Eagle Materials (EXP) 26 Oct 232024 Q2 Earnings call transcript

Good day, everyone, and welcome to Eagle Materials Second Quarter of Fiscal 2024 Earnings Conference Call. This call is being recorded.

At this time, I would 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 XXXX. Eagle conference Welcome is Good our second morning. for year Haack. to quarter Michael Materials MJ. of This fiscal

webcast. and Kesler, Joining it, are Corporate please To and in Development. a eaglematerials.com Investor our connection Alex be and Haddock, click will go link presentation Chief Relations, me to Strategy Vice Craig to on access Financial slide today There with of President call. the Officer; the made this

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

this the included is to disclosure, press release. For which end our further at please also of information, refer

generated that second points, start record of Materials. and $X.XX, another me by and Let of diluted expanded XXX million, off record earnings share gross quarter we excited to fiscal per revenue In to up highlight XX.X%, for of basis net margins quarter I'm Eagle up XX%. up X%. financial record Eagle the of Eagle performance achieved $XXX operating saying XXXX,

of our employees. our commitment businesses our key performance A long-term sustainability reason superior our margin our to for is plants, our and

to On forward to look always an the participating this event front, one I that I highlight past attending employee want that quarter, we conducted in. and

conference Environment This all and Health, brings our Seventh Our from Safety HSE Conference. across operations together Annual of Eagle. and leaders

with and we and regards open HSE. about currently where have Eagle be honest where discussion an going is to will We

implementation dedication employees incident PLC be industry able cement, measured our safe of leader emissions focused and in of recordable people, our the been to our Eagle an reduce our total to as by through keeping more rate, continue closed From serious leading they water focus ensure eliminate has focus the demonstrated in our sharing indicators loop injuries best injury practice and our rate. through are redesign systems through reduce that to lost usage time efforts and of to as our

more this and quarter, starting our turn highway versus and prior footprint, our outpace increased the public awards now Materials to on Within XX% financial continue to the operational quarter. I'll infrastructure specifics year with Heavy Revenue second national businesses. the average. performance for

manufacturing announced of clean almost construction energy These announced heavy markets XXXX. batteries, serve. been projects projects and benefiting Similarly, have $XXX EV semiconductors, since billion we totaled projects nationwide industrial the

On new known to challenging. when fallen the capacity supply plant U.S. by making has XXXX be demand. supply and as continues NESHAP, construction capacity since enacted were side, regulations manufactured Total expansion cement outpaced further

This creates markets the across ingredients for for of environment. announcing price the a we in July increases have our second year. next Thus, we of of cement a and January begun early strong next round pricing implemented increases round half

Limestone also in disposal makes we go made PLC This our of it Portland quarter, our to lowering intensity our at further or meaningful our clinker PLC, conversion footprint. across Cement, is surpassing XX% important progress carbon lever system. an the for and our

provides excited opportunities about we are PLC So the us.

color date. little around very have that Lehigh system last it call. still our some made much pleased mentioned We the and I'm do, plant there is to to better. remiss the be was but the kiln Texas work happy in with on progress performing did recognize more to substantial we is a earnings that operation if progress add I'm I say JV I'd not since quarterly

to manufacturing spending. demand have construction, for particularly remains to cement, see longer-term volume mid- and regards robust visibility across aggregates, and strong cement picture nonresidential Both into the for continue projects and public our end multiyear and concrete the within In outlook markets. we private

demand from is be of for the built construction and to There for as tail projects must as projects runway often come. meaningful With a these years of well out. layering infrastructure there is dollars, other a federal communities infrastructure local long

our side to for heavy the business. outlook side the supply Moving of

requirements have supply that the plant materially cement We are in manufacturing meet imported areas our order Because or markets permitting picture. have do our not stringent any builds demand. the perceive would capacity, very sold-out turn industry. expansions Since change constrained around we the in markets of we the will so significant in on new to this, to coastal to

To supplement integration acquired the Coast. terminal the chain of on recently cement we our to in Northern have West our this continued import extent, supply California

Our these our our short, of network our heavy to the U.S. are Heartland businesses. long-term given mid- insulated high side Because will imports manufactured cement delivered up we made of outlook and dynamics, is markets. from cost footprint that remain about largely optimistic for

quarterly our to turn me let on performance side. the light Now

unclear volume Wallboard, with us, was and prior sales encouraging pricing recognize we spending, of the date. interest mean in shipments, Gypsum rise Since net term. X%, environment the the price choppy while for For orders Wallboard most sales rates the average market may in resiliency the to declined has Gypsum their critical housing see sees and It to year. path short the flat maintain consumer been is end

South XXXX. housing the in demand the the Gypsum relatively given we well. existing Wallboard homebuilder starts single-family of at have operate supply long-term permits outlook Looking sale limited homes business, in with the South. orders, in this in in for coincided should in In and market, for Similarly, held wallboard consumption the Sunbelt the markets mid- single-family up translate

creating repair and for term, are existing built housing the in homes it structural a current the for remodel undergo lock-ins underbuilt Looking people rate before of businesses better as getting U.S. tailwind homes for their our new gets projects. see worse in keep as longer we homes longer,

we of supply synthetic have and the for our long-term on With times the businesses, of spoken having the add regard side light outlook to is gypsum to ability the lack mid- capacity effect to many of industry. the

provide example. an me Let

in added as new cycle demand U.S. through The both has the the at demand material the the pricing broader industry much beyond housing the has on and through are peak. industry played This XXXX This and record indicative decade those shortages cycles X In raw having has levels. X industry. cycle cycles Looking capacity the the prior a represented capacity reached XXXX, no significant periods, through significant XXXX in XXXX of out new of even in differently. effect added is wallboard over

and imply. much Eagle plants insulating of the Materials of pressures capacity of supply material figures It cost is all be surety wallboard this, capacity raw to industry the viability needs to from noted lower of because the for half effective from gypsum, the than benefits about the supply designed of facing is economic the that synthetic curve industry utilize industry. wallboard our us nameplate likely the

well. the qualities Wallboard demand-supply that fact, benefiting our aggregates so many In cement resemble dynamics businesses our of businesses make attractive as the and

business capital out execute Closing half of like allocation the performance our well year, our first I'd our fiscal to playbook. mention on through continue to we how

the generation key reason why through is is flow cash attractive Materials a cycles. Eagle business so

on our value flexibility our are create a Given for cyclical shareholders. industries, long-term management, businesses maintaining in cycle financial we on to and focus

meet quarter, return we don't way. Our of to million positions share the cash through a same, cash to we strategic continue grow share dividends. through repurchases materialize, repurchase those returned in that to return remain opportunities Last shareholders to program $XX use and and our meaningful low-cost shareholders improve financial when organic priorities to investments criteria. And competitive and and strict our acquisitions our businesses our

balance strengthen at flow ended the We also X.Xx. sheet, leverage our our used strong our cash ratio to quarter

turn With that, in go results detail. to our over I'll it Craig through financial to more

Thank you, Michael.

higher in increase from import quarter reflects partially prior of terminal increase offset Second cement and sales the record sales from California, cement contribution Stockton, X% $XXX a year. by the recently was wallboard revenue paperboard The million, lower prices and an volume. acquired

earnings quarter, Stockton up was the share. Again, revenue record generated per this acquisition, Excluding past X%. we

due $X.XX, program. in year. share to The was per from was a earnings X% increase increase by diluted prior a higher our quarter share buyback fully reduction earnings XX% Second driven at the shares

Turning highlight prices and segment sector, on primarily increased driven in the import Aggregates slide. performance, sales terminal segments, California. next by Heavy In the contribution which revenue the Cement cement recently Concrete XX%, implemented the our Materials cement now year, earlier this our our and from Northern increase and in acquired includes to

of prices. XX%, up Operating earnings primarily were because increased cement

second market cement ton in in or price cement early discussed, January price X% average and a our per $X recently conditions We've XXXX. sequentially. increases cement approximately most the effective our of increased price markets that July, Michael increases Given we announced implemented strong of round also X,

sector paperboard sales sales sector to primarily on sector wallboard Materials declined next while recycled by lower Moving Light Light earnings flat. the million, reflecting prices wallboard for decreased the costs, X% recycled energy. Operating our and in volume, fiber reduced to were reflecting offset sales Revenue $XX wallboard X%, and partially Materials in volume, input the lower slide.

flow. cash our now Looking at

and strong generate capital way. to continue We a cash flow in allocate disciplined

cash our $XXX acquired million, while flow $XX fiscal the X% and improved $XX terminal months X to first operating import During spending million. the of to for in cement Stockton million, increased year, we capital

million We half quarterly year. our a or in dividends, shares of returning of for also paying during XXX,XXX million repurchased shareholders X.X% first our to fiscal of total the to addition a outstanding total of $XXX $XXX our

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

to our used strengthen sheet. cash we flow our strong Finally, balance

$XX XX, near-term of ratio Total XX%, look liquidity was Let's million We no substantial maturities, meaningful hand. quarter the ended was net was our structure. flexibility. the leverage committed we at us end on XXXX, cash capital million X.Xx. net September $XXX our have with debt-to-EBITDA debt quarter At our giving ratio and financial at and debt-to-cap of approximately the

the call. Thank question-and-answer today's we're you to to for attending ready move session. MJ,

with [Operator Instructions] Trey Grooms comes question Today's Stephens. first from

wallboard gave clearly And X with have down the around outlook here. but think So little color it's holding guess, demand no the in higher surprise, backdrop backdrop Michael, at in and thought. quarters more and than the least I would volume there, understandably most better on we've residential now this the rates, creates seen I you actually a of uncertainty, for, last

the wallboard you at point we've And you that start given we volume outlook side. you what do on can there? residential are the from term? could the in how it, about stabilization seen that about and the expect extent To see completions to thinking talk But starts some then what near

of the which a Yes, Look, factors bring up seen on Trey, other across lot most different shortage U.S. in environment in navigate through. it a very notably, many you existing will there's markets And rate is environment we've interesting prior points. higher than homes the of a of side, homes cycles. the interest

where note think important U.S. part southern look, robust to parts of where the I continue to more also in of homeowners to our live And And we somewhere. that's operate the core market. the activity have has we requiring country. been It's other than

So and well. and quarter orders improved this there homebuilder -- are we've seen a factors last lot as quarter of again

well. pretty positioned hard it's we're So predict we right now, but to think

guess sticking And of that, picture. Okay. with just the I kind demand with

side, good. it's bit the some there's -- into On maybe quite more still the demand or picture, sounds cement pretty granted, a there visibility more like which

But we foreseeable kind situation. position this future? maybe should a calendar created stay 'XX, of with continue kind kind position Is of or that into is in increased what at look rate least uncertainty expectation it we as to your the the nearly again look by we the as sold-out that's of sold-out over

Yes.

opposed those benefit that As the which bill to more funds and multiyear residential more demand And that and really obviously, that side. wallboard infrastructure cement is than on aggregates should the to offset by impact highway driven starting with heavy the is activity, residentially industry, the spending. awards are more of oriented, highway

to pointed Michael and high. activity manufacturing/industrial for several semiconductor projects multi-decade kind type facilities, mention, that at to plants, out, a is of them battery large Not

So in the those for just gives not projects given demand side 'XX, what outlook the multiyear around nature. confidence that's for us but some beyond are that, heavy

if Okay. more got in sneak one And I've to here, I could.

magnitude you cement you for widespread went could how these are? additional out maybe us or pricing on Any mentioned a with early January. announcements announcement give maybe You color

most markets, Yes. It's still X, of of ranged announcements $XX markets, have across but $XX evaluating a between ton. our the our January all to

over. it I'll Perfect. turn

comes from Stanley The Elliott Stifel. next with question

on piece. of in way a and was a so seeing be impact you that curious the talk about curious, quantify bit as been I kind was differences to wallboard what some having of East just has West? synthetic that little about you're the And resilient. And Is congratulations. the to an the there you the I it. might when spoke pricing

you look, generation this declined new significantly a what and but seen source been facing was raw vehicle cycles mentioned environment we've added amount supply most in the that's being has were pressures material. availability and different gypsum the not centered a as it, that of reduced there such of reduced around power gypsum we've where Stanley, as it's Yes, of cycle synthetic only prior the significant than Michael that of has demand

country the doubt. the a But half has where and more predominant been part more western lot southern the again, U.S., of in the activity it's construction robust. eastern And is the of no of

So a pricing factors different balance. sure. it's and nationally of country say kind held has for well And I'd across pretty in the

And you little talked of kind about balance the a bit sheet X.Xx.

generating a you've basis. of Help with happening You go-forward a again been M&A of with should kind cash pipeline, active shares. be what's buying on bunch the us

curious Just curious that? get maybe the tick anything. if leverage more down we little than continue something the a Or the color larger see pipe? to on coming a down around should more -- we thought little really with plans Just of

paramount are spend a cash we of generating high a flow. And it's The Stanley, and free of great because an capital as a we Yes. allocation level where focus lot time is area question. maintaining is position of always capital in ourselves function which in of the as both the we've a said, fronts. structure assets we Eagle a and management, bedrock those put is good

so is And next the continue enterprise. to grow the to use

As investment. criteria, And continue meet happy those shareholders. that know, to when and cash don't we we're strict strategically to very criteria, return to have high both for you financially that investments

dependent the front shares whether we've And and We time. value of between the a and allocation those criteria or long continue those for opportunities, kind obviously balance in upon us capital the to way not. past it's that's saw in this operated of investment X balance of meets the quarter, that

with from comes Davidson. Brent Thielman D.A. question next The

term? regions rates. to have just seen this you what and considering guess with optimistic just sort your I down mortgage mean, you've still short these I more actually mid-single-digit if than Are wallboard. over like I does come the volume a you back what sort your then for that? we conversations of environment be sort I'd feel fiscal wanted to year-to-date prevailing of curious of see customers, around

said I that rates. in -- what are that Yes, interest the Brent, that got we impact that building. you comments, recognize to as factors other home are There's some think traditionally, today in in just look, place our recent increase how prepared a are them the And shortage the as that have mortgages very homes, are significant amount very we levels out, idea got the are sub-X%. different that than And pointed of you've country. of outstanding across existing very, you at low this homes where that would

And so just like aren't new puts once moving which they more folks were need on and the homes. pressure just build to

you're mid-single And so it's in hard It cycles. me to predict. We've kind of not been than for running But would in digit. that different this we've very it's while. prior a what that it's -- range seen down in little surprise again,

up. keep wallboard mean, you little a the I in year. Understood. the of sort just are last a And line we're allowing or there flesh strong few margins could pressure Craig, some if comparably out variables margins, I top than business, better to you wonder the that of considering

it's It's a business. a again, big Look, not cost fixed business. high not Yes. oriented volume

doesn't paper much. which a prices, a That is input year-over-year. And So energy. benefit, large are be is hurt continued as a down to tailwind nice down volumes as

down of is dollars a year versus to continuing energy to were couple million track seems where So we last that be and direction. a

had flat. help been what year of pretty turned ago have margins or a and So keep headwinds around kind tailwind

Pettinari comes Citi. next with Anthony The question from

for up acquisition, question your how rationale the M&A. and Stanley's And was the about about what that system? following attractive asset more bit little on a just supplements talk on you Can Stockton then terminal it

blue there heavy-side Or once that so attractive? kind those there Kosmos moon? You in potentially could lot a with to of had the success just assets kind are acquisition. of scarce a of Are out be

Yes.

that appreciate -- I look question criteria mentioned, Michael. some when at of is bunch are first, as take question. if this We're first. financial evaluate I'll strict the light. always involved Yes, stuff. We I and performance both to Craig there. second come we we any But your work a So acquisition have

We we to best. only really interested to were at like our a keep assets anything ones one our were available. it, of allocation out cash if And again, criteria the through light, of But lot different fit look come and that if businesses would to the we grow condition to something select new is our existing there. in be come acquisition and network

we you already and the Stockton, opportunity. look we Nevada from into that terminal California bringing were where have on really As with for cement grow if everything at stand, our Coast we supports business Cement a Nevada. West our business That import side. as We

And as were customers. finding surrounding on we're our light little continue grow, grow there we Nevada continues of and supporting the -- to to a areas some

opportunity we that grow to great support saw supports customers in a to that a our So product and to this our there. of one cement continue bring in as facilities market

helpful. Okay. over. That's it I'll very turn

Jerry comes question next with from The Goldman Revich Sachs.

thinking Jatin volatility in Khanna Jerry and behalf for How on Revich. This overall XXXX is the in about prices inflation? of you diesel are light pricing of extreme cement

us have so an Just the depending ton January, earlier, we business. in And we clear, early increases said our a for plans in diesel $XX $XX announced our prices cement price -- market. to as this much point. at of impact and announced don't as upon of cement kind on And that's be between have

from Davis. Thompson, Thalhimer question with Adam next The comes

price Craig, QX? quarter. exit Wallboard the what Nice in for was

was consistent It quarterly pretty with the average.

X% the an December down cited thinking volumes quarter, year-over-year, How are you cement comp. then have And you it. easy Got you weather. about

and early down was, volumes? probably thinking You I But don't year. that cement XX% you about that are what then of comp XXXX were weather. last how remember kind

that that's whether in there's quarters. look, demand in these continue Brent, cement awards fundamental underlying the look, for facilities. to grow weather large go infrastructure, always industrial the But direction, the continue yes, different highway right to

delays to or depending demand to certain our utilization we project It's things backdrop a happen rates us. an good environment should see But across and quarter-to-quarter whatnot. when continue remain high predict where or network, there's upon hard for

than geographically? any see Do you more normal variability

think again, nearly got There's were to for think Ohio, exposure we the from -- through prior the then. it's were size that Texas. No, don't so. California, We us, Xx we're I cycle, if you interesting East South back Northern

represent regional much where were were we today versus So of where -- a or national very very kind so smallest more decade ago, average a player. we a we

So markets ever than today before. more we we just operate had

exceptional. on the -- the cement in Got then into you back half ton because have per cost cement I'm it. thoughts do the remain And back any to trying I'm margins margins cement wondering, the year? But of

Yes.

as profile margin looking out, yes, that So in energy, start business. you were have certainly, what our pointed And as specifically 'XX as year is FY we've well lower. abated. Certainly costs, FY tailwinds the us for trended which ago to fuels in solid fuel, those predominantly have continues very 'XX in you around here fuel a do today said, beyond

some there. see should So you benefit

costs, inflationary. direction seen to services, start across I Maintenance go might the less inflation turn we've and or that that, least would at and become parts hope other

be us. for it environment should a reasonable So

The comes next with Phil Jefferies. Ng question from

is from wanted just I quarter. to about really you contribution terminal touch quickly. us to segment a this that the fiscal Phil. as help the Can Stockton on margins to wholly from any color have at volume it forward? plant capacity actually nice to owned at Or look on is its how Cement margins? This this the just versus your for those Colin it think And contributor was XQ ramp then point? contribution? going Does up ability It

there a manufacturing imported good And it but operating of your it's just kind still pointed of out amount a largely are but expected, a there through business that's function we is margin price of good behind Look, quarter, with versus a business, normal It's to be lower margins in earnings had the this some flowing going release, manufacturing and as purchase us allocation than depreciation. we profile. distribution margins. is

And we've not in profile, in expand are on to that immediate remain that but some to the I quite in opportunities this yet. But volume it are there decisions term. terms of expect made the that exploring, we any level

margins wallboard side fifth north just the I Great. backdrop of to consecutive seen of guess for business, given we're this is And how level quarter in? of That's you've that uncertain going XX% the macro the wallboard helpful. margin the sustainable EBIT just now.

And been look, and of And more don't flat much again, had face other it's and Colin, just said, cost. prior a of uncertainties we flat resilient, as we've that has in price, some almost function much pretty the price we exactly year-over-year. cycles.

not to surprised resilient more here. see So pricing

pointed then into sit little of we stabilized MMBtu the a on below sequentially, natural out, And prices the $X and don't that have us, basis. the stable gas see here remained at an the we here cost has here, on prices changes gas wallboard least inputs significant pretty or horizon manufacturing for as side, today. as on Those are primary paper any

the very So biggest been and far. those they've so factors, supportive are

the color. Appreciate

over concludes like Michael our I question-and-answer to Haack for Mr. session. now to the hand This would back remarks. call closing

Thank just today, for will I joining appreciate you XXXX. our call us want you, say early to the MJ. I and talk to in everybody we

you Thank concluded. now has conference for your The participation.

now may disconnect. You