Vulcan Materials Company
), the largest producer of construction aggregates in the U.S.,
recently announced several transactions related to debt
reduction, asset sales and promising investments, thereby
building up its overall credit portfolio.
In order to enhance the optimization of its resources, the
company sold off excess land in California and a small quarry in
rural Virginia. Alongside, the company sold off a portion of the
future produce of four of its aggregate quarries in South
Plum Creek Timber Company, Inc.
) for $75 million. Vulcan retains full ownership of the
quarries in South Carolina. These transactions will result in pre
tax gain of $120 million, of which the company expects to record
$47 million by the fourth quarter of 2012.
In addition, the company acquired 2 active quarries and an
additional reserve, worth 80 million. These acquisitions are
expected to strengthen the company's position in the aggregate
markets of Texas and Georgia. Also, the company reduced its debt
by $135 million during the fourth quarter of 2012.
All of the transactions have been a part of the company's
initiatives announced in February 2012. The company announced two
initiatives, a Profit Enhancement Plan (PEP) and planned asset
sales in order to improve its earnings and cash flows, pay off
debts, and thereby strengthen its overall credit profile.
The PEP plan is designed to reduce costs as well as enhance
profitability by streamlining management structure over the next
18 months. The plan is expected to improve earnings before
interest, taxes, depreciation and amortization (EBITDA) by $100
million annually by 2014 at current volumes.
Under the planned assets sale, the company intends to divest its
non-core assets (ready-mix concrete and cement operations,
non-strategic aggregates assets, and real estate) in order to
focus on the higher growth Aggregates business. These sales are
expected to generate after-tax net proceeds of $500 million by
mid-2013 and improve the company's liquidity position and
earnings. Though these initiatives will hurt the company's
earnings in the near term, they will be accretive to its earnings
growth profile in the long term as demand improves with the
overall market recovery.
Vulcan Materials Company carries a Zacks Rank #3 (Hold). Vulcan
is expected to benefit from the growing housing market demand
thus leading to higher demand for its products. On the other
Eagle Materials Inc.
) carries a Zacks Rank #1 (Strong Buy) and
Texas Industries Inc.
) carries a Zacks Rank #2 (Buy).
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VULCAN MATLS CO (VMC): Free Stock Analysis
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