Vulcan Profits Plummet - Analyst Blog

Vulcan Materials Company (VMC) showed a 78% fall in profit to $10.59 million in the third quarter of 2010 from $47.92 million in the corresponding quarter of the prior year. On earnings per share basis, profits of 8 cents were significantly down from 38 cents in the third quarter of 2009 and the Zacks Consensus Estimate of 19 cents.

Total revenues in the quarter slid 4.5% to $743.2 million, which was higher than the Zacks Consensus Estimate of $733 million. Operating profit declined to $50.43 million from $82.7 million in the prior-year period.

The decline in sales and earnings were attributable to an industry-wide strike by construction workers at Illinois in the month of July, which led to a year-over-year decline in shipments as well as a dip in average unit price of the company's products.

Segment Details

Revenues in the Aggregates segment slipped 3% to $469.54 million as shipments declined 2.6% to 43,393 tons due to industry-wide strike in July and average price fell $2 to $10.18. Consequently, earnings decreased by $8.1 million to $125.13 million.

Revenues in the Concrete segment dipped 12% to $105.05 million due to a 4.5% fall in shipments to 1,137 tons and 9% drop in average selling price to $87.62. The segment reported a wider loss of $10.07 million in the quarter compared with $604,000 a year ago.

Revenues in the Asphalt Mix segment shrank 7% to $115.79 million due to a 3% decrease in both shipments to 2,258 tons and in average selling price to $50.62. Earnings in the segment were $13.44 million, which was lower than the year-ago level by $7.89 million.

Revenues in the Cement segment slashed 11% to $9.42 million due to a fall in shipments by 40 tons to 218 tons and a decline in average selling price by 15% to $79.56. The segment reported a loss of $1.75 million in contrast to a profit of $521,000 in the year-ago quarter.

Financials

Vulcan had cash and cash equivalents of $82.5 million as of September 30, 2010, an increase from $46.55 million in the corresponding quarter-end of the previous year.

Long-term debt amounted to $2.76 billion as of the above date, reflecting a long-term debt-to-capitalization ratio of 41%. This was higher than the year ago level of $2.57 billion and 39%. The company aims to reduce total debt by $120 million by the end of 2010.

In the first nine months of the year, Vulcan's net cash flow from operating activities decreased significantly to $127.83 million from $354.82 million in the year-ago period due to a decline in profit.

Meanwhile, capital expenditures reduced to $62.1 million from $94.17 million a year ago. The company expects capital spending to be less than $100 million for full year 2010, down from the previous outlook of $125 million.

Vulcan Materials, a Zacks #4 Rank (Sell) stock, is engaged in the production, distribution and sale of construction aggregates, and other construction materials and related services in the U.S. and Mexico. It is the nation's largest producer of construction aggregates and a leading producer of other construction materials.