QUOTE AND NEWS
Market Intelligence Center  Jul 1  Comment 
After closing Tuesday at $83.93, Vulcan Materials Co (VMC) presents an attractive opportunity to get a 3.22% return in just 51 days, which is an annualized return of 23.01% (for comparison purposes only). To enter this trade, sell one Aug. '15...
BBC News  Jun 26  Comment 
Can Aston Martin's £1.5m car rev up its fortunes?
Automotive World  Jun 26  Comment 
Months of anticipation for Aston Martin enthusiasts around the world are, today, brought to a close with the exciting global dynamic debut of the Aston Martin Vulcan – a track-only supercar and the British luxury brand’s most intense and...
Market Intelligence Center  May 22  Comment 
After Thursday’s trading in Vulcan Materials Co (VMC) MarketIntelligenceCenter.com's option trade-picking algorithms uncovered a trade that offers a 3.51% or 14.07% (for comparison purposes only), while providing 5.33% downside protection. The...
Forbes  May 11  Comment 
Vulcan Materials Company (VMC) declared a quarterly cash dividend of ten cents per share on its common stock. The dividend will be payable on June 10, 2015, to shareholders of record at the close of business on May 26, 2015.
Forbes  May 6  Comment 
Looking at the sectors faring best as of midday Wednesday, shares of Materials companies are outperforming other sectors, up 0.1%. Within that group, CONSOL Energy Inc (NYSE: CNX) and Vulcan Materials Co (NYSE: VMC) are two large stocks leading...
Wall Street Journal  May 5  Comment 
Vulcan Materials Co. swung to a loss in the first quarter as demand for its construction materials remains “well below normal levels.”
Market Intelligence Center  May 1  Comment 
Vulcan Materials Co (VMC) presents a trading opportunity that offers a 5.17% return in just 112 days. A covered call on Vulcan Materials at the $85.00 level expiring on Aug. '15 offers an assigned return rate of 5.17% or 16.86% annualized. This...
SeekingAlpha  Apr 29  Comment 




 
TOP CONTRIBUTORS

Vulcan Materials Company (NYSE: VMC) is the largest producer of construction aggregates in the United States by sales. Aggregates include gravel, sand, and crushed rock and are used to make composite building materials like asphalt and concrete. The construction aggregates produced by VMC are used in projects as diverse as constructing airports, highways, and home foundations. The company focuses on areas with above-average population and aggregates demand growth. The company earned $2.5 billion in revenue and $31 million in net income in 2009.[1]

Public construction projects, such as bridges, dams and roads are responsible for almost 50% of the company's business.[2] These projects tend to be less dependent on economic factors and provide a degree of revenue stability. That said, approximately 19% of the company's revenue come from sales related to the residential construction market. The slumping U.S. Housing Market has cause the demand for some of the company's products to fall. However, limited competition has resulted in greater pricing power for companies like VMC. As such, in spite of the drop in sales volume, VMC has been able to keep revenue flat by increasing its average prices.

Like nuclear power plants and garbage dumps, quarries, which create noise and dust, are also subject to the "not in my backyard" mentality. Most residents prefer not to have a quarry within close proximity. This makes getting the zoning permits necessary to open a new quarry in a metropolitan area difficult. Construction aggregates are also expensive to transport due to their high density, and most aggregate producers are limited to supplying customers within a 50 mile radius. As a result, aggregate producers in one region do not typically face competition from producers in other regions.

Company Overview

Vulcan Materials Company operates primarily in the United States; it ships roughly 231 million tons of aggregates to 22 states, the District of Columbia, the Bahamas, and Mexico from 334 facilities.

VMC has defined its business into three operating segments, based on the company's principal product lines: aggregates, asphalt mix, concrete and cement:[3]

  • 75% of net sales originated from the Aggregates segment, which mines, processes, distributes and sells sand, gravel and crushed stone.
  • 24.8% of net sales originated from the Asphalt mix and Concrete segment, which produces and sells asphalt mix, ready-mixed concrete, concrete block, prestressed concrete beams and precast concrete, and sells other building materials.
  • 0.2% of net sales originated from the Cement segment, which mines, produces and sells Portland cement (a common type of cement used in the production of concrete) and masonry cement, imports, grinds, blends and sells cement and slag, and produces and sells calcium products.

Business Growth

FY 2009 (ended December 31, 2009)[1]

  • Net revenue decreased 26% to $2.5 billion. Aggregates shipments declined 26%.
  • Net income was $31 million compared to a net gain of $900K in the previous year. Net earnings from continuing operations were $18.6 million compared to $3.4 million in the previous year.

Trends and Forces

Falling Housing Starts Hurts VMC's Aggregates Business

The slumping U.S. Housing Market has led homebuilders to dramatically reduce the number of homes they build. The drop in the number of housing starts has a negative effect on Vulcan because fewer housing starts means less demand for its aggregates, which are used in foundations and driveways. Furthermore, the housing markets of Florida and California, which are two of Vulcan's biggest markets, are among the most affected..

Florida Rock Acquisition Adds Reserves and Geographical Positioning

Vulcan's acquisition of Florida Rock increased Vulcan's reserves by almost 20%. Arguably more important, however, is the expansion of VMCs geographic presence. The company's strategy is to do business in states with populations and metropolitan areas expanding more quickly than the national average, so that demand for their products grows correspondingly fast. The acquisition of Florida Rock gives Vulcan much greater access to markets in the southeastern and southern United States; both of these areas are growing more quickly than the national average. Vulcan's sales will benefit from these fast-growing areas.

Energy Costs Affect VMC's Business on Multiple Levels

Vulcan requires significant amounts of electricity , diesel, and natural gas in the production of construction materials - both in mining raw materials from quarries, and in processing products like asphalt mix and cement.. As such, increasing energy costs have already lowered gross profit, and continue to pose a threat to the company's margins. Furthermore, rising energy costs also increases the expense of transporting the company's products to market via truck, train, or ship.

Competition

The company's largest competitors are:

Although Vulcan is the largest construction aggregates company in the United States, the market for its products is highly competitive, including competition for price, service and product performance. The company estimates that the 10 largest aggregates producers in the United States supply about 30% to 35% of the national market.[4] There are, however, a large number of smaller, independent producers, which means that in any given market Vulcan may be competing with large regional and small local producers. As mentioned above, the high weight-to value ratio of aggregates makes long distance transport expensive, so both proximity to the market and transportation costs are important factors for market delivery. Vulcan maintains production facilities near rail lines and waterways, which increases the number of markets the company's products can reach.

References

  1. 1.0 1.1 VMC 2009 10-K "Selected Financial Data" pg. 22
  2. VMC 2009 10-K "Public Sector" pg. 7
  3. VMC 2009 10-K pg. 5-11
  4. VMC 2009 10-K "Largest US Aggregates Company By Production and Revenues" pg. 2
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