Summit Materials(SUM) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Summit Materials reported record Q4 results for net revenue, operating income, and adjusted EBITDA, with net revenue increasing 13% to $571.9 million [12][36] - Full year 2020 net revenue reached $2.1 billion, up 5.1% from 2019, driven by volume increases and acquisition-related growth [18][38] - Adjusted EBITDA for Q4 was $130.6 million, up 8% year-over-year, while full year adjusted EBITDA was $485 million, also up 5.1% [40][41] - The company achieved a year-end leverage ratio of 3.2 times, the lowest in its history, with a significant improvement over the past five quarters [21][59] Business Line Data and Key Metrics Changes - Aggregate volumes increased by 24.7% in Q4, with cement volumes up 4.5%, ready-mix volumes up 6.4%, and asphalt volumes up 20.3% [13][40] - The West segment was the largest contributor to Q4 results, benefiting from residential activity in Utah and Texas, while the East segment saw double-digit organic growth in Kansas aggregates [13][14] - The Cement segment reported higher adjusted EBITDA compared to Q4 2019, driven by demand recovery and price increases implemented in June 2020 [16][38] Market Data and Key Metrics Changes - Summit's end-use markets are approximately 38% public, 31% residential, and 31% non-residential, with favorable conditions for residential construction [24] - In Texas, projected lettings for the current fiscal year are $9.6 billion, a substantial increase from the previous year, supported by over $900 million from recent stimulus [25] - Kansas is planning $1.9 billion in spending for the current fiscal year, with single-family permits up 16% year-over-year [27] Company Strategy and Development Direction - The company is focused on cash optimization and operational improvements, particularly in Kentucky, where public spending has been deferred [15][19] - Summit plans to invest $200 million to $220 million in CapEx for 2021, with $25 million to $35 million allocated for Greenfields [62] - The company is optimistic about future infrastructure plans from the new administration, which may drive demand for materials and services [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall demand picture for 2021, particularly in residential markets, despite some disruptions from cold weather [22][107] - The company anticipates adjusted EBITDA for 2021 to be in the range of $490 million to $520 million, reflecting a 5% increase over 2020 [61] - Management highlighted the importance of safety and operational excellence, which contributed to record performance in 2020 [10][63] Other Important Information - The Green America recycling facility operated on a limited basis in Q4, impacting adjusted EBITDA by $4.2 million, with expectations for full operations to resume in early 2021 [17][55] - The company generated $246 million of free cash flow in 2020, resulting in a closing cash position of $418 million, an increase of over $100 million from the prior year [58] Q&A Session Summary Question: Impact of the 53rd week on guidance - Management clarified that the 53rd week impacted results in October and provided a boost across the business, with expectations for steady growth throughout the year [68][85] Question: Shape of the year for aggregates growth - Management indicated steady growth in residential markets, with Kansas bidding starting and expectations for a second-half impact from Greenfield projects [74][75] Question: M&A pipeline and focus - The M&A pipeline remains active, with a focus on high ROIC opportunities, particularly in markets where vertical integration is strong [119] Question: Cost inflation headwinds - Management acknowledged inflationary pressures in labor, healthcare, and hydrocarbon costs, but expects to recover some of these through productivity improvements and price increases [91][93] Question: Impact of winter storm on Q1 - Management noted that while Q1 is typically the lowest quarter, the impact of the winter storm was manageable, and operations are expected to catch up quickly [106][108]