Eagle Materials (EXP) 26 Oct 222023 Q2 Earnings call transcript

Good day, everyone, and welcome to Eagle Materials Second Quarter of Fiscal 2023 Earnings Conference Call. This call is being recorded. At this time, I'd like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. sir. ahead go please Haack

Thank you call This Eagle conference Welcome Michael Good our second morning. for XXXX. to quarter Haack. Materials Jason. for is fiscal

Bob our Joining Development Corporate Financial Craig today Communications. Vice Kesler, me Officer; of are and and Stewart, Strategy Executive President Chief

a call. and glad are webcast. To to please to eaglematerials.com be access on be made the in the today. There with it, We presentation us connection click link could will you slide with this go

note please cautionary the slides, and the first statements the during discussed our accessing you're could These results risks that slide covers from those subject during disclosure made cause While differ uncertainties that to forward-looking the regarding to statements call. this call. are

also This end our and about our For further information our I'd please morning, our for agenda. refer a is at press quarter, of included to few release. business to ESG which this offer like outlook perspectives the the disclosure,

products demand talk me is and let First, share, report record record earnings pleased up up our about be revenue XX% per quarter. The strong. I'm to XX%. for continues the to

of Our more our and mitigated pressures. Price entire system. price are realizations by inflation cost across across our geographic the driven earnings improvement results businesses than robust

We and roughly XXX,XXX shareholders also shares. through $XXX to the returned million dividends repurchase of

in This economic cycle. and our serve operational points strategic at quarter's all the reflects us performance disciplines. Disciplines well would

strong with We focus our have keeping systematically clear a strategic been strategic growing improving and and in boundaries. businesses

to growing quarry to the reserves acquisition this aggregates today successful decisions well-demonstrated that sustainable ability in over serve us growth extends profitable cycle. in our have our our advantages This made resilient. of The might be of high our pursuit decisions as low-cost Nevada, The producer our will this distribution increasing this significant and which Nashville, today provide and the us region providing are operational quarter's the a rapidly we access and Northern well actions in and included market. make terminal aggregate ahead the operations in eventualities advantages Southeastern years reach are increasingly any to strategy we positions making significant future and the we of for purchase

of grow doing have we to in the two continue as heavy side will our ways. business We been

is our returns First that asset and acquisitions that our through and system second meet capabilities. financial growth through is criteria strategic expand the investments

We improving in will the and to our also invest sustainability existing assets. the profitability of continue

the outlook with Now businesses for side. heavy let the to me turn starting our

demand for well before. as cement aggregates, into pricing perhaps the into have visibility than as For perhaps power opportunities best and we ever multiyear the

We have and announced for a cement is a our three die to price over pretty cast is the construction substantially January see we think public construction to stretch network of could frame. XXXX. The spending effective infrastructure not next well increase five-year higher. time across plants It X, public

Cement above system Some excellent picture. demand well or averages which see state the are averages. in budgets state three for cement budgets decade visibility US are time, are contract markets DoT demand footprint. high and facts expansion highly is this supporting years. constrained optimism the skews the The DoT no national in line, US manufacturing supply will Bottom running cement we DoT favorably and the we next on that magnitude for operate. portion dollars above material states At for change state infrastructure are fundamentally response same Eagle allocations, we budget build of values receiving of fund Eagle trending award Infrastructure prior in have

for how provide frame. for power. expensive basis US These cement markets. we We should the healthy a to know And the same on have on capacity are excellent our or cement formula our visibility facts in imports manufacturing delivered heartland thereof pricing markets time expansion a lack relatively

we turning to in wallboard ahead. expect to light softening it rates reasonable side, I attest. construction reasons to main demand have the are this in housing in yet rise there million Now some units are today. under our as demand given that is not The all-time X.X interest as for the is quarterly the the want seen rapid first This results softening emphasize, U.S. record. to an

combined. Our the South the important important in footprint three wallboard the production country business other more most the Sun has regions U.S. than in the The its Belt. is in region U.S.

where are outlook remodeling the another and driver near-term is the wallboard We and demand important appear for favorable. of Repair action implications is. Wallboard

today wallboard side, we the has business many its are high-capacity sold our operate plants cement in our To our turning name wallboard comparatively resembling business. out. utilization at Now characteristics supply cement ways to in three and

each the Our and Both higher for U.S. conditions is utilization be rebuilding albeit products of substitutes with mid-term demand these persistent to suggest through America. and very outlook and are construction different reasons. to Cement growth significant will Both businesses businesses. capacity both have essential limited would for the in Wallboard constraints addition

let operations. plant but as with joint talking whole, of I'd plant venture. about has recently failure that turn struggled delighted issues. I our Texas Lehigh Now cement am a results our remiss reported is be we me network plants This one plant across with to not equipment the in

With issues failures in our This long-term. in this extended some which few numbers. issue. quarter's and over commonly one-off of the time in As engineering fix plant keeping like reflected cause to are not usually doing the Supply additional us these want of our failures plants condition. hallmarks the replacements work the chain are and little to is has ensure failure that one seen. with This equipment we each but in repairs properly downtime had a fix we resulted it root that well these of takes serve you a new have understanding the will know,

root to of downtime will coming that these into the cause be Some issue. but when quarter, feel fix confident will the this the reliable, we of extend plant the more investments

well cement. with with that before Portland report have lines is face XX% I go limestone as and mentioned approval to agenda, opportunity of but port Let net Adoption DoTs marketing our limestone, our equipment some be and some capital on I to plants. state as for future not the a were to environmental. we significant cement. make locations close way our investment acceptance manufacturing chain is path cement that PLC biggest on system-wide further. quarter, clinker the best progress. I'm and at almost with commented in today sales needle, through all from state continue Last me us we DoTs It the happy our issues our our zero requires side comments for make overnight approvals time moving will as introduction, starting Implementing of ESG completed on the and supply to quickest

that with two proportion to PLC quarter, range. grew plants in shipping to This the XX% XX% XX%

construction-grade Shortly cement importance We let more intend be With the goal over and is cementitious product all in XXX% sold-out the the of have at Meeting operations we updating given of after by to the the our well cement will set as very implications more limestone enable it a explicit, to quarter. also move conditions. will to cementitious footprint progress our disclosure turn formally for and as carbon to of of this produce we me their improve the XXXX. S review our more goal financial the of make that, part will production which are E level. Craig critical broader we ESG. on internal an it first importantly these us to But goals year of as our

you, Thank Michael.

Second quarter revenue million, XX% was year. a an $XXX increase of record prior the from

Northern business well increased The sales volume. increased acquired recently Excluding higher cements sales Colorado XX%. and as increase reflects the in prices revenue wallboard as wallboard

were earnings increase. XX% diluted $X.XX Second a quarter per share

our actions shares share increase of buyback the XX% down was refinancing our year The in the year. and XX%. prior was due EPS earnings driven program. impact Fully diluted count from reduced by the are prior Excluding increase improved the to

Turning were driven and the material cement cement by the Operating now which higher the costs. shows XX%, This concrete prices. increased includes increased energy in which partially higher offset cement segment sector segments. slide and sales our Revenue in prices maintenance our sector to was by heavy aggregates performance. and reflecting up XX%, our results earnings next

round markets. a Given across cement the the we our implemented strong early price July majority in of of increases second demand backdrop,

Moving reflecting higher higher on XX%, sector light the XX% prices wallboard namely to materials higher our costs, and light input paper. the to next increased Operating sales offset to material slide. earnings $XX reflecting which freight, volume. net Revenue sector helped and in increased sales prices energy million, the in

significantly in and fiber September recycled in have costs come October. However, down again

our now which Looking cash at strong. remained flow,

capital $XX to spending our fiscal year, operating million. six flow first million of the $XXX improved to increased and During months XX% cash

$XX of acquisition with the Michael purchase Nashville, during million. a the distribution of price completed we quarter terminal As cement approximately in Tennessee, mentioned, the

our also Year-to-date dividend. our repurchased outstanding X.X% XXX,XXX for common quarterly we of or our paid stock million have shares. repurchased of approximately shares, We shares X.X million $XXX and

We our under shares also remaining have current authorization. repurchase million X.X

debt-to-cap Finally, X.X committed quarter of question-and-answer approximately Session flexibility. of for a end meaningful and our the $XXX today's now was maturities, us our million hand. call. times. was the on capital financial At cash Jason, we giving attending near-term quarter to have we'll net debt leverage the was XX, million ended you the ratio at look and September Question-and-Answer debt-to-EBITDA XXXX, our Total ratio Thank liquidity no XX% at substantial move with session. net structure. We $XX

Thank you.

begin from now go from will Our Grooms session. first ahead. Instructions] question the Stephens. We comes Please, Trey question-and-answer [Operator

Congrats Hey, the good morning, everyone. quarter. on

Thanks.

the First on business. question is cement

really out. And up seen about Clearly, that on end relative kind the in think how just and into markets of maybe and those demand for as as your XXXX? are You construction, remain different geographically outlook you progress markets mentioned you And year? see what's question also, we you kind we've we any the remain condition we next if the your guess, can on virtually should expectations for you private there? I look health in those kind your this going as footprint at softening, well res, look in calendar as you're maybe into, is -- with around, that also of markets holding do we sold of the there but as talk of markets, generally infrastructure sold-out

question I'll Yes. it. that with take Trey,

we than have extending you see that ago So bad with making network some that across, our it. network look the good a cement network did times is And resilient times when plants we and little and and we differently years with run why in acquisitions that that's we reliable of of bit now. did during system sure we a

comments footprint the of we and said, overall, plants and those we on We this Southeast could favorable. the So this the this nothing earnings distribution pretty feel shielded that DOT of Nashville getting was public from areas. the that comfortable, purchase budgets infrastructure mid-term extend that we that of the markets markets. region they're hit a that higher spending. too near our be with think business multiple mind very our side where will some our that as into down hallmark profitable very for there's my state in construction And doesn't my IS, looked Where participate of infrastructure spending into over in through imports

a markets today. and it's on sold-out look another in We With very in at going individual a just we position great overall now. more is another Cement consumed itself Your it. position that softening or a it think We really right than position. be submarket in network. that as in It's market in with good that some think is Cement submarket one question sitting a to

stand you're March year we XX-month front? when next that I conversations and maybe expecting largely Thank on color And Cement you in? guys know business on I And kind front. on Great. today the early the of any next rest for be for any the cost it there the you're year on having in the those of year. are Cement energy on maybe there with in for guess And reset guess lock for that locked on the I fiscal Michael. you Perfect. I – would guess folks from what energy for with the sticking with color where

would Yes. Thanks, a tell the cost inflation Energy Trey. The didn't there. side in we upward you've – And sequentially of I got you change see fiscal lot right. has been on it XXXX.

we for will of negotiations beginning year. been a more a Look, a largely the we fuels you in of change inflation are at into those But so pressure. type continuing of here prices But go gas You the XXXX. FY as year, is natural to as the we solid getting locked continue the little down bit recently into we're for your favorable. next that's bit. And upward little see there similar fuel energy to can mix see

price have side a of your the that's cover footprint or that announced that And margin step-up for the that expecting, increase going the there be outlook increase thought the to kind follow-on of there, enough that across just things you're as pricing? to any the around January cost with that given you in is color to

the that's with intent We've on side it. Yes. – Trey definitely been that

going We numbers the any. increase announced to on. with haven't with increases. on any We've recover price we're our that to cost But the customers working going what finalized be yes, we're on and materializes

of Thank Okay. the Well, for thanks, it on I'll the year. rest and pass good luck you.

Please comes go question ahead. D.A. next from Thielman The from Davidson. Brent

a of and specifically or that's issues you. great. near-term indirect sort just first Good cement. impacts on direct in any was The your River Mississippi business of question. more – Thank having morning. thinking My whether Hey, the question the

we're wouldn't Brent, the Mississippi that impact so on no, River not Yes. us.

just I effects. know if any there's Yes didn't indirect Okay.

the Okay. in the prices consider. in there more prices that eventually? dive just Is recently on behind pricing much strength just the effect should to have here And then wallboard an OCC in that wondering

couple takes about the I but will that tailwind into eastern we has wallboard the we've material nice prices in No. there we've part have largely for and be for for It time as little the well But that get of then through around October, been business, a to the issues raw in about will in as paper OCC Look a as mill that business. of seen favor I some winter. talked dynamics down demand comments some that and pricing bit see of as September we my flow country. a the the think others again to our strength been of the the wallboard in lower being quarters in wallboard costs talked and in supply going

your of or facilities whether not the effectively PLC then your PLC? serve take seeing the play able being the And you to for already sell governor Okay. PLC comments if effectively of or you're that Is on DOTs by in XXXX. all all on that factors serve you where I'm that? will they're into all already accepting just already DOTs other wondering kind

things. Yes. It really of mixture is two a

the status need that issues to keep the of of DOTs pretty expect why do expanding along We comments far equipment range. significantly that's on some PLC. it see XX% that order And on plants with you XX% side. to have chain we some we're some approval XXX% to order to my XXX% the -- in With we material some to with plants in convert supply to

for we but So, parts plant XXX% delivery compliant. the XX% with there be get some grinding some plants to equipment of get will to different the capacity for be it then need plants these additional wait final or XX% we to partially able installation and that be either the got to at to

great. guys. Thanks Okay,

ahead. Please from question next from Citigroup. Pettinari comes go Anthony The

Sohnen taking question. Anthony. This for my for is on Thanks Asher

you understanding we that Just on size January customers, that as thinking And increase hike maybe? another communicated are roughly? those double-digit that ongoing conversations can the then about to you Are normal midyear a hike sort should January sort implied of now? April, is another a customers communicate than new January to rather customers is of or just message historical that hike, expect the you

and we'll ended we'll next up have report with with out it. continue to those quarter our the we So, discussions customers where

a on amount leave what past had with in all the dollar to similar We with expect is the it. we've cadence I'll

increases, those. price don't on I want future for As speculate to

the see with evaluate We market that. note of we've our market stands. -- pricing our in We we market strategy what we'll we'll half to we opened the forward see continue then the And in year. saying will the did going will determine will where that monitor and and the second happens

switching Great. Wallboard. And then to

working cover with about their in reduce pricing talked down. talk home as You to But medium costs prices about come term. homebuilders strong we the of remaining some material their producers the

or So, sort builders any started effect. conversations you wallboard from to of having side to on any of I'm sort pressure the just if see wondering that that

Yes. We It increase in a had August. price in Wallboard. was mid-quarter

are you can in our XX we were XX across I the were about up there months to able price the meantime sequentially. footprint. questions prices increase see But from our As understand achieve now. that largely a

Sure. Thanks. I'll turn it over.

The next question go Jerry Sachs. from comes Revich ahead. Please from Goldman

that course business we Yes, hi. of the Can I'm that and see repair whether come anything obviously the a but in miscellaneous of cetera? up those could talk lot -- Good the cement just services at about items? inflation some or morning commodities inflation least about the wondering Any over contracted everyone. Craig like the changes meaningful for about any is if stabilizing labor talk what quarter. you of just of cadence things and you similar et

that things I larger the increase. cost of maintenance and energy year-over-year energy two the Yes, being pointed component were the out

I in prices wasn't significant. earlier As energy the sequential mentioned change

for As costs in the year. we we locked generally said those

will but XXXX. sequentially within things not that changes. of that bucket a inflation a is generally of major maintenance some well. Again kind the We not that, parts component see see as part some on that's ongoing businesses of of been labor like inflation these the into But FY consume We we significant. as lot do

do What you sorry ahead. -- please go

quarter. but down seems we of freight also the in OCC September more to That's some flat-lined just the here in then and them And of here. kind plateaued from within year. the have a again come cost where business as in of say mentioned post earlier would significantly I prior have were have flat-lined we the Wallboard prices October

pricing in see opportunity increases similar into very spoke Could outpace today see strong how price to and thinking versus that January X% they maintain inflation you we about? Cement, price about year-over-year expansion margin the potentially, ago. Do or price a balance been increase robust profitability, necessary with an the are year big so you the actually with essentially January? are margins And have cost you

Yes. past our over this Look Jerry, points expand able XXX we wholly-owned margins basis were quarter. to

inflationary in facilities increases we're this our seeing. So accretive. at utilization price those supply-demand pressures has January and operating offset year some of margin in that these the as pricing than given dynamics we rate the a and that achieved high production again And where mentioned are where more July of and Michael should are been

I didn't folks out. And can last deliberate all are your you year-to-date? big the months construction we're the slow to improvement you about ask stock with deployment on buybacks very mean in that question, the I but to shortchange capital you program XX signs all for looking residential spoke

you but the cost get your that. have the margin like increases trough in buyback business It historical talk can wallboard, confidence industry? the given your So behind on maybe on stock margins the you I expand is in feels than actions wallboard just about in profile for you to better confidence can

confidence a tell of in it's these about. is for And point. manage company, I'll assets our assets manageable more structure. flow we've what these that's cycles Jerry, generation all structure the to around been throughout capital hallmark To how Yes of whether is always the great capital to are that is continue that to place capabilities opportunities where leverage that is the a we me position you a cash whether cycle. is my positioned the grow

strategic can cash how well then through met expand met. be we share to our free continue either footprint additional or to and we if financial shareholders pretty returned cash to that that to criteria the free repurchase program. flow geographic to we know the have criteria the the were and do flow were so extent And used And our

point ago. generation we than cycles it's given cash our prior XX is these of company relative resilient dramatically you and think the years to our just the And of were position in in confidence assets footprint were given geographic I to of the position more we have and wallboard anything. more we where management flow the business out, So relative that as where the

the Appreciate Thanks. discussion. Okay.

question next The Please Elliott ahead. from Stifel. Stanley go comes from

regional then to call. you to kind the these the taking cement for size it's more do. you Quick know, industry Thank just hurricanes guys. for typically I I way Is probably wallboard morning, for a from very guess for and question. there from standpoint? both well a what of sees hard Good major

Stanley, a it's question. good

tell a cleanup is an that, Here's there what It for an very is that that with rebuild with such else that happens you. the know over initial is period happens parse it's construction. period. just I and and The time would rebuild event a experience what's surge insurance a fighting like out our versus effort of over what's the broad new unfortunate event. such companies happens that just We everything to the hard broad time hurricane hurricanes

next And pulling think it mean, of to we kind exactly some year however at do the then looking to JV just what into spend more capital JV. this basically or for that is on year so this going want lower this as that vis-à-vis it out maintenance about system, across I spend think a the bit or equipment you're the or little CapEx maintenance with relates parse to you is ahead of and capital actually trying the issues

it. spend typically the outage Where issues you were Yes. with capital of could with going the we We're work assume were to No the some they items failures us. and same really do don't had that going to be type is fail same. just that one-off

so didn't necessarily spare parts the with on-site all And we it. have

so. we condition. -- was and in go operate. we And like plants the assume we sure chain plants -- occurrences cadence the we would take sure outage. spend all little the make just So a an will our But make down. This parts new usually of same through one-off spend supply they longer. ordering on I these to they're specialty and took We We

That's me. luck. best of Thanks and it for guys. Perfect

Thank you.

Please ahead. Thalhimer The Thompson go from Adam next question comes Davis. from

good Hey, guys. quarter. Nice morning

Thanks.

on half and improvement? year-over-year really your to which the margin cement both the ask in sustainability wallboard of are first wanted about margins that kind thoughts of back are good in of I What QX.

plateaued. as mentioned wallboard, seen freight of Look kind has I the Yes. have we

in quarter. down you about realization of have different over had here couple the the prices coming are price down. if pieces, good weeks. come prices So OCC Gas we last think the

positive been for all the Wallboard that's So business.

cement tell side, shape. does good the you the was our across cement when it's the July and on all price And quarter in of up businesses some but maintenance December northern for margin a done. we the The have largely those about more the I are especially of look in good show winter On climates, spot. markets profile. the realized are again, increase majority will a programs side, And in good

And the but at Paperboard relates extent as then declines. eating To been question, OCC similar higher it you to have segment? OCC what the price the prices

Yes.

So we don't have on of fiber. a inventory lot hand of recycled

see they quickly like here that prices business last the or two you especially when within the months paper in fall So so. pretty have benefit

paperboard a snap -- back more that to. it in XX% quickly operating to margins with to in The Could the take they gross that be down, that margins range than or used range. OCC does

tell relative margin nice for higher improvement the year-over-year and we that call costs business. business this energy I Freight years higher or it you a five that business. in sequentially ago prices for would still are paper Yes. saw to both quarter. certainly Look are still four

impact we but have to to back get improvement So here. those ability margins for nice that levels will seen the

of was a cement, lot sustainable, price one that related kind spiked sequentially. the the production Okay. Last Texas issues? that or one-off to Is a

supply the our market now. That Great. very right market. Sustainable. that is in -- market demand very in that pricing profile demand the extreme consolidated very, That's is and

Thanks guys. you lot. a For

Ng from from Please question next Jefferies. Phil go comes The ahead.

on as increase on Can you implies start morning. what volumes any year second preliminary rates. volumes thoughts then markets Good calendar in to elaborate actually just half look year? out for markets might your And being the the Hey, the and I of about into guys? to what you of touch the the this on year XXXX positioned what seeing you're [ph] its just you talked here is for This like principal wallboard Phil. EXP just you Colin your back look half for in on interest well remarks fiscal prepared wanted for despite in in wallboard

Colin, Yes, good question.

-- things in activity, throughout As construction our a those "backlog" a elongated. because There And of we said of need lot for of homes shipments quarter. have home cycle the steady construction to the is wallboard a remained is be building completed. our that as orders

quite, demand for interest a the I what Certainly, early homes here there's think in on We're industry. significant little the that'd rates to US the I'd a multifamily. trying out, much volumes recent figure more Those too US, still again, due in half rise to southern generally. is single-family say homebuilding markets all yet. speculate it's XXXX or the whether also of resilient operate national the been have be than in we the to average.

quarter. You saw this past

we positioned well. from So as that think well we're perspective

dive into constraints, color. capacity in And then rate about if wallboard decline interest Can resilience helpful just That's Okay. of those and you side thinking that And supply we additions start are for a to spike? little prepared just how wallboard. some pricing given going given your then remarks, more? you also bit especially, dynamics, you talked about see constraints the these from volumes forward, the

the was are predominant designed ago, plants. from to that years for US of and constraints be used eastern where utilize added those gypsum was synthetic material raw was generally, new synthetic generated which was Colin, ago XX a was capacity produce to the to power XX years the expected the is Yes. coal-fired lot half wallboard. that of That gypsum,

a amount of that As is in diminished. we that as via capacity that was that's of material power gypsum the And US less the we've material. availability generated reduced, wanted the coal, -- has to use

constraint. to generally would be to it go major overseas, alternative to The difficult be is expensive going which that's and So, a is arrange.

very this seeing not pressure is this why much capacity So, we're that around cycles, the versus go new demand in in The of cycle. were advance -- prior a large where different we wallboard actually capacity. adding be could part cycle

that's we to cycle cycles. think prior this why, up So, than could different shape be very

Great. the color for Thank you

concludes like Michael I'd remarks. back conference to Q&A any over End to for session. turn the This closing question-and-answer Haack of our

joining call to for look to Thanks. early you the next today at Thank you next Thanks, the year. call, and Josh. forward we talking

attending Thank concluded. for presentation. now has today's Conference you

You now may disconnect.