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Vulcan Materials (VMC)
Q1 2011 Earnings Call
May 05, 2011 10:00 am ET
Donald James - Chairman, Chief Executive Officer and Chairman of Executive Committee
Jerry Revich - Goldman Sachs Group Inc.
Scott Levine - JP Morgan Chase & Co
Brent Thielman - D.A. Davidson & Co.
Adam Rudiger - Wells Fargo Securities, LLC
Ted Grace - Susquehanna Financial Group, LLLP
John Kasprzak - BB&T Capital Markets
Garik Shmois - Longbow Research LLC
Previous Statements by VMC
» Vulcan Materials' CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Vulcan Materials CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Vulcan Materials Q2 2010 Earnings Call Transcript
Good morning. Thank you for joining this conference to discuss Vulcan's first quarter results. I'm Don James, Chairman and Chief Executive Officer of Vulcan Materials. Joining me today is Dan Sansone, our Executive Vice President and Chief Financial Officer; and Danny Shepherd, Executive Vice President, Construction Materials.
Before we begin, let me remind you that certain matters discussed in this conference call contain forward-looking statements, which are subject to risks and uncertainties. Descriptions of these risks and uncertainties are detailed in the company's SEC reports, including our most recent report on Form 10-K.
Let me begin by making some brief remarks about last week's tragic and devastating tornadoes that moved across the Southeast. As you know, our home state, Alabama, was particularly hard-hit by these storms. First, from the human perspective, I'm pleased to report that all Vulcan employees living in the numerous affected areas in Alabama as well as Mississippi, Georgia, Tennessee, North Carolina and Virginia are safe, although some employees have lost their homes and many more suffered serious property damage. But there's great devastation, loss of life and many tragedies as a result of the tornadoes in many of the communities where Vulcan has operations.
Virtually all of us here in Alabama and our other southeastern states know someone affected by the storms. So on behalf of all current and former Vulcan employees, let me say that our thoughts and prayers go out to those who have suffered loss.
Vulcan is actively involved in the recovery effort here in Alabama and in our other affected states with both human resources and financial support. I would like to thank every employee who has jumped into action to help others. Your can-do effort helps makes this organization special.
From an operations perspective, we had modest damage and electrical outages in several locations but nothing that should impact our ability to serve our customers going forward.
Turning now to the first quarter. Our results were generally in line with our expectations and support our broader expectations for full year volume and earnings growth in 2011. Freight-adjusted aggregates pricing was in line with the first quarter of the prior year. Unit materials margins were higher in both ready-mix concrete and asphalt mix.
On a comparable basis, SAG expenses were flat with the prior year, and a significant amount of the earnings effect from higher unit cost for diesel fuel and liquid asphalt was recovered through improved production efficiencies in Aggregates and higher pricing for asphalt mix.
One aspect of our first quarter results that was outside our expectations was the weather impact on March sales volumes. After a very solid start in January and February, extremely wet weather hampered aggregate shipments in March in many of our key markets. As a result, aggregate shipments in the first quarter were almost 3% lower than last year's first quarter. Despite the inclement March weather, our Virginia, Tennessee and Georgia Aggregates businesses realized increases in shipments compared to last year's first quarter. Older markets, however, including South Carolina, Florida and along the Gulf Coast experienced declines in shipments.
Freight-adjusted aggregate pricing in the first quarter was in line with the prior year but more importantly, is underpinned by several factors we consider to be positive. First, there was less variation around the change in average selling prices across our geographic footprint. Second, on a same-store basis, adjusted for mix and freight, the overall average selling price was slightly above last year's levels. More specifically, the adjusted selling price in Florida increased from the prior year's level, a very positive sign for one of our important markets.
During this economic downturn, our employees have effectively managed the business. These efforts have not only included minimizing cost but have also included aggressive management of working capital, including a reduction in total aggregates inventory. In the prior year, inventory reduction negatively affected our GAAP earnings and margins because of the reduced production levels. In the first quarter of this year, our production cost benefited from our ability to increase production and efficiency and helped to offset a 34% increase in the unit cost for diesel fuel.
Overall, first quarter segment earnings in Aggregates were approximately $11 million versus $15 million last year. Most of the decline in segment earnings in aggregates related to the lower volumes.
In our Asphalt segment, earnings were a loss of $200,000 versus earnings of $1 million in last year's first quarter. Selling prices for asphalt mix increased 4%, offsetting most of the earnings effect of the 12% increase in liquid asphalt cost. Unit material margins in the first quarter increased slightly from the prior year and were in line with those in the second half of 2010.