Eagle Materials Reports Record Second Quarter Results With 15% EPS Growth

Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2024 ended September 30, 2023. Notable items for the quarter are highlighted below (unless otherwise noted, all comparisons are with the prior year’s fiscal second quarter):

Second Quarter Fiscal 2024 Highlights

• Record Revenue of $622.2 million, up 3%
• Record Net Earnings of $150.6 million, up 8%
• Record Net Earnings per diluted share of $4.26, up 15%
• Adjusted net earnings per share (Adjusted EPS) of $4.28, up 14%
  • Adjusted EPS is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 6
• Adjusted EBITDA of $247.2 million, up 9%
  • Adjusted EBITDA is a non-GAAP financial measure calculated by excluding non-routine items and certain non-cash expenses in the manner described in Attachment 6
• Repurchased 432,500 shares of Eagle’s common stock for $77 million

Commenting on the second quarter results, Michael Haack, President and CEO, said, “Market conditions for our construction materials remained resilient during the quarter, even as the Fed continued to raise interest rates and tighten money supply to contain inflation. Several factors helped offset the higher rates and supported demand for wallboard and cement, including limited housing supply, strong homebuyer demand, increasing infrastructure awards and significant investment in domestic manufacturing facilities.

Against this backdrop, our businesses performed well. We generated record revenue of $622 million and record EPS of $4.26, and we expanded gross margins by 150 bps to 33.6%. Cash flow from operations was $172.4 million. We returned $86 million of cash to shareholders through share repurchases and dividends, while using our strong cashflow to strengthen our balance sheet: at September 30, 2023, Eagle’s net debt was $1.1 billion, and our net adjusted leverage ratio (net debt to Adjusted EBITDA) was 1.3x. We also made progress on our strategic initiatives. We increased production and sales of Portland Limestone Cement, to more than 60% across our system, and we continued the integration of our recently acquired cement import terminal in Stockton, California.

Mr. Haack continued, “In our Heavy Materials business, as demand remained strong and our operations remained nearly sold-out, we implemented a second round of cement price increases in early July across half our markets and announced the next round of price increases for early January 2024. In our Light Materials sector, the backlog of housing construction supported resilient wallboard shipments and orders, but we recognize the significant increase in interest rates may have an impact on residential construction activity in the future. Nonetheless, we expect that our portfolio of businesses will remain well-positioned for the second half of fiscal 2024.”

Segment Financial Results

Heavy Materials: Cement, Concrete and Aggregates

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, Joint Venture and intersegment Cement revenue, was $426.9 million, a 10% increase. Heavy Materials operating earnings were up 19% to $126.1 million. Both the increase in revenue and operating earnings were primarily attributable to higher Cement sales prices.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 13% to $360.8 million, and operating earnings were a record $121.4 million, up 23%. These increases reflect higher Cement net sales prices and the contribution of approximately $13 million of revenue from the recently acquired Stockton Terminal, which helped mitigate an overall decrease in sales volume. The increase in operating earnings was partially offset by the impact of the step-up in inventory values related to the acquisition of the Stockton Terminal. The average net sales price for the quarter was up 15% to $151.99 per ton, reflecting Cement price increases implemented in January 2023 and a second round of price increases implemented in early July 2023. Cement sales volume decreased 1% to 2.1 million tons. Excluding the recently acquired Stockton Terminal, Cement sales volume declined 5%, because of wet weather in several markets and extreme heat in our southern markets throughout the quarter.

Concrete and Aggregates revenue decreased 5% to $66.1 million, reflecting lower Concrete sales volume partially offset by higher Concrete pricing. Second quarter operating earnings declined 36% to $4.6 million, primarily reflecting lower Concrete sales volume and higher cost of materials.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard and Paperboard, decreased 8% to $233.5 million, reflecting lower Wallboard and Paperboard sales volume and lower Paperboard sales prices. Gypsum Wallboard sales volume declined 6% to 733 million square feet (MMSF), while the average Gypsum Wallboard net sales price was flat with the prior year at $233.69 per MSF.

Paperboard sales volume for the quarter was down 6% from the prior year at 80,000 tons, in line with overall gypsum wallboard shipments. The average Paperboard net sales price was $542.28 per ton, down 10%, consistent with the pricing provisions in our long-term sales agreements that factor in changes to input costs.

Operating earnings in the sector were $93.3 million, a decrease of 2%, reflecting lower Wallboard sales volume, partially offset by lower raw material costs, namely recycled fiber and energy.

Details of Financial Results

We conduct one of our cement plant operations through a 50/50 joint venture, Texas Lehigh Cement Company LP (the Joint Venture). We use the equity method of accounting for our 50% interest in the Joint Venture. For segment reporting purposes only, we proportionately consolidate our 50% share of the Joint Venture’s revenue and operating earnings, which is consistent with the way management organizes the segments within the Company for making operating decisions and assessing performance.

In addition, for segment reporting purposes, we report intersegment revenue as a part of a segment’s total revenue. Intersegment sales are eliminated on the consolidated income statement. Refer to Attachment 3 for a reconciliation of these amounts.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Portland Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and Aggregates from more than 70 facilities across the US. Eagle’s corporate headquarters is in Dallas, Texas.

Eagle’s senior management will conduct a conference call to discuss the financial results, forward looking information and other matters at 8:30 a.m. Eastern Time (7:30 a.m. Central Time) on Thursday, October 26, 2023. The conference call will be webcast on the Eagle website, eaglematerials.com. A replay of the webcast and the presentation will be archived on the website for one year.

Forward-Looking Statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statements and generally arise when the Company is discussing its beliefs, estimates or expectations as to future events. These statements are not historical facts or guarantees of future performance but instead represent only the Company’s belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside the Company’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company’s actual performance include the following: the cyclical and seasonal nature of the Company’s businesses; fluctuations in public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; the availability and fluctuations in the cost of raw materials; changes in the costs of energy, including, without limitation, natural gas, coal and oil (including diesel), and the nature of our obligations to counterparties under energy supply contracts, such as those related to market conditions (for example, spot market prices), governmental orders and other matters; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; material nonpayment or non-performance by any of our key customers; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change and other environmental regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions or the nature or level of activity in any one or more of the markets or industries in which the Company or its customers are engaged; severe weather conditions (such as winter storms, tornados and hurricanes) and their effects on our facilities, operations and contractual arrangements with third parties; competition; cyber-attacks or data security breaches; increases in capacity in the gypsum wallboard and cement industries; changes in the demand for residential housing construction or commercial construction or construction projects undertaken by state or local governments; the availability of acquisitions or other growth opportunities that meet our financial return standards and fit our strategic focus; risks related to pursuit of acquisitions, joint ventures and other transactions or the execution or implementation of such transactions, including the integration of operations acquired by the Company; general economic conditions, including inflation and recessionary conditions; and changes in interest rates and the resulting effects on the Company and demand for our products. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) or the cost of our raw materials can be expected to adversely affect the revenue and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company’s result of operations. Finally, any forward-looking statements made by the Company are subject to the risks and impacts associated with natural disasters, the outbreak, escalation or resurgence of health emergencies, pandemics or other unforeseen events, including, without limitation, the COVID-19 pandemic and responses thereto designed to contain its spread and mitigate its public health effects, as well as their impact on our operations and on economic conditions, capital and financial markets. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and subsequent quarterly and annual reports upon filing. These reports are filed with the Securities and Exchange Commission. All forward-looking statements made herein are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. The Company undertakes no duty to update any forward-looking statement to reflect future events or changes in the Company’s expectations.

Attachment 1 Statement of Consolidated Earnings

Attachment 2 Revenue and Earnings by Lines of Business

Attachment 3 Sales Volume, Average Net Sales Prices and Intersegment and Cement Revenue

Attachment 4 Consolidated Balance Sheets

Attachment 5 Depreciation, Depletion and Amortization by Lines of Business

Attachment 6 Reconciliation of Non-GAAP Financial Measures

Attachment 7 Reconciliation of Net Debt to Adjusted EBITDA

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