Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue of $609 million and a 16% increase in earnings per share.
- Strong operational performance despite challenging weather conditions.
- Consistent focus on safety, efficiency, and sustainability.
- Progress on several organic investments, including the Texas Lehigh slag grinding facility and Mountain Cement facility upgrade.
- Healthy balance sheet with leverage at or below 1.5 times, allowing for flexibility in investments and shareholder returns.
Negative Points
- Lower cement sales volume due to weather delays and fewer shipping days in June.
- Uncertainty in the near-term demand cycle for the wallboard business.
- Increased working capital leading to a 6% decrease in operating cash flow.
- Potential inflation in wallboard costs due to rising OCC prices.
- Challenges in predicting the exact timing and magnitude of future price increases in both cement and wallboard.
Q & A Highlights
Q: OCC costs have been rising. How should we be thinking about the directional impact on wallboard in the near term? And could lower natural gas prices help offset this?
A: OCC prices have been flat in April, May, and June, which will pass through to the wallboard business in the September quarter. Natural gas prices are lower, and we are 40% hedged for the remainder of fiscal 2025 at current market prices.
Q: Can you provide more detail on the sustainability of the margin improvement in cement?
A: We have good visibility into lower fuel costs for the remainder of the year. Our teams managed maintenance costs well during the quarter, which contributed to the margin improvement.
Q: Did you see residential projects getting pushed out due to financing costs? Are there concerns about rising inventory levels?
A: There is not a significant amount of inventory build in wallboard due to its perishable nature. While weather delays impacted some projects, the low supply of homes continues to support resilient construction activity.
Q: Any plans for cement price increases in the second half of the calendar year?
A: Some markets have price increases planned for the second half, but the exact timing and magnitude will depend on market conditions and discussions with customers.
Q: How did weather impact cement volumes in the quarter, and is there an opportunity to make up for lost volumes in the second half of the year?
A: It's hard to quantify the exact impact of weather, but significant delays were noted. We expect a busy second half of the year as projects delayed by weather are pushed out.
Q: What drove the strong wallboard margins, and what are your thoughts on sustainability?
A: Lower natural gas prices and effective cost management contributed to strong margins. Our well-positioned assets and long-term raw material contracts support sustainable performance.
Q: How did cement volumes track intra-quarter, especially when weather cleared up?
A: Volumes improved in June despite two fewer shipping days. We feel good about the forward view of cement demand and have the inventory to meet customer needs.
Q: How should we think about the margin cadence for the rest of the year in wallboard and cement?
A: Natural gas prices are expected to remain stable, while OCC prices will see a slight increase in the September quarter. Cement margins should continue to perform well with lower fuel costs and completed maintenance programs.
Q: What is the truck to rail mix for wallboard transportation?
A: Wallboard transportation is primarily by truck, with very little moved by rail due to inefficiencies.
Q: Do you expect cement price increases to return to a once-a-year cadence?
A: It's hard to predict the exact timing of price increases. While this year saw limited second-round increases due to a delayed construction season, future increases will depend on market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
