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01/11 03:38
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed signals: strong cement and aggregate volumes but declining Wallboard performance and operating cash flow. The Q&A highlights stable pricing in a challenging demand environment, cautious optimism for cement, and unclear responses on volume sustainability. While share repurchases and dividend payments are positive, the lack of clear guidance on volume trends and the impact of seasonality tempers optimism. Overall, the sentiment is neutral, reflecting a balance between positive and negative factors.
Revenue Second quarter revenue was a record $639 million, up 2% from the prior year. The increase was driven by higher cement sales volume and the contribution from the recently acquired aggregates businesses. Excluding the acquired businesses, consolidated revenue was up 1% from the prior year.
Earnings Per Share (EPS) Second quarter earnings per share was $4.23, down 1% from the second quarter of fiscal 2025. The quarterly EPS reflects lower net earnings, mostly the result of lower Wallboard sales volume, offset by a 4% reduction in fully diluted shares due to our share buyback program.
Heavy Materials Sector Revenue Revenue was up 11%, driven primarily by increased cement sales volume and a 24% increase in concrete and aggregates revenue. Record aggregate sales volume was up 103%, including the contribution from the recently acquired aggregates businesses. Organic aggregate sales volume was up 35%. Operating earnings were also up 11%, primarily because of the 8% increase in cement sales volume, which was partially offset by a 1% decline in net sales prices.
Light Materials Sector Revenue Second quarter revenue in our Light Materials sector decreased 13% to $213 million, reflecting lower Wallboard sales volume and a 2% decrease in Wallboard sales prices. Operating earnings in the sector were down 20% to $78 million, primarily because of lower Wallboard sales volume.
Operating Cash Flow Operating cash flow decreased 12% to $205 million, primarily reflecting working capital changes on tax payment timing.
Capital Spending Capital spending increased to $109 million. Most of this increase was associated with the modernization and expansion of our Mountain Cement plant and the project to modernize our Duke, Oklahoma Wallboard plant.
Share Repurchases Approximately 396,000 shares were repurchased for $89 million in addition to paying quarterly dividends, returning a total of $97 million to shareholders in the second quarter.
Net Debt-to-EBITDA Leverage Ratio At September 30, 2025, the net debt-to-EBITDA leverage ratio was 1.6x.
Wallboard production modernization: Modernization of the Duke, Oklahoma Wallboard plant to reduce production costs by 20% through automation, reduced electricity consumption, and lower maintenance needs.
Cement and aggregates volume: Cement and aggregates volume increased for the second consecutive quarter, supported by infrastructure investments and private nonresidential construction dynamics.
Cement price increases: Price increases announced across most markets effective January 1, 2026.
Record revenue: Achieved record revenue of $639 million, with a gross margin of 31.3% and EPS of $4.23.
Heavy Materials sector growth: Revenue in the Heavy Materials sector increased by 11%, driven by an 8% increase in cement sales volume and a 24% increase in concrete and aggregates revenue.
Light Materials sector decline: Revenue in the Light Materials sector decreased by 13%, primarily due to lower Wallboard sales volume and a 2% decrease in Wallboard sales prices.
Laramie, Wyoming cement plant modernization: $430 million modernization and expansion project to reduce manufacturing costs by 25% and improve energy efficiency, scheduled for completion by the end of calendar 2026.
Capital allocation strategy: Continued focus on high-growth, high-return projects, including M&A opportunities and share repurchases, with $97 million returned to shareholders in the second quarter.
Residential Construction Pullback: The company faced headwinds from a pullback in residential construction, which impacted wallboard volumes due to reduced demand caused by high interest rates and affordability challenges.
Wallboard Sales Volume Decline: Wallboard sales volume decreased, leading to a 13% revenue decline in the Light Materials sector and a 20% drop in operating earnings for the sector.
High-Cost Legacy Plants: The Laramie, Wyoming cement plant and Duke, Oklahoma wallboard plant are among the oldest and highest-cost facilities in the company's network, necessitating costly modernization projects to improve efficiency and reduce costs.
Regulatory Challenges: Federal and state environmental regulations make it increasingly difficult to permit new cement capacity additions, limiting growth opportunities.
Economic and Market Uncertainty: High interest rates and affordability challenges in the housing market create uncertainty in residential construction, a key driver for wallboard demand.
Capital Expenditure Pressure: The company is undertaking significant capital expenditures, with fiscal 2026 spending expected to range between $475 million and $500 million, which could strain financial resources.
Laramie, Wyoming cement plant modernization and expansion: The $430 million project is on track to be completed by the end of calendar 2026. It aims to modernize the plant, reduce manufacturing costs by 25%, lower energy usage, and increase the use of alternative fuels and natural gas.
Duke, Oklahoma Wallboard plant upgrade: The modernization project will lower per unit production costs by 20% through reduced electricity consumption, automation, and lower maintenance needs. It positions the plant for long-term growth when volume recovers.
Cement and aggregates volume outlook: Volumes are expected to remain favorable for the remainder of fiscal 2026, supported by unspent Infrastructure and Jobs Act funds and private nonresidential construction dynamics. Price increases have been announced effective January 1, 2026.
Wallboard demand outlook: Near-term demand remains reserved due to high interest rates and affordability challenges. However, mid- and long-term growth is expected due to decades of underbuilding of homes.
Capital spending guidance: Total company capital spending for fiscal 2026 is expected to range between $475 million and $500 million, primarily driven by the modernization projects in Laramie and Duke.
Quarterly Dividends: The company paid quarterly dividends as part of its shareholder return strategy.
Share Repurchase Program: The company repurchased approximately 396,000 shares for $89 million during the second quarter. There are approximately 3.9 million shares remaining under the current repurchase authorization.
The earnings call reveals mixed signals: strong cement and aggregate volumes but declining Wallboard performance and operating cash flow. The Q&A highlights stable pricing in a challenging demand environment, cautious optimism for cement, and unclear responses on volume sustainability. While share repurchases and dividend payments are positive, the lack of clear guidance on volume trends and the impact of seasonality tempers optimism. Overall, the sentiment is neutral, reflecting a balance between positive and negative factors.
Despite record revenue and increased EPS, operating earnings in key sectors declined. The Q&A reveals stable but not improving cost trends, and management's evasive responses on regional dynamics may indicate uncertainties. Share repurchases and dividends are positives, but increased capital spending and debt levels balance this out. Overall, mixed signals suggest a neutral stock price movement.
The earnings call presents mixed signals: despite a decline in EPS and heavy materials revenue, there's a positive outlook with increased wallboard sales and strategic acquisitions. The Q&A reveals management's focus on long-term growth and strategic investments, yet lacks clarity in some responses. Share repurchases and a strong capital structure are positive, but adverse weather and maintenance costs weigh on short-term results. Without market cap data, the prediction leans neutral, as positive and negative factors balance out.
The earnings call summary shows mixed signals. Basic financial performance is weak with a decline in EPS and revenue, but the company has a strong balance sheet and continues to invest in modernization. The Q&A session reveals management's evasive responses on spending and pricing impacts, adding uncertainty. Positive factors include share repurchases and dividends, but weather impacts and operational downtime are concerns. Given the mixed performance and cautious outlook, the stock price is likely to remain stable, resulting in a neutral sentiment.
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