Vulcan Materials Company (VMC) reported loss from continuing operations of 10 cents per share, below the Zacks Consensus Estimate of a break-even in the fourth quarter of 2009.
In the fourth quarter, aggregates shipments declined 23% year over year, reducing earnings $0.57 per diluted share. Aggregates pricing increased 5%. Aggregate cash fixed costs decreased 8% compared to the year-ago quarter. Selling, administrative and general expenses declined 7%. Total contract awards for highways increased 13% in Vulcan-served states.
Key Vulcan-served markets in the Mid-Atlantic, Southeast, Midwest, and Southwest regions were hampered by an unusually large amount of rainfall throughout the quarter. Additionally, aggregates volumes were negatively affected by the varied timing of spending of stimulus-related funding, uncertainty regarding timing and duration of an extension of the federal highway bill and the lack of visibility about the timing for ultimate passage of the new multi-year highway bill.
Construction activity on stimulus-related highway projects has varied widely in Vulcan-served states and certain key states lagged the rest of the country. Florida, Virginia, California, and Georgia had spent less than 10% of their highway-related stimulus funds by the end of 2009. Conversely, Illinois, Tennessee, and North Carolina spent 41%, 36% and 23%, respectively of stimulus funds by year-end.
Segment earnings in asphalt and concrete were a slight loss due to the earnings effects of lower volumes and lower materials margins. Asphalt materials margins in the fourth quarter were lower than the prior year as lower selling prices for asphalt mix more than offset lower costs, including a 29% decline in the costs for liquid asphalt.
Outlook
Overall, the outlook for aggregates demand in 2010 reflects an increase in highway and other infrastructure-related construction activity due primarily to stimulus-related funding. Additionally, residential construction activity should increase year-over-year in 2010, albeit from low levels. Further weakness is expected in private nonresidential construction. As a result, aggregates volumes are expected to be flat to up 5% from 2009 levels. For the full year 2010, aggregates pricing is expected to improve 2% to 3%.
In asphalt business, the company expects sales volumes to increase approximately 5% from 2009 levels. Pricing for asphalt mix is expected to increase from 2009 levels but not enough to offset projected higher prices for liquid asphalt and aggregates. As a result, it expects lower material margins in asphalt compared to the prior year. In concrete, sales volumes are projected to remain flat with the prior year and pricing to decline modestly, reflecting continued weakness in private nonresidential construction.
The company has positioned itself to participate efficiently and effectively in the $50 to $60 billion stimulus-related construction industry, including significant remaining portions of $27 billion for highways and bridges. 2010 is expected to be the largest year of stimulus-related highway demand for its products followed by another solid year in 2011.
Vulcan Materials Company is the United States’ largest producer of construction aggregates, a major producer of asphalt mix and concrete and a leading producer of cement in Florida. Major competitor is Martin Marietta Materials Inc (MLM).
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