Summit Materials reported gains within its aggregate business during the second quarter, including with net revenue and average selling price.
Summit’s net revenue tied to aggregates jumped 13 percent to $182.5 million in the quarter while the company’s average selling price for aggregates increased 14.5 percent.
The company’s adjusted cash gross profit margin in aggregates, meanwhile, slipped to 53.6 percent. That mark was at 53.7 percent in the second quarter of 2022.
Aggregate sales volumes also declined in the second quarter by 2.5 percent, although Summit attributes part of the drop to divestitures in its East segment. Unfavorable weather conditions and residential softness in the West were factors as well, the company says.
“Sustained pricing momentum across the portfolio, together with solid demand fundamentals and very strong operational execution, resulted in [a] remarkable second-quarter performance and several financial records for our business,” says Anne Noonan, president and CEO of Summit Materials. “Importantly, we are delivering against our Elevate Summit goals, setting high-water marks for adjusted EBITDA margin and surpassing our ROIC target minimum. Given these first-half tailwinds, more favorable second half operating conditions and contributions from recently completed acquisitions, we are on solid footing to again raise our financial commitments for this year.
“Underpinning these upgraded expectations is better-than-anticipated traction on recent pricing actions and a more robust demand environment, especially concerning residential demand resiliency,” Noonan adds. “[The] bottom line is that the teams across our Summit footprint are capitalizing on market opportunities, raising the bar operationally and delivering significant growth in 2023 for the organization and our shareholders.”
M&A development
Summit says it completed three acquisitions in the second quarter, including the purchase of Arizona Materials.
“These acquisitions further our materials-led portfolio strategy while, at the same time, enter Summit into the prioritized market of Phoenix, Arizona,” says Scott Anderson, executive vice president and CFO at Summit. “With the purchase of Arizona Materials, we establish an integrated leadership position in one of the fastest-growing markets in the country with the opportunity and intentions to build out a more extensive, materials-oriented growth platform in that geography. Collectively, we believe ongoing portfolio additions like these alongside existing organic opportunities is a powerful algorithm for Summit’s profitable growth.”
West versus East
According to Summit, its West segment operating income increased $12.1 million in the second quarter to $74.7 million. The segment’s adjusted EBITDA increased 23.5 percent to $104.5 million versus the prior-year period.
Aggregate revenue in Summit’s West segment increased 12.8 percent, as 17.6 percent organic pricing growth was partially offset by 6.6 percent organic volume declines. In the West, Summit says pricing growth was strongest in Texas followed by British Columbia, Canada, and then its Intermountain West region.
The company’s East segment operating income of $31.6 million was essentially flat to the prior-year period, according to Summit. Adjusted EBITDA in the East increased 2 percent to $47.6 million despite the impact of divestitures and reflective of a favorable pricing and demand environment.
Aggregate revenue in Summit’s East segment increased 10.4 percent versus the prior-year period. Organic aggregate volumes increased 3.4 percent, with strong growth in Kansas and Virginia driving them. Aggregate pricing in the East increased 10.3 percent with growth across markets, the company adds.
