Summit Materials Inc., a leading construction materials company, has recently completed two strategic acquisitions that have greatly improved its reserve position. These acquisitions, finalized in the second quarter of 2023, have positioned the company for continued growth and success in the materials market.
The first acquisition took place in North Texas, where Summit Materials acquired a quarry. This acquisition strengthens the company’s existing market presence and improves vertical integration. It is also expected to have a positive impact on aggregates pull-through and extend the company’s reserves. The second acquisition occurred in Northwest Missouri, where Summit Materials acquired three provinces. This acquisition is expected to enhance margins and further extend its materials-led position in Missouri. The proximity of this acquisition to Summit Materials’ existing footprint will allow for operational synergies and improved pricing.
Summit Materials is known for its successful integration of acquisitions and optimizing their performance. The company leverages its operational excellence and pricing strategies to enhance margins and drive profitability. By implementing back-office efficiencies and operational improvements, Summit Materials aims to achieve significant growth and success from these acquisitions.
The recently completed acquisitions are expected to contribute approximately $12 million in adjusted Ebitda for the remainder of 2023.
Summit Materials has raised its expectations for 2023 adjusted Ebitda guidance, anticipating a mid-teens percentage growth in adjusted Ebitda for the year. The company aims to achieve record levels of growth and profitability, driven by strong pricing execution, operational opportunities, and accretive acquisitions.
During the second quarter earnings call, Summit Materials CEO Anne Noonan highlighted the company’s strong performance, which exceeded expectations. The company has revised forecasts for residential demand, projecting a 20% decline instead of the previously expected 25% decline. This revision is based on improved conditions in Houston and Salt Lake City, where economic recovery and single-family construction are accelerating.
Summit Materials’ West Segment experienced a strong rebound in the second quarter after challenging weather conditions in the first quarter. The robust pricing trend, particularly in Texas, led to a remarkable increase in aggregates pricing. Demand for aggregates and ready-mix also showed substantial recovery, and asphalt pricing and volume growth further contributed to positive performance. The East Segment saw growth in aggregates pricing, fueled by sales in Missouri and Kansas. Despite divestitures, the segment’s adjusted Ebitda margins improved significantly.
Continental Cement, another business line of Summit Materials, reported a price increase and significant growth in adjusted Ebitda. The company has implemented fresh pricing strategies across its businesses, resulting in upgraded materials pricing forecasts for the year.
Analysts raised questions about margin expansion in the aggregates business and potential price increases in 2024. Summit Materials’ president and COO expressed confidence in driving margin expansion through pricing actions, cost moderation, and operational excellence. The company has set an overall margin expansion target of 23.5% to 24% for the full year.
Summit Materials’ success and revised outlook demonstrate its ability to deliver growth and achieve record levels of profitability. With a focus on margin expansion and operational excellence, the company is well-positioned for continued success in the construction materials industry.
Sources: Summit Materials Inc.