Q3 2021 Eagle Materials Inc Earnings Call
Okay.
Good day, everyone and welcome to Eagle materials third quarter of fiscal 2021 earnings Conference call.
This call is being recorded.
At this time I would like to turn the call over to Eagle's, President and Chief Executive Officer, Mr. Michael Haack. Mr. Haq. Please go ahead Sir.
Good morning.
Conference call for our third fiscal quarter of 2021.
Michael Hack joining me today are Craig Kesler, our Chief Financial Officer.
Stewart Executive Vice President of strategy corporate development and communications, we're glad you could be with US today, there will be a slide presentation made in connection with the call to access. It. Please go to Eagle materials Dot com and click on the link to the webcast.
While you're accessing the slides. Please note that the first slide 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 for further information. Please refer to this disclosure which is also included at the end of our press release.
Let me start today by acknowledging that we had another solid quarter of increasing earnings and what is shaping up to be an exceptional fiscal year for eagle materials.
Our results reflect that we are entering into a second phase for our businesses, whereas the demand for all of our products are strong.
There are two overreaching regions for this wondering relates to market conditions, which are on an improving trajectory in most respects.
The second relates to Eagle high performing well.
Geographically advantaged operations that can take advantage of these market opportunities.
Let me start with some foundational comments about market conditions.
Having construction is an important driver for both sides of our business and single family starts are especially important for gypsum wallboard.
There are positive short term midterm and long term dimensions to the robust housing related demand for our materials.
As for the short term wallboard is installed on the walls and ceilings in the later based on the building construction process. After framing has occurred.
This means that the recent increase in starts and permits will have the greatest impact in the months ahead.
Pandemic has resulted in a surge in home buying.
Demand that had been swelling over more than a decade of under building is now being realized.
What is more remarkable is even with the improved rate of home construction EBITDA.
As a nation still do not have a balance supply and demand picture for housing.
On the inventories on the market remain at all time lows.
We believe the annual housing supply demand imbalance is unlikely to be rectified by new construction before 2022.
This is in part due to the pace of what is possible for homebuilders to get into production.
This supply demand pressure will challenge housing affordability.
Given the fed's commitment to keep interest rates low for an extended period it should translate into a multiyear construct a continuation of favorable mortgage rate environment.
Another important end use segment for us is the repair and remodeling.
Research shows that purchasers of existing homes spend money on remodeling materials in the wake of their home purchase.
To make the home their own and more fully conform to their needs and tastes.
Longer term trends also favor our geographic positioning.
It is from states, such as California, New York, and New Jersey State from the Sun belt from the Carolinas to Arizona and in the U S Heartland, including Texas and Colorado.
As expected to continue.
This migration aligns well with our network of facilities within Eagle materials.
You have the in place capacity to flex with the demand growth for wallboard without additional capital investment.
We expect to benefit from higher volume higher margins and restrained cost due to our ownership position in our gypsum raw materials and Dave.
Now, let me turn to the market outlook as it relates to the heavy side.
Infrastructure spend drives about half the U S cement demand with residential being the next important most important driver.
State budgets have been the lion's share of infrastructure spend for many years.
We do not want to minimize the pressure that some state budgets are experiencing on our analysis of the sources of state revenue, including sales taxes property taxes.
Income taxes in corporate taxes suggests to us that many states and cities would not be a severely affected.
Some might fear.
This is especially relevant for many of the states in which we operate.
What our analysis shows is that income and sales tax which account for more than half of the state and local revenues fell on calendar Q2, but searched above pre COVID-19 levels in Q3.
The states still have choices on what to do with this money, but we maintain our expectation that even without federal support.
States and cities trend demand for cement will be sustained in low single digits across much of our footprint.
Of course day D O Ts could receive further federal support with the New administration and this would provide an uplift to infrastructure construction activity.
To be clear that activity that multiyear federal funding bills generate generally takes years to materialize on the demand for our products.
Non residential is the smallest end use segments for heavy and we continue to see short term pressure.
Non residential construction continues to be depressed by the potential dangers posed by many indoor activities.
The pipeline per office projects has been significantly and it's also very geographic dependent spur.
Spending on manufacturing buildings is beginning to see some improvement and warehouse construction trends to be strong and many of our geographies.
Now let me address the second factor mentioned, which is the high performing low cost network of plants. We have created to take advantage of the market opportunities are presenting themselves to us.
Opportunities, which we've eaten in our view should continue for some time.
The only limitations in our ability to capture these opportunities are on cement.
We are operating at very high levels of capacity utilization today, and we are facing a tightening cycle that would challenge our resourcefulness to squeeze out every bit of production through optimization of grinding seasonal storage and market selection.
Whereas in wallboard, we have headroom for earnings expansion through volume and price growth.
Going forward, we expect price will be the most important earnings growth lever for us on cement.
Against this positive backdrop on <unk>.
Certainties about.
Most important of these relate to the pandemic and getting it under control.
Because of this I do not have an update today on timing for the spin and I wont until there are some increased visibility that were past the potentially more disruptive effects of this pandemic.
We are hopeful that vaccines will be a game changer. The optimist in me believes that risks for the business tilt to the upside and the best is yet to come.
With the introduction on context for our results, let me turn it over to Craig to discuss the financials.
Thank you Michael.
Eagle third quarter revenue was $405 million, an increase of 18% from the prior year.
This increase primarily reflects contribution from the Kosmos cement business, we acquired in March.
Adjusting for the acquisition and the sale of our northern California concrete and aggregates business.
<unk> revenue improved 7%.
Reflecting increased cement and wallboard sales volume and price.
Third quarter earnings per share from continuing operations were $1 94, an improvement of 87%.
As we highlighted in the press release prior year results include a <unk> 47 per share asset impairment charge.
Excluding the non routine charge third quarter EPS increased 28 per cent.
Turning now to segment performance, let's look at heavy materials results for the quarter highlighted on the next page.
But heavy materials sector includes our cement concrete and aggregate segments.
Revenue in this sector increased 21% driven.
Driven primarily by the contribution from the Kosmos cement business.
Organic cement sales prices improved 4%, while organic sales volume was flat with our facilities continuing to operate at a very high utilization rates.
Operating earnings increased 31% again, reflecting the addition of the Kosmos cement business.
And organic operating earnings increased 8%.
<unk>, primarily higher net cement sales price.
Our concrete and aggregates business continued to benefit from higher organic sales volume and lower diesel fuel costs with margins improving significantly from the prior year.
Moving to the light materials sector on the next slide.
Third quarter revenue in our wallboard and paperboard business was up 8%.
Reflecting record third quarter wallboard sales volume and a 1% increase in wallboard sales prices.
As we highlighted on the earnings release.
Our quarterly average wallboard price doesn't fully reflect the price increase that was implemented this quarter.
For perspective, the December average price was $1 $152 per thousand square foot versus the quarterly average of 148.
Quarterly operating earnings in the sector increased 1% to $48 million.
Reflecting the increased wallboard sales volume and prices, partially offset by higher input costs, namely recycled fiber costs.
Looking now on our cash flow, which remains strong.
During the first nine months of the year operating cash flow increased 69%.
Reflecting earnings growth.
Disciplined working capital management, and the receipt of our IRS refund.
Capital spending declined to $46 million.
Finally.
You look at our capital structure.
During the quarter, we continue to prioritize debt reduction as a primary use of cash providing.
Providing us significant financial flexibility in light of pandemic related uncertainties and potential opportunities.
At December 31, 2020, our net debt to cap ratio was 41% down from 60% at the end of our fiscal year.
Our net debt to EBITDA leverage ratio was well below two times.
We ended the quarter with $143 million of cash on hand.
Total liquidity at the end of the quarter was $888 million and we have no near term debt maturities.
Thank you for attending today's call I will now move to the question and answer session Lisa.
At this time of line.
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 up.
<unk>.
Hey, good morning, Thanks, and congrats on a great quarter.
So I guess first off on the wallboard business volume was very strong.
And it seems like you outperformed the some of the industry numbers that we've seen even for your region.
So I guess number one is do you feel like there was.
Any pre buy going on in the quarter.
Given the price increases that were announced.
Or do you think this is mostly driven by the improvement we've seen in new residential demand and is there any or do you feel like there was any.
You know market shifts or anything like that in the quarter on that I think I know the answer to that but.
Market share shifts just given the outperformance.
Yeah. Thanks, Trey it's good question similar to the last couple of quarters I would tell you that if you look at the regional breakdown of both housing starts and the wallboard shipments data across the country. We once again benefited from a very strong regional footprint or.
And where we are generally in the southern half of the U S.
So that has remained consistent.
<unk> been the last several months.
And then in terms of just underlying demand.
Demand for wallboard has been very strong as Michael commented.
85% of wallboard as driven by residential construction activity is the most important part of that day.
New residential construction and even more specifically within that single family construction activities really drive on wallboard fan at the end of the day and we've all seen the recent housing start data on housing permit data.
This continues to be very strong, which sets up really well for wallboard I think thats why youre seeing on the strength broadly for the wallboard business right now.
Got it okay.
And then on the pricing.
From your.
October increase it looks like it's getting traction, especially.
Given the details you gave us around.
On the quarter ended price I believe was the.
152, so a pretty good sequential improvement so as we're looking forward and I know you guys have a January increase it's I'm sure to too early to really have a sense from what's going on there just yet but.
Bigger picture is we're as we're looking forward I know you guys are looking for higher volume you were looking for higher margins in wallboard youre getting some traction on pricing demand looks good. So how should we be thinking about the longer term pricing picture for wallboard as we're kind of looking over the next year to year.
That's the main continues made a pretty low.
Yeah look I think you pointed out several of the important aspects and the most important part of that is the demand outlook and with single family construction activity.
Really picking up momentum on what we haven't seen in many many years.
I don't want to over exaggerate.
You move back out to the suburbs in single family construction activity, but as we've said before single family construction consumes more than two times the amount on wallboard and a multifamily unit.
The single family construction activities is really important and.
That's what will be the opportunity for further pricing from here.
Yeah, Okay, well it seems like a good setup and then.
On cement last one from me and then I'll hop out and pass it on but on the JV volume being down I think 6%.
What can you talk a little bit about that the drivers there.
Sounds like in most markets you guys are seeing some pretty decent demand. So can you talk a little bit about what was behind the 6% down in JV and then what youre seeing in that market currently.
Yeah.
I can take that one with it you know when we look at the Texas market. You know that plant has been one where we can flex up and down with some oil well cement well well well, it's not a significant portion of our portfolio.
That market, we are converting more into.
You know away from oil well as we use that as a lever back and forth.
So some of the demand decrease you do see with some of the.
Reduction on oil well drilling this time and as we work to migrate that into the construction grade materials that we provide with a E. You should see that picking up a little bit more on closing that gap.
Okay. Thanks, Michael and thanks for taking my questions. Good luck in the rest of the quarter.
Your next question comes from the line of Brent Thielman with D. A Davidson <unk> company.
Great. Thank you congratulations as well.
I had a question on the cement business you made the comment continue to operate at very.
Very high levels of capacity utilization far back as I can remember I think you guys had been in that position I guess my question is is there is there a desire to expand the capacity of some of these <unk>.
Assets right now are you.
Are you seeking to make any preparations for that.
As you might remember in some of the previous calls we did some expansions during this year and we actually set record cement shipment numbers on our our base businesses last quarter.
They were not in the last quarter the quarter before I should say we.
We did a expansion at our Sugar Creek facility with grinding capacity. We've also done some work around our networking and distribution channels with it.
Right now when we look at a lot of our assets were at capacity that doesn't mean, we're not trying to squeeze every single on out of every single facility that we have and we do have some strategic projects on on board to look at expanding capacities. It's just not in the existing facilities. It's just.
Not ones that are are significant volume additions with it. So that's why our comments were that were at or near capacity until some of these projects come in and then the capacity is not great growth significantly from our existing structure.
Okay I appreciate that and then.
You guys have on.
Obviously.
Pay down a lot of debt leverage ratio is coming down.
Any thoughts on kind of growth initiatives right now I know you guys are still making preparations around the separation.
How do you how do you think about potentially looking at M&A today versus a couple of quarters GAAP.
Yes.
Every time, we're always looking at M&A and M&A has to meet several thresholds for US you know.
We are as you're probably well aware, we're very disciplined in where we play and how we view the businesses.
We will always look at opportunities that make sense for us that fit into our network that are cover returns that we think we can improve those businesses for and so we're always open to that side just the opportunity has to be right for our business.
Understood and then I guess coming back to.
Cement.
I'll give it a shot and just curious if you offer any commentary on your price initiatives plans per calendar 'twenty one.
Yeah I'm curious if you think just given the fact that you guys and others in the industry are operating at such high levels of capacity do you think the industry can get back to sort of the traditional plan at two price increases this year.
You know that's going to be really.
Pendant on you know our customer base and what the demand profile looks coming forward.
As we said in our comments, we see and being very strong this year typically.
Typically in the industry cement price increases come in the.
Early summer late spring timeframe so.
Working with customers on those and having those discussions now.
Those unfolds, we will be able to provide you more insight on to where those reside in the coming quarters.
Okay last one from me just loved.
I'd love to get any perspective, you have and just in terms of change administration.
You know potential possible regulatory implications to come obviously different different view on things on when the prior regime. So just curious what you're watching from Washington on that front.
Yeah, that's a good question.
Yeah.
One of the things that has made a lot of high line.
Is.
The infrastructure Bill and.
We continue to watch that we do want to be.
Pretty Frank and you can see in my comments that we.
We think the states are strong by themselves, but a federally funded infrastructure bill would would be a significant benefit to us.
Where we want to be cautious with that is that takes those bills are for multi years, Inc.
A lot of planning upfront, which translates into demand for our products later down.
We do think that that is a potential possibility with the new administration and we're going to watch that closely.
Sorry, Michael I was I was just referring more from the EPA environmental front I mean anything on that end that you guys are closely monitoring.
Yeah, we always continuously watch that and monitor that you know we are.
Our core values are to do more with less.
So we are continuously watching on that side all of our plants have you know.
Permit levels on limits that we fall stringently and tried to drive value out of those.
With.
Doing more with less with regards to you know.
Fuel additives and everything else. So we continuously watch what they have a new administration may change.
Metrics with it and we'll keep our eye on that.
But we're well prepared for that.
Okay, great. Thank you.
Your next question comes from the line of Adrienne <unk> with J P. Morgan.
Thank you. Thank you good morning, everyone and congrats on the results as well.
Just moving back quickly on the previous question.
Do you have any existing plan in.
Place to reduce C O two emissions.
That's my number one question and then the number two question would be.
Have you been looking on on blended cement.
Basically.
We were able to reduce the clinker factor, we understand that from D O D.
Including the one in Texas is now, allowing for lower clinker factors on cement.
So are you looking for any opportunities to reduce it by using other substitutes.
Yeah, when we look at it Tonight as a whole we have always looked at that side with it that's something that we've always been interested in and it ties to your first part of the question on <unk>.
You know youre a ton of cement.
<unk> emissions with it you know if you can do some blended cement.
There are some other all additives into it you know we have a a.
<unk> business, we do puzzle in.
<unk> always been looking at how to reduce.
Two emission and part of that is through blending cement and we also have a slab operation that falls into that same category.
And looking at all aspects of that for several years and we plan on doing it.
Going forward also.
Thank you Michael.
Your next question comes from the line of Anthony Pettinari with Citigroup.
Good morning.
On an organic basis, your concrete and <unk> revenue was up I think 13% year over year I'm. Just wondering if you can break that out between volume and price and in terms of what's driving that strength.
It's fair to say that's exposure to residential.
That kind of growth cadence maybe possible.
Over the next couple of quarters or is there a reason that would accelerate or decelerate.
Yeah, Anthony good question.
I'll make a couple of comments first.
We consider that we are our concrete and aggregates business is really in three markets today, Northern Nevada, Kansas City in Austin, and when Youre on that a few markets you are really subject to a change in one market can really impact the average so you.
You are right. We saw good with frankly, the improvement was across both volume and pricing on an organic basis.
And we just had some really fortuitous events and a couple of our markets.
Not to mention on the margin side right lower diesel fuel costs really helped us.
Our teams have done a fantastic job of some operational efficiencies as well so you know, but so far we've done very well it.
It looks like housing will continue to be strong force.
That should continue to support on our concrete and aggregate volumes.
Okay. That's helpful. And then is it possible to quantify the benefit you saw from hydrocarbon deflation in the quarter and is there a way we can think about the impact of that in for Q, either you know lessening of reversing just just based on how these costs are trending in January so far.
Yes, so when you say hydrocarbons, but you have along with the concrete business, we saw the benefit there.
It was under $1 million all in total for the quarter.
On the wallboard and paper side, where we generally use natural gas.
Those costs have been pretty flat year for four years now.
Sub $3 1 million.
It fluctuates a little bit within that range, but it hasnt moved dramatically over the last three or four years.
Okay. That's helpful I'll turn it over.
Your next question comes from the line of Jeremy revenue.
Thanks.
Okay.
I'm wondering if you could talk about on infrastructure.
Infrastructure, we've seen lettings activity.
Slowing.
Over the course of this year and you know the last time, we had discussions about an infrastructure bill that drove through further slow down on Lettings can you just talk about what you're seeing in your markets in terms of pace of activity in.
The hope for federal.
Money is driving any change in the pace of lettings either to date or from here. Thanks.
Yeah.
Hi, Jerry.
You know.
In my comments section.
<unk>.
Alluding to some of that is that we see the states.
Responsible for a lot of the infrastructure building on spend and the state.
Tax receipts from all of our analysis looked to be.
At or near pre Covid levels in some cases higher than pre COVID-19 levels. There wasn't that we need to recognize in the second quarter, there and I know that based on under some pressure on where that money goes but we have not seen a significant you're operating any of our markets or even a drop in a lot of on.
Markets on on that side with it so we see that the states are more responsible as it comes to the federal side.
You know those those take longer to materialize that will be some.
Extra benefit that the states will get support from the federal government a bill has to be passed.
But again that would be you know.
By the time those projects come into play the engineering work is done on those on the work in construction starts of the demand for our products would be kind of like that when we say with the housing starts and so you know.
A couple of quarters down the road.
You see the significant on that side, but for the states. We operate in ourselves, we feel fairly comfortable with what the.
Pressure will be this this next year.
Okay.
And on wallboard.
In the past you folks had a single price increase a year and obviously you put two increases in over a short period of time here can you just talk about your pricing philosophy on message to customers going forward. When are you telling customers to generally expect price increase announcements how much lead time.
Do you expect to get there, but can you just talk about how the framework has changed versus a couple of years ago.
January one day.
Yes, Jerry look I think I would tell you that the demand environment is more important than the cadence of the price increase.
As you point out years ago, we went to an annual price increase environment setup and that was the right.
Timing for the situation we're in.
Given the demand environment that we find ourselves in today.
There's no doubt that the cadence of pricing has changed.
And that's very consistent with the demand environment, what we see today so.
I wouldn't use past experience too.
Totally accounts on the cadence on pricing.
And Craig the lead time can you just comment on that how much lead time do you seek to give customers.
Future pricing actions.
Yes, we won't go into exactly how we negotiated with customers.
It's just going to be demand driven from here.
So far the demand environment has been very supportive of our wallboard business.
Okay. Thank you and lastly, I appreciate the update on the separation I'm wondering if you just expand on your <unk>.
Prepared remarks, and just talk about some of the signposts.
Signposts are some areas that you're working on to complete the separation and if you care to comment on any.
Any updated thoughts on net debt allocation between the businesses.
Yeah.
This is the separation obviously is a standing discussion point at our board meeting so.
We will be having other discussion about this at that time, so I really don't have any further comments on any clarification around <unk>.
Around that separation at this time until after after we have our board meeting and we meet discuss it.
But we discuss it at every single board meeting and as soon as we have a clear path forward, we will be announcing that out.
Okay. Thank you.
Your next question comes from the line of Stanley Elliott with Stifel Nicholas.
Hey, Good morning, Mike Craig. Thank you guys for taking my question.
Can you all talk about.
Whether it's delivery times on the wallboard side or maybe describe kind of what you all are seeing inventory levels at the dealer level.
Broadly across the industry.
Yeah. Thanks, Thanks for the question.
Look I think a couple of thoughts there one is the supply chain and I'll speak more broadly for anything that's supplying the homebuilding business right now is being stressed and distressed in a way that it hasnt seen in many many years.
It's one thing to navigate a million housing starts so another thing to navigate an environment or a million and a half or more housing starts so.
Whether youre talking about appliances on wallboard that supply chain is being stressed and so lead times are.
Extending out a little bit.
And in that environment. So.
Other than that I Wouldnt say there is any other significant changes there.
Lindsay you can kind of turn it back to the M&A environment.
You mentioned kind of an always on kind of always looking would you say you're looking more at the heavy side or on the lighter side, all else being equal and maybe where are there more opportunities now.
Yeah. So.
You said, we're always looking we look at a lot of opportunities that come available and we're very selective in what we choose with it.
<unk>.
I had a long term strategy.
Grow our heavy side of the business and our strategy has not changed over the net.
There are moments at all so.
We'll look at opportunities on both sides of the business, but we really are.
<unk> focus on the heavy side of the business force for the Max the most growth opportunities.
Great guys. Thanks for the kind of special items.
Your next question comes from the line of Adam <unk> with Thompson Davis.
Hey, good morning, guys.
Okay.
What is it what is your wallboard.
Passenger I mean, when we see housing starts and permits up 30%.
Just trying to think through how much you can grow your wallboard shipments.
Yeah, I don't want day, we disclosed it obviously in our form 10-K, its just shy of 4 billion square feet.
On a five plants four of which are located west of the Mississippi sit on the natural gypsum deposits of which are extremely plentiful right near the facilities.
Other plant planters in South Carolina, with a long term synthetic gypsum supply contract there.
So I think what.
You've seen us as the housing demand has picked up.
Thats, pushing demand, which is pushing utilization rates.
But there is a finite shipping radius from what you can ship from.
That is one thing to keep in mind as you look at.
Growth in wallboard demand, we've been very fortunate that it's grown stronger and our market share.
<unk>.
Yeah.
But I mean, you could conceivably see a scenario where you're at that $4 billion.
Look I think we're not there yet we still have room to go at our facilities certainly in Oklahoma and New Mexico.
But certainly utilization rates have certainly picked up on the last couple of months.
And then.
Greg.
What should we expect for Kosmos volumes in the March quarter.
Yes.
The market is at that plant operates in is more of a northern market. So I would say, it's a similar type of environment, Illinois, even Kansas City were.
Very strong June September and even in the December quarter, but.
This quarter the March quarter is always about winter in the environment that we find ourselves in so far winter has been pretty mild for most parts of the country that can chew.
Change, but this will be an generally is always the slowest quarter on the cement business because there is more seasonality here.
I wanted to do last March.
You'll recall, we only took ownership of that asset like March six so we only had it for a very small portion of the quarter.
And so youre still going to have a year over year.
Parison issue that will that will highlight for you.
No no I get that but what what Kosmos L. G.
Just looking at Kosmos what do they sell on the March quarter last year.
Yes, so some of that like I said from two months of the quarter, we did on that.
So we wouldn't go into that level of granularity nor would we give you simply the one month that we owned it in March.
Thanks, I'll turn it over.
Your next question comes from the line of Philip Inc. With Jefferies.
Hey, guys. This is actually calling on for Phil.
Wanted to touch on the costs in the wallboard business it looks like they're more than offset some of the margin benefit from the higher operating leverage on higher prices. I was just wondering if you could talk about the different drivers there and how youre thinking about these headwinds going forward and I guess, just eat feasibility to offset these costs with those price increases.
Yes, Paul on keep in mind, the price increase was only implemented halfway through the quarter. So we really didn't see the full benefit of the price increase this quarter.
In terms of on the cost side.
There were some input cost increases predominantly in recycled fiber costs that we didn't see those creep up a little bit this quarter.
It's too early to tell where those prices are going to go longer term.
But that was predominantly what was driving this quarter's cost increase.
Got you and just on the paperboard business external volumes they were flat internal volumes were down 3%.
But you're in a high speed capacity demand from wallboard appears strong and just if you should be getting stronger as we head into calendar year 'twenty 'twenty. One can you just walk us through the divergence in line trend between the paperboard in the wallboard business.
And that happens from time to time, just given inventory levels at the wallboard plants versus at the paper mill you can see that day.
Cadence is located for a period of time.
And it has to do with buying patterns, but both we do internally and some of our external customers.
We've said that plant continues to operate in a sold out position. So in addition to the inventories wells we have also.
Moved away from non contracted sales in terms of third party sales to make sure that we see.
Satisfy the needs of our customers so on the.
New equipment is installed on.
<unk>.
Some uptime that we'll continue to improve on.
You should see those over a broader period of time more of on an annual basis Youll see.
So those those volume changes to be in line with each other.
Okay, and then just pivoting back to demand on the wallboard side.
The robust housing starts and permits and things like that point to from a really strong demand.
But youre also hearing some bottlenecks on the from the builders about labor and things like that so I guess just in terms of wallboard volume can typically got until on low single digit volume over time is this 6% trailing 12 month growth rate sustainable in this kind of environment or do you think that that's a little aggressive just given some of the constraints that the market is saying.
Yeah look I think in our markets and again I think we are.
Highlighted this multiple times on our markets are continuing to outperform the national average so we don't.
Don't necessarily give guidance, specifically, but given the current strength of the homebuilding. This is a pretty sustainable pace.
When it comes to wallboard demand and again in our markets.
I can't speak we don't go to the northeast, we don't really go to the northwest much but we continue to see strength in our markets.
We like where we're positioned.
Great. Thank you very much.
Your next question comes from the line of Joshua Wilson with Raymond James.
Good morning, Michael on Craig Thanks for fitting me in and congratulations on the quarter.
Thanks, Josh.
Wanted to circle back on the Paperboard question margins were down a fair amount there is that purely a function of the timing on the recycled fiber and that's a headwind that's yet to come to the wallboard side, but should normalize or are there. Some other factors impacting the margin support.
And certainly the biggest piece of that is the input costs on the recycled fibers.
Pant pass throughs on wallboard business on a quarterly lag.
But as I said I think we will also continue to see efficiency improvements now that we've installed the equipment at the paper mill that should benefit us as well as the other thing I do want to make sure to highlight when you look at operating income realized.
Pretty decent amount of depreciation that's been added into that business. So you really have to look at it on an EBITDA margin basis on a year over year comparison because of that incremental depreciation.
Got it and then your aggregates pricing slipped can you talk through what the driver was there.
So within aggregates pricing, you've got faced pricing in sand and rock.
We just had a little bit more base sales on average are on the weighted average relative to where we were last year.
And then basis generally lower price products.
Nothing other than that.
Okay, and then last one from me as it relates to the split can you give us some more color on.
What tasks, you've completed already to prepare for the split and how quickly you can consummate it once a day.
Environment is to your liking.
It's probably a little too early to comment on on exact timing or cadence, but look there are some long lead items, whether thats with the SEC on the financial reporting side with the IRS. So those are things that we've been working on and will continue to work on those other administrative items.
In the background.
It will be completed.
But that's our best to be done going forward.
Okay. Good luck with the next quarter.
At this time I would like to turn the call back over to Mr. Michael <unk> for any closing remarks.
Thank you very much for attending our call and we look forward to talking to you in the end.
At the end of the next quarter.
This concludes today's conference you may now disconnect.
[music].