MDU - Earnings call transcript Q3 2018 | MDU Resources Group, Inc.

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Operator

Hello, my name is Regina, and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2018 Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise After the speakers' remarks, there will be a question-and-answer period. This call will be available for replay beginning at 5:00 PM, Eastern Time today through 11:59 PM Eastern Time on November 15. The conference ID number for the replay is 2136759. number replay ID XXXXXXX. conference the for is the Again, is for XXX-XXX-XXXX. The dial replay X-XXX-XXX-XXXX number to the or I would and now to Resources Jason like to turn Vice Group. Chief the President, Financial Officer Treasurer MDU Vollmer, of conference over you. Thank Mr. Vollmer, you begin may conference. your

Jason L. Vollmer

our the welcome conference conference will our Internet being and Regina, is XXXX to live This quarter remarks. to slides you, earnings third Thank the call broadcast and release call. public over accompany

follow our like link to slides, website view conference at Earnings to the to call. available and you'd the If on also please www.mdu.com the is go website. release our

course will of within of statements this the During Section Securities the of presentation, XXXX. make certain XXE of meaning we forward-looking Act Exchange the

actual results differ company believes may its the beliefs that assumptions, are and materially. Although reasonable expectations based on

cause in recent our Item to that discussion please differ, a to most Factors factors of XA For Risk actual results – XX-K. may Form refer

financial presentation questions. and For MDU Dave's discuss today, then formal remarks. for open key will remarks, President Goodin, and Dave After we'll the our the I CEO for to his line highlights turn Resources call of over

earnings in $XXX.X per operations compared share $XXX.X or Chief Montana-Dakota $X.XX WBI third in Yesterday, $X.XX earnings President and Cascade and In announced consolidated On Utilities; Controller available addition continuing per Energy; Knife President questions XXXX. Officer Construction million Thiede, or answer of and to of Trevor Accounting Natural CEO per and CEO to share quarter Resources. compared are; President, share President our $X.XX Gas, Services of Gas CEO today of Hastings, Kivisto, basis or and to Gas, and Natural XXXX. $X.XX we CEO MDU to Group; $XX.X Barney, Dave President your River Nicole million a who will Corporation; members $XX.X Intermountain share Great per management and of of or team Barth, Dave Jeff be million of myself, Plains MDU were our million Vice Stephanie and from

third the record Tax business Cuts general as and had earnings sales product of the margins compared reported of income The volumes and earnings same asphalt $XX.X product Our XXXX. to million and in payroll lines offsetting XXXX million $XXX.X result in quarter tax million, $XXX.X expense primarily higher Jobs to mainly million was higher $XX.X of in increase the well revenues The revenues most construction construction reported lower to Act. due as materials the for selling, related up higher from volumes in business administrative costs. was margins. increase higher Partially and and and period expenses

final impact earnings negative in third revenues maintenance partially offset $X.X income decrease Changes the $XX expense. services were construction higher third selling, and were Also earnings outside by that or benefit new million our quarter. contributing recently million volumes the quarter increase XXXX. estimates for and higher quarter expenses driven the resulted million to in higher a in million primarily Partially were in quarter compared equipment of tax in administrative to rentals $XX.X earnings resulted earnings offsetting from pipeline lower projects of a sales general earnings. business And Commission, FERC, Our Higher midstream accounting the business, the construction $X.X in on to by was a and in million Regulatory were and Energy taxes, compared $X transportation and reported million The Federal lower issued projects. by in construction certain XXXX. $X.X order operation payroll-related.

was the quarter related driven $X.X to adjustments transmission of largely electric Partially our $X.X the primarily and million maintenance to This Big million utility compared XXXX. lower costs. of million costs lower on business offsetting expense increase the $XX.X segment million operation compared third combined in our the project. Stone result rate utility The payroll quarter earned quarter, XXX-kilovolt electric year. lower For in earnings to prior to transmission for by due the $XX.X reported estimated South-to-Ellendale the margins a decrease was of

natural from depreciation, the I'll Our now utility rate XXXX. higher resulted expense. the period gas of increased for $XX.X million segment and maintenance Partially gas for the depletion and his higher seasonal loss from margins natural relief formal reported increased turn loss call offsetting expense, conservation decrease million the and compared and same Dave? loss revenues. operation of remarks. to to Dave amortization a were retail higher for in quarter $XX.X This over

David L. Goodin

Jason Well, Resources We for stock and good to for our us in your released afternoon, third third thank results. MDU Thank market today closed time the you to interest you, quarter quarter taking discuss and earnings join the everyone. after our yesterday.

half All organically the solid our with growth progress the of build execution of through strategic quarter am our I businesses the and our continue momentum have in third and up the year. both first strategy, saw we we acquisitions. the on pleased during made to

two-platform Now starting like businesses. business I'd to the construction go model with through our

business XX% business continue strong Company, of repair earnings acquisition over behind inside family of This market work. additional and Construction Falls $XXX to Sweetman of ready-mix work, Construction of only in announced specialty $XXX at impacted a the up is Combined, high our October, last having the most is in hospitality backlog this billion $X.XX is quarter Our end the million the third record construction engaged $X.X by revenues volumes areas work XXXX. quarter as sales the services business. high-tech We record had construction companies specialty This communications power, as of In from business third sectors, provider and continues and $XXX billion. year perform specifically XX, at XXXX to This record exploring employees well as earnings, acquisition quarter our quarter, quarter in hurricanes. opportunities. with leading record business numbers at and materials we contracting this growth on the and of with backlog, line revenues, million, Construction of of September X% end as construction volumes is of welcome year's aggregates, which power Sioux between our a strong increased evaluate Sweetman lines. at organic in at revenues South are outside also XXXX. year-to-date asphalt and the product fourth of the in are ended year Dakota. with third the business of opportunities recently of Backlog and acquisition the gas seeing MDU we up purchase anticipating the and the to and materials million

these going forward. for opportunities the about excited truly are businesses We

Now platform, our organic growth business opportunities. turning several here perform energy regulated to to well very pipeline on executing continues and busy our is

to our we amount that transportation XXXX the XX also consecutive natural continued transported a record and at its capacity. natural gas completed Line mid-September. partially projects today XX-mile With in additional in just here the excited the quarter Valley XX-mile completing the through We're For expansion company production that Bakken system Section fifth to Line for there's record our with of announce due demand the expansion region levels put gas also project in two customers. pipeline our over accordance operation. agreement Expansion a actually to day. Section the XXXX from per in X.X Bcf will company's our with business settlement FERC rate help capacity FERC Yesterday and capacity bring into much-needed Valley with total was bring filed Dakota. increase This XX will rate eastern gas commercial request to project back and Combined, Expansion North

forward, XX-mile McKenzie business Looking is Line North Billings XX-inch working by pipeline in Demicks our supported County, XX in additional Dakota for opportunities organic and a on finalizing two – construction Montana growth commitments. area. Section expansion Lake, growth the customer long-term greater pipeline plans

next in year both We expected expect with start to dates in-service constructing late XXXX. projects early

utility Thunder X.X% along have gas just quarter natural system safety deliverability. higher that gas will reported sales the and natural Spirit electric also enhance completion the South-to-Ellendale XXX-kV in on focus megawatts. completed pipeline progressing is reliability, quarter the third our North utility with of volumes the to we announced yesterday anticipated that XXXX. for farm projects purchase Big on on approximately first expansion continues in at And Construction the Dakota. production wind with Our southwest the Wind transmission line This of Stone capacity farm schedule expansion to increases XXX

between as Over we X% current year long-term to overall with completes our look looking are X%. grow expectations. that annually. results the earnings $X.XX a And our years guidance the quarter to year customer business we utility next five are expects X.X the our on growth we base its to X% between third compounded annual would and rate discussion. the unit at individual reiterate I with corporation, After range $X.XX of our million reaffirming X% for and This track

been as doing that. significant our business targeted and produce focus acquisitions plans, projects we're Our and growth long-term Resources has at to just value we MDU organic execute

good continue our maintain for ratings XX dividend sheet position. competitive We shareholders. a a with a liquidity provided to with years solid strong along And credit consecutive balance we for

while MDU always, shareholder the Resources. ask we integrity I As Building commitment on open we And Strong would line in value creating both and continue now as America. with as to appreciate to is Resources and interest to operator? say questions, your superior tag committed a a our focus line to safety operating MDU that

Operator

of line the Ridzon KeyBanc. ahead. Paul Please from comes with question first Your go

Paul T. Ridzon

Good afternoon.

David L. Goodin

Good afternoon. Paul. Hi,

Paul T. Ridzon

treating world the you, How Dave?

David L. Goodin

been It's How about kind your slow of lately. direction?

Paul T. Ridzon

active be to opportunity-rich think anyway, that market. winter. Do is further a that been going in But market deals? long you've pretty you M&A for potential it's (XX:XX:XX) the

David L. Goodin

Paul. Barney answer Dave four activity particularly we're I'll with really and targeting start question, of which that earlier at M&A the more Yeah. I'm split Jeff to Dave between Dave. is probably closed Thiede having Great deals some with going year. both this and

David C. Barney

market of Paul. there. out the Hi, There's M&A strong. private a looks really Yeah, companies lot

looking list we're long of a have companies We at.

them. We have prioritized

So we're us some near future market. it for and more announcing be the think going I very deals in in We'll forward M&A the good looks optimistic.

Jeffrey S. Thiede

opportunities Connors announcing currently We'll well be brought the to looking be to and and as you posted. adding as we keep for into additions we able to geographically future. seeing Group. these Paul, a M&A the in this companies Jeff. to some fits be we're that the team to efforts like Bill our provide. And We've services Hey, that our Construction Services is in opportunities for of companies lot we'll believe of we're added We

Paul T. Ridzon

for cost strength services masks that? labor driving tightness estimate But looks like And kind the of segment. that in what's Is about? the that at construction it some hearing change project we're

Jeffrey S. Thiede

the that's had just don't in future. happen this jobs as the collection the in to impacts several – jobs an we and see due one rarely of We of history results. of that see this significant contributors. this had Paul, obviously We the We going anomaly. expect forward CSG

Paul T. Ridzon

give you flavor Can that composed of? amount to what Okay. is more as dollar

David L. Goodin

you a little broke Paul if could bit out on question. you that, just the repeat

Paul T. Ridzon

those Sure. give flavor Could a just you what little dollars? to composes as

Jason L. Vollmer

I'll to Yeah. that. Paul, is more clarity on give Jason. a little this try

got true-up that helps estimates projects various of make that we've here we involved So that then new and that. through receive as information we changes estimates these many we on we work of are will go as those on us some

a As on contracts. would so see significant this significant a little more But to was far more adjust we bit basis the this I majority adjustment handful say as it. the a here. do in quarter as of highlight couple is certainly rather quarter (XX:XX:XX) of Jeff (XX:XX:XX) than this adjusted mentioned, a this as regular contracts we we

spot of business mean with been for what us on for an that of quarter – lot else. looking of But get that as that kind absent that I has a has makes a that. at had like it's as the it's analysis of detail quarter pieces year-to-date far more something moving just of really Jeff the But seems you're business this that anomaly Jeff's mentioned on As can't and your quarter, there's so up, there's than anything performance exceptional. the lot

Paul T. Ridzon

much. very you Thank Okay.

David L. Goodin

Thank Paul. Yeah. you,

Operator

next comes Please Zane Karimi ahead. Your question from go Davidson. of the with D.A. line

Zane Adam Karimi

guys. Thanks the far, clarity so for

David L. Goodin

you. Thank

Zane Adam Karimi

covered recent backlog your kind is of earnings how of growth, (XX:XX:XX) to question specifically, were (XX:XX:XX) and more growth market -- versus River, the improvement kind for other the the the for energy market? Knife the First of compared much in

David L. Goodin

the in? more relative So how's your relative recovery the that other states, markets there question, was Zane, we're and to what's the contribution to energy-producing

Zane Adam Karimi

Yeah.

David L. Goodin

Yeah.

Okay. Dave Barney?

David C. Barney

the of except most in but recovery North states energy-producing can that backlog is Alaska, coming I Wyoming Zane. tell from we not Northern Hi, seeing Minnesota, the for market. are uptake() Texas, you Dakota, the our

seeing some non-energy coming positive the right So Texas. coming majority more signs out. of we're the of uptake() now work besides from states But the is

Zane Adam Karimi

increasing industry also then And that. in prices some the of that yourselves for you're see cost you do experiencing? Thank you. you these sufficiently Got the offset to headwinds

David L. Goodin

increases? connection. related margins just Could relative I have a it must River? was cost to light Or – little think repeat you Knife Again, question? just we your Zane, to the

Zane Adam Karimi

Yeah, apologies. a better volume? this Is

David L. Goodin

Yeah. it's Yeah, a little bit better.

David C. Barney

if at Zane? do margins our going you're So at looking to what – think hold are you're you is improve, or to looking continue that

Zane Adam Karimi

Yeah. see industry you I'll repeat yourselves the real in Do cost sufficiently question to increasing quick. prices headwinds... (XX:XX:XX) offset the

Zane Adam Karimi

... Knife River?

David C. Barney

what years, out, to to be margins three near pricing going we've go the continue see seen I don't to the or see that's we'll last go four think future. continue I in to continue to up. anything softening that in

Zane Adam Karimi

you Thank I'll jump much. in queue. very back Great.

David L. Goodin

Okay. Thank you, Zane.

Operator

with go of from line Your next ExodusPoint. come Andrew question Levi will the Please ahead.

Andrew Stuart Levi

doing? Good How you Hi. are afternoon. guys

David L. Goodin

Andrew. afternoon, Good

you How doing great. are are doing? We

Andrew Stuart Levi

questions. of there two fear Doing well. stock I is have today, The lot well There's a just (XX:XX:XX). out doing finally.

of we from just down south relating whether your kind business that saw hurricane that? and one will line to benefit First the

David L. Goodin

short answer did response some is incidences. the to Andrew, we those Yeah.

it I'll to to though. over you a more turn give So, Thiede Jeff details little

Jeffrey S. Thiede

Thanks for Andrew. the question,

responded company our industry restore Our responded to and hurricanes. those by impacted power the safely to

We to recently the this and Georgia to cruise grateful year. northeast, industry. Carolinas, for to responders We've the including for all first our sent are line most the

So not for work from our company the we But success is storm the business. to opportunity of serve. storm of solely work on benefited our and reliant

have company supporting also in companies We an that participated in line work. storm equipment

to the also the in the stringing company() to offer equipment, addition equipment in Our is tools we able think industry. which is best wire

Andrew Stuart Levi

in kind the no benefit (XX:XX:XX) And guess, Okay. to quantify, of that I of fourth way maybe? there's

Jeffrey S. Thiede

It an – contribution it part a of wasn't strong our made our was success. of small a a it success. contribution part But and overwhelming

Andrew Stuart Levi

kind given hit But and was but that (XX:XX:XX) XXXX, kind last you pricing of got lot there others or three and you can just hurricane that if in (XX:XX:XX) around to or Okay. (XX:XX:XX) of your a mean watched and then stock And guys kind issues recovered of you and also the of whether fear guidance related you business or then on XXXX where I their badly about months and obviously the like But but it's that stock some aggregates it's the of can nice (XX:XX:XX) haven't see into some fear of kind margins of you kind their where somewhat. the focus aggregate whether stock ... as because look address as and of just overblown. of trading action for address stocks the were. at part utility call premium, aggregates other more the it a I obviously sector from went the business (XX:XX:XX) on one again company group you're cheapest stocks whether and the

David L. Goodin

that. this weigh Yeah. on in Andrew, Dave. I'll is

my earlier that We I about backlog best up comments third $XXX I companies some $XXX company also strong at group. from our can our other with the addition I quarter to now here. our a have in watch materials million. mean market we in record released in peer of about comment million talked had very that in the quarter moving

Barney guidance talk and expecting minutes and our increasing where well. to Dave heard to question in did materials comparable as talk those we're about ago we a margins business slightly about few actually margins earlier our You in an just

think hitting those and our what comment that industry We have of I there. our about can very we with if two So understand resuming four we're XXXX. the The in others acquisitions position years of Again, that. some the we did good put our very year particular recently. Well we're about most material you ago about years this factors out are business here actually been will. like. talked stride commenting in getting and I about M&A, we sector the at where all ago we've we the activity that feel into two Really November

at So we starting and feel up. to we're where is how like XXXX shape good

Andrew Stuart Levi

Great. you very the and super much stock Thank so. cheap,

David L. Goodin

Yeah.

you, Thank Andrew. Okay.

Operator

ahead. go D.A. Your next of Karimi question line Davidson. with Zane comes from the Please

Zane Adam Karimi

Actually very I guys to from hear you guys forward you again. much. answered thank it you And look so

David L. Goodin

Okay. Zane. much, Thank very you

Operator

Time XXXXXXX. questions. P.M. The marks replay This through for the Eastern be call November for number This Time the on beginning XX:XX conference X:XX Eastern last to XXXXXXX. would for replay further for ID time available back today for questions. is at the Again, closing any replay to is conference XX. will there call P.M. the number like At management no turn the ID I conference are this over remarks.

David L. Goodin

you Thank very much.

throughout we optimistic At I committed XXXX. earlier, quarter MDU our strong the a strong remainder execution America noted expect long-term along we with As we being Resources, opportunities. had Building are to a about Strong of another and

for And the We I'll your it participation in continued today. with again back And you MDU our turn that also operator. call to thank appreciate your on over interest Resources.

Operator

This call. your you Thank concludes today's participation. MDU Resources Group for conference

You may now disconnect.

MDU Resources (MDU) 1 Nov 182018 Q3 Earnings call transcript