EXP - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to Eagle Materials Third Quarter of Fiscal 2020 Earnings Conference Call. This call is being recorded.

At this time, I would like to turn the call over to the Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. sir. ahead, go please Haack,

Michael Haack

Good morning. third call our Materials' to quarter of Eagle fiscal conference XXXX. for Welcome

We are glad you could be with us today.

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

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

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

with remain our favorable with that been this have we results sharing across conditions have quarter you, Our business the outlook and markets. consistent construction been

in the Heavy Moving the Side, demand continue single on the Gypsum growth expect specifically the both low On Light in for forward, Wallboard. to Side, Cement; future. and the digits Portland we notably foreseeable

are to We to that there upside tilt these continue XXXX. I to before risks also believe risks as this outlook, calendar the for have recognized stated but we

were solid Eagle quarter Overall, and it was a driven Materials. up Consolidated by shipments, operational for pricing. execution Cement revenues strong X% Wallboard Cement increased and improved

same XX% sales the a up remains to higher tons. Our demand and over from a due X% were volumes record shipments X.X healthy million Cement up up were Wallboard were sales Operating earnings year X%. volumes. Cement our to quarter ago,

increases of for in do the expansion side development was businesses. in a Wallboard We affecting major both well. heavy across to at on segment price our like you Cement I’d take as all the quarter. this and to a markets update pricing earnings underway operating light Wallboard have and soft in moment However, headwind

expanding aimed Republic cost productive roughly XX%. at demand, current announced expansion minimize Starting The significant expansion lower capacity we this operations market goal exposure fiber. with the by a Paperboard and meet project of at costs our light side, white to there to is future

proven a The is and manufacturing is operation technology is technology, team the but project this performance. paper new installation our will paper industry. talented the Gypsum further to that world-class Republic Wallboard to advantages competitive utilize entails technology of extend on it there

complete The of this for quarter paper equipment complete expect expected spring begin we the is of be XXXX. to project to ramping in and is spend the second Most production up project. this calendar

entered the announced venture. joint a seven we definitive the into from the purchase Kosmos agreement the we related that Side, On terminals, Heavy Buzzi to quarter CEMEX plant, during and assets Cement

year. on and starting are quarter We review. transaction cleared fiscal begin in to HSR cash transaction on The this track enjoying the next to contribution now flow has fiscal immediate an close fourth

We’re acquisition also to plant even quite footprint Heartland this consistent extends will about the with with and acquisition Cement excited in serve further U.S. more markets. growth Heartland strategy. the This as network business U.S. the capacity our Cement our provide reach

into come the light have given better not at separate of our could timing The a intensions heavy this transaction entities to company this time summer. standalone and

frac processing Also, summer have distribution been underscore indicated topic for evaluating separation, side to we While prior the as to as the assets, for our we track separation, want that prelude company are launch heavy the including sand, on still that we we have I and of the assets. specifically on of are I two-parts a in the options communications. non-core of

excluding evaluating to sand While items, ago. this the based, wrote this per on near operate year third say, breakeven we our to continued a this down we process, net flow yet have this make other frac and we business work share quarter the to was I continue on to noting adjusted announcements a been the XX% no assets than that quarter have non-routine fiscal up It impairment over worth cash while alternatives. earnings is have

as me That’s remarks. as introductory far all from

turn Now, go through quarter. let to for it to financials over the the Craig me

Craig Kesler

X% The Michael. sales million, you, Eagle’s and quarter. the Thank reflecting Wallboard improved of revenue and during million results contributed concrete sales the quarter third business approximately and smaller volume revenue Cement and to aggregates improved $XXX pricing, Paperboard of $X increased volume, a acquisition. acquired

of during impact Third quarter the $X.XX, loss includes EPS a items quarter. which was of several the non-routine

asset notably, oil of expansion paper development the to and and effect an business non-routine an planned gas were business. the outage $XXX linked our to impairment related Most cost the items mill. million profits charge Other of

Excluding items, $X.XX. of non-routine adjusted these the was the impact EPS

highlights volume, to segment XX% includes slide segments. acquisition. Operating sector, sales next the X% performance, which cement the now improvement in aggregate of Materials the the reflecting Heavy this XX%, concrete this improved pricing our and and volume pricing. increased and concrete results aggregates and in in increased driven by cement improvement our earnings Revenue cement concrete of and results primarily sector sales of Turning again both and

revenue. med Materials our Materials on by business Paperboard partially operating million, $XX declined a an offset decrease earnings was lead higher slide, decline Moving which by sales X% Quarterly Light Light next volume offset the lower X% X% the the sector Wallboard sales volume. prices, to in to sales to and in in Light reflecting improved prices, Wallboard Materials

Gas this revenue our during equipment. expansion had to new XX%, In third and of loss connection outage with In paper $X.X million. the quarter. the down we tie of sector, extended million impact operating during Oil an an we $X in the was was mill, approximately quarter The quarter took outage of and Proppants the

pending $XXX to as XXXX, completed our of approximately XX million, of of company an small purchase cash flow acquisition fiscal the a During Cement spending down to We and of Company, the nine separation. aggregates the Kosmos X% increased operating well during acquisition the first and concrete August million. months company price slightly and capital was with million advance XX of as

repurchase structure. the share our manage capital paused have to program We

Finally, our XX% cash with was XX, million debt-to-cap XXXX on of a at December ratio $XXX hand.

of times we term X.X established a us facility ratio December providing the with source. leverage debt-to-EBITDA low loan million advance acquisition, and In at XX. approximately financing cost in $XXX a December Cement net was Kosmos Our

immediate below capacity X.X forma cash Kosmos pro be or with deliver will acquisition, to at will flow. and XX% increase The nearly three good million assets leverage provide Post acquisition. cement Cement times slightly more annual visibility to our to annual post tons an contribution than by

said, the As be completed expect quarter. acquisition to Michael our we fourth pending fiscal during

employees group to and position excited Eagle. very opportunity our to of cement to this new grow We are about a welcome talented

today’s Thank for call. attending you

now Catherine? session. will question-and-answer to move the We

Operator

Thank coming you. Grooms our with from And Stephens. first it [Operator like Instructions] looks question is Trey

Your line is open.

Trey Grooms

morning. you. Thank Good

excuse Kosmos So, acquisition. me, I one the on, guess first the is

demand that in an And know, pricing standpoint? getting So, also with Can of the the it’s kind seven and that about kind into of talk market picture in others geographic terminals. market, long in I that bringing plant from or like more how or compare network of haul it you been profitability that to in market, serves, the the there into plant in deeper you might this maybe your network fits outlook? how then barging just what’s kind efficiency guess more also your the

Michael Haack

we to network. Sure, transaction opportunity, alluded our we plant asset, asset as network. at get we this When at looking at are looked you and into looked as this Trey. we're excited this very really our Craig When a this to, cement know and I

customers of those We this have Illinois this throughout Cement, knits further are it better enhances, Creek our Airborne this together area that kind going Sugar provide is and and Cement to all to area. in service that

As XXXX, a itself, capacity plant so per it with redone was large the in a modern plant. it’s plant

and our I’ve extend us said as capacity in perfect fit that So, area. that one reach it’s unit we knitting extend as that our feel a in together for to market

Trey Grooms

of demand last sticking you pretty any thought you. over realization been for there price about kind this given you against cement around Okay. you look specifically comments you pricing of stage the you early then in of spring the have have seems tying or well? in may competitive we Wallboard the January years, Thank more, with good and the would more that know backdrop it should know of that then, cement talk the some increase you the than can as stage that, that the had some set for for reads we into be pricing your and season, any And like behavior anyway as that outlook, few at early markets cement, year cycle, Michael. this given competitive around know Thank within kind maybe kind

Michael Haack

market price be. it’s early is Yes. to markets you will out increase. are with determine to too too tell Trey, to what early really what price the in Cement to and It’s the it, at we going – that’s you that tell when know all market our going of look the

everywhere you the know fairly, it. is We’re out same thing. we’re Wallboard with

We’re to with don’t price increase going time where and Wallboard out yet have see just enough settle we to the out. that’s

the have to be. over to price market coming months see will that more here information We the what determines

Trey Grooms

pass Thank we’ll Okay, stay very it tuned. on. I’ll you much.

Operator

question Thank D.A. with you, from next Brent our and Davidson. Thielman comes

open. is line Your

Brent Thielman

you. price and Light guys clarify increases out Heavy? you within Good the Could thank on the morning. market Great, you’re

Craig Kesler

This Brent. Sure, is Craig.

that closer the X. is we the $X were everyone generally There are that then and April generally were January in up Wallboard a customers. markets we for was markets and April couple Cement in the generally around side, price our of On January, $X ton a are it’s but to time communicating of those out spring price to in

Brent Thielman

Got it.

it and from some before guys demand what there? of sort some you maybe your of market environment, regions Wallboard of signs Wallboard, to on see talk the in we just healthier, the then And looking perspective like the talk outperform the seems about seem seeing broader in you’re the demand about just Okay. early could a in you are

Michael Haack

Yes.

with good. the know fundamentals look underlying You

are You we low those growth digit future and to know, planning growth. of that planning in around us single we’ve foreseeable consistently kind is we digit and the deter from see nothing what numbers, there’s single low around said

Brent Thielman

Okay. Thank you.

Operator

question our And you. with Anthony Pettinari Thank next comes from Citigroup.

open. is line Your

Anthony Pettinari

if you a I seeing are the in regional markets. could touch demand you Cement morning. Good little on some bit your was of wondering

you talked additional of about if think had on Colorado market I just and strength. in wondering Texas kind Illinois, and you any some color strength regional in weakness

Craig Kesler

in of Texas improvement we seeing in the the perspective, XXXX million be put State all into of demand. I million, Anthony, pace know increase and as of we’ve markets was it I XX the tons think of mean know but calendar XX slightly our different, you you in past, to are might said pushing

their We is seeing also infrastructure you’re spending. more but states the State That financed our aggressive see good or to the continue across a an seeing here becoming Texas. enormous even creative – we’re number, way other of growth in in states they more

good in You mentioned a place some order a put doesn’t period happen to in it over time, all our improve improvement Illinois, is we spending Illinois That budgets where example but of are across happens seeing overnight, infrastructure. they’ve of markets. their

Anthony Pettinari

as on you expecting specifically months, costs about other Okay. saw kind remain this and Paperboard we levels the costs kind lows, helpful. side, think year you know historic Paperboard for just prices would the collapse you they in OCC $XX] call I for items think cost XX of XXXX, And next guess of kind year that near to you a exited That’s about then these prices, of [$XX, as ton are last on any you out? OCC the

Michael Haack

know with minor it’s market, declining month-to-month flat basis, on a you with that, months but and Really and cyclical think of it last a fairly of to trend variances projecting very last, XX that been fairly OCC stabilization a we to there. kind a you the the pricing, regards There stabilized price. over slightly overall trends rising a Yes. expecting slightly we’re know be it’s will projecting but we’re over the has we’re that flat

Anthony Pettinari

That’s it I over. turn will helpful. Okay.

Operator

Thank question Goldman comes And next you. Jerry our Sachs. Revich with from

open. line Your is

Jerry Revich

everyone. Hi, Yes. good morning,

Michael Haack

Jerry. Hi,

Jerry Revich

white space would view wondering you that and network earlier markets you could you you’ve I’m geography? do transaction about these helpful. closes as talk would if assuming be attractive? within Side highlighted what qualitatively, view the – parameters thinking Just U.S. the your how Heavy about you’re Any other how

Michael Haack

Yes.

one those open, but So, speculate come money, we’ve you see invested see this going space historical does a performance I'm could fill you becomes markets not as on white to what so. know, that’s use our whole, network, at of if our what we how we or available network our our where filling you spaces bring as our and and look strategy, kind that’s a in together of those how plans white we

Jerry Revich

the spoken thought terms land-lock and particular Obviously, barge you the is evolved asset network. parts about Okay. exposure assets. And in this your Can of just opportunity folks? the have you about interesting really you how folks the process parts there focusing past talk on on we’ve the of why has got of some proposed in to

Michael Haack

revolves, It location the and how really our it fits other Yes. facilities. around again, with

it then So, have said have you we and you we how have know, like, you earlier a know, little ties when bit I that together Illinois and asset you Sugar look we completes nice this know, was, a and and you those it it. Fairborn in does reach, with all that haven’t Creek, while extended markets area that reach past, have market participating fills the been, the know, a in we extended this at

in it with where network very attractive this us we’ve done, together, why a barge you to area you it’s, we’ve and everything ties know, completes determined know, how just so opportunity So, that’s in of in. participate for mode that that one this past transportation rail truck and is, and the was as

Jerry Revich

thanks. Okay,

Operator

question from you. And Adam Thalhimer Thompson Thank our next is Davis. with

is line Your open.

Adam Thalhimer

guys. Hi, morning good

First the question is that on pricing to Kosmos, wholly-owned the regions? of rest region your in similar

Craig Kesler

Yes, pretty close to the be it average, will Adam.

Adam Thalhimer

we Craig, we in? $X.X should bake use how million much volume then, figure? And that should

Craig Kesler

to utilization industry, of are rates high. pretty U.S. a the Similar Yes. lot

utilization we marketplace. high that but know, own don’t certainly You it today, is rate pretty in

Adam Thalhimer

Okay.

closes. Just getting it when ready for

Craig Kesler

Yes.

Adam Thalhimer

on XX%. down And the pricing then, side, Paperboard

some there? agreements were play does said pricing going long-term our You sales what’s that there down, that that in provisions out? brought How on

Craig Kesler

on sold the volume said have and of most we’ve and price based in is past, inflators inputs. like deflators of So, contracts those that contractually our

there’s the that it, with price one comes charge OCC as price fibers major consistent. the it’s so, pretty or prices and customers been we come being down, And and the recycled to down so

Adam Thalhimer

over would does bake then, XXXX? in the full in just you Or the of increase layer kind that [year]? And volumes, Okay. QX in Paperboard XX% of

Craig Kesler

Yes.

to in know, be, it It a frame. line the little move of will time will Mike it – several the in you begin while next will be [than takes broader ramp over a the think time alluded March/April market, ramp out will a over that]. to the to machine. a it then And we'll come I months, of as outset. over period but, This up know, yes, it period you and, time into

Adam Thalhimer

Thanks guys. perfect. Okay,

Operator

Thank next comes you. Phil with from And Ng our question Jefferies.

Your line is open.

Phil Ng

fourth you assuming clinker demand In up north holds in year. quarter, like of it running this your, guys. looks business, okay reported the capacity Hi, Cement are your

well to So, is more unlock acquisition do you? there more some this of And you Kosmos supply? up does can free for that capacity as

Michael Haack

Yes.

all XX-month you at So, we at it too. look know, if as rolling it, you look

have you we that able that green we times So, store] year more know, to produce clinker. [clean do are some busy a less

take grind where we market. talked out capacity on to the the also, in of of additional storage call, we’re able had some last into and matched brand sell about We our facilities the that some and clinker of it

busier to times meet some So, for the the storing side demand. and clinker feel the these we of increased full-year with of comfortable plants of that that running year

Phil Ng

think to you calendar are using are Just make supply out, imagine supply on know, of And having have it demand? low-single does kind that XXXX, you close, pretty I we have customers the situation of with And secure. differently? sure necessary of digit pricing? you you conversations your to so wanted When feel about outlook full are those you're running you growth, only kind run approaching backdrop, like meet to with they they it. what Got conversations that your

Michael Haack

Yes.

we’re with going having to market know, that stated, we’ve also. conversations you calendar We this you out to customers’ you number $X those satisfy to with know, able – year think know, those needs. able across next the as through and our be the Craig we’re We currently So, we're been satisfy needs, customers.

where [indiscernible]. settles out see that so Let’s

Phil Ng

and when Got any driving ASP with Curious the volumes, we our it. competition saw if but that in housing maybe solid it’s a at region And Okay. a what’s switching slipping lagged Wallboard, choppy quarter in you bit? broadly. to gears your environment, it little look pretty increased the

Craig Kesler

Yes. markets very we’re with I happy performing. would say are our where that

about have be homebuilding the average or they recently, four was as on done we excited calendar latest And XXXX national another year good look, and regions, pretty we’re will prints volumes. for the positive. and think Our

Phil Ng

just stuff then, on see out? one think me and for the upcoming did last in I in all any one quarter? And know kind you we it Okay. of that normalizing noisy Wallboard, should pre-buy about that gets quarter, Thanks. how the

Craig Kesler

pre-buy think as it’s any is don’t was you demand said, activity. there significant a And improving. noisier I little Phil, as Yes,

years easier what five was four, than pre-buy it little spot today know, was. You meaningful ago. a It’s to

just we see improve. starting You homebuilding know, to

Phil Ng

the appreciate I Thanks. color.

Operator

Thank next with question Raymond you. from Josh Wilson James. comes And our

Your line is open.

Josh Wilson

Thanks my questions. for morning. taking Good

Craig Kesler

Hi, Josh.

Josh Wilson

off, so First a can question, you the the sense to was Wallboard give just keeping quarter, a your exiting know of where we price us house start where from? January

Craig Kesler

with consistent the pretty was It quarterly average.

Josh Wilson

revenue Okay. the in of was plant? impact Paperboard the And what outage the

Craig Kesler

as impact impact. is much a a efficiency It as cost it is of revenue

Josh Wilson

what year-on-year in that So, were drivers the margin there? terms then benefit out, of adjusting

Craig Kesler

saying, very – remained Look, our we've margin. on have OCC is the and OCC prices, are but pretty low prices the major as been driver even energy low, – there

Josh Wilson

okay your something prior you that? like related re-ask And share just Wallboard nothing in to is it. then, there Got and feel or the like was timing question market

Craig Kesler

changed Our more points hasn't than basis market share in XX years. five

Josh Wilson

some me, for is Okay. Or And payable well? activity a amount inventory there? year-on-year, was were days as timing then, or fair down days your last one there and that a shift

Craig Kesler

Yes.

of on is – the [beat as but through] lot flow, we’re allowed investments to abilities our the side, of managing inventory it you think Cement and, and made we to maximize some best of capital as some well. a clinker always know, I you seasonal timing to that’s said, us Michael just cash know, grinding the working and on

Josh Wilson

Thanks it. a Got lot.

Operator

from Roger BNP next comes Paul our And question Paribas. with you. Thank

Your line is open.

Unidentified Analyst

[indiscernible] the Roger. for of hedging is Thank this start to I your policy, on asking Hi, you. sort and remind of you outlook comment natural for by on us wanted Paul gas. for inflation cost can especially

Craig Kesler

Yes.

As no we cost know sit here majority significant with inflation. of you inputs, our the

things like think it’s You on the about more know, side. natural you gas, OCC, Light

You know you're you nothing on And business but side unusual the platform. there, seeing the oriented Heavy some across and electricity pressures, energy with inflationary it know, is fuels.

for you – very certainly some terms you of these costs into months gas, XX we’re well with putting next to yes, place hedges hedging, now, know, low making below we levels. the $X those in fix In looking and you know out, know, are

Unidentified Analyst

follow-up, you. that closing Kosmos sale thank at Great, And doing? at investments would shortly, just one you look be more upcoming you’ll something obviously would look you Cement, separation? despite that Is you the are obviously, making the – into

Michael Haack

You now look know, come we’ve [indiscernible] at that right opportunities always – any we available.

You don’t discuss to on. want know, really I

investing would thing. the know into You open it be to more

You in that’s we’re of know right the concentrating team these summer is, companies the happen is right focused that the what you on management now months, now. will separation know, so where

Unidentified Analyst

Fair you. enough. Thank

Operator

Thank you.

Huerta Our next question comes from JP with Morgan. Adrian

line open. Your is

Adrian Huerta

was my $X Thank one can in stabilizing; questions, in quarter freight the that cost, that Thank little quarter? you, Two what the specific in amount tell a were you. said very taking prior it less you you costs this separation million and than cost And previous on the you question. the quarter? cost, thank how this quarter, for on is question second was was Cement the us

Craig Kesler

major has two know, the say the announcement. know, associated nothing freight then release there. but you and so also we’re That press last Cosmos know, like – of kind not incurred included just to again, always general, Yes, pretty your XX a the little in pressure development in cost what freight were we the years highlighted like first around for we The fees seeing cost. changes in last trend with acquisition cement for your ago. what And, been we question that certainly I’ll benign, terms we It costs of there’s there, the of saw months. call you question bit included I’d I million flat And you and $X.X separation. answer first, prior as business to

Adrian Huerta

you. Thank

Operator

we a from And you. with have Thielman follow-up Brent D.A. Thank Davidson.

open. is line Your

Brent Thielman

thanks. Hi,

how is one on any $XXX quick could more recognizing kind in would transaction, and in once the – you about original you release, Kosmos this we one done? the that talked about this of Just tax benefits, million that color you guys think to

Craig Kesler

investment. question. Yes, you Brent, a great It’s very part that’s know, a the important of

here parameter, a So, deduct to we process are tax a NOL forward the with will or that move closing but right be amount transaction year-one a We're deduction the purchase post through likely of reform, going significant three able will tax able be perspective right that upon and to position into using a will of allocation there from even separation. very us Fairborn of in expense immediately depreciation price. with an both companies carried that the be now, significant as

the taxes in be minimal position we’ll of paid. enviable being So,

again, where chunk that inevitably million comes cash improved flow a free So, of $XXX price. that immediate a of deduction the that’s this, as for purchase result all but that is big from

Brent Thielman

more Okay, do wrapped expect that outages this as here gets expansion the that’s the basis? any great. downtime paper impact cost have you might some quick up of on Actually or one one more mill,

Craig Kesler

this this pretty that the the will Yes, certainly we’ll on as March – in wrap so more in – even to it new quantify be tie here that outage, past we’ll Michael a call, so our than extended quarter that spring, will quarter impact total but March up and package. everybody will likely for very said, we equipment

Brent Thielman

Yes.

Okay, alright, you. thank

Operator

time. I’m to Mr. turn like I’d And for back further call this no Haack you. remarks. showing the closing questions to at Thank Michael

Michael Haack

call in you today, speaking look summer. the the Thank again everybody we’ll and you for forward with to attending

Operator

day. this disconnect. gentlemen, today’s have may a conference Ladies participating, call. and you Thank now you Everyone for great concludes

Eagle Materials (EXP) 4 Feb 202020 Q3 Earnings call transcript