Vulcan Materials Company (VMC) has undergone a rating cut by Moody’s Investors Service, a subsidiary of Moody’s Corp. (MCO).
The company’s senior unsecured rating has been lowered to “Baa3” from “Baa2”, whereas its commercial paper rating has been reduced to “Prime-3” from “Prime-2”. Moody’s has also maintained a “negative” outlook on the company.
According to Moody’s, Vulcan’s weaker volumes and intensified pricing competition in the Southeast and West of the U.S., particularly for asphalt and gravel, inspired the rating downgrade.
Another key factor is the end of federal stimulus for certain projects, including highway construction undertaken by Vulcan. As a consequence, Vulcan is expected to experience a lower demand from the construction industry.
Recently, Vulcan’s corporate credit rating has also been downgraded by Standard & Poor’s due to disappointing performance in the second quarter, ended on June 30, 2010. Operating earnings and EBIDTA underperformed expectations.
Vulcan Materials, one of the largest construction aggregates producers in North America, is going through tough times. Intense competition from big industrial players such as Cemex (CX) and Lafarge Coppee SA can negatively affect the company.
In addition, the expiration of the federal tax credits for homebuyers that led to a declining demand of housings is, in turn, affecting the demand in the closely interrelated sectors such as construction, building materials and home appliances.
Vulcan’s net profits for the second quarter stood at $20.5 million or 15 cents per share, up $4.9 million or 1 cent from the same quarter last year. However, the company failed to meet the Zacks Consensus Estimate of 24 cents per share. Also, revenues were at $736 million.
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