Summit Materials (SUM) Tops Q3 EPS by 3c, Revenues Beat

Summit Materials (NYSE: SUM) reported Q3 EPS of $0.74, $0.03 better than the analyst estimate of $0.71. Revenue for the quarter came in at $694.66 million versus the consensus estimate of $642.57 million.

Tom Hill, CEO of Summit Materials, stated, "We experienced significant inclement weather in the third quarter, as well as continued inflationary cost pressures in our businesses beyond our expectations. While we achieved organic volume and price increases in our aggregates and products during the third quarter, our net income declined and our Adjusted EBITDA remained flat in the third quarter of 2018 as compared to the third quarter of 2017, reflecting lower contributions from our cement segment and Houston operations together with inflation in our variable costs. We had expected normal weather going into the third quarter; instead, weather patterns continued to have a significant negative impact on most of our operating geographies.”

Organic sales volumes in Summit\'s cement segment were impacted by a combination of high precipitation levels, together with competitive pressures along the Mississippi River corridor. Further, Summit\'s Houston operations were affected by a wetter than normal third quarter, as rainfall in many parts of Texas reached all-time record levels in September. Summit\'s average selling prices on both materials and products gained traction through the third quarter, which partially offset these higher raw materials, freight, labor and fuel costs. As the inflationary cost increases have exceeded Summit\'s price increases, and the persistent weather conditions impacted operations, Summit reduced 2018 guidance for Adjusted EBITDA to $400 million to $410 million.

“Underlying demand conditions in most of our markets are healthy and are expected to remain so into 2019,” continued Hill. In Summit\'s public markets, state transportation funding measures in Texas, coupled with steady increases in federal subsidies, are contributing to increased lettings activity. Single family housing starts and permits remain well below peak levels in Summit\'s major markets.

Since August 2018, Summit has completed two aggregates-based acquisitions for total invested capital of $72 million. During 2018 to date, Summit has completed 13 acquisitions for total invested capital of $300 million. Across these 13 transactions, Summit has added more than 400 million tons of aggregates reserves to its portfolio.

“While our guidance for Adjusted EBITDA has been reduced, we continue to generate significant free cash flow from operations that is helping to support the overall growth of our business,” stated Brian Harris, CFO of Summit Materials. The Company expects its net leverage ratio to approximate current levels at year end, based on the midpoint of the revised guidance. Summit plans to reduce its leverage during 2019 through a disciplined capital allocation program, reducing its capital expenditures and implementing an increasingly selective acquisition strategy.

For earnings history and earnings-related data on Summit Materials (SUM) click here.

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