News from Vulcan — 2010 Looks Better
Vulcan Materials says stimulus funds will buoy 2010 demand.
Vulcan Materials Co. (VMC), a supplier of asphalt, cement and other mainstays of heavy construction, said government economic stimulus funding finally appears poised to spur an uptick in demand.
The Birmingham, Ala., company made the forecast despite posting fourth-quarter results that came in below Wall Street expectations, on a 23% decline in shipments of construction aggregates.
"We expect 2010 to be the largest year of stimulus-related highway demand for our products followed by another solid year in 2011," Chief Executive Don James said in a prepared statement.
The estimated $27.5 billion in stimulus money set aside for highway construction has taken longer than expected to work its way into actual contracts for many suppliers, who initially hoped to see a bigger impact in 2009.
But Vulcan said contract awards in the states that it serves climbed 13% in the fourth quarter, indicating the logjam is clearing.
"We are encouraged by the increased award activity and are optimistic that stimulus-related highway projects in Vulcan-served states, after a slow start, are now moving forward," James said.
Still, he noted that the overall construction sector remains challenging, predicting Vulcan's 2010 aggregates volume will be flat to up only 5%, compared to 2009.
The company said it expects residential construction to increase, albeit from low levels, while privately funded non-residential construction likely will experience "further weakness."
But he said the company should get a boost from stimulus-related highway spending through 2011. "By that time, we expect demand from private construction activity to be improving, accelerating the earnings leverage from our improved cost structure and disciplined approach to pricing," he said.
For the fourth quarter, Vulcan reported a net loss of 11 cents a share on $590 million in revenue, compared to a net loss of $1.93 a share in the year-ago period on $799 million in revenue.
Analysts had been expecting the company to post a loss of 2 cents a share, excluding items, on $641 million in revenue.
Source: Dow Jones Newswires, Bob Sechler
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