Q1 2021 Eagle Materials Inc Earnings Call
Good morning, My name is Lisa and I will be your conference operator today.
This time I would like to welcome everyone to the Eagle materials first quarter fiscal year 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise.
For the speakers remarks, there will be a question and answer session.
I'd like to ask a question during this time simply press star and the number one on your telephone keypad.
She was much withdraw your question press the pound.
Thank you I would now like to turn the call over to Mr., Michael <unk>, President and CEO. Please go ahead Sir.
Thank you Lisa.
Good morning, welcome to Eagle materials Conference call for first fiscal quarter of 2021. This is Michael hacking. Joining me today are great cancer, Our Chief Financial Officer, Bob Stewart, Our executive Vice President strategy corporate development and communications.
We are glad you could be with us today.
There will be it's my presentation made in connection with this call to access. It. Please go to www dot Eagle materials Dot com and click on the weight to the webcast.
While you're accessing the slides.
Please note that the first by covers our cautionary disclosure regarding forward looking statements made during the call.
These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call.
Further information please refer to this disclosure, which is also included at the end of our press release.
Let me start my comments today with its simple. Thank you toward thousands of team members, but stepped up during these unprecedented times.
Well the teen animus about the first half of calendar 2020 being extremely challenging to navigate.
Especially with regard to the pandemic its effect on our communities.
Each unique circumstances have required or team members to adapt how they work regarding how we serve our customers.
How we operate efficiently.
And simply how we take care of each other.
The focus and successful implementation of these items are certainly reflected in our first fiscal quarter results.
Results, which represents an all time quarterly high watermark for the company.
Our results this quarter reports success in both our growth strategy and in our operational execution.
The integration of Kosmos summit acquisition proceeding on schedule.
I'm proud to say that.
He goes history.
Sold over 2 million tons of summit during the quarter.
Our cement operations performed well.
Recent strategic investments to extend our capabilities to satisfy customer requirements are paying off.
Hi. Good example of this is our expansion of grinding capacity at our Sugar Creek plant.
Cement demand has remained strong across all of our markets. We're fortunate to operate in states, where construction has largely been uninterrupted by coated.
I can say this is blocked and in many ways. It certainly is but I do not want to minimize that we have been extremely strategic.
Selective about our growth targets in the U.S.
We have focused on economically resilient and less cyclical U.S. heartland geographies.
We continue to shape or heavy side portfolio with both strategic sales and acquisitions.
Our sale of Western aggregates, and Matthews ready mix in Northern California reflected in this quarter's results was a strategic decision to divest of an asset outside or network.
This asset was previously replaced through an acquisition in northern Nevada, aggregates and ready mix asset located in better proximity to our Nevada cement operations.
The northern Nevada asset is fully integrated into our system now and is operating very well.
This quarter, our wallboard business showed that geography matters.
Our wallboard shipments were up 7% over the same quarter a year ago. This is an environment, where national shipments were down about 5%.
I went to emphasize this is primarily a reflection of our strategic geographic positioning and long term attractive markets and our strong operational execution.
Regarding our previously announced Republic paperboard facility expansion project.
The first step of equipment installation and integration is now complete and it's giving us increased supply to meet our customer demand.
The major cash investment is now behind us for this project.
As for Frac sand, we have fully I hope that facility to minimize the cost impact and preserve value for future use.
As previously announced we continue to explore alternatives for this business.
In the current market conditions.
We recognize there are significant uncertainties about the sustainable level of demand.
Coping is uncertain and public policy is uncertain.
Second wave risks are real.
Caution certainly warranted.
At Eagle, we keep our eyes on the horizon as well on the road in front of US and there's every reason to believe this period of uncertainty will pass and give way to a healthy runway for construction materials business.
I'm encouraged that policymakers have reacted aggressively with unprecedented monetary and fiscal measures.
You as house prices are increasing.
Mortgage rates are low.
Credit spreads are narrowing.
Bondi prices are advancing every week, there's a chance of more scientific breakthroughs in both therapeutics and vaccines.
When economic Preopening is completed economic activity could have another bounds, particularly with the lagging response of U.S. monetary stimulus that work.
The bottom line as I do not know when this period of uncertainty well pads, but I'm confident that it will.
Eagle is prepared to navigate this period of uncertainty regardless of the duration.
The company did when it profitably navigated through the longest construction recession and U.S. history.
We will continue to be cautiously optimistic but internally, we will continue to can find capital spending until a clearer picture emerges.
Our resilience as a company, it's certainly greatly enabled by the strong cash flow characteristics of our businesses.
In this regard is worth noting that this quarter, our net leverage declined by $150 million from March 30, Onest and total liquidity improved to over $450 million at June Thirtyth.
Now, let me turn to the topic of our planned separation of the two businesses.
We still look forward to executing the separation, which at this moment has been delayed by Colgate uncertainties.
I do not have an update today on timing and wall until there is some increased visibility that we are passed the potentially more disruptive effect of this pandemic.
I can say that our conviction about the separation remains intact and we have every intention of completing the separation.
That's all for me as far as introductory remarks, I'll, let me turn it over to Craig to go through the financial results for the quarter.
Thank you Michael.
First quarter revenue was a record $448 million increase of 15% from the prior year.
This increase reflects contribution from the Cosmo cement business, we acquired in March.
And improved summit toward sales volume.
Excluding the recently acquired businesses and the effects of the business, we sold in Northern California revenue improved 2% from the prior year.
First quarter diluted earnings per share were $2.31 an improvement of 146%.
As we've highlighted the press release, both the current year and prior year quarters include the impact of several non routine items.
Most notably this year first quarter results benefited from a sizable gain on sale of our northern California businesses.
Both quarters also include the effective business development expenses.
Excluding these and other non routine items first quarter adjusted EPS improved 39%.
Turning now to segment performance.
This next slide highlights the results of our heavy material sector, which includes our cement concrete and aggregate segments.
Revenue in the sector increased 30%.
And primarily by the contribution from the recently acquired caused most of that business and a 7% increase in like for like cement sales volume.
Operating earnings improved 62% again, reflecting the contribution for cosmos and improve sales volume.
As well as lower diesel prices on our concrete operations.
In addition, given the concerns around having contractors on site. During the focus 90 endemic we adjusted the timing extends our cement maintenance outages and delayed approximately $6 million of maintenance costs from the first quarter into the second and third.
Moving to the light material sector on the next slide.
First quarter revenue on our wallboard and paperboard business is up slightly.
Has improved wallboard sales volume was partially offset by lower wallboard prices and lower won't paperboard sales volume.
Quarterly operating earnings in the sector declined 8% to $44 million as improved wallboard earnings were offset by higher recycled fiber costs and the inefficiencies of starting up the paper mill. After this expansion project in March.
The earnings impact from start up was approximately $2 million and by the end of the quarter, our operating efficiencies at the mill were bunch improves.
Here in July the mills has been setting production speed records.
In the oil and gas profit sector revenue was down 93% and we have the operating loss of 1 million.
This business came under increasing pressure in the spring and early summer as lower oil prices further reduced drilling hydraulic fracturing activity.
During the quarter, we significantly curtailed our operations to minimize operating costs and preserve the value of the assets.
This next slide provide summary cash flow information.
During the first quarter operating cash flow improved 8% to 95.3 million.
Reflecting strong earnings and disciplined working capital management.
Total capital spending improved increased to 26 million as we completed several projects initiated last year and purchased land, Oklahoma, which will provide our do forward plan with over 20 million tons of additional chips and reserves.
We continue to expect total capital spending in a range of $60 million to $70 million for fiscal 2021.
Also during the quarter, we received the proceeds from the sales of our Northern California businesses on April 17.
Finally, a look at our capital structure.
Given the ongoing pandemic related uncertainty, we are continuing to fortify our balance sheet and liquidity.
At June Thirtyth, our net debt to cap ratio was 55% and we had $199 million from cash on hand.
Our net debt to EBITDA labor leverage ratio was two and a half times and total liquidity. The ended the quarter was 459 million and we have no near term debt maturities.
We received our IRS refund in early July which is further improved our balance sheet and liquidity post the quarter.
Thank you for attending today's call. We will now move to the question answer session Lisa.
At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
First question comes from the line of trade growth with Stephens, Inc.
Hey, good morning.
It looks like.
It looks like overall demand has continued to hold in pretty nicely at least you know in the quarter.
You mentioned, a course that the the outlook remains uncertain given the pandemic, but.
Can you talk about how the quarter progressed, a demand trends maybe that you're seeing on both sides of the business.
Here in July have you seen any changes in extreme.
Yes try this Michael.
So the demand profile has been pretty consistent from what we've been seeing and or the first quarter to how we are in July.
So across our network you know or.
Geography, really get better for us and the demand profile looks looks pretty consistent.
Across all good things.
Yeah.
Good to hear.
Okay, and then and secondly.
Overall margins approved not lead Craig you mentioned some of the puts and takes there you know with maintenance cost in the math and a 2 million dollar impact to the paperboard plan on the negative side, there I guess in the right and we can kind of do that math, but you know there's there's other things maybe that might.
Be gone like LCC, you talked about that but how did the ULCC situations.
How do we think about that impact the paperboard and wallboard and then also any other.
Maybe more more sustainable kinda benefit you're seeing on the on the submit side that we should think about.
Yes, right good questions on the LCC side of things as you'll recall most of our papers sold under some long term supply agreements and those agreements have inflators. His deep layers based on the pricing sort of inputs RCC your recycled fibers being one of the major inputs to produce paper.
And those as those prices rise, we have a quarterly lag in which we then pass through those costs to the ultimate paper customer.
So here in the June quarter, we absorb those costs at the paper mill as you see and then we turned around in July will pass those costs long underneath the pricing provisions and so we will recoup that Ah profitability their paper mills this quarter.
And then as you said there are some other nice tailwinds.
Energy costs here, the U.S. continue to be very low you on the wallboard side of the paper mill side I was probably natural gas natural gas remains below $2 a million.
I can tell you electricity costs, which is more of a cement.
Production inputs or remain very low across our markets and so.
From a a a cost perspective, we are seeing some some benefit there.
Okay.
Alright, Thanks for that that's helpful. And then lastly from me out it's just around the summit price.
Adjusted for Kosmos was was up 1%.
Seems like most of the the price increases out there were shifted to gene So I.
I guess the biggest thing its first is it fair to say that you know or perhaps to assume that maybe the reported price for the quarter Didnt necessarily reflect all of the increase again, given the timing and then secondly.
I know that you guys don't really really produce much on the oil well cement anymore, but.
Just.
Well checking that.
There was any impact there from from that falling off and you know any mix impact.
Another submit player had mentioned some mix impact and I'm just checking on that I'm curious around that impact there.
Yes, great it's Michael.
You are correct, you know a with a pandemic going on and everything else. Our cement increases were delayed till June 1st so the fully recognized value. It was not in the last quarter was just a portion of that aside.
On your second question with regards to oil well cement that had become.
Yes, okay.
Demand picture for us.
You know when we look across network of course. This this quarter was impacted by that we have been successful and we are very nimble and moving between oil and construction grade cement.
So you know where where the market still have the oil well, we are still providing that but with the decrease we have shifted that overdone construction grade. So it had to smaller impact on our of our margin portfolio right now.
Okay. Thanks for taking my questions. That's it for me.
Your next question comes on line, Brent Thielman with D.A. Davidson.
Great. Thank you are good morning, I just wanted to pick up on Craig's question just in regards to that Juergen cement price increases and then kind of consider.
Your integration of Cod married and well railway for men.
About the level of reported pricing you would expect ended the fiscal second quarter, just trying to think about.
All the moving pieces going forward.
Yes, we have implemented our price increase and we implemented those with customers you know tail from both where where we stand on that then you know I'm not going to get into the specifics of what we did by market by market. You know, it's just a we feel we got a good return.
Okay.
Yes on the on the paperboard with the expense and here's how quickly you think.
Youll be able to kind of leverage that pool capacity.
At the facility I know that's market dependent but I'm just from an operational perspective, how quickly you can ramp up to that that pool capacity.
Yeah, I would tell you we are pretty much we're close to it as I said in his prepared comments as we started up in April obviously, you have some startup in efficiencies by the time, we exited the quarter in June we had worked through much of those and here in July we are setting speed records all the mill.
And so we've seen a improvement there on the production output I can tell you that Michael mentioned, the paperboard volumes will fall wallboard volumes those have been very strong here in July. So we are seeing the best it already.
Okay, that's great and then I guess on wallboard.
Pricing relatively resilient I think but.
I just curious is I mean, you average realized during this last quarter about where you see the market today.
So the last part of your question, Brent I Didnt catch that.
Craig I'd just on the wallboard sizes average price you realized.
In the quarter is that about where you see your markets today.
Yeah. There's you know the prices have really been flat now for call. It 10, 11 months is $146 on that basis.
Our range, so that that's about where the the quarter exited as well.
Okay. One more for me I guess, just just thinking about the balance sheet.
Actually no delaying that the timing of the separation just did cause married that you're still to California business lot of moving pieces. Just curious as you guys are looking to preserve some capital and pay down debt, what what target level debt or leverage are you thinking about or where do you want to get to simulate combined business right.
Now.
Yeah Trinet, it's a great question one of the things that has been a hallmark of eagle over the for over the years as Ben a fortress balance sheet at a high cash flow generation business.
And so that that would really on display at this quarter.
Operating cash flow, we can moderate capital spending very quickly we maintain these assets in very good condition and so as we said we've taken a capital spending down 50% this year and you'll see that amount starts to moderate even further as we exited the year.
Sure you start finishing projects initiated last year, so that the run rate by the end of the calendar year is even much lower than where we were here in Q1.
All that says we're going to be generating significant cash we don't set a target leverage level I could tell you we like to have a lot of power on the balance sheet. So that we can either managed through cycles a war role in the opportunity presented itself and so here the near term we are continuing.
To to de lever and prepare for a what what lies ahead.
Okay. Thank you for taking the questions.
Your next question comes from the line of Anthony Pettinari with Citi.
Hi, good morning.
In some you know when someone you referenced pretty strong demand across geographies and I'm. Just wondering if that was uniform across end markets, whether it's a public or private residential and nonresidential and then you know with regards to the kind of.
Funding environment budgetary health, maybe have some of your biggest states. If you could just talk about maybe how the duties are doing again.
Public side, maybe books in the second after the year.
Yes so.
When we look across our network.
Not really every one of our facilities had a good demand profile profile, so it's really across or across the country, where we have the.
On your second question is more complicated question to answer every state.
Impacted a little different from.
This pandemic.
Right now you know our portfolio.
What we're seeing and what were our demand is going to is pretty consistent with past with both public and private.
Ah sector.
We are seeing you know a housing starts up and everything so we get more demand on that side, but it's been pretty consistent with past month go alone, which were not a big player in anymore.
Stakes in a handle their issues differently and you know, it's kind of a a wait and see how they handle those were right now our demand profile still looks very strong going board. So we just we just don't don't see that impact as of yet.
Great Great. That's very helpful and you know as you would you think about coal did in the safety precautions that you're taking to protect your people social distance and again I don't know limiting contractor access et cetera are you incurring kind of meaningful additional operating costs.
From these measures or is there anyway that you can help us think about.
Financial impact maybe some of these cautions.
Yes, we're not being that at all.
We we were aggressive at the beginning of this pandemic.
No I see this started hitting we implemented some.
Pretty robust policies and procedures on all the operations have been following those in performing very well with those high and no from temperature screens to you know a face mask wearing social distancing to restriction of contractors on site too.
A restriction of vendors onsite.
And it just really has not we have not seen a cost impact we've actually seen.
Which.
Very good a really focused workforce.
And we can see some of our safety statistics and everything else that the workforce understands what's what's out there and they perform to this fabulous and I think our team has done a tremendous job on it and there's not any constant.
Great. That's very helpful. One great to hear I'll turn it over.
Your next question comes from the line of Adrian hard gel with JP Morgan.
Hi, Thank you everyone. Thank you for taking my call Mike Great can you share with us on a one have you seen just about potential synergies.
On the back of the on the Mckinnis acquisition.
Yeah.
Adrian I'll take them as Michael.
No. It's a great question and where you've seen some odd number we're exploring right now, but you know you've got to remember we've taken this asset.
The last three months and we had went directly into an outage and then we also had a pandemic, where we do not having the flexibility to travel as much.
Identified areas, where we really want to pursue and it'll take a whole cycle. So look through those and really determine on how we attack. Those so at this time I'm not really ready to talk about those synergies, but I will say that we have several identified that we will be progressing on over these next quarter.
Yes.
But would you say thank you Mike would you say that time so far.
Has been probably will be better than what you originally expected that before you acquired yes.
Yes, we're very comfortable with this acquisition, we made I mean, we hit the ground running with the acquisition. We contributed this quarter with the acquisition.
We're on pace to what we had.
Projected in the plan.
And you know these synergies will be will be additional to that we feel comfortable with ER with how we value this asset.
Understood. Thank you.
Your next question comes on line as Jerry Revich Goldman Sachs [noise].
But you sound good morning, everyone.
I'm wondering if you could talk about your planned cadence for a price increase in wallboard nice to see a reacceleration in single family demanding.
I'm wondering if we should be thinking about going back to the January one.
Nice increases can you just talked about when you expect to make an announcement to your customers and how you're thinking about.
The cadence thanks.
Yeah, Jerry look your volumes have been strong as we saw here in the quarter and and post the quarter I think you've also seen some good orders from the homebuilders other going out the last week or two so we are expecting wallboard volumes to the hang in there and but in terms of of anticipating a pricing.
Chris will hold off.
On the on speculating on specific timing or anything but are certainly our customers will be the first to know that once we have those plans in place.
Okay and I. Appreciate there were none of that gives you talked about magnitude or price increases, but are going up as we should talk about.
Timing and.
Your expected.
Frustrations with customers so what what data is roughly.
Got to get on what we won't speculate on on the timing of price increases were amounts or anything but you did make a good point, you've got a very strong volumes right now and and so there's you know that as volumes rise utilization rates rise and we're well positioned.
But our geography is to move forward.
Okay and then in terms of you know good going through this challenging operating environment.
Can you talk about are there any opportunities for sustained improved efficiencies on the other side of it whether it's by digital order management or any other opportunities that have come up that has turned out to be more efficient Ben.
Analog.
We've been doing things previously.
Yeah, Jerry I think it's good question I would tell you. We are is that it's something that is continually in process here Eagle right. It isn't just a dynamic related changes, but we are constantly looking for innovative ways to improve our operations improve our logistics Im just improve the way we'd go.
About our business and sometimes youre forced to do some of those things, but I think we've become very efficient with our truckers and and getting them through a plan. So whether that's on wallboard side or the some insight, but yeah with those such as a continuous process around here.
Okay, and lastly, I'm wondering can can you just talk about where your backlogs stand today compared to year ago compared to last quarter. Just if you don't lunch or how much visibility you have over the next call. It 90 days compared to normal.
Did you hear I wouldn't tell you that we have a backlog in a traditional sensitivity and see company, but it's certainly it is a customer order and their breeze is job site, what I can tell you what the.
Volume sales volumes has been strong when we've talked to customers live good confidence in the near term that their volumes will remain intact.
But Ah you know again as we said there is uncertainty as you look further out, but a very near term or orders of a pretty strong.
And.
Greg could you talk about the timeline related to that when you say very near term set a 30 day comment you made comments just a bit of context. Please.
Yeah, we look it's looking out over the remainder you know it into the fall.
People feel pretty confident and you really have to bifurcated into the two businesses, but keep in mind. When you look good housing permits and housing starts a there's a lag between those two wallboard consumption in that can be 60 to 90 days at least in so that gives you some visibility with the orders that are coming in.
In the home homebuilding side and for new homes. That's wallboard is two or three months. So that's a similar thing you've got projects that are underway and certainly we'll go through completion. So you did you got a pretty good forward view here.
Okay.
Thanks appreciate the discussion.
Your next question comes from the line of Adam Elemer with Thompson Davis.
Hey, good morning, guys.
It can you walk us through I know I think we touched on this early on but just the O C C pricing and how that I'm thinking specifically in Q2, how that would impact wallboard and paperboard margins.
Yes, so it's a good question.
In terms of what we experience and the springs, we have a backup a little but.
We saw a pretty significant spike in April and May.
And a and then and so when that happens that doesn't get passed along to the ultimate customer until the following quarter. So there's a quarter lag between that increase and when we can pass those costs loans, which is why you see the paperboard profitability down right you absorbed a higher costs.
Put a and aren't able to pass it along until the next quarter.
Ben in June and July as we had anticipated ULCC prices aided significantly in June and July again, once the economy's open you started to generate LCC recycled fibers.
The supply came back and prices came down so where the second quarter in our second quarter.
We will pass the cost along a while at the same time the input cost have moderated somewhat so the wallboard business will experience a slightly higher paper costs here the September quarter than what they experienced in the June quarter.
Okay, that's something that's like hundreds of basis points of an impact or.
More like HP Dell will pick it up I would point you go back two or three years to when we saw the last spiking LCC prices like this.
You saw a very similar earnings impact from those higher costs and then it rebounded fairly quickly when we can pass those a those costs long, but it is pretty and as quickly as fairly significant quite frankly.
Okay.
Craig corporate GNS. It was light in the quarter is that sustainable or was that just the fact that nobody was traveling.
[laughter], Yeah look I think actually if you were to take out for business development related expenses and I think we highlighted for those for you in the press release, you'll actually see corporate Gionee was pretty well flat year over year. When you take the pluses and minuses out a this is kind of in the range that we've been running out here we're up.
For a couple of quarters or rose I think it'll feels the same here.
Okay, how big was the IRS refund in July.
Yeah, but $104 million, we received right. After the end of the quarter. We had some other of funds that are still on deposit with the IRS that should be coming as well. We you look at the balance sheet. There was a $120 million more income tax receivable, we got the vast majority, though that was relate.
The two prior years and that a in a well carry back that we had took advantage of but then we also have another call. It almost $20 million on deposit that we should be getting returns listen.
Great. Okay, and then not just last one from me in terms of modeling Frac sand. So would you just put to zero revenue in and kind of that you know million or 2 million quarterly loss.
Yes look I think as my goal and I've said, we've significantly curtailed those operations and with with the volatility that we saw this spring that business has a really changed dramatically. So yeah, I think a run rate pretty close to where we were this quarter isn't a bad starting place subject to change and so.
Just to things as they develop but city, where we are today, that's that's a reasonable run rate.
Okay. Thanks, good luck as well.
Your next question comes from the line of steel with Jefferies.
Hey, guys, it's actually calling on for Phil I, just want go back to cement volumes I know you guys called out the strong trends that you saw in July but how sustainable is like mid to high single digit organic volume growth rate through the rest of the second quarter and through the rest of the year, just given you're going to pay some tough comps and you've historically seen this business.
Under the low single digit grower.
Yeah, that's a fantastic question with it you know when we look crops that were.
We.
Ben.
Taking advantage of some of the capital projects that we have implemented in the past you know I called out in the comments about our sugar free grinding capacity we have.
You know all that is dependent on how much inventory you could actually produce.
So we are very tight across our networks.
Right now its cement demand a you know were at or near sold out capacity and are these stages. The last last year's comparable was very tight I was very good for a with it. So you know we are doing everything we can to a especially on the cost front of bringing our product closer.
We're back to the plants, a working with our customers and.
But you know a.
No they did a high single digit growth.
You know when you get near a sold out capacity is going to be very very challenging to need.
Great. Thank you and then just on the public market side can you talk about your expectations for fees for stimulus for the studio teasing kind of what your expectations are for long term funding and if we don't get any of this fees for.
Get a CR for highway funding how are you going to thinking about cement volumes in that kind of environment.
Yeah, you know it's a it's a good question. It's a very complicated question because theres. So many different monetary policy going through and if it's a state funding at the federal funding assets Oh, you know each state is looking at the different on how they balance their budget. Some states are affected more than other state you know.
We're taking that on a.
Today, I mean, we're looking for the future with it we haven't seen at the demand impact as much we've seen one or two projects you know delayed not canceled or delayed and you know we still see a bit demand profile in front of us and you know there's monetary policy that went into place.
There is money out there and it's a lagging effect is that we expect that that will come into play overtime and then depending on what how the federal policy comes with a infrastructure bill and everything else that will that will have an impact so right now.
Doug we're taking as it sounds right now we're seeing good demand profile right now for the foreseeable.
Sure.
Great. Thank you just my last question.
I know there's around the 90 seeking any day lag on the wallboard side from when they start happened.
Have you seen any indication that there could be an air pocket of demand maybe not in the upcoming quarter maybe into the.
Into your fiscal third quarter kind of in the starts would be going to completion or have you had not seen any indication of that thank you.
Honestly I would call I would tell you the snap back was so quickly in April and May, but and again in our markets. You know we don't play of the northeast we don't play up in the northwest with our wallboard business. We are generally in the southern half the U.S., where the shutdown was was much worse.
A minimal and so in our markets, we've not seen a that bill.
Great. Thank you very much.
Your next question comes from the line of Sosh Wilson with Raymond James.
Good morning, Michael Craig Congrats on the quarter and thanks for taking my question.
Hey structure I think.
Just a few modeling questions for me here you mentioned the shift in the outage for the cement plant can you should we just split about evenly between Twoq and Threeq you.
No I put more of it in Q2 in Q3.
At probably 80 20 minutes something along those lines.
Got it and then on the just one more on the outlook for Wallboard, you set up a slight impact from the spike in O C C. But clearly it was a short term impact. So can you help us more with what the magnitude of that hit might be and what you're able to manage around it in your buying or anything like.
[laughter].
Yeah. It will be goes we've seen in years past its a couple of dollars thousands in terms of what that impacts to the wallboard business and again, it's relatively short lived is really the September quarter, and then assuming prices remain flat or continue to abate here about if I can get to December.
Your bet, but well see see prices really moderated at both the paper mill and the wallboard business.
So it's really just a one quarter impact on wallboard costs on the paper mill side right into continued benefit in terms of the lower overseas see prices.
Got it and then I your inventory dropped I know, that's mostly maintenance parts, but it is that something you pared back during the worst of the shutdowns at our current need to reinvest in.
Yeah look I think we have very strict discipline working capital management this quarter, if we do always.
I think a big piece that was also one of the paper mill was down a we were selling out or paper inventory or you know just just as you would expect coming out of an outage like that and then also some inside a really that's a a reflection of how strong the cement demand is better than your working down the inventory less.
Uhhuh flavor, you know across the system and as Michael said, we we've made some investments the last 12 to 18 months to allow us to move product, even even more than we had in the past and so.
That's allowed us to to convert that inventory to catch.
Very good good luck with the next quarter.
Your next question comes from the line of Keith Hughes with Twoish Securities.
Hi, This is actually Josh on four key chosen a couple of questions kind on the wallboard side.
So one or are you seeing the pickup in new home construction in July yet.
You know I understand that was really starts really poor two months ago, but it seems like things have picked up a lot.
Yeah, I mean look I think as we're saying earlier there is a lag time between housing starts in wallboard consumption.
And so we would we've just tie those the correlation is tighter there over over 60 to 90 day timeframe.
Okay, and then can you can help us think about pricing with the mix shift since new home construction has been so strong.
Yeah, I guess, you're talking about the pricing mix between a half engine five age is what I'm, assuming you're asking about yes.
Look I'll tell you over time that ratio doesn't change dramatically you might see it fluctuate a little bit, but that's not a driving any sort of pricing changes in our business.
So the 146, you talked about exiting the quarter roughly is because it's flat like that's a like for like basis, it's like for like.
And then last kind of question on the paperboard expansion last quarter, you kind of mentioned there was a final stage with some personnel.
Coming and there was some international travel restrictions, maybe they'd be causing some delay there has not been completed or you know just kind of update us on where exactly the paperboard is it sounds like it's pretty much done.
So what I can tell you the capital spending is virtually complete.
Yeah, we and we were able to achieve a lot of significant portion of the expansion. There are some final pieces of equipment that require some expertise to be installed we hope to get that done here in the fall, we're trying to be creative with how we get back on that back.
Slipped, but there's not impacting the the ability of the operation to run and is there no more significant capital spending there but are there. There is one final piece to finish there.
Okay, great. Thank you.
And at this time there are no further questions I would like to turn the call back over to Mr., Michael Heck for closing remarks.
Hi, Thank you for attending this call and we'll look forward to talking to you in the fall.
This concludes today's conference you may now disconnect.
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