EXP - Earnings call transcript Q3 2018

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Operator

Good day, everyone, and welcome to Eagle Materials Conference Call for the Third Quarter of Fiscal 2018. This call is being recorded. At this time, I’d like to turn the call over to Eagle President and CEO, Mr. Dave Powers. Mr. ahead. go please Powers,

Dave Powers

Good our welcome XXXX. third Skyler. conference Eagle call for fiscal morning. you, to And Materials Thank quarter of

glad be could that today. We’re with us you

webcast. and Craig Corporate it, Strategy, and please To and in Communications. a eaglematerials.com Chief Joining connection President be Development Kesler, click will go link presentation today Executive Vice to are Financial me to on access Officer; slide Bob There with Stewart, of call. the our the made this

accessing please regarding slide statements These slides, you’re cause covers differ those our risks made call. results first While that the could from to discussed the note this uncertainties subject cautionary forward-looking statements during that to and the disclosure are during call.

this the included is to disclosure, press release. For which end our further at please also of information, refer

that an begin quarter third exceptional an strong me simply Let standpoint. by earnings Materials quarter had a and fiscal Eagle operating an from standpoint from saying

exceeded the market Our operations capturing to quarter. them the available opportunities my expectations in over

our visibility feel U.S. more being did We And this indirect for are place will uncertainty. from earnings Well, We the years be purchaser to put doubled reduce greatly Today, from take the well segments. the been and us. a we also other the a has and tax and years. as good operations people wrong. these the tax did our have this distraction lot is January. We claims, the we’re than system biggest expense would of can cement settle to exclusively come. demand strategy from our prospects the our train a has remain the and Paperboard that now, next we indeed. made dynamics very and more the expect operating geopolitical lawsuits We markets only in we reform. here businesses. risk nothing risk, direct the reform as all already to benefiting all increased spend, and contribution, looking model for the believe Eagle’s increase derail and us group We and the going over of able earnings. contribution action forward. record expect We approaching repair Beyond still economic prospects increased feel with from decision in cycle us two price demand great invest better-than-average litigation cycle uncertainty capacity. it the right in this to benefit our to our more but We construction business wallboard business to grown magnitude on in our behind behind cement And to company, over fully mid construction our antitrust the are Wallboard than are pricing favorable benefiting especially of were U.S. put supply-demand forward, as wallboard and new size to enable businesses implemented this housing Company exceed to record a presses class agreements to

these We come. industry There to the is our contributing for affect increase report will vantage is business $X our frac pleased I’m about increase of might it this and that like per this mill fiscal on cost also some be which which forward. nets headwinds looks affecting announced in to going X,XXX, freight, the year. notably point, are commenting would today’s from meaningfully success quarters adversely the among us sand

greater year. contribution in from With we the completion the Utica summer, for fiscal business coming mine project this on materially track this expect

capital We allocators. continue to disciplined be

and We’re our that system the position plants. and benefit cost productivity build projects growth improve organic identifying proactive in of high return our

not has and no growth our these our for and opportunities move discipline. we into materials others forward. having intention criteria. either. this opportunities and strategy not traps through advantage numerous flexibility cycles cycle us in want us I the commonly and relax we take assure with sheet has so industry. gives that tremendous could align I will you, construction investment the has Eagle served of going discipline the did We to investment balance also then capacity well prior in fall as cycle doing financial when recognize This to that not, evaluate of relaxation evidenced been this it

of shareholders. generate the We meaningful situations to managing cash of continue to of effectively amounts record our a benefit these track have we and

Craig Now, let over financial turn results. it the to me to on comment

Craig Kesler

you, Eagle’s year. prior and $X.XX. million to share revenues per the improved XX% a a were quarter Eagle’s from third record Dave. XX% Thank record earnings improved quarterly $XXX

As the financial press we quarter third Eagle’s nonrecurring mentioned include two in release, results items.

to recorded related settlement wallboard charge we First, $XX pretax a antitrust class the million of litigation. our action

tax expense remeasurement a non-cash This income a liabilities reform. to Second, tax onetime corporate relates as lower our million deferred rates $XX to related of statutory enacted the to recently and we is reform. decrease net recorded to a result the of benefit tax

had anticipate rates and highlights to A the Cement, pricing Operating and rate we to Going to XX%. of businesses. Aggregates Aggregates improved Eagle’s in cement record a both earnings been comparative flow. Eagle’s lower addition cash of the after Concrete XX% and also drivers tax in million, and these Aggregates next range pricing. expect XXXX XX% earnings to around be this Cement, improved reform, improvement Business businesses improved XX% our effective and in to our Fairborn XX%. the of forward, Prior sales and XX% $XX our net effective time, revenues. in increase the the volumes the primary reflecting tax the increase tax results of from This were tax At we new fiscal of Concrete Concrete rate Cement, slide quarterly

our improvement our improvement volumes sales our businesses quarterly Wallboard of timing comparative X%, volumes. during the flow Oil EBITDA Operating helped of months and nearly down This X% third cash last to sand in of first Proppants was generate for XX% sales nine prior frac reflecting of earnings million in $X Eagle’s quarter. the the this year of the our Improved to and in $XX improved improved certain plant, improve million. businesses. cement from capital Bernalillo increase facility, Quarterly near-term to Gas sales $XX these from which items, includes plant revenues. continued Illinois. of in Paperboard an investments capital Moving quarter frac Wallboard sand to wallboard volumes the business and reflected our and operating investments our operating working drawing year increased earnings Paperboard construction time year, million, XXX% frac for which start-up new and Nevada the while in third prospects is have the sand drove

Wildcat reflects generation earlier year. was our cash competitive the completed used acquisition flow Excess also borrowings. flow highly in This to pay position. cash dividends, outstanding last We fiscal reduce the results repurchase slide and the low-cost shares, of

you Our now today’s to net Skyler, debt to session. move the cap we’ll XXXX. ratio question-and-answer was for XX% attending XX, at call. Thank December

Operator

our with comes [Operator And Instructions] first Grooms question from Stephens. Trey

Your line is now open.

Trey Grooms

quarter, factors some -- cement. lower bit maybe for today, cement guess, the into from XXXX you’re in on about of fiscal owned? in kind Can the I looking wholly what sit is question JV talk we in operate And a are calendar expecting like-for-like both that behind the the where the XXXX? volume or you of the little demand the that the with end-market and you markets First

Dave Powers

some Well, of were Trey, has that and X% our cement is jobs that volume weather. first some lot about and delayed to all, with of down a do

at not we’re economists, that, a forward, we’re forward looking I all really for are Going that the going read but X.X% little more. and next years year, about folks growth making bit the projections, when beyond

Trey Grooms

expected impact I from with weather would I have that’s mean, some there. Okay. obviously, And the JV,

If issues color what’s going seeing you and of that in forth there is backlog of any kind there? impacts there, the us is look the expect forward so any just what behind with on lingering weather that we you’re from with JV, should or and kind

Dave Powers

We behind weather the us. are impacts think

Trey Grooms

very thinking there think in was like or the into for demand lines that the But, And quarter, or in to kind follow-up of feel end-market quarter, thoughts we’re pre-buying volumes cement as Thank wallboard, calendar you December, on as strong seeing And guess, to What the then, you question. around building at same specifically expectations quarter. the far of you. moving new in any just guys going wallboard? year Okay. how your that? looking looking are obviously about do as December the the when past inventory I were the December along into quarter, of or XXXX, of good, kind into to kind

Craig Kesler

first Trey, this part. Craig. address will your I is

remodel and to related those look strong drivers continue XX-plus-percent what the head this construction. wallboard construction, forecasts demand improve calendar both underlying least new if think at for to it’s wallboard fundamentals and On two we about and construction business repair as into that drives side, year. to residential the And demand continue very for you demand,

in activity our XX have exactly. in little hard you have is But, the that have you not of and addition, quarter improving which feet underlying of associated the But you demand how pre-buying pre-buying. it was in activity. economic impacting On about. of hurricanes bit quarter, the when quarter, activity or of do the between distinguish, to mention have or square distinguish million and as have would the could talked very a those fundamentals some with third of that post we so the volumes it’s strong type the that to been hard that some picked in underlying to It’s kind impacted pre-buying it the up

Trey Grooms

about That’s it’s prices And you. All down, the think being helpful, pretty from business and to we starts like quickly benefiting right. do with paperboard impacts timing wallboard roll How the super on back and wallboard, that. Craig. Thank OCC, that there? through still how looks

Craig Kesler

Yes.

So, talked is the the pricing in lags on quarterly wallboard business about. Trey, the mechanism we’ve

as wallboard to of And but the through. roll, or benefit little couple in prices, case, this how the is in of a pass that it the experiencing still the start those next business start pricing they contracts paper abate to months into should higher rolls so,

Trey Grooms

is may for for how I’ll you CapEx give any tax a as in bit one tax a pass result it effective be you in type organic, on, Last to that. touched also growth. little talked allow on Any will tax then on us how can the think reform, this invest it. rate. expectation that, on specifics me Got you and D&A to and resulting But, and color of about operations, people you internal

Craig Kesler

Trey. Sure,

reform, As it tax really the tax that or flow will change we reform from priorities. doesn’t allocation see it our strategy capital and relates to cash increased

our business We producer low invest cost continue the will to to strengthen position.

historically We’ve return opportunistically the through balance shareholders. we met. We the repurchase with done where as our primarily criterions And grow Company that cash will program. continue share returning done, always are we’ve to that to

while is we certainly tax So, for good and it a reform return we’ll good invest to the remained allocate capital. priorities Eagle, way the thing projects. in the continue change same, doesn’t have The

Operator

[Operator Billy Our Davidson. question Instructions] next Newby with from D.A. comes

line is Your open. now

Billy Newby

Thielman Good morning. Bill my taking on for Brent today. for questions. Thanks

kind to shifting with of gears So, -- guess, over sand frac I business. the

oil into about conversations any changes seen develop you this the recovering of as outlook of business year? customers to changes are the kind with you that guys we we’ve -- in year, in the move through having prices talk With this you’re can and that calendar any the end just

Dave Powers

And are say conversations WTI. agreements yes, with customers the I having oil as sold up. oil go business. that the are our tied to we prices of And our with sand are we out customers many prices, in frac would

Billy Newby

-- assume well oil the become I of a that’s optimistic bit guys you as leading regards to in that kind is well? cement more And business to Okay. little

Dave Powers

Yes. is. it Absolutely,

cement to well more oil supply product to expecting area. We’re the

Billy Newby

to Right. this there And with sand that way developing ourselves? it point of I for kind guess, a reach year this of breakeven oil is ahead or the is runway environment, end by is that business that a in little frac new of the -- business is

Craig Kesler

Yes.

last further we’re that continues year, add generated up And see EBITDA Wisconsin today we’re improve investing couple another should our we’ve the cash looking sold the to of on flow, out to will Illinois talked be as forward of capacity, building whole the the basis. facility So business total July even in to that drawing incremental over an past this bringing we’re that can Dave That quarters, XXXX. on in are mentioned. Illinois The facility this meaningful capacity flows then, generate plant, tons our as ready as this million is cash and out, running you in pretty one from business. X.X and in the and that in about summer

Operator

comes next Our from question Schrier Scott with Citi.

Your now open. is line

Scott Schrier

aside costs into wallboard curious, that we on OCC, the see freight buckets? and And freight going in First appreciate that have. add question also of you is the commentary more other the margins, that the this increased been just shipping and and distance quarter, have freight the level any that a there on the you wallboard something the I’m I of and Houston? because specifically, should from Duke forward? continue to is from Does

Dave Powers

of of freight in customers’ situations bit a higher just the expenses was a quarter to a quite paid and quite there during take get bit all, some we on result down affected legal had care as We needs. trucks Duke and shortage to of business, wallboard product that shift of freight our it. margins. the First during the a paid more we did quarter of XX% There product our adversely some we to

things So, quarter. those the are during us two that impacted

Scott Schrier

then, wallboard New the you I costs of had Got talk in quarter Mexico, the can about last restarting ramp on And it. know it. some up you plant? just with

think good margins demand and all Phoenix of I you good the area? seeing behind that out into that’s Are us. plant

Dave Powers

making the four are if of we I’ve of actually peaker days. got a I and two we’re it running days; a the we’ve run plant quarter money will will during worth as out it If it days We run orders, little plant. of four, two got bit

pleased with up in just at So, starting it’s we’re it September. now, right where

Scott Schrier

I’m think like of cement it input areas there other year-over-year, volume or the should margins inflation going And Is if that thinking about it. costs to to think are forward. then, is Got due absorption like cost just on compression cost that how from the too about? fixed and the we you about the seeing compressing, decline for

Craig Kesler

it couple think you’ve Scott, ways. of a to in different got about

business operating some the did level, it still would we of a margins But which pressures it. Fairborn added of the EBITDA see of We earnings to depreciation be well year-over-year way. that depreciation fuel as a that side. addition bit an be majority the perform the of out impact on look comparison; would the pretty at again cost continue backing With quite facility on in unique the Fairborn that

Scott Schrier

of whether thinking you’re One impacting last how into some that material progress Got the going locations, you you’re can and color it. just helpful. business That’s one, you’re of what Wildcat, shipping us kind more the it’s seeing that there, now forward? types about

Craig Kesler

some really that late business We during and benefits acquired to do summer, continues business in our the going us It see today, a to but to low-cost business continues of long-term earnings in predominantly to moving that sand volumes the of that with whole well, grow for starting position within strengthen frac mover our was system. huge forward. good gas that It’s just there, the and still the will think opportunities terms oil business. but and not continue we

Operator

Sachs. Revich [Operator Jerry Instructions] Goldman comes from next question Our with

now is open. line Your

Jerry Revich

year, that expecting you’re in public, cement, this unit can mentioned you additional in is view out call, hopefully us that private, flush low driving before non-res? Any of the you context volume XXXX. acceleration the Can more what’s growth is of in year, just it earlier an footprint? it your Dave, for you give terms growth this

Dave Powers

are starts to and But, we we are do at X.X% We in. think are bit. agree the people the to would markets When X.X X.X in million forward the at the forecasting going be a the play of going some folks million additional tonnage. housing all in them area look projecting that little residential, up going I all with that of a from

Jerry Revich

how shipment in And folks for? general looking to coming as production your us terms in sand view others the the competitive have be position compared on up terms ramping out business, of you do And for help should that what’s business, Utica pace contract area? cover we understand ramp the just or of ramp you then in of will much you up are Okay. have the of

Craig Kesler

quickly. Jerry, to X.X I finish good feel tons incremental summer, here about as the do ability that mentioned the very and in that project million pretty will our up

Jerry Revich

just cadence can can out? X,XXX you on costs, expect $X I talk play about timing then, So, be the the because rate increase? how rates to you your contract transportation versus inflation us spot you per guess, to And exposure, I spot just remind sure, what’s to rate? And, make the in teens of look what’s mix the want calibrated. the properly of of we’re

Dave Powers

And into some projecting outbound looking we’re X% going those about quarter in we’re looking are about. that’s maybe and that’s of what to the now. what April. We’re effect at shipments; take right in But most first wallboard

Jerry Revich

context, for play or tended need to local wallboard similarly then, to we’ve transportation we we’ve mind in business. here seen in keep your to nature seen that that’s higher what reinforce to expect of rise move this cycles, competitive you prior And pricing time cycles? anything in prior shipping as Do out costs compared

Craig Kesler

construction think our of market. that’s I continue to continue sell as are importantly, the remodel improve, demand important repair certainly costs all whole going we to to building fundamentals to the activity Jerry, to underlying a wallboard see and more activity us. more opportunities continue expand. part improve, Freight But, improve, and looking maybe to good single-family with is side, and to the

Operator

from Thompson Thalhimer And our Davis. question comes next Adam with

line Your is open. now

Adam Thalhimer

volumes. cement I want to start with organic

delays You headwind jobs some maybe say experienced the behind Are you; us? said two. your that quarter or behind job last weather you delays was was also there the

Dave Powers

it don’t public doubt, think the the second the there’s has way to the volumes with up spending be frustrating eventually just has need the catch the the of a need to level Whether infrastructure the the delays continue we on side. we’re it’s it picked within U.S. construction one only in we with to reasons, or any the talked half expect is there to activity is slow year. need just there. no state demand at the As quarter, verity cement last here meet about improve the I by of It’s or there. Because been right, the going little up. frustrated that But and

Adam Thalhimer

I So, that not as year for X.X% guys, if X, at X, plus out plus growth you, full I plus of industry parse year? the type for through and you’re as does like you mean, play forecasters, X that comment, the X, plus looking

Craig Kesler

get we at on to Again, look that the I across business see the try don’t to basis trailing But, PCA XX-month use a at think, continue long see all we’ll the by We quarter. underlying of least. our we the granularity could to we know very into change. we’ll improvement projections. things things improve demand But, markets. and run, continue over

Adam Thalhimer

wallboard -- what the on side, in quarter? And costs referenced you higher legal the the were

Craig Kesler

It’s the antitrust Sure. with of but was it meaningful and pretty finalizing couple bucks. number, settling associated lawsuit, million just over a

Adam Thalhimer

to get sand. round want add portfolio? you And and regional emergence your then, do to you out sense need of look your the of general of How some do think in kind frac sand in-basin I just sand to that and you business the on at

Dave Powers

out. We brown the think need Permian. we sold a in little mesh, very make don’t for No. we’re There XXX% brown to place sand add XXX any. XXX% sand, We is

markets in It’s already Our for. great new have those. plant, XX% and to have we other is spoken options

Operator

have Citi. we from follow-up a Schrier question And Scott with

is line open. Your

Scott Schrier

looks Obviously, the on like to up it pricing. had stress a and I of concrete aggs just wanted there. lot you’ve follow

to anything there I had if some is I Austin want issues know, regional weather call there. to out, it just is So, whether specific in see you mix?

price helpful. on will anything that Just be

Craig Kesler

Scott. No. Nothing unusual,

unusual markets continued nothing improve very three really each and just have other those concentrated But, there. separated We’re to in from but here in

Operator

call questions. Mr. I’d At Dave showing to to for like remarks. I’m this turn over the time, closing further back Powers no

Dave Powers

in call all the spring. thank forward to and to want for of I participating with you you. we look talking the Thank in you

Operator

Ladies This and thank program. you gentlemen, for conference. today’s the participation your conclude in does

a may Everyone, great You day. disconnect. now have

Eagle Materials (EXP) 31 Jan 182018 Q3 Earnings call transcript