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United States Lime & Minerals Inc Earnings Improve With the Weather

By Matthew DiLallo - Oct 31, 2015 at 7:21AM

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The lime and limestone product maker is still being impacted by the oil and gas industry downturn.

An improvement in the weather during the third quarter drove a rebound in the construction industry, which provided a boost to United States Lime & Minerals' (USLM 0.52%) results. While its results, which it reported Wednesday evening, showed weaker revenue, earnings did improve. Having said that, the company did still feel the impact from weakness in the oil and gas industry, which hurt its own oil and gas business as well as sales to oil and gas customers and to steel customers that support the energy industry.

U.S. Lime results: The raw numbers

 

Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)

Revenue

$37.0 million

$39.1 million

-5.2%

Net Income

$5.7 million

$5.4 million

4.6%

EPS

$1.01

$0.97

4.1%

Data source: U.S. Lime & Minerals.

What happened with U.S. Lime this quarter? 
U.S. Lime reported a mixed quarter.

  • Revenue in the company's core lime and limestone operations fell 3.7% year over year to $36.5 million. While an improvement in weather conditions over the prior two quarters drove a rebound in demand from construction customers, that rebound couldn't offset weaker sales to oil and gas services and steel customers.
  • Revenue from the company's natural gas interests plunged 52.6% year over year to $577,000 due to weakness in commodity prices as well as lower production volumes.
  • Net income increased due to higher lime and limestone prices as well as materially lower interest expenses after the company repaid the balance of its term loan last quarter.

What management had to say 
In commenting on the quarter, CEO Timothy Byrne said:

With the greatly improved weather conditions in the third quarter 2015 compared to the first two quarters, we were pleased to see demand from our construction customers rebound...However, we continue to see reduced demand from our oil and gas services and steel customers compared to last year.

U.S. Lime is far from the only materials company to feel the sting from the weakness in the oil and gas industry. Eagle Materials (EXP 2.14%), which provides raw sand that's used as a proppant for fracking, saw sand volumes and sales prices fall 36% and 13%, respectively, over last year's fiscal second quarter. Further, Eagle Materials reported a loss in its Oil and Gas Proppants division of $44.6 million after recording a profit of $700,000 in the prior year. Driving this loss was the writedown of raw sand inventory and an impairment charge relating to an acquisition that Eagle Materials made the prior year.

Looking forward 
Given the stubborn weakness of oil and gas prices, it's unlikely that industry conditions will improve anytime soon. This suggests that U.S. Lime's results will continue to be under pressure, from its interests in natural gas production as well as its sales to oil and gas related customers.

 

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Stocks Mentioned

Eagle Materials Inc. Stock Quote
Eagle Materials Inc.
EXP
$112.29 (2.14%) $2.35
United States Lime & Minerals, Inc. Stock Quote
United States Lime & Minerals, Inc.
USLM
$106.15 (0.52%) $0.55

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