Summit Materials Inc, a leading producer of aggregates, cement, ready-mix concrete, and asphalt paving mix, reported its second-quarter 2024 results, showcasing a notable increase in net revenue but a decrease in earnings per share (EPS) compared to the same period last year.
Company Overview
Summit Materials Inc is engaged in the production and sale of aggregates, cement, ready-mix concrete, asphalt paving mix, and concrete products. The company operates quarries, sand and gravel pits, cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants, and landfill sites. It operates in 21 U.S. states and British Columbia, Canada, through its three segments: West, East, and Cement.
Performance and Challenges
For the quarter ended June 29, 2024, Summit Materials Inc reported net revenue of $1,075.5 million, a 58.1% increase from $680.4 million in the same period last year. This growth was primarily driven by acquisitions, notably the Argos USA transaction, which contributed $464.0 million to net revenue. However, divestitures reduced net revenue by $46.6 million.
Despite the revenue growth, the company faced challenges, including weather-related disruptions and a decrease in organic sales volumes across several segments. These factors contributed to a decline in operating margin from 19.1% to 16.1%.
Financial Achievements
Summit Materials Inc's operating income increased by 33.4% to $172.9 million, and net income rose by 25.2% to $106.1 million. However, basic EPS decreased by 14.3% to $0.60, falling short of the analyst estimate of $0.68. Adjusted diluted EPS also declined by 7.0% to $0.66.
Adjusted EBITDA saw a significant increase of 54.5% to $296.2 million, reflecting contributions from the Argos USA assets and ongoing pricing gains. The company's adjusted cash gross profit also grew by 55.5% to $368.3 million.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Net Revenue | $1,075.5 million | $680.4 million | 58.1% |
| Operating Income | $172.9 million | $129.6 million | 33.4% |
| Net Income | $106.1 million | $84.7 million | 25.2% |
| Basic EPS | $0.60 | $0.70 | (14.3%) |
| Adjusted EBITDA | $296.2 million | $191.7 million | 54.5% |
| Adjusted Diluted EPS | $0.66 | $0.71 | (7.0%) |
Segment Performance
The Aggregates segment reported net revenues of $187.1 million, a slight increase of $4.6 million. However, sales volume decreased by 10.0% due to adverse weather conditions and restrained private end-market activity. The Cement segment saw net revenues rise to $324.8 million, with a 238.0% increase in sales volume, primarily due to the Argos USA transaction. The Products segment experienced a 60.0% increase in net revenues to $495.5 million, despite a decrease in organic sales volumes of ready-mix concrete and asphalt.
Liquidity and Capital Resources
As of June 29, 2024, Summit Materials Inc had $538.7 million in cash and $2.8 billion in debt. The company’s revolving credit facility had $592.7 million available after outstanding letters of credit. For the six months ended June 29, 2024, cash flow from operations was $111.4 million, while capital expenditures amounted to $176.0 million.
Analysis
Summit Materials Inc's strong revenue growth highlights the successful integration of acquisitions, particularly the Argos USA transaction. However, the decline in EPS and operating margin indicates challenges in managing costs and organic sales volumes. The company's reaffirmed guidance for 2024 Adjusted EBITDA and capital expenditures suggests confidence in its strategic initiatives and operational improvements.
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Explore the complete 8-K earnings release (here) from Summit Materials Inc for further details.
