Eagle Materials(US:EXP)2022-05-19 18:48Financial Data and Key Metrics Changes - Revenue for fiscal year 2022 increased by 15% to a record $1.9 billion, with gross profit margin rising by 270 basis points to 27.9% [7][24] - Earnings per share (EPS) from continuing operations rose by 14% to a record $9.14, with fourth quarter EPS up by 22% [8][25] - Operating cash flow for fiscal 2022 was $517 million, down 20% from the prior year due to timing of working capital [30] Business Line Data and Key Metrics Changes - Heavy Materials sector revenue increased by 6%, driven by higher cement sales volume and pricing, with operating earnings up by 10% [26] - Light Materials sector revenue surged by 27%, with operating earnings increasing by 42% to $274 million, reflecting improved wallboard sales volume and prices [29] Market Data and Key Metrics Changes - Demand for housing continues to outpace supply, with steady order trends across major business lines despite rising interest rates [21][22] - Public infrastructure spending is supported by improving state and local government revenues, with federal infrastructure spending expected to boost cement demand [22] Company Strategy and Development Direction - The company emphasizes resilience through owning manufacturing facilities and controlling raw materials, which has proven effective during supply chain disruptions [11][12] - A commitment to sustainability is highlighted by the introduction of limestone cement, which reduces carbon intensity and enhances clinker manufacturing capacity [15] - The company plans to increase capital spending to $115 million to $125 million in fiscal 2023 to expand production of Portland Limestone Cement [33] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about fiscal 2023, expecting it to be another record year, supported by midyear price increases in wallboard, cement, and aggregates [23] - The company is closely monitoring inflationary pressures on energy and transportation costs, with multiple price increases planned to offset these pressures [39][75] Other Important Information - The company returned $620 million to shareholders through share repurchases and dividends, with an additional 7.5 million shares authorized for repurchase [17][32] - The acquisition of an aggregates-led business in Colorado for $120 million is expected to complement existing operations and provide sustainable growth [12][33] Q&A Session Summary Question: How are you thinking about raw material and energy-related costs? - Management noted that OCC prices have plateaued and natural gas needs are partially hedged, indicating a cautious but optimistic outlook on margins [36][37][39] Question: How is housing demand expected to evolve? - Despite rising interest rates, management believes housing demand remains strong due to reasonable affordability and a lack of inventory [41][42] Question: Can you discuss wallboard volume trends? - Management indicated that previous volume declines were due to supply chain issues, but improvements are expected as these issues resolve [45][46] Question: How do you view wallboard margins in a potential downturn? - Management expressed confidence in their position due to controlled raw material costs and a strong supply contract, suggesting resilience in margins [50][52] Question: What are your thoughts on capital allocation in a recession? - The company is positioned to manage cycles and continue growth, with a focus on strategic opportunities and returning cash to shareholders [58][60] Question: Any updates on cement capacity and pricing? - Management confirmed multiple price increases due to tight market conditions and indicated ongoing projects to enhance cement production capacity [68][75]