Eagle Materials Inc

Good day, everyone, and welcome to EGLE Materials' fourth quarter and fiscal 2026 earnings conference call. This call is being recorded. At this time, I would like to turn the call over to EGLE's President and Chief Executive Officer, Mr. Michael Hack. Mr. Hack, please go ahead.

Thank you, Bailey, and welcome, everyone. 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. Thanks for joining us today to discuss another year of solid execution at Eagle Materials. In fiscal 2026, during unusually high uncertainty in the economic environment, the Eagle team delivered strong financial and operational results. For the fifth straight year, we generated record revenue, delivering $2.3 billion of annual revenue and strong earnings per share of $13.16. We also returned over $400 million of cash to our shareholders. Eagle has a long track record of consistently investing where it matters. Let me start with the safety of our people. For the past five years, our combined businesses have, on average, maintained a total recordable incident rate below the industry average. In fiscal 2026, we also increased our near-miss hazard observations, the best leading indicator to prevent safety incidents by 24%. With regards to ensuring the long-term sustainability of our operations, we have completed or started several very strategic investments, the most notable Over the next 18 months, EGLE will complete the modernization of one of our oldest cement plants, Mountain Cement, and one of our oldest wallboard plants in Oklahoma. These projects show our continued focus on investing in our assets to keep them in like-new condition. The Mountain Cement plant modernization is approximately 60% complete, and we expect commissioning of the new kiln line to begin in late calendar 2026. Construction on the Duke, Oklahoma wallboard plant is approximately 30% complete, and we expect to commission the new wallboard line in the second half of calendar 2027. These investments will lower our cost structure, improve reliability, and expand the capacity of each plant, which will further increase production flexibility across our plant network and strengthen our already low-cost competitive position. Another area of strategic investment has been in our quarries. The limestone, gypsum, and rock that we have at each quarry and their proximity to their plants is crucial for EGLE's success across all of our business lines. Controlling decades of our primary raw materials gives us a critical competitive advantage in terms of cost and consistent high quality supply. This is particularly important in periods of cost spikes and supply chain disruptions. It also enables us to maintain a consistent high quality product that is reliable for our customers through decades. We have over 50 years on average of quarried reserves at each plant, and we have maintained the 50 year average on a rolling basis through land investments. Turning to the macro level view of our businesses, we could easily get distracted by headline noise and the near-term volatility and become overly focused on the potential knock-on effects for short-term product demand. However, we are disciplined in maintaining a through-the-cycle view. From that perspective, we are still fundamentally bullish on the structural tailwinds that will continue to support our industries for many cycles to come. Our products are essential for building and renewal of America's infrastructure, schools, hospitals, and homes. to name some applications. Though demand for our core products is trending well below prior peak levels, the U.S. population has grown significantly and the U.S. infrastructure of existing homes are reaching record age levels. At the same time, there are no scalable or viable substitutes for our products and supply constraints across cement, wallboard, and aggregates will constrain capacity additions in each industry over the medium to long run. We believe that when demand does strengthen, we are well positioned given our low cost production advantages and our ongoing investments to reinforce those advantages. In fact, we are seeing this play out for Eagle even in the current choppy business environment. In the cement sector, infrastructure and cement-intensive non-residential construction applications are tightening several of our regional markets. Given the federal infrastructure spending still ahead for IIJA, the strength of state-level infrastructure budgets, and the data center projects positively affecting our entire footprint, the volume outlook for our heavy materials businesses remain favorable across our entire footprint. On the cost side of our cement businesses, we are relatively well insulated from energy cost disruptions in the near term, as we already locked in our fiscal 2027 primary fuel costs last winter. On the wallboard side, as we've discussed, the near-term housing outlook is still facing several affordability headwinds. Most notably, we need mortgage rate relief to encourage home inventory turnover which should translate into normalized new home construction activity. We have seen wallboard sales volumes hold steady from a historical perspective, and most importantly, we have seen relative price stability that is not surprising to us given supply constraints and raw material challenges for the rest of the industry. In both our cement and aggregates businesses, where volumes are inflecting positively currently, And in our wallboard business, where in the midterm we believe the volume is poised to rebound as the home building market normalizes, there is significant runway for earnings across our core business lines. We are well positioned to capitalize on that runway. We have continuously invested in our businesses throughout the cycle to capture upside opportunities as they materialize. As Craig will discuss, we have strengthened our already healthy balance sheet, which, in combination with our excess free cash flow generation, enables prudent, disciplined investments that further strengthen our competitive position. Our rigorous strategic and financial criteria mean we will be patient and ensure our inorganic and organic investments will reinforce consistent through the cycle growth. With that, I'll turn it over to Craig.

All right, thank you, Michael. Fiscal year 2026 revenue was a record $2.3 billion, up 2% from the prior year. Fourth quarter revenue was also up 2% to a record $479 million. Both increases were driven by higher cement sales volume and contribution from the two acquired aggregates businesses, which were partially offset by lower wallboard sales volume and prices. Annual earnings per share was $13.16, down 4%. The decrease reflects lower net earnings, which were mostly the result of lower wallboard sales volume and prices, offset by a 5% reduction in fully diluted shares due to our share buyback program. Turning now to segment performance, highlighted on the next slide. In our heavy materials sector, which includes our cement and concrete and aggregate segments, revenue increased 10%. driven primarily by an 8% increase in cement sales volume and a 19% increase in concrete and aggregates revenue. Aggregate sales volume reached a record 6.6 million tons, up 70% year-over-year, reflecting contributions from our acquired aggregate operations. Importantly, organic aggregate sales volume increased 24%, underscoring healthy underlying demand. Sales volume growth in both business lines was supported by continued strength in public infrastructure spending, as well as key areas of private non-residential construction activity, such as data center development. Operating earnings also increased 10%, driven primarily by higher cement sales volume, partially offset by a 1% decline in net cement sales prices. Moving to the light materials sector on the next slide, Annual revenue in the sector decreased 9% to $881 million, reflecting lower wallboard and recycled paperboard sales volume and a 4% decline in wallboard sales prices, resulting from continued softness in residential construction. Operating earnings in the sector were down 15% to $331 million, primarily because of lower wallboard sales volume and prices. Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined manner, consistent with our long-term strategic priorities. During fiscal 2026, operating cash flow increased 12% to $614 million, reflecting the strength of our business and the resiliency of our operating model. Capital expenditures totaled $417 million in fiscal 2026, driven primarily by investments in the modernization and expansion of our mountain cement plant in Laramie, Wyoming, and the modernization of our Duke, Oklahoma, wallboard facility. These projects represent important long-term investments that will enhance plant efficiency, improve reliability, and strengthen our competitive position. Looking ahead to fiscal 2027, we expect capital expenditures to range between $490 and $525 million, reflecting continued progress on these strategic growth initiatives, as well as ongoing sustaining capital investments across the company. Capital spending is expected to peak in fiscal 2027, with the Mountain Cement project scheduled for commissioning later this calendar year and the Duke project anticipated to conclude in mid-fiscal 2028. At the same time, we remain committed to returning capital to shareholders. During fiscal 2026, we returned a total of $414 million through quarterly dividends and the repurchase of approximately 1.7 million shares for $382 million. We ended the year with approximately 2.9 million shares remaining under our current repurchase authorization. And finally, turning to our capital structure. which continues to provide us with significant financial strength and flexibility. During the fiscal year, we further strengthened our balance sheet through the issuance of $750 million of 10-year senior notes at an attractive 5% interest rate. This transaction improved our debt maturity profile, enhanced committed liquidity, and better aligned our capital structure with the long-term strategic investments underway at our Mountain Cement Plant and Duke Wallboard facility. We also used a portion of the proceeds to repay borrowings under our bank credit facility, further enhancing our financial flexibility. At March 31, 2026, our net debt to capital ratio was 50% and our net debt to EBITDA leverage ratio was 1.9 times. levels we believe remain prudent and supportive of our growth strategy. We ended the quarter with $298 million of cash on hand and approximately $1 billion of total committed liquidity. Importantly, we have no significant near-term debt maturities, positioning us well to continue investing in the business while maintaining a strong and flexible balance sheet. Thank you for joining today's call. Bailey, we will now open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you were using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. Our first question comes from Trey Grooms with Stevens. Please go ahead.

Good morning, Craig, Michael, and Alex, and congrats on the strong finish to the fiscal year, particularly on the margin performance. Maybe starting there, could you walk us through some of the key puts and takes on the margins across the segments this quarter?

Yeah, no, thanks, Trey. Look, on the cement side, as you saw, we're really good volume. Our region's continue to perform well. That volume, you know, the incremental on volume is good this quarter. As we saw, you know, a good flow through. We've, as Michael mentioned, a lot of our solid fuels have been obligated through supply agreements through this year. So we continue to perform very well there. The plants, really good plant efficiencies this quarter versus a year ago. And then on the light side, the wallboard business continues to perform very well. The paper mill had another record year for us. That plant is running very, very well. Those plant deficiencies across the enterprise, really you see the benefit and the margin profile that's being generated.

Yep, very good. And, you know, on that cement volume strength in the corridor, Could you talk a little bit about some of the drivers there and maybe what you're seeing from just kind of an underlying demand perspective as we move into the seasonally stronger part of the building season?

Yeah, and we mentioned in the release some portion of it was last year's fourth quarter had a really tough comp or had a really tough weather environment. So there was a relatively easy comp. But, you know, as we've talked about, the underlying strength in public infrastructure remains positive with state budgets very healthy. And then the, you know, areas of private non-residential construction, we mentioned data centers. Those have been very strong, especially in the regions in which we operate. So, you know, those are the two big drivers for underlying demand. And as you pointed out, really during what would generally be a pretty slow construction season. So we're excited about how the construction season has started here in April and carrying into May and shaping up for a good year in fiscal 2027.

Great. Thank you for that. Last one for me. On cement, the pricing was down slightly, although you've now implemented price increases across most of your markets, as you've talked about in prior calls. Could you give us any color to the extent you could on how those increases are being received, how maybe we should think about that cement pricing here again as we're moving into the peak construction season? I know you did mention that regionally in some of your markets you are seeing some tightening there. So just any color you might could give us on the cement pricing front.

We have cement price increases in just about every market for April 1st. Some of our western markets and down south, we didn't have increases. But we're in the process of executing on those. We do have some higher freight costs that on a net basis will be impactful. We see that in cement when we transfer to terminals. We see that also in wallboard, as we pointed out in the release. But we're in the process of implementing those and And having a good volume environment is certainly a positive and a support for that.

Yep. All right. Makes sense. And thanks a lot for taking my questions.

I'll pass it on and best of luck.

Our next question comes from Anthony Pettinori with Citi. Please go ahead.

Good morning. Just following up on Trey's question, and there's a little bit in the release about this, but could you maybe give any more color in terms of quantifying the impact of diesel and freight costs and maybe just kind of remind us how much you're buying directly, how much is sort of like a pass-through versus having to raise prices in the open market? Just kind of... If you could put any kind of finer point on how a higher diesel environment impacts both the cement and the wallboard business.

Yeah, we'll start on the wallboard side. Maybe it's a little easier to understand. So we price wallboard on a delivered basis, meaning we're responsible for the freight bill. And sequentially, we saw at least about a $2, maybe pushing $3 price. increase in freight costs so that impacts what we call our mill net our net sales price so you know that's that's how diesel from a delivery basis impacts the wallboard business on cement is a little more nuanced you know because there's a more of a combination of customer pickup and and then which you know the customers would cover versus delivering to our terminals for them to pick up. We cover the freight to the terminal. And again, we saw some inflation there, a couple of dollars on a per ton basis. And so then if you think about operating costs, we certainly use diesel in the quarry operations. We're very fortunate, again, our quarries are near our facilities, meaning the limestone quarries that are feeding cement plants, the gypsum quarries that are feeding the wallboard plants close to the facility. So we try to minimize what we can in terms of those freight costs, but we certainly saw an impact. But the delivery cost is a much more meaningful number for us today.

Okay, that's very helpful. And then maybe just one follow-up. I know you don't have as much exposure to imports from a cement perspective as some other companies, but You know, given the rise in fuel costs and challenges in ocean freight, are you seeing cement imports come in at a higher cost or meaningful impact there?

Yes. So, you know, we do import into a couple of markets, into South Texas and into California. Northern California. And yes, we've seen, you know, we track the Baltic Dry Index, and that has certainly ticked up here recently with all of the issues that are happening globally, not just the energy costs, but there's other factors that are impacting ocean freight rates. And yes, that has increased those costs, which, you know, again, is upward pressure on a supply product into the U.S.,

Okay, that's helpful. I'll turn it over.

Our next question comes from Timna Tanners with Wells Fargo. Please go ahead.

Hey, good morning. There's some views out there that the data center demand is the real reason why Q1 volumes have been so strong. And I'm just wondering what you think of that. I know you mentioned that on the cement side. I know you mentioned that there are easier comps and other factors, but can you drill down a little bit more on what you're seeing on the data center side and remind us how big it is for your end markets?

It's definitely very meaningful. We mentioned two things. With public infrastructure, we continue to see good activity there in our markets, but data centers were certainly a large contributor to the improvement And I might add, I mean, it's not like we're in the last innings of the data center development. You know, it's just in the beginning in many of our markets, more soil stabilization and those type of activities. So that's certainly, you know, it's funny. You think about the components of the demand environment. We talk about private non-res. We traditionally thought about hotels, office buildings, schools, those types of things. You really have components of private non-residential that didn't exist 10, 15 years ago, whether that's warehouses or these data centers. We've seen the fabrication facilities for a while now. So there's actual components of private non-res that I think are much more meaningful than what people were expecting and certainly than we've ever seen historically.

Our next question comes from Adam Tallheimer with Thompson Davis. Please go ahead.

Hey, good morning, guys. Nice quarter. Thanks, Adam. Craig, can you give a little bit more color on the April 1 cement price increases? And then on the wallboard side, what's the chance that wallboard pricing bottoms here in the near term?

Yeah, so Adam, I'll start with the last part of your question first. We have a June 1st price increase in wallboard, and a lot of that is stemming from some of these transportation costs that we've seen over the last several months. As I mentioned a few moments ago, we priced wallboard on a delivered basis, and that freight bill is falling back to us, and so we do have a price increase letter out there. You know, broadly speaking, you know, Adam, you look at where the demand trends are for wallboard today in the United States. Michael mentioned it. You know, they are dramatically below trend that you would have expected to see with the population growth we've seen here in the U.S., et cetera. So, you know, demand and pricing are going to be linked. But given where our business is performing at this demand level, you know, very, very – Proud of how that business is operating and and our folks are running our facilities In terms of the cement price increase as we mentioned a little while ago Also, we've got price increases in most markets for April 1st You know, those are underway There are some some nets Against with freight bills that will offset that But you know given the demand environment we are pushing forward with those April 1st increases as well okay, and

Craig, you mentioned CapEx this year is around $500 million, plus or minus. I'm just curious, what would that be if you stripped out the two big capital projects and you just had maintenance CapEx? And then once the two big capital projects are done, what will the maintenance CapEx be in perpetuity?

Yeah, Adam, that's a great question, something we really focus on. As I mentioned, fiscal 27, this $500 million number, will really be the peak As you start to look towards fiscal 28, as the Mountain Cement project will have been completed, the Duke plant will be completed during that year, that number starts to come down significantly. What I call sustaining capital needs are in the $150 million range. I don't think we're that exact run rate for fiscal 28. We're probably still in the $250 million range with the Duke plant finishing in the first half of the year, but as you get into the back half of fiscal 28, absent some other significant project coming up, we would be at that $150 million annual run rate.

Perfect. Thanks, Craig.

Our next question comes from Philip Ng with Jefferies. Please go ahead.

Hey, guys. Congrats on the strong quarter. I think on the wall board side of things, the previous two quarters, your volumes lagged the industry considerably. So that trend reversed pretty nicely. Were there any one-offs that's driving that, like with rebates and how contracts were set up? Or are you seeing a nice catch-up here? You're recapping some share at this point.

No, Phil, I don't think anything we would call out. I think as we talked about a year ago, we outperformed – the industry because of some regional benefits and things like that. But, you know, this was just in the last couple of quarters, we're just a normalization of that. So, you know, not surprised to see us performing in line with the industry.

Okay, helpful. Craig, any early read on how trends are shaping up in April, May? I mean, housing's still been pretty choppy, but any color in terms of order patterns on the wallboard side?

Look, as you said, housing, it's hard. The crystal ball there isn't real clear. It's clear over a broader time period we need to build significantly more homes in the U.S. We're significantly underbuilt. How that trend happens over the next six to nine months I think is still a little unclear. But certainly over a broader time period we see a lot of upside for that business, both for volume price and therefore margins.

Okay. On the cement side, certainly volumes are extremely strong in 2026. Admittedly, some of that is lapping easier comps. When we look out to April, May, and frankly, 2027, should we expect positive volume growth given some of the momentum you're seeing in infrastructure and some of these data center projects? I ask just because the industry data, I think PCA or whatever new format it's called, is anticipated volumes down, call it low single digits, but certainly you're seeing that momentum. So just help us kind of tease out what you're seeing and how we should think about the demand backdrop this year.

Yeah, Phil, it's interesting. We've seen the same data. And look, I think part of it is our regional footprint is certainly we saw it in calendar 25 outperformed the national average. The national average was down in and 25, and we are up slightly. But if you went market by market, region by region, however you want to describe it, our markets outperform the national average. And so as we head into calendar 26, our fiscal 27, I think we remain optimistic about the underlying demand environment for the reasons we've discussed. So yeah, we still look for a positive momentum and volume. Certainly understanding the ACA has a different number, but, you know, again, it could be more of a national average type of issue. But as we look at our markets, we continue to see good momentum there. Do I think we continue to post, you know, double-digit type of increases? I'm not suggesting that. But I do think we continue to see improvement in our markets.

Okay. Very helpful. Appreciate it, Craig.

Our next question will come from Timna Tanners with Wells Fargo. Please go ahead.

Okay, thanks. I just wanted to also ask if you could share some thoughts on some of the chatter recently about gas tax holidays on the federal and state level and also the proposed replacement for IIJA and how you think that will impact EGLE in the industry.

Yeah, the last part of your question is pretty fresh. Some of that text coming out in the last call is 24 hours or so. I think what it points to is there's obviously a desire and a need to continue to extend the IIJA and its new version. I think that'll be supportive of public infrastructure for a long period of time. It's a little early to speculate on exact dollar amounts and exactly how and when, but it's certainly supportive. In terms of the first part around gasoline tax holidays, things like that, those have traditionally been pretty temporary in terms of you see some energy spikes like this and try to compensate for that. But the projects that we've seen in the funnel are already supported and don't see them impacting those projects moving forward.

Okay, appreciate it. And if I could, if you think past the current heavy CapEx cycle, could you remind us about how you're thinking about capital allocation? Anything juicy in terms of the pipeline for acquisitions or if you could give us a high-level characterization of the M&A outlook?

Yeah, I appreciate the question on that. You know, we always look for M&A acquisitions, you know, as long as they make sense and meet our financial return criteria. So, you know, I think we've been clear and will remain clear on our capital allocation is always for growth primarily as long as it comes at a good value and you know, maintaining our assets in like-new condition and then returning cash to shareholders. That's been our hallmark for the last decade and will continue to be our hallmark of how we deploy our capital.

Okay, thank you.

Our next question comes from Tyler Brown with Raymond James. Please go ahead.

Hey, good morning, guys. Good morning. Hey, Craig, I think between Mountain Summit and Duke, you're going to spend maybe $760 million on those projects. And I know that those projects are kind of both growth and kind of maintenance in nature. But by the time we get to think about maybe fiscal 29, is there a return on that capital that we should think about conceptually? I mean, is there a way to think about, you know, we deploy $760 at some EBITDA multiple, or is there just any way to think about that off into the future?

Yeah, Tyler, great question. You know, look, I want to go back to the projects. I mean, these are long-term strategic investments that, you know, will give us some incremental output, but also dramatically reduce the operating cost structure of both of those facilities. As we pointed out, you know, the Mountain Cement Plant in Laramie, Wyoming is one of our oldest cement plants, will lower the cost structure predominantly through more energy savings, a much more fuel-efficient facility. Duke, the same way, very similar. So I don't want to dismiss the improvements of those projects, but when we make investments like those projects, and we've made similar investments historically, we're targeting a double-digit type of return on those investments. And so, yeah, you're pointing out the right time frame for As we get into fiscal 29, you know, that's when you've got both of those projects, you know, will have been completed and available to run. You know, and those cost savings, you know, will be very, very meaningful part of that improvement.

Okay. Excellent. That's helpful. And then this is a bit more of a minutiae question, I suppose. But you mentioned earlier that the paper board plant is running very well. And it's no doubt, if you look at the EBIT contribution of that plant, But big picture, is that $40 million of EBIT a good run rate, or was there a favorable setup this last year with revenue and cost mismatching, or just any color there, just think about the longer-term model? Thank you.

You know, that profitability is sustainable. You know, part of that is because we have some pass-throughs. So call it 60% of their sales volume is sold through long-term supply agreements, and those agreements have inflators and deflators. So, yes, OCC was down this year, but we have the ability, you know, if it goes up, you pass that along. Sometimes there's a quarter lag to that. But that is about a team there at the paper mill really performing well, high plant efficiencies. That drove a lot of it, but very, very sustainable earnings.

Perfect. Thanks, guys.

This concludes our question and answer session. I would like to turn the conference back over to Michael Hack for any closing remarks.

Thank you, Bailey. Before we end the call, I want to acknowledge and thank all of my EGLE colleagues for their focus and commitment through the turbulence of the last couple of years. The focus has enabled us to deliver strong financial results while making great progress on our two plant modernizations in fiscal 2026. As we move into our fiscal year 2027, even as uncertainty persists, we'll keep steadily focused on safety, operational excellence, and high return value enhancing investment opportunities. Thanks for joining our call today. I look forward to keeping you updated on our progress through fiscal 2027.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.