Summit Materials

Summit Materials is one of the fastest growing construction materials companies in the United States, with a 76% increase in revenue between the year ended Dec 2012 and the year ended Dec 2016, as compared to an average increase of approximately 39% in revenue reported by competitors. Materials include aggregates and cement. Within their markets they offer customers a single-source provider for construction materials and related downstream products through vertical integration. In addition to supplying aggregates to customers they use internally owned materials to produce ready-mix concrete and asphalt paving mix, which is sold externally or used in paving and related service businesses. This vertical integration creates opportunities to increase aggregates volumes, optimize margin at each stage of production and provide customers with efficiency gains, convenience and reliability, which gives the Company a competitive advantage over its competitors. 

Summit Materials, Inc., together with its subsidiaries, produces and sells construction materials and related downstream products. Its products include aggregates, cement, ready-mixed concrete, asphalt paving mixes, and concrete products. The company also provides paving and related services to private and public infrastructure sectors. In addition, it operates municipal waste, construction, and demolition debris landfills; and liquid asphalt terminal. The company was founded in 2009 and is headquartered in Denver, Colorado.
(Summary) (Company) (Chart)

10 December 2017
Price $32.43
1yr Target $35.34
Analysts 12
Dividend $0.00
Payout Ratio 0.00%

1yr Cap Gain 8.97%
Yield 0.00%
1yr Tot Return 8.97%

P/E 47.34
PEG 1.59
Beta ---

EPS (ttm) $0.69
EPS next yr $1.51
Forward P/E 21.43
EPS next 5yr 29.84%
1yr Price Support $45.05

Market Cap $3.48 Bil
Revenues $1.87 Bil
Earnings $76.30 Mil
Profit Margin 4.06%

Quick Ratio 1.90
Current Ratio 2.60
Debt/Equity 1.53

1yr RevGR 13.54%
3yr RevGR ---
5yr RevGR ---

1yr EarnGR 2.58%
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 2.30%
ROE 7.30%

Operations and History
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Since the Company's first acquisition more than seven years ago, Summit Materials has rapidly become a major participant in the U.S. construction materials industry. By volume they are a top 10 aggregates supplier, a top 15 cement producer and a major producer of ready-mix concrete and asphalt paving mix. Revenue in 2016 was $1.6 billion with net income was $46.1 million. The Company's proven and probable aggregates reserves were 2.7 billion tons as of December 31, 2016. In the year ended December 31, 2016 they sold 36.1 million tons of aggregates, 2.4 million tons of cement, 3.8 million cubic yards of ready-mix concrete and 4.4 million tons of asphalt paving mix across our more than 300 sites and plants.

The Company's rapid growth over the last seven years has been due mostly to acquisitions which were funded through equity issuances, debt financings and cash from operations. Over the past decade the Company has witnessed a cyclical decline followed by a slow recovery in the private construction market and nominal growth in public infrastructure spending. However, the U.S. private construction market has grown in recent years. The Company believes they are well positioned to capitalize on any recovery, grow the business and reduce leverage. As of Dec 2016 total indebtedness was approximately $1.5 billion. 

The Company anticipates continued growth in their primary end markets, public infrastructure and the private construction market. Public infrastructure, which includes spending by federal, state and local governments for roads, highways, bridges, airports and other public infrastructure projects, has been a relatively stable portion of government budgets providing consistent demand to the industry and is projected by the Portland Cement Association to grow approximately 10% from 2017 to 2021. With the nation’s infrastructure aging, there is increasing momentum to grow federal infrastructure spending among certain legislators and the U.S. President. The Trump administration’s infrastructure stimulus plan is estimated to be close to $1 trillion. The public infrastructure market represented 37% of our revenue in 2016.

​The private construction market includes residential and nonresidential new construction and the repair and remodel market. According to the Portland Cement Association, the number of total housing starts in the United States, a leading indicator for our residential business, is expected to grow 29% from 2017 to 2021. In addition, the PCA projects that spending in private nonresidential construction will grow 13% over the same period. The private construction market represented 63% of our revenue in 2016.

In addition to the anticipated growth in our end markets, I expect higher pricing in the core product categories. The PCA estimates that cement consumption will increase approximately 19% from 2017 to 2021, reflecting rising demand in the major end markets. I believe that the increased demand will drive higher cement pricing as production capacity in the United States tightens. The PCA projects consumption will exceed domestic cement capacity by 2019. 

Business Segments

Summit Materials operates in 21 U.S. states and in British Columbia, Canada and has assets in 20 U.S. states and in British Columbia, Canada through their platforms that make up the operating segments: West, East, and Cement. The platform businesses in the West and East segments have their own management teams that report to a segment president. The segment presidents, including the cement division president, are responsible for overseeing the operating platforms, developing growth opportunities, implementing best practices and integrating acquired businesses. Acquisitions are an important element of the Company's strategy to enhance value through increased scale and cost savings within local markets. ​

West Segment: The West segment includes operations in Texas, the Mountain states of Utah, Colorado, Idaho, Wyoming and Nevada and in British Columbia, Canada. Summit Materials supplies aggregates, ready-mix concrete, asphalt paving mix and paving and related services in the West segment. As of December 31, 2016, the West segment controlled approximately 0.8 billion tons of proven and probable aggregates reserves and $459.8 million of net property, plant and equipment and inventories (“hard assets”). During the year ended December 31, 2016, approximately 50% of our revenue and 41% of adjusted EBITDA were generated in the West segment.

East Segment: The East segment serves markets extending across the Midwestern and Eastern United States, most notably in Kansas, Missouri, Virginia, Kentucky, North Carolina, South Carolina and Nebraska where the Company supplies aggregates, ready-mix concrete, asphalt paving mix and paving and related services. As of December 31, 2016, the East segment controlled approximately 1.4 billion tons of proven and probable aggregates reserves and $522.5 million of hard assets. During the year ended December 31, 2016, approximately 33% of revenue and 31% of adjusted EBITDA were generated in the East segment.

Cement Segment: The Cement segment consists of the Hannibal, Missouri and Davenport, Iowa cement plants and 10 distribution terminals along the Mississippi River from Minnesota to Louisiana. These highly efficient plants are complemented by an integrated distribution system that spans the Mississippi River. The Company processes solid and liquid waste into fuel from the plants which reduces the plants’ fuel costs by 50%. The Hannibal, Missouri plant is one of only 12 facilities in the United States that can process both hazardous and non-hazardous solid and liquid waste into fuel. As of December 31, 2016, the Cement segment controlled approximately 0.5 billion tons of proven and probable aggregates reserves, which serve its cement business, and $614.7 million of hard assets. During the year ended December 31, 2016, approximately 17% of revenue and approximately 28% of adjusted EBITDA were generated in the Cement segment.