Low Demand Sinks U.S. Concrete
By
David Lee Smith
March 5, 2008
|
Depending on a company's specific spot in the building-materials mix, its management is either hanging onto slight earnings gains or praying for a quick end to the housing debacle. The powers that be at Houston-based U.S. Concrete (Nasdaq: RMIX) decidedly fall into the latter camp.
With the demand for its ready-mixed and precast concrete falling steadily throughout the past year, the company's final quarter involved a loss of $75.7 million, or $1.97 a share, versus a loss of $23.5 million and $0.62 a share in the final quarter of 2006. And even if you back out the company's goodwill write-down in the quarter, the proportions don't change much, coming in at earnings of a couple pennies for the most recent quarter, compared to nine cents a year earlier.
There were, however, a few positives in the company's quarter. For instance, with the ready-mix selling price actually increasing by 1.5% year over year, revenues were up about $1.5 million vs. the December 2006 quarter. Further, while the change was anything but earth-shattering, U.S. Concrete's long-term debt finished the quarter at a somewhat lower level than its year-end 2006 level.
The type of products produced really does matter meaningfully for building materials companies these days. For instance, Eagle Materials (NYSE: EXP) also did well in its cement operations -- it operates four cement plants nationwide -- but was hit by softness in its gypsum wallboard pricing and sales.
Similarly, Martin Marietta Materials (NYSE: MLM) saw its earning slip, but less than they might have had aggregates (generally, sand and gravel used in concrete) prices not remained relatively firm. And Legacy Vulcan (NYSE: VMC) actually churned out improved results on the basis of aggregates and the late-in-the-year acquisition of Florida Rock Industries.
Clearly, good fortunes for U.S. Concrete and the other companies are closely tied to an improved housing market and a stronger economy. But since neither is likely to materialize tomorrow or the next day, I'm inclined to take a pass on the company's shares for now.
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