EAGLE MATERIALS INC Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Health, Safety, and Environment: Annual HSE Conference discussed safety culture, sustainability. Highlights include commissioning Texas Lehigh slag grinding facility, reducing coal/coke use, water usage reduction at Republic Paperboard, and blended cement production over 90%.
• Financial Results: Fiscal Q2 2025 revenue was a record $624 million. Heavy Materials affected by weather, Denver aggregate demand, and Kansas City concrete union work stoppage. Upcoming quarter has maintenance projects at Texas Lehigh and Tulsa Cement.
• Business Outlook: Infrastructure spending from IIJA expected to materialize, non-residential construction mixed but large manufacturing projects strong, residential construction expected to rebound. Wallboard demand resilient despite rate environment.
• Strategic Initiatives: Low-cost producer with high barriers to entry, healthy balance sheet for investments. Acquired aggregates business, upgraded Mountain Cement plant, robust M&A pipeline.

Segment Performance

• Heavy Materials: Revenue declined 2% primarily due to lower cement sales volume, partially offset by higher sales prices. Operating earnings were down 9% because of lower cement sales volume and higher maintenance costs.
• Light Materials: Revenue increased 5% from higher wallboard and recycled paperboard sales volume and prices. Operating earnings in the sector were up 5% to $98 million, driven by higher sales volume and prices.

Guidance

• Revenue for Q2 2025 was a record $624 million, slight uptick from prior year due to higher prices and volume.
• EPS $4.26 even with prior year, offset by share buyback reducing diluted shares.
• Anticipate maintenance costs in upcoming quarter from projects at Texas Lehigh and Tulsa Cement.
• Wallboard price increase delayed to early 2025.
• Expect continued demand tailwinds from IIJA, non-residential, and residential construction.

Risks

• Weather impact on cement and aggregates volumes.
• Delays in IIJA spending materialization.
• Union work stoppage impact on volumes in Kansas City.
• Synthetic gypsum shortage affecting industry margins.

Question and Answer

Q: Weather impact on wallboard and heavy business, volume trends post-weather A: Fortunately, hurricanes didn't impact operations, but rainfall affected volumes. October volumes improved.

Q: Wallboard pricing, like-for-like pressure A: Slight sequential price drop due to mix/geography, but resilient pricing; accommodative policy expected to spur single-family construction.

Q: Cement backlogs, visibility, IIJA effect A: No significant backlog, positive demand picture with IIJA projects queued, but weather and delays affected 2024.

Q: Texas Lehigh investments, maintenance cycle A: Outage completed, investments improve reliability, back to normal maintenance cycle.

Q: Cement margins, maintenance costs, long-term outlook A: Industry supply constraints favor higher margins; $6-8M maintenance impact in Q3, long-term margin resilience.

Q: Slag capacity addition, cement additive mix A: Slag facility in Houston commissioned, exploring alternative cementitious materials.

Q: Cement demand cadence, seasonality A: December volumes weather-dependent, 2024 season started slow with weather headwinds.

Q: Aggregates acquisition, CapEx update A: Aggregates acquisition contributed volume, CapEx for FY25 ~$280M-$310M, Laramie project ongoing.

Q: Cost structure, KC/Denver issues A: Wallboard cost structure includes paper and natural gas; KC issue resolved, Denver business being refocused.