The continued slump in oil and gas prices is having an impact on U.S. Lime & Minerals' (NASDAQ:USLM) results. Not only is it hampering demand for lime and limestone, but it's putting pressure on the company's earnings from its natural gas production. This resulted in weaker fourth-quarter results, which the company reported Thursday evening.

U.S. Lime results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


$31.3 million

$35.4 million


Net Income

$2.3 million

$3.7 million






Data source: U.S. Lime & Minerals.

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

  • Revenue in the company's core lime and limestone operations fell 10.6% year over year to $30.8 million. This was due to decreased demand from steel, environmental, and oil and gas customers, which was only partially offset by improved sales to construction customers.
  • Revenue from its natural gas interests plunged 53.1% year over year to $497,000 due to weaker gas prices and lower volumes.
  • These weaker sales put a lot of pressure on net income, which dropped sharply, and despite a nearly $300,000 decrease in interest expenses after the company recently repaid the balance of its term loan.

What management had to say 
About the quarter, CEO Timothy Byrne said:

In the fourth quarter, we saw demand for our lime and limestone products increase from our construction customers, which is also carrying into 2016...Our continuing strong cash flows and balance sheet enabled us to repay our term loans and terminate the pension plan in the second quarter 2015, initiate a share repurchase program in December 2015 and continue to pay cash dividends.

While the company is feeling the pinch from its exposure to the oil and gas market, it is experiencing a pickup in demand from construction customers. As is Eagle Materials (NYSE:EXP), which has noted that its products and building materials businesses performed well during the quarter. That said, Eagle Materials was likewise affected by its exposure to oil and gas, with the company seeing lower demand for oil well cement as well as for proppants used in hydraulic fracturing. However, because of their overall customer base diversity, both U.S. Lime and Eagle Materials continue to generate solid cash flow, which they are using to pay dividends, reduce debt, and buy back shares, with U.S. Lime recently announcing a new $10 million share repurchase program.

Looking forward 
While the improvement in sales to construction customers is good to see, the persistent weakness in the oil and gas market will likely hold down U.S. Lime's earnings potential for the foreseeable future. That said, a growing number of industry participants believe that oil prices could rebound sharply in the second half of 2016 due to significant production declines on the horizon that could fuel a rebound in U.S. Lime's sales later this year. 

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