Summit Materials (NYSE: SUM) reported Q2 EPS of $0.32, $0.21 worse than the analyst estimate of $0.53. Revenue for the quarter came in at $600 million versus the consensus estimate of $542.84 million.

• -Y/Y Net Revenue Growth of 14.8%, Supported By Broad-Based Organic Volume Improvements
• -Completed Four Materials-Based Bolt-on Acquisitions For Total Invested Capital of $75 million Since May 2018
• -Reduced Midpoint of Adjusted EBITDA Guidance Range For The Full-Year 2018 By 7%
• -Remain On Pace To Achieve Record Full-Year Adjusted EBITDA in 2018

“While net revenue increased 14.8% on a year-over-basis in the second quarter 2018, supported by organic volume growth in our aggregates and products lines of business, Adjusted EBITDA was flat on a year-over-year basis, given lower contributions from our cement segment and Houston operations, together with inflation in our variable costs,” stated Tom Hill, CEO of Summit Materials. “With a finite number of days remaining in the construction season, we have reduced the midpoint of our 2018 Adjusted EBITDA guidance by 7 percent.”

“Organic sales volumes in our cement segment were impacted by a combination of high precipitation levels during April and May, together with competitive pressures in the markets we serve,” stated Hill. “Our Houston operations were impacted by a slower start to the construction season than had been anticipated. Looking to the second half of the year, we expect a strengthening in both our cement segment and Houston operations, given accelerating demand in our residential, low-rise commercial and public end-markets.”

“The pace of cost inflation in raw materials, freight, labor and fuel exceeded our expectations in the first half of 2018,” continued Hill. “Although we anticipated some measure of cost inflation entering the year, the effective date of our announced price increases lagged behind the impact of higher costs incurred by our business. Importantly, our average selling prices on both materials and products have gained traction entering the third quarter, which we expect will offset these higher variable costs in the second half of the year.”

“Demand conditions in most of our markets are strong and are expected to remain so into 2019 and beyond,” continued Hill. “Within our private markets, we are seeing sustained growth in new single-family home construction, given low inventories and positive demographic trends, while in our public markets, state transportation funding measures in Texas, coupled with steady increases in federal subsidies, are contributing to increased lettings activity. In July 2018, aggregates shipments per day increased 5% versus the prior year period and 13% versus June 2018.”

“Since May 2018, we have completed four materials-based acquisitions for total invested capital of $75 million,” continued Hill. “Recent acquisitions have served to further establish our leadership in well-structured, materials-based markets in Texas, Kansas, Missouri and Virginia. On a year-to-date basis, we have completed eleven acquisitions for total invested capital of $228 million. Across these eleven transactions, we have added more than 300 million tons of aggregates reserves to our portfolio. The acquisition pipeline remains active as we look ahead to the remainder of the year, with multiple transactions currently in various stages of diligence.”

“As of June 30, 2018, our net leverage increased to 4.3x, due to the timing of acquisition-related investments,” stated Brian Harris, CFO of Summit Materials. “By year-end 2018, we anticipate net leverage to be approximately 3.5x, subject to the pace of acquisitions.”

“We continue to generate significant free cash flow from operations that is helping to support the overall growth of our business,” continued Harris. “Based on the midpoint of our revised guidance, we anticipate Adjusted EBITDA less total capital spending will be approximately $250 million in 2018. Importantly, this includes approximately $100 million of discretionary capital spending.”

“Our vertically integrated, multi-local strategy continues to gain momentum in our regional markets, positioning Summit as an emerging leader in the North American heavy materials industry that remains on pace to achieve record full-year Adjusted EBITDA in 2018,” stated Hill.

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