Eagle Materials Inc

Good day everyone and welcome to EGLE Materials first quarter fiscal 2025 earnings conference call. Today's event is being recorded. At this time, I'd like to turn the floor over to EGLE's President and Chief Executive Officer, Mr. Michael Hack. Mr. Hack, please go ahead.

Thank you, Jamie. Good morning. Welcome to EGLE Materials conference call for our first quarter of fiscal year 2025. This is Michael Hack. Joining me today are Craig Kessler, our Chief Financial Officer, and Alex Haddock, Senior Vice President of Investor Relations, Strategy, and Corporate Development. There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast. While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release. Today, I'm pleased to discuss a good start to our 2025 fiscal year. The first quarter results include record revenue of $609 million and a 16% increase in earnings per share. Our performance this quarter reflects our consistent, disciplined approach to managing and operating our businesses through shifting conditions. We achieved our positive results during the quarter characterized by challenging weather conditions and our solid performance was largely led by operational efforts of our employees. At EGLE, we maintain our consistent approach to running our businesses regardless of the challenges presented. Our approach revolves around several aspects that we hold as standards. The first focus area is on safety. It is our belief that a safe operation leads to superior operational and financial results. As I travel to our facilities across the country, it is always impressive to see our employees across all of our businesses stay committed to maintaining the safest possible working environment. Their efforts are demonstrated through our safety statistics, which are consistently below industry averages, but also, most importantly, through their interactions with one another, ensuring each job can be done safely. Second, we are relentlessly focused on operating as efficiently as possible. We are always proactive with our maintenance programs to keep our facilities in like-new condition, enabling us to perform with high efficiency and support our customers. This proactive approach regarding maintenance last quarter benefited us this quarter. We were able to navigate the weather challenges well and manage our costs accordingly. Third, we continuously maintain our focus on sustainability. This quarter, like others, have several highlights I want to mention. We continue to make progress on several organic investments, including our joint venture Texas-Lehigh slag grinding facility, which is nearing completion and will have meaningful economic and environmental benefits by providing slag to our customers in Texas. We also recently announced the expansion and upgrade of our mountain cement facility. This upgrade will make this plant more efficient, aligning not only with our focus on sustainability by doing more with less, but also expanding our low-cost producer position. Dirt work on this project has begun, and we will continue to provide updates on this project as we reach other milestones. Another area we are focused on with regards to sustainability is around the products we produce. A few highlights regarding our work in this area are we continue our transition to Portland Limestone Cement, or PLC, and other blended products to reduce our CO2 intensity. Currently 90% of our production is PLC or blended cement. We are also in process of installing two alternative fuel systems to expand the usage of these fuels. Our capital project at our paper mill to cut our water usage in half continues and is scheduled to be completed mid-next year. Now let me turn to some financial observations for the quarter. Regarding our demand outlook for our businesses, we see The cadence and timing of our business demand drivers vary, but we also see the outlook for each business continuing to skew to the upside. In cement, the demand visibility picture remains strong. BBO data shows years of public infrastructure spend ahead, largely driven by the IIJA bill. Non-residential construction, especially as it relates to heavy manufacturing projects, should continue to remain at elevated levels. Both infrastructure and non-residential projects are typically multi-year projects that provide confidence around our visibility over the coming years. We also benefit from our geographic footprint, and our markets generally outperform the national average. While weather impacted all our regions, it did so at different magnitudes and pushed out the construction season to varying degrees. If the demand fundamentals we see do stay in place, We think the cement business will continue to see strong performance, especially given the US manufacturing supply response is more limited than in any other cycle. Regarding the wallboard side of our business, in the near term, frankly, the demand cycle is harder to predict right now, and much will depend on how the economy fares, as well as how our policymakers react in response to the economic data. As we've said many times, we continue to believe in the structural characteristics of our wallboard business, especially as the supply has continued to come offline over the last several years. Some key facts that lead us to believe this are we have been underbuilding housing against underlying demand in the U.S. for a long time. This underbuilding has led to a shortage of homes while household formations expand. In addition, The U.S. existing housing stock continues to age and is older than ever, giving us further confidence in the medium and long-term demand profile for our wallboard business. But as this cycle has already proven out, we believe both demand and supply fundamentals of the wallboard industry create an appealing performance backdrop for our business. As we look forward, even with some of the uncertainties I mentioned, we are confident we can continue our track record of superior margin performance, setting the industry benchmark for our low-cost producer position. To that end, I'll conclude with some remarks that largely mirror my opening comments on the consistency of our approach to running our businesses exceptionally well in shifting economic conditions. As we look forward to the quarters, years, and even cycles ahead, We are committed to looking for opportunities to strengthen our core businesses across both the heavy and light material segments through investments, both organically and through M&A. Our consistent strategy has led to superior shareholder returns over the history of our company, and we believe these unique investments, coupled with our strict strategic and financial investment criteria, will generate similar outstanding returns in the future. Another key tenant to maintaining a strong core is keeping our balance sheet healthy. We have generally kept our leverage at or below 1.5 times through the last several years. This allows us to execute on investment opportunities, but it also gives us the flexibility to return our excess free cash flow to shareholders, mostly through share buybacks. Finally, but equally important, we'll make our core business stronger by executing operationally. As our long track record of performance shows, we will achieve this while keeping our people safe and being excellent environmental stewards in the communities we operate in. With that, I'll turn it over to Craig for more details on our financials.

Thank you, Michael. As mentioned, first quarter revenue was a record $609 million, an increase of 1%. The increase primarily reflects higher cement and wallboard sales prices and record paperboard sales volume, partially offset by lower cement sales volume, which I'll comment on during the segment discussion. First quarter earnings per share was a record $3.94. That's a 16% increase from the prior year. The increase was driven by higher earnings and a 4% reduction in fully diluted shares due to our share buyback program. Turning now to segment performance on the next slide. In our heavy materials sector, which includes our cement and concrete and aggregate segments, revenue was up 1%, driven primarily by cement sales price increases implemented earlier this year. Higher cement prices were partially offset by lower cement sales volume as wet weather delayed construction projects, hampering cement, concrete, and aggregates volume during the quarter. In addition, June of 2024 had two fewer shipping days than last June. Operating earnings were up 14%, primarily because of increased cement prices, lower fuel costs within the cement business, and lower maintenance costs during our planned annual maintenance outages. In addition, last year's quarterly results included approximately $2.8 million of costs associated with the step-up in inventory values related to the terminal Stockton acquisition. Moving to the light materials sector on the next slide, revenue in the sector increased 2%, reflecting higher wallboard sales prices and record recycled paperboard sales volume. Operating earnings in the sector increased 5% to $102 million, reflecting higher net sales prices and lower input costs, primarily for freight and energy. Looking now at our cash flow, we continue to generate substantial cash flow and allocate capital in a disciplined way in line with our strategic priorities. In the first quarter, operating cash flow decreased by 6% to $133 million, reflecting improved earnings offset by increased working capital. Capital spending decreased to $33 million, and we repurchased 348,000 shares of our common stock for $85.5 million and paid our quarterly dividend, returning $94 million to shareholders. We have 5.5 million shares remaining under our current repurchase authorization. Finally, a look at our capital structure, which continues to give us significant financial flexibility. At June 30, 2024, our net debt to cap ratio was 44%, and our net debt to EBITDA leverage ratio remained at 1.3 times. We ended the quarter with $47 million of cash on hand. Total committed liquidity at the end of the quarter was approximately $607 million, and we have no meaningful near-term debt maturities. Thank you for attending today's call. We'll now move to the question and answer session. Jamie?