Q1 2025 Titan America SA Earnings Call
[music]
[inaudible]
Speaker Change: Greetings and welcome to Titan America earnings company score. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone key pair. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Daniel Scott, in Miss Relations. Thank you, Mr. Scott. You may begin.
Speaker Change: Thank you, operator, and good afternoon to everyone on the line. Thank you for joining us for Titan America's first quarter 2025 conference call. I am joined by Bill Sarkatoulos, Chief Executive Officer of Titan America, and Larry Wilk, Chief Financial Officer.
Speaker Change: Before we begin, I would like to remind you that earlier this afternoon, we released Titan America's first quarter financial results, which are available on our website at IR.TitanAmerica.com along with today's accompanying slide presentation.
Speaker Change: This call is being recorded and a replay will be made available on our Industrial Relations website.
Speaker Change: During the call, we will present both IFRS and non IFRS financial measures.
Speaker Change: The most directly comparable IFRS measures and reconciliation for non-IFRS measures are available in today's press release and accompanying slides. Certain statements on today's call may be deemed to be forward-looking statements.
Speaker Change: Dutch statements can be identified by terms such as expect, believe, intend, anticipate, and may, among others, or by the use of the future tense.
You should not place undue reliance on forward-looking statements.
Speaker Change: Actual results may differ materially from those forward-looking statements and we do not undertake any obligation to update any forward-looking statements we make today.
Speaker Change: For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issue today, as well as the risks and uncertainties described in our SEC filings. I will now like to turn the call over to Bill. Please go ahead.
Bill Sarkalis: Thank you, Dan. Good afternoon, everyone, and thank you for joining us today for our first quarter at 225 Financial Results Code.
Bill Sarkalis: If you turn to slide 4 in the presentation, I'd like to begin by highlighting our key messages for the quarter.
Bill Sarkalis: In the first quarter, we delivered solid revenue, net income and in adjusted bidam, despite adverse weather conditions across most of our operating regions.
Bill Sarkalis: This performance demonstrates the resilience of our business model and our ability to execute effectively under challenging market conditions.
Bill Sarkalis: Importantly, we've seen resilient prices across our product lines, which helped offset weather-related softness in demand in affected regions.
Bill Sarkalis: This price in resiliency reflects both the continued strong at their line demand fundamentals in our key markets and the strength of our market position.
Bill Sarkalis: Notably, pricing across all our product lines was up sequentially from the fourth quarter of 2024.
Bill Sarkalis: I want to draw your attention to our strategic investments in aggregate capacity which are driving improved volumes up 23.6% compared to the first quarter of 1024 along with improved margins.
Bill Sarkalis: The significant growth validates our investment strategy, which we believe positions as well to capture additional value in 2025 and beyond.
Bill Sarkalis: Finally, I am pleased to note that we are reaffirming our full year 225 outlook, deflecting our confidence in the underlying demand trends and our ability to execute our strategic initiatives throughout the remainder of the year.
Bill Sarkalis: Moving to slide five, I'd like to take a moment to touch upon the puts and takes in our markets and why we believe we are well positioned to capitalize on the underlying strengths as near-term uncertainty updates.
Bill Sarkalis: Apart from the inclement weather affecting available work days in the first quarter of this year.
Bill Sarkalis: At the moment we are faced with a number of headwinds including macro economic uncertainty, deteriorating business and consumer sentiment.
Bill Sarkalis: As well as sluggish residential end markets, where recovery has been delayed by persistently high mortgage rates and low housing affordability.
Bill Sarkalis: Offset in those challenges, which we believe are near-term hurdles are the robust favorable secular trends that we don't want to lose sight of.
This includes strong demand for infrastructure, commercial and industrial projects.
Bill Sarkalis: As evidenced by accelerating investments in highway construction, water supply and treatment, modernization and expansion of airport and seaport facilities, bridges, energy assets, and health centers.
Bill Sarkalis: At the same time, data center demand remains strong and the significant residential under supply continues to grow, resulting in pent-up demand and resilient pricing for our products.
Speaker Change: At Titan America we believe we are well positioned to continue building upon our strong market position. Thanks to our value added product solutions and services, combined with our unparalleled logistics network.
Speaker Change: At slide six and seven, you will see a number of examples of the exciting projects across infrastructure and commercial in which we are currently participating. I'd like to highlight two of these projects in particular.
The first is with Amazon Wear services or AWS.
Speaker Change: Titan is continuing our long-standing customer relationship with AWS, supplying multiple new data center projects in Virginia.
Speaker Change: Each facility is being built with the latest low carbon concrete technologies, including our proprietary green-create products, reinforcing our leadership position in sustainable construction.
Speaker Change: The data center market remains strong, driven by persistent demand for cloud infrastructure and AI-related growth.
Speaker Change: The second project is at the state of the art of Alexandria Hospital in Northern Virginia.
Speaker Change: We are proud to announce the start of construction of this healthcare facility which will serve the growing ease of the region's expanding population and marks another milestone in our commitment to critical community infrastructure.
Speaker Change: In addition to a standard suite of products, this project features advanced ultra-high strength and heavy weight concrete mixes, developed using novel technologies to meet stringent specifications set by our customer.
Speaker Change: Before I hand it over to Larry, I'd like to formally welcome Jason Morin to the Titan America family. Jason joins us as the president of our Florida Business Unit.
Speaker Change: He brings a wealth of experience to the position, having previously be a Kim member of the leadership teams of Falsim, Samit, and recently a CEO of Black Mountain
Speaker Change: Jason succeeds, Randy Dunlap, who is transitioning to serve as executive director, growth and strategy and will focus on strategic growth efforts across our company.
Speaker Change: Cojation and Randy will serve on Titan America's Executive Committee. We are very excited to welcome Jason and for Randy's upcoming vital contribution in his new role.
Speaker Change: Larry will now provide a more detailed breakdown of our financial results and segment performance.
Speaker Change: Thank you Bill, and good afternoon everyone. Moving to slide eight, let me share an overview of our first quarter of financial results.
Speaker Change: Revenue was 392.4 million dollars compared to 400.1 million dollars in the first quarter of 2024.
Speaker Change: Despite this slight year year decline in revenue, we delivered solid growth in profitability with net income of $33.4 million, an increase of 13%.
Speaker Change: compared to the first quarter of 2024 and earnings per share of 19 cents up from 17 cents in the prior year quarter.
Speaker Change: Notably, adjusted EBITDA increased 11.7% to $79.8 million, and are adjusted EBITDA margin expanded to 20.3%, compared to 17.9% in the first quarter of 2024.
Speaker Change: This margin expansion reflects the benefit of higher aggregates volumes, a timing difference for the planned maintenance knowledge at our Pensico cement plant and resilient pricing for our products.
Speaker Change: As we discussed on our fourth quarter 2024 financial results call the first quarter of 2025 was impacted by unusually adverse weather conditions.
Speaker Change: Particularly in our mid-Atlantic region, we experienced some of the coldest temperatures in over a decade and January and unusually wet weather in February . These conditions temporarily affected construction activity across our operations.
Speaker Change: However, as conditions gradually started to improve in March, we saw demand recover and our project order book remains strong.
Speaker Change: Turning to slide 9, let me walk you through our Q1 volume comparisons. Our cement volumes decreased 7% year-over-year, primarily due to weather-related disruptions I mentioned coupled with the impacts of softer demand in the residential sector.
Speaker Change: However, we saw exceptional performance in our aggregates business with volumes increasing 23.6% compared to the first quarter of 2024. This substantial growth was primarily driven by recent investments at our Pensucro facility.
Speaker Change: Ready makes concrete volumes declined by 2.2% as strength in public and private non-residential demand was all set by softness in residential.
Speaker Change: Concrete block volumes were down 11.9% reflecting the referenced ongoing trends in residential construction activity.
Our fly ash vines improved by 15.4% compared to the prior EUR period.
Speaker Change: On slide 10, we're encouraged by the resilient pricing across our product portfolio which speaks to the strength of our market position and are differentiated value proposition in a period affected by softer demand.
Speaker Change: The meant, aggregates, and block prices were essentially flat, while ready-mixed concrete prices improved by 2.3%. Specific to aggregates, the reported pricing reflects changes in our product mix resulting from the introduction of new capacity.
Speaker Change: Fly ash saw a significant increase of 28.8% reflecting favorable geographic mix.
Speaker Change: One important note that we show at the bottom of slide ten is a sequential improvement quarter over quarter in pricing across all our product lines.
Speaker Change: Turning to Slide 11, let me share some highlights for our Florida segment.
Speaker Change: The Florida market was characterized in the quarter by positive momentum and infrastructure and commercial offset by continued selfness and residential.
Speaker Change: The Florida region delivered $253.2 million in revenue for the first quarter, a slight increase of 0.3% compared to the first quarter of 2024.
Speaker Change: However, we experience strong segment adjusted EBITDA growth increasing 25.9% to 70.8 million dollars from 56.2 million dollars in the prior year quarter.
Speaker Change: This segment-adjusted EBITDA growth was driven by several factors, including improved aggregate finds, enabled by strategic investments at our Miami area quarry, the timing of our Pensicco cement plant annual made-in at-allage and improved logistics costs.
Speaker Change: The Pensucco Outage occurred in April this year, versus mainly in March last year, so the impact of the outage will be reflected in our Q2 results.
On slide 12, you'll see our results for the Mid-Atlantic segment.
Speaker Change: Much like Florida, demand was stronger in the commercial and infrastructure sectors while residential recovery remained delayed.
Speaker Change: As mentioned previously, the mid-Atlantic segment was more affected by harsh winter weather conditions with revenue totaling $139.2 million for the first quarter compared to $147.3 million in the prior year quarter.
Speaker Change: The segment adjusted EBITDA was $10.9 million compared to $18.2 million in the prior year quarter.
Speaker Change: Now, turning to our balance sheet and cash flows on the slides, 13-15
Speaker Change: As of March 31st, 2025, we had 143.2 million in cash and cash equivalents and total debt of $462 million.
Speaker Change: Our net debt position was $318.7 million representing a ratio of 0.84 times trailing 12 months adjusted down significantly from 1.21 times at the end of 2024.
Speaker Change: This improvement in our leverage ratio reflects both the proceeds from our successful IPO in February and our improvement in adjusted EBITOP performance.
Speaker Change: For the quarter, cash flows provided by operations was $35.2 million and net capital expenditures were $32.5 million, resulting in free cash flow of $2.7 million.
Speaker Change: Our capital expenditure is for the quarter. We're mainly focused on our ongoing strategic initiatives to expand our capacity and improve our operational efficiencies across our network.
Speaker Change: Turning to slide 16, I'd like to remind everyone of our balanced approach to capital allocation. Importantly, our balance sheet is strong, providing us with significant financial flexibility to pursue growth opportunities that align with our long-term vision.
Speaker Change: As a reminder, we remain focused on three key priorities. First, investing in organic growth opportunities including capacity expansions and greenfield projects that enhance our market leading positions.
Speaker Change: Second, pursuing strategic eminent opportunities that build upon and expand our existing positions or provide access to adjacent value chain opportunities, all while maintaining a healthy, leveraged profile.
And third
Providing returns to shareholders to our regular quarterly dividend.
Speaker Change: Subject to the approval of shareholders at tomorrow's annual general meeting. Our Board of Directors has recommended a 4 cents per share distribution for Q1 and Q2 2025, a total of 8 cents per share.
Bill Sarkalis: With that, I'll turn the call back to Bill for his closing remarks.
Thank you, Larry.
Bill Sarkalis: Before you move to the Q&A portion of our call on slide 17, we are reaffirming our full year 205 guidance of mid-single digits revenue growth with modest improvement in adjusted EBDA margins compared to full year 204.
All assuming no severe economic downturn.
Bill Sarkalis: While our first quarter was impacted by weather-related challenges, we believed that the underlying demand trends remain robust, and we expect pent-up demand to have a positive impact in the second half of the year on both volumes and pricing.
Bill Sarkalis: In closing, I want to thank everyone for joining us today for our first quarter financial results call.
Bill Sarkalis: We are pleased with our soil is started 2025, particularly our ability to deliver improved profitability on top of challenging weather and macroeconomic conditions.
Bill Sarkalis: The strategic investments we made in our operations, particularly in aggregate capacity and logistics, are already yielding results, and we remain well positioned to capitalize on the strong underlying demand trends in our markets.
Bill Sarkalis: Looking ahead, we remain focused on executing our strategic initiatives to drive top line and growth, margin expansion and strong returns on invested capital.
Bill Sarkalis: We are confident in our ability to create substantial value for our shareholders in 2025 and beyond.
Bill Sarkalis: With that, I'll turn the call over to the operator for the Q&A session. Operator?
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press start to if you would like to remove the questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.
One moment please, valuable poll for questions.
Operator: The first question comes on the line of Anthony Petinari, City Group, Piscoveda.
Good evening.
Bye.
Speaker Change: Bill, can you talk a little bit about a quarter to date trends, you know, April May and I guess specifically I'm curious if you saw an impact, you know, following the liberation day tariff announcements.
Operator: In terms of your order book, do you see any pullback or disruption or just how do you characterize trends in order to date?
Speaker Change: Thanks Tony. First let me say that with weather improving in March we saw the demand momentum picking up and this continued into April .
Speaker Change: As far as impacts from tariffs, we didn't see any specific impact.
Speaker Change: Keep in mind that the announcement about tariffs essentially came in early April .
Speaker Change: only to be rescinded practically in on April 9th, you know, moving into the blanket and also allowing for a period of four months if I'm not mistaken into July .
Speaker Change: So the answer is no. We haven't seen any specific impact from the tariffs announcement.
Speaker Change: Got it, got it. And then with the deferred maintenance of Pensuko, is there an impact to margins in 2Q? And is it possible to just kind of quantify it?
Speaker Change: Yeah, Tony is Larry. I'm good to hear you. You know, the impact as I described in the discussion the prepared comments.
Speaker Change: Last year's shutdown spanned a little bit of Q2 as well as Q1, so the net impact, we think, will be roughly $8 million in that range, the impact year over year.
Speaker Change: Got it. Got it. That's very helpful. I'll turn it over.
Thank you, Tony.
Speaker Change: Thank you. Next question comes to the line of Jerry's average with Goldman Sachs. Please go by now.
Jerry Revich: Uh yes I uh good afternoon and good evening. Um can I ask you in terms of that. Hey Bill. Uh in terms of the tariff timing and implementation that 10%
a version of the tariffs we're hearing there is the and I see born
Exemption that will essentially mean no tariffs until
May 27th, is that consistent with
Speaker Change: What you're expecting and can you just spend a minibill just talking about if with tariffs are implemented at that age just the flexibility that you folks have and and how do you feel your position in that environment if we do move in that direction.
Speaker Change: Sorry, it's Larry here, Jerry. So, I think on the tariffs from Bill mentioned the general tariff of 10% as applies to the product of cement for products that left, you know, the port headed to the U.S.
Speaker Change: after April the 9th. So we haven't seen any financial impact per se so far, but it will come later in a second provided that the terrorists stay at the level where they currently are. So at this point it is capitalized in the inventory if you will through this part of April . So that comes at a later point.
Speaker Change: And Larry, sorry, just to clarify what we're hearing from other companies is as long as product arrives by
Speaker Change: May 27th, there's no tariff impact so that would give you if that applies to your business a longer window before you start accruing tariffs. Can I just get a clarification that you're seeing as well as your product category different?
Bill Sarkalis: Exactly this is Bill, this is what we see and everybody is in a weight and sea mode because essentially things are going to become clearer after July , mid of July . So this is where we are right now, so far no impact, a weight and sea mode.
Bill Sarkalis: In the meantime, as we discussed last time, and I'm sure you remember, we're taking all the necessary steps to prepare for any kind of scenario, and as we discuss, we have flexibility, we have options, and we prepare for any kind of scenario after July .
Speaker Change: Quarters did you get a full quarter of impact and you know what's the the fit in terms of unit profitability to you folks at the higher volumes presumably. That's coming at a creative margins but maybe Larry I could trouble you to expand on that place.
Larry Wilk: Yeah, you know, Jerry, we don't break out margins by product line. We operate this vertically integrated model that you know, we've shared so much about.
Larry Wilk: It has a positive impact for sure relative to the average margins that we would have.
Larry Wilk: Whether it's a full quarter that comes in, we don't say at this point exactly what the vines will be across that same category and next quarter. But you've heard about the investments we made.
Larry Wilk: and the capabilities are there, you saw it in the fourth quarter, some impact. So the second quarter, we expect positive contribution as well.
Thank you.
Thank you, Joe.
Thank you. Next question comes on the line of Philip NG with Jeff Lee's please go ahead.
Speaker Change: Hey guys, congrats on a strong quarter despite all this wet weather.
Thank you.
Speaker Change: Bill, can you give us an update on pricing? Really good to see the resiliency on pricing. I think last quarter you guys are talking about
Speaker Change: a January nine dollar cement price increase in Florida and eight bucks in middle-antique for April any color on where that's kind of landing on the cement side attraction and then and certainly was encouraging to see ready mixed prices go up sequentially but any more color on where we how do you think that right next prices
[inaudible]
Speaker Change: Yes, Philip. I mean obviously you saw the quarter on quarter from Q4 to Q1 improving price also light that you mentioned clearly.
Speaker Change: that although albeit the aggregates appear to be at practically flat price, this is an issue of the new product mix we have.
Speaker Change: with different products as we increase capacity at Pensuco. Overall what we so as you recall all our price increases in the mid-Atlantic will take effect in the second quarter.
Speaker Change: in relation to Florida, however, with the impact of the weather.
as we discussed in the in in the previous course.
We had unusual precipitation.
in Florida remain soft.
Speaker Change: Flood essentially in Q1. However, the price in power and the resolution of our price in is driven essentially by the favorable supply demand balance.
Speaker Change: Also by the fact that there is increasing demand both from infrastructure but also from private non-residential.
Speaker Change: in commercial projects, in data centers, in health centers, in water supply and water treatment in power and electricity and utilities overall. This is going to help us continue increasing our prices in the months to come.
Speaker Change: Okay, so we should assume you get some contraction in 2K or is it more of a back-up event for Florida?
Speaker Change: You're going to see some traction in the quarters to come.
Speaker Change: Okay, super. And then a question for Larry. I appreciate EBITDA improvements coming me more back half weighted and just.
Speaker Change: and certainly very encouraging one cue was up, giving some of the timing of the maintenance with Pinsucle still going over to cue. Do you have the ability to grow you but down a year of your basis in to cue or actually it's going to be down a little bit this year?
Speaker Change: Look, I think we'll report Q2 when Q2 comes. The headwind is eight million analysis I described before.
Okay.
Speaker Change: And just one simple housekeeping question. If I look at your mid-Atlantic results, your decaramentals were like 90% give or take if I did my math correctly. What's driving the outside decaramentals in one queue for mid-Atlantic? I know what it was an issue, but just still seems pretty outsized. Should we assume that decaramental profile for medallic normalizes in the common quarters?
Speaker Change: It'll become more normal. I think that would be our expectation. Certainly, the Q1 was difficult because of the weather. I am back primarily.
Speaker Change: I feel that usually in the mid-Atlantic, the first quarter is very small quarter.
Speaker Change: So, it's very sensitive to phenomena like the weather. I mean, we lost...
Speaker Change: More than one third of the working days due to the weather in the mid-Atlantic in the first quarter So in a small quarter like this losing 33 30% plus They working days had an impact, but you cannot drive conclusions about the rest of the year from that
Okay, thank you guys. Really appreciate it.
Thanks, Philip, all the best.
Thank you. Next question comes to the line of Chad Dilard with Bernstein-Piskovil.
All right, good evening, guys.
Speaker Change: So you talked about mid-single desert revenue growth for the balance of the year, how does it break down between price versus volume as we think about the second half? And then can you confirm whether you have embedded any costs from terrorists into your guide?
Speaker Change: Yep, so look, on the first part of the question, we choose not to break down at this point what percentage comes from...
Speaker Change: Vime and what presented would come from price, Chad, but we are confident and comfortable with the forecast we provide of this low Single low sort of mid single digit range of price increase That's that's where we are on that one
The tariff, you know, if you think about the tariff's
Speaker Change: you know you could put them into a couple of buckets on chance for primary secondary tertiary right if you think about primary interracies are going to make things on the direct
Speaker Change: The imports that we carry at tariff at a 10% rate, this would be something in order of $8 million, we think, for the balance of the year. And yes, that would be in our forecast if we would receive that.
Speaker Change: That's super helpful. Let me just a question on aggregates seem like there's some sustainable strength there. Can you talk about how to think about that as we go through the balance of the year and as we look forward as your animal capacity? How do you think about the mix of that business relative to the rest and there's a potential upside from just better values in that product?
Speaker Change: Certainly better margins and I mean if you put it in order as we've said before some aggregates seem to be at the top of it block doesn't fall forward behind and then obviously red emix would be the the fourth of those in terms of margin profiles which had before in terms of percentages the aggregate business has two contributions that the more we produce the more we can consume internally this helps our business overall and then we also have some excess product meant to sell and that sells into the open market come in demand
Speaker Change: that are high in that geography and infrastructure and commercial projects where we can better participate. So strong performance there. But it is a relatively smaller part of a business presentation.
Thank you.
Bigger shot. Thank you.
Speaker Change: A reminder to all the participants that you may press star in one to ask a question.
Next question comes to the line of Brian Proffy. Let's see for please go ahead.
Thanks, good evening, everybody. A bill you talked about at the adoption.
Speaker Change: of green energy, excuse me, green cement products from some of your tech customers and your comments. Can you talk about what you're seeing from an adoption standpoint from customers outside of tech?
Speaker Change: And how we should be thinking about adoption from those customers over time. Thanks.
Speaker Change: We have started in the past brand data. Adoption in the States is at a lower rates as compared to what we see for example in Europe where it's driven mainly by the course of carbon emissions.
Speaker Change: Here in the states we see mainly adoption and pool from major customers like Microsoft and Amazon and companies overall who have a clear blueprint.
for net zero emissions by 2050.
Speaker Change: So this is the main pull comes from customers like this and in major projects like we see in warehouses, in data centers, it helps centers in elements like this.
Speaker Change: Overall, we're happy with the demand that we see and as we have discussed we are the first company in a country that went into 100% limestone cement.
Speaker Change: also with a 14.7% substitution so a major contribution in meeting the needs of our customers for high performance and ultra high performance products with low carbon profile.
Speaker Change: And we continue now to develop new products like blended cement, 1T.
with a reduced carbon profile of about 40%.
And this is the products we move.
Speaker Change: to meet the needs of these customers that require ultra-high performance with low carbon profile. So we're happy about what we've seen in terms of the rate of adoption and we intend to continue accelerating in these segments.
Speaker Change: Thanks, that's really helpful. And then just one on catbacks. It looks like it was trending quite a bit below where we were thinking at least in the first quarter. Just kind of curious your latest thoughts on catbacks for the rest of the year. Thanks.
Speaker Change: Yep, you're right to observe. It was down for some expectations, but it's still a strong capex profiler that enables us to meet our growth targets. We expected to grow as a year goes on. We just had some delays in the start of some of those capital projects that you would see.
Speaker Change: So we'll give some updates as we go along quarter by quarter
Okay, thanks. I'll pass it on.
Speaker Change: Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Bill Sir Callis for closing comments.
Bill Zerkalis: Thank you very much. Thank you all for your time today. We appreciate your interest in Titan America and we look forward to updating you on our progress on our second quarter call. Enjoy the rest of your day. Thank you so much.
Speaker Change: Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you for your participation.