Vulcan Misses Expectations - Analyst Blog

Vulcan Materials Co. (VMC) posted a profit of $20.5 million or 15 cents per share (excluding charges related to settlement of a lawsuit in Illinois and to flooding in Nashville, Tennessee) in its second quarter. The Zacks Consensus Estimate was pegged at 24 cents per share. In the year-ago period, the company's profit stood at $15.6 million or 14 cents per share.

Although the company witnessed higher Aggregates volume, it was adversely affected by higher unit costs for liquid asphalt and diesel fuel as well as lower product pricing during the quarter. Average price for aggregates fell 2% while unit cost for diesel fuel and liquid asphalt increased 38% and 26%, respectively during the quarter.
 
Total revenues in the quarter rose marginally by 2% to $736.2 million. Operating profit declined to $41.2 million (excluding charges related to settlement of a lawsuit in Illinois) from $65.7 million in the prior-year period.
 
Revenues in the Aggregates segment inched up 4% to $471.5 million. Earnings in the segment was negatively affected by a 2% decrease in aggregates prices and a 38% increase in the unit cost for diesel fuel, which more than offset the positive impact from a 6% rise in shipments.
 
Revenues in the Concrete segment dipped 8% to $105 million due to an 11% fall in average selling price. Earnings in the segment was positively affected by higher shipments of ready-mixed concrete and lower costs, which were more than offset by a decrease in the average selling price.
 
Revenues in the Asphalt Mix segment were almost flat at $103.5 million due to 5% decrease in selling prices, offset by a 2% rise in unit shipments. Earnings in the segment were lower than the year-ago level due to a 26% rise in the unit cost for liquid asphalt and lower selling prices.
 
Revenues in Cement segment slashed 53% to $12.7 million due to a 22% fall in selling prices. However, earnings in the segment were slightly lower than the prior-year level as lower average selling prices offset higher sales volumes.
 
Vulcan had cash and cash equivalents of $42.2 million as of June 30, 2010, flat compared to the year-ago level of $43.7 million. Long-term debt amounted to $2.43 billion as on that date. The long-term debt to capitalization ratio stood at 37.5%, down from the year-ago level of 39%.
 
In the first half of the year, Vulcan’s net cash flow from operating activities decreased significantly to $18.7 million from $169.4 million in the year-ago period due to a decline in net income. Meanwhile, capital expenditures reduced to $42.2 million from $60.1 million a year ago.
 
In the second half of 2010, Vulcan expects Aggregates shipments to be flat to up 5% from the prior year. In the Asphalt segment, the company expects sales volumes and segment earnings to be almost the same as that of the last year.
 
In the Concrete segment, the company expects sales volumes to increase from the prior year period but pricing to decline due to competitive pressures. In the cement segment, the company expects to incur a loss compared to the breakeven results reported in the prior year.
 
Vulcan Materials, a Zacks #3 Rank (Hold) 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.