placing orders. An increase in demand from “remote” markets was a mixed blessing, as the company charged higher prices to those customers, but at the expense of increased delivery costs.
Asphalt, Concrete and Calcium, while still positive, was less robust than Aggregates. While Q4 gross profit in Asphalt rose, by 57% over the previous year, gross profit in Concrete fell 42%. The main issues in Concrete were due to project delays and higher costs associated with repair and maintenance costs.
Vulcan used 2019 to improve its balance sheet, decreasing debt to 2.2 times trailing-twelve month adjusted EBITDA, versus 2.6 times earnings at the end of 2018. Vulcan returned $167 million to shareholders in 2019, through a combination of dividends and share repurchases.
Vulcan CEO Hill was very positive on the outlook for 2020. In the Q4 earnings release he said, “In 2020, we expect another year of strong earnings growth. Vulcan-served markets should continue to benefit from public construction demand, led by higher levels of highway funding in our key states.”
Hill also sees a positive outlook for residential demand for Vulcan’s products in 2020, after a soft second half in 2019. He pointed to positive leading indicators as a sign the residential market may be ticking higher.
Vulcan expects between $5.20 and $5.80 EPS in 2020. The company has forecast a 2 to 4 percent increase in Aggregates shipments. And, a gross profit increase of 10 to 15 percent in Asphalt, Concrete and Calcium.
Steven Adams’s personal position in Vulcan Materials: none.