Vulcan Materials (VMC) reported a 20% fall in net profits to $48 million or 38 cents per share in the third quarter, from $60 million or 53 cents per share in the year-ago period. The decline was on the back of a 19%-29% fall in sales volumes for the company’s key product lines. However, the company did manage to meet the Zacks Consensus Estimate.
Revenue declined 23% to $778 million. Gross profit as a percent of net sales — excluding depreciation, depletion and amortization — increased to 34% from 31% in the prior-year quarter. This was attributed to Vulcan’s efficient cost management and productivity improvements.
Segment Performance
Revenue in the Aggregates segment shrank 19% to $533 million due to lower shipments, which more than offset the earnings benefit from improved prices, lower unit costs for diesel fuel and cost control measures. Shipments declined 20% due to weak demand and wet weather in certain key markets. Average selling price increased reflecting wide variations across the markets.
Revenue in Asphalt Mix and Concrete slashed 29% to $243 million. Earnings in the segment increased as material margins improved due to lower costs for liquid asphalt, more than offsetting the earnings effect of a 19% decline in asphalt volumes. Concrete earnings decreased due to lower volumes.
Revenue in Cement sank 23% to $20 million. Earnings in the segment declined due to the effects of weaker sales volumes, slightly offset by lower energy costs.
Financial Position
Vulcan had cash and cash equivalents of $47 million as on Sept. 30, 2009. Long-term debt amounted to $2.57 billion as on that date. The long-term debt-to-capitalization ratio stood at 39%.
In the first half of 2009, Vulcan had a net cash flow from operating activities of $355 million, up from $278 million in the year-ago period. Meanwhile, capital expenditures totaled $94 million during the same period, down from $295 million a year ago.
In the upcoming quarter, Vulcan expects capital spending to be $140 million, down from $175 million projected at the end of the second quarter and down sharply from the $353 million spent in 2008.
Vulcan Materials, based in Birmingham, AL, together with its subsidiaries, engages in the production and sale of basic materials for the infrastructure primarily in the U.S. The company serves asphalt mix, ready-mixed concrete and concrete product producers as well as construction, road and highway, nonresidential building, nonresidential parking lot and residential contractors. We recommend the shares of the company as Neutral.
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