MDU Resources (US:MDU)2021-11-04 21:09Financial Data and Key Metrics Changes - The company reported third quarter earnings of $139.3 million, or $0.68 per share, compared to $153.1 million, or $0.76 per share in the same quarter of 2020 [7] - Year-to-date earnings reached $291.6 million, or $1.44 per share, compared to $277.9 million, or $1.39 per share in the prior year [7] Business Segment Data and Key Metrics Changes - Construction services reported third quarter earnings of $23.1 million, down from $29.8 million in the prior year, with EBITDA decreasing by $10.9 million to $35.9 million [8] - The construction materials business reported earnings of $96.3 million, down from $107.3 million, with EBITDA decreasing by $13.4 million to $158.9 million due to lower asphalt sales and margins [9][10] - The combined utility business reported net income of $5.2 million, compared to a net loss of $800,000 in the third quarter of 2020, with the electric utility segment earning $20.6 million, up from $16.8 million [11] - The natural gas segment reported a seasonal loss of $15.4 million, an improvement of $2.2 million from the previous year [13] - The pipeline business earned $10.6 million, compared to $8 million in the same quarter of 2020, primarily due to higher AFUDC on the North Bakken Expansion project [14] Market Data and Key Metrics Changes - The utility operations experienced a 1.7% customer growth since the same period in 2020 [17] - The electric retail sales volumes increased by 11.1% due to warmer weather and more businesses being open compared to the previous year [12] Company Strategy and Development Direction - The company is focused on regulatory recovery for costs associated with providing electric and natural gas services to a growing customer base [16] - Construction is set to begin on the Heskett Station Unit 4, expected to be operational in early 2023, to replace generation loss from retiring coal-fired units [18] - The North Bakken Expansion project is expected to be in service in early 2022, with a capacity to transport 250 million cubic feet of natural gas per day [19] - The company is actively seeking acquisition opportunities to enhance market share in construction operations [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for a strong end to 2021 and beyond, despite headwinds faced by construction businesses [15] - The company adjusted its earnings per share guidance to a range of $1.90 to $2.05, reflecting third quarter results and expectations for the fourth quarter [35] - Management highlighted the potential benefits from the American Rescue Plan Act funds and federal infrastructure plans for construction businesses [35] Other Important Information - The construction services group ended the quarter with a backlog of $1.27 billion, slightly down from the previous year's record [27] - Knife River's backlog as of September 30 was $651.7 million, a 14% increase from the prior year's $571.3 million [32] - The company is building a training center to enhance skills for current employees and newcomers to the construction industry [30] Q&A Session Summary Question: Comments on the materials segment and visibility on American Rescue Plan Act disbursements - Management indicated that states are beginning to allocate funds, with expectations to see some funds in the marketplace as early as next year [38][39] Question: Increase in bidding opportunities in certain regions - Increased bidding is noted in regions like Idaho, Oregon, and Montana, with tight margins due to high competition [41][42] Question: Revenue guidance adjustment - The adjustment is primarily due to timing issues with mega projects not being replaced immediately [43][44] Question: Estimate change on a construction contract - The estimate change was due to delays and increased labor and material costs on a specific project [52][53] Question: Interest in expansion opportunities on the North Bakken pipeline - Increased activity in the Bakken is noted, with potential interest due to new methane rules [55][60] Question: Undergrounding opportunity on the West Coast - The company is well positioned for a multi-year effort to underground power lines in California [62] Question: Industry-wide price adjustments due to labor and material costs - The company has been able to increase pricing on aggregates and ready-mix, but asphalt oil margins were significantly impacted [91]