Eagle Materials(EXP) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record first quarter revenue of $634.7 million, an increase of 4% year-over-year, primarily driven by higher cement and wallboard sales volume, as well as contributions from recently acquired aggregates businesses [4][15] - Diluted net earnings per share decreased by 5% to $3.76, mainly due to lower earnings in cement from higher operating costs, partially offset by a 3% reduction in fully diluted shares due to the share buyback program [15] - Operating cash flow increased by 3% to $137 million, reflecting improved working capital management [17] Business Line Data and Key Metrics Changes - In the heavy materials sector, revenue increased by 5%, driven by increased cement sales volume and a 21% increase in concrete and aggregates revenue [16] - Aggregates sales volume surged by 117%, including contributions from recently acquired businesses, with organic aggregates sales volume up by 29% [16] - The light materials sector saw a 1% increase in revenue, reflecting higher wallboard sales volume, but was partially offset by lower wallboard sales prices [17] Market Data and Key Metrics Changes - Cement volumes improved year-over-year, marking the first quarter since December 2023 with a year-over-year increase in cement sales volumes, despite major weather disruptions [9] - Aggregate volumes improved significantly, aided by the integration of two recently acquired quarries [8] - Wallboard volumes remain subdued due to ongoing affordability challenges in the housing market, with structural constraints on adding supply in cement and wallboard [11][12] Company Strategy and Development Direction - The company continues to focus on operational improvement and sustainability initiatives, aiming to enhance its competitive advantage as a low-cost producer [5][6] - Strategic investments are being made in modernization and expansion projects, including the Laramie, Wyoming cement plant and the Duke, Oklahoma wallboard facility [13] - The company plans to continue investing in strategic projects and opportunistic share repurchases to create value [14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding demand trends, noting stable order trends across major business lines despite macroeconomic uncertainties [8] - The company anticipates that high capacity utilization rates in the cement industry will lead to an improved pricing environment as cement sales volumes rebound [10] - Long-term demand fundamentals are expected to favor the consumption of the company's products due to aging infrastructure and housing stock [12] Other Important Information - The company repurchased 358,000 shares for $79 million and paid a quarterly dividend, returning $87 million to shareholders during the first quarter [19] - The net debt to capitalization ratio remained at 46%, and the net debt to EBITDA leverage ratio was 1.6 times, indicating significant financial flexibility [20] Q&A Session Summary Question: Wallboard performance and demand drivers - Management noted that geographic positioning and trailing twelve-month volume analysis are key factors in outperforming the market, despite ongoing affordability issues in housing [22][23] Question: Cost dynamics in wallboard - Natural gas prices have stabilized, and the company has sufficient natural gypsum reserves, indicating no immediate cost concerns [24] Question: Joint venture operating earnings and ramp-up - Earnings were impacted by the ramp-up of a new facility and weather issues in Texas, but improvements are expected as the year progresses [27][28] Question: Cement volume cadence and regional dynamics - Cement volume demand has been consistent throughout the quarter, driven by infrastructure spending, with no significant regional deviations noted [35][38] Question: Wallboard volume outlook - Management expects wallboard demand to remain under pressure due to affordability issues, but believes the market is underbuilt in the medium to long term [41][42] Question: Cement pricing outlook - Management is optimistic about mid to long-term pricing potential as demand remains stable, but short-term pricing increases may be more challenging [49][50] Question: Wallboard pricing dynamics - Wallboard pricing has been range-bound, with expectations for similar trends until there is a meaningful increase in volume [59]