Q1 2025 Eagle Materials Inc Earnings Call
Turning the call over the Eagles, President and Chief Executive Officer, Mr. Michael Hecht Mr. Hecht. Please go ahead Sir.
Thank you Chuck.
Good morning, welcome to Eagle materials conference call for our first quarter of fiscal year 2026. This is Michael hack joining me today are Craig Kesler, our Chief Financial Officer, and Alex <unk> Senior Vice President of Investor Relations strategy and corporate development.
There will be a slide presentation made in connection with this call to access. It. Please go to the 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 this call.
These statements are subject to risks and uncertainties that could cause results to differ for those discussed during the call.
For further information please refer to this disclosure, which is also included at the end of our press release.
Thank you for joining us today.
I am pleased to report that we had a solid start to our fiscal year 2026.
We generated record first quarter revenue of $634 7 million and diluted net earnings per share of $3 76.
Despite challenging weather conditions across many of our cement concrete and aggregate market.
Throughout our history, our low cost producer position and operational focus has helped us weather tougher periods in the cycle and capture the benefits of stronger conditions.
Regardless of specific near term conditions, our operations, maintaining the same disciplined focus every quarter and every year.
Improving our operational metrics is always a key priority in this long term multi cycle approach to operational improvement is an important competitive advantage for eagle materials.
For me it all starts with our safety performance.
Pleased we continued our safety progress maintaining our total recordable incident rate well below the industry average and near our all time record as a company.
And as always we aim to do better to establish our safety culture. So it is self sustaining.
The progress we've made is tangible and I am grateful.
To our employees for their relentless efforts.
We've also made substantial progress on our sustainability initiatives.
Capturing the economic benefits of being a low cost producer means sustainability has always been part of our operational DNA.
We're always looking for ways to do more with less.
Over the last five plus years, we have expanded our investments that offer us good return focused on improving our sustainability.
I think our progress is evidenced in our results across several initiatives, which can be found in our newly published updated sustainability report.
To highlight just a few examples we met our 2030 midterm cement Coa <unk> intensity goal. Early this does not mean, we are done we will continue to focus on efforts. So we can improve this metric operate more efficiently and provide a return to our investors.
We continue to enhance our reporting for example in our most recent report we separate cement GHT emissions by fuel and process for the first time.
We also made an investment in <unk> as a lead investor to further our efforts to produce low carbon supplementary cementitious material to help meet the expected future demand for cement more broadly.
Overall, I'm pleased with our progress and believe we still are in the early innings and we will show further improvements.
With that let me turn to a few comments on our business environment.
First from a demand perspective, despite headline macroeconomic and policy uncertainty, we saw stable order trends across each of our major business lines.
Our aggregates volumes improved meaningfully year over year, both from the integration of our two recently acquired quarries.
And on an organic basis.
Our cement volumes also improved year over year, which is especially impressive given the major weather disruptions in several of our cement markets.
This is the first quarter since December 2023 that we've seen a year over year increase in cement sales volumes.
Our heavy side customers continue to express cautious optimism for their business outlooks as Dot's state budgets remain healthy and infrastructure awards accelerate.
Against this backdrop once cement sales volumes rebound from the slower than anticipated consumption. We had in calendar 2023, and 2024, we believe the high capacity utilization rates across the cement industry should also lead to an improved pricing environment.
Our near term outlook on volumes for the wallboard business remains more subdued.
Single family, New homebuilding constraints persists, primarily driven by affordability challenges for the new home buyer.
For wallboard volumes to recover interest rates <unk> home prices will need to come down to a buyer demand more broadly.
However, putting the current environment in the context annual consumption of wallboard sits at levels akin to the late 19 nineties when the U S had a much lower population base and despite the tougher residential construction environment, our wallboard business has performed exceptionally well.
Even against a softer demand environment, we have been able to maintain our margin profile across our businesses given our operational advantages.
Our cement footprint is more moderate than prior cycles, thanks to strategic acquisitions and in cement and wallboard structural constraints on adding supply remained.
We believe long term demand fundamentals favor the consumption of our products U S infrastructure assets in the U S. U S housing stock continue to age and the replenishment of our roads bridges and homes will require cement concrete and aggregates and wallboard.
That is why as we look out over the next three to five years. We believe we can continue to grow and expand our margins further.
We also continue to prudently invest our substantial excess free cash flow.
I recently visited our Laramie, Wyoming cement plant and I am happy with the progress we are making on modernizing and expanding the plant.
The project remains on budget and on schedule for late calendar 2026 commissioning.
Construction for our Duke, Oklahoma Wallboard plant modernization will also commence this summer.
And we have already begun purchasing major equipment.
Both projects highlight our investment philosophy, well, we plan to continue to seek strategic projects, whether acquisitions or organic opportunities that meet our financial return criteria position our company for the next 40 years or more.
Alongside these projects we plan to continue to invest in our company through opportunistic share repurchases as well.
There is a lot of meaningful value, creating work underway at Eagle materials, and I'm excited to share our progress along the way.
With that Greg I'll pass it over to you.
Thank you Michael as mentioned first quarter revenue was a record $635 million an increase of 4%.
The increase primarily reflects higher cement and wallboard sales volumes as well as the contribution from the recently acquired aggregates businesses.
Excluding the acquired businesses consolidated revenue was up 2%.
First quarter earnings per share were down 5% to $3 76.
The decrease was driven by lower earnings mostly instruments as a result of higher operating costs.
Partially offset by a 3% reduction in fully diluted shares due to our share buyback program.
Turning now to segment performance highlighted on the next slide.
In our heavy materials sector, which includes our cement and concrete and aggregates segment's revenue was up 5% driven primarily by increased cement sales volume and a 21% increase in concrete and aggregates revenues.
Aggregate sales volume was up 117%, including the contribution from the recently acquired aggregates businesses.
Organic aggregate sales volume was up 29%.
Operating earnings in the sector were down 5%, primarily because of the impact of lower production volumes on fixed costs as well as increased raw material costs.
Moving to the light materials sector on the next slide.
First quarter revenue in our light materials sector increased 1%, reflecting higher wallboard sales volume, partially offset by lower wallboard sales prices are.
Operating earnings in the sector were down slightly reflecting lower net sales prices.
Actually offset by lower input costs, primarily for recycled fiber.
Looking now at our cash flow.
We continue to generate substantial cash flow and allocate capital in a disciplined way.
In fixed costs as well as increased raw material costs.
In the first quarter operating cash flow increased by 3% to $137 million.
Moving to the light materials sector on the next slide.
First quarter revenue in our light materials sector increased 1%, reflecting higher wallboard sales volume, partially offset by lower wallboard sales prices.
<unk> improved working capital management.
Capital spending increased to $76 million as we continued to invest in and improve our operations.
Operating earnings in the sector were down slightly reflecting lower net sales prices, partially offset by lower input costs, primarily for recycled fiber.
Most of the increase was associated with the modernization and expansion of our mountain cement plant.
And equipment purchases for the project to modernize our Duke Oklahoma Wallboard facility.
Looking now at our cash flow.
These two projects as well as our sustaining capital spending.
We continue to generate substantial cash flow and allocate capital in a disciplined way.
We continue to expect total company capital spending in fiscal 2026 to be in the range of $475 million to $525 million.
In the first quarter operating cash flow increased by 3% to $137 million, reflecting improved working capital management.
We repurchased 358000 shares of our common stock for $79 million and paid our quarterly dividend.
Capital spending increased to $76 million as we continued to invest in and improve our operation.
Returning $87 million to shareholders during the first quarter.
Most of the increase was associated with the modernization and expansion of our mountain cement plant.
We have $4 3 million shares remaining under our current repurchase authorization.
And equipment purchases for the project to modernize our Duke Oklahoma Wallboard facility.
Finally, a look at our capital structure.
These two projects as well as our sustaining capital spending.
Which continues to give us significant financial flexibility.
We continue to expect total company capital spending in fiscal 2026 to be in the range of $475 million to $525 million.
June 30, our net debt to cap ratio remained at 46%.
Our net debt to EBITDA leverage ratio was one six times.
We ended the quarter with $60 million of cash on hand.
We repurchased 358000 shares of our common stock for $79 million and paid our quarterly dividend.
Total committed liquidity at the end of the quarter was approximately $525 million and we have no meaningful near term debt maturities.
Returning $87 million to shareholders during the first quarter.
We have $4 3 million shares remaining under our current repurchase authorization.
Thank you for attending today's call, we will now move to the question and answer session.
Finally, a look at our capital structure.
Thank you we will now begin the question and answer session.
Which continues to give us significant financial flexibility.
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At June 30, our net debt to cap ratio remained at 46%.
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And our net debt to EBITDA leverage ratio was one six times.
Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
We ended the quarter with $60 million of cash on hand.
Total committed liquidity at the end of the quarter was approximately $525 million and we have no meaningful near term debt maturities.
And the first question will come from Trey Grooms with Stephens. Please go ahead.
Thank you for attending today's call, we will now move to the question and answer session.
Hi, good morning, everyone.
Thank you we will now begin the question and answer session.
Good morning.
If you could maybe touch on wallboard here I mean, you guys are clearly outperforming the market.
You're asking a question you May press Star then one on your Touchtone phone.
We are using a speakerphone please pick up your handset before pressing the keys.
Maybe maybe touch on some of the drivers there.
Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
And maybe what youre seeing on the demand front housing continues to be pretty weak.
But.
You guys are outperforming there so any color you can give us around that.
Detroit.
And the first question will come from Trey Grooms with Stephens. Please go ahead.
Some of it is our geographic position continues to do well.
Hi, good morning, everyone.
You've heard me say this many times also looking at volumes on a trailing 12 month basis is important quarter to quarter, you could have weather issues could have projects that shift around but we're happy with where our businesses are positioned our facilities are in good condition.
Good morning.
If you could maybe touch on wallboard here I mean, you guys are clearly outperforming the market.
Maybe maybe touch on some of the drivers there.
And maybe what youre seeing on the demand front housing continues to be pretty weak.
And the team's performing well.
No doubt.
But.
And as Michael mentioned, the affordability issues continue to plague the housing industry, but.
You guys are outperforming there so any any color you could give us around that.
Yeah look I think some of it is our geographic position continues to do well.
In wallboard volumes.
We're still at very low levels.
You've heard me say this many times also looking at volumes on a trailing 12 month basis is important.
In the Grand scheme of things, so we like our position.
We can improve the affordability issue in the United States I think our business is positioned very very well.
Order to quarter, you could have weather issues could have projects that shipped around but yeah, we're happy with where our businesses are positioned our facilities are in good condition.
Okay.
And then kind of sticking with wallboard.
The margins there continue to be really good.
And the team's performing well.
No doubt.
Can you talk about.
And as Michael mentioned, the affordability issues continue to plague the housing industry, but.
<unk> on the on the cost front, we should be kind of keeping our eye out for.
On the wallboard side any any swings there.
In wallboard volumes.
Any changes that you are expecting on that front.
We are still at very low levels.
Natural gas has pretty been range bound for quite some time now.
In the Grand scheme of things, so we like our position and we.
We can improve the affordability issue in the United States I think our business is positioned very very well.
Little over $3 1 million OCC prices have come down I think they probably stabilize at this level for a little while.
Okay.
We're fortunate with our natural gypsum reserves and having plenty of those for many many years many decades and.
And then kind of sticking with wallboard.
The margins there continue to be really good.
Can you talk about.
So I don't see anything on the immediate horizon, one way or the other on the cost side.
<unk> on the on the cost front, we should be kind of keeping our eye out for on the on the wallboard side any any swings there.
Yeah.
Alright, well, thanks for taking my questions I'll pass it on and jump back in queue. Thank you.
Any changes that you are expecting on that correct.
Natural gas has pretty been range bound for quite some time now.
The next question will come from Brian Brophy with Stifel. Please go ahead.
Little over $3 1 million OCC.
Yes, thanks, good morning, everybody.
Prices have come down I think they probably stabilize at this level for a little while.
The JV operating earnings were a little bit lower than the street was.
We're fortunate with our natural gypsum reserves and having plenty of those for many many years many decades.
Just curious to what extent that was a continuation.
The drag from the slide facility ramp up and just any update on how you guys are thinking about that that ramp moving forward here.
So I don't see anything on the immediate horizon.
One way or the other on the cost side.
Yes look I think there were two things in the quarter you hit on one of them certainly.
Alright, well, thanks for taking my questions I'll pass it on and jump back in queue. Thank you.
As we commission that facility during the winter and its really in startup mode.
The next question will come from Brian Brophy with Stifel. Please go ahead.
As we gone through the spring and early summer so that did continue to be a drag on earnings.
Yes, thanks, good morning, everybody.
The business is starting up.
The JV operating earnings were a little bit lower than the street was I guess, just curious to what extent that was a continuation of a drag from the slide facility ramp up and just any update on how you guys are thinking about that that ramp moving forward here.
And we will continue to improve I think as we go along this year.
Other point and you see it in the release sales volumes were down 12%.
Texas continue to see some weather issues across across the whole state and that certainly contributed to the decline in volumes.
Yes look I think there were two things in the quarter you hit on one of them certainly.
We commissioned that facility during the winter and its really in startup mode.
That's helpful and then on the flip side, obviously there was.
We've gone through the spring and early summer so that did continue to be a drag on earnings.
A nice bounce back in profitability on the concrete and AG side.
Is this a good run rate to think about margins moving forward in that segment or is there any kind of one off benefits to call out this quarter.
The business is starting up.
And we will continue to improve I think as we go along this year.
The other point and you see it in the release sales volumes were down 12%.
Yes, no one one time issues of onetime benefits I would tell you.
Texas continue to see some weather issues across across the whole state and that certainly contributed to the decline in volumes.
Like many of these businesses that are that are outdoor sports there will be some seasonality as you get into the December and certainly in the March quarter.
But but here in the June and September quarter, those businesses performed well we had some unique items last year that we'd highlighted several times I think we're past many of those so youre right business did perform very well they will have natural seasonality too very happy.
That's helpful and then on the flip side, obviously there was.
A nice bounce back in profitability on the concrete and AG side.
Is this a good run rate to think about margins moving forward in that segment or is there any kind of one off benefits to call out this quarter.
Thanks, I'll pass it on.
Yes, no one one time issues of onetime benefits I would tell you.
The next question will come from Anthony Pettinari with Citigroup. Please go ahead.
Like many of these businesses that are that are outdoor sports there will be some seasonality as you get into the December and certainly in the March quarter.
Hi, good morning.
I was wondering.
With the strength you saw in cement volumes. If there was anything notable in terms of the cadence.
But but here in the June and September quarter, those businesses performed well.
In the three months of the quarter and then maybe.
Had some unique items last year that we had highlighted several times I think we're past many of those so you write business did perform very well they will have natural seasonality towards the very happy.
Quarter to date here in July weather I don't know the strength is built or there's any pattern. There and then I'm wondering if you could talk a little bit more about maybe some of the regional or state by state dynamics that youre seeing.
Thanks, I'll pass it on.
And this is in that market.
The next question will come from Anthony Pettinari with Citigroup. Please go ahead.
Yes, Thanks Anthony.
I would tell you the volume cadence was pretty consistent throughout the quarter and.
Hi, good morning.
I was wondering.
And as we've highlighted for a while now.
With the strength you saw in cement volumes. If there was anything notable in terms of the cadence.
Yes.
The underpinning of cement demand is driven by infrastructure spending.
In the three months of the quarter and then maybe.
Those awards have continued to accelerate.
Quarter to date here in July weather I don't know the strength is built or there's any pattern. There and then I'm wondering if you could talk a little bit more about maybe some of the regional or state by state dynamics that youre seeing.
So feel good about where that businesses from a volume perspective.
I think it's been pretty consistent throughout.
Throughout the quarter and expect it to remain remained so even in light of some weather pressures and Michael mentioned that we had some some areas of the country, especially in places like Oklahoma, where they saw a year's worth of rain in the first half of the year.
In the cement market.
Yeah. Thanks Anthony.
I would tell you the volume cadence was pretty consistent throughout the quarter and.
As we've highlighted for a while now.
So even even with that environment.
Yes.
We continue to see.
The underpinning of cement demand is driven by infrastructure spending.
A nice improvement in cement volumes steady.
Those awards have continued to accelerate and so feel good about where that business from a volume perspective.
Great great.
Is there any notable dynamics you call out in the states that you serve.
Areas that are stronger or maybe weaker.
I think it's been pretty consistent throughout.
Throughout the quarter and would expect it to remain remained so even in light of some weather pressures and Michael mentioned that we had some some areas of the country, especially in places like Oklahoma, where they saw a year's worth of rain in the first half of the year.
No really if you look across the country.
Yeah.
It's pretty consistent across the country with it.
We don't have anything that I would call out.
Specific thats, a big deviation compared to any other location.
So even even with that environment.
Okay. That's helpful I'll turn it over.
We continue to see.
Okay.
A nice improvement in cement volumes steady.
The next question will come from Adam Thalheimer with Thompson Davis. Please go ahead.
Great great.
Is there any notable dynamics you call out in the states that you serve.
Hey, good morning, guys nice quarter.
Thanks Al.
Greg can you give us any high level thoughts on wallboard volumes going forward.
Areas that are stronger or maybe weaker.
No really if you look across the country.
Yes, Adam look again, very happy with how the business performed through the June quarter.
Yeah.
It's pretty consistent across the country with it.
We don't have anything that I would call out.
Well chronicled and we've discussed here a little bit I mean housing has been under some pressure.
Specific thats, a big deviation compared to any other location.
Given where interest rates are just general affordability issues. So still look I don't see a major change one way or the other in wallboard.
Okay. That's helpful I'll turn it over.
Okay.
The next question will come from Adam Thalheimer with Thompson Davis. Please go ahead.
Hey, good morning, guys nice quarter.
Demand.
Frankly, but.
Thanks Al.
It's kind of a hard crystal ball right now to figure out where homebuilding is going.
Greg can you give us any high level thoughts on wallboard volumes going forward.
Certainly I think the spring selling season wasn't as strong as the homebuilders had hoped for but still feel good about kind of the medium and longer term housing issue here in the U S. With we still feel like we're under built in.
Yes, Adam look again, very happy with how the business performed through the June quarter.
Well chronicled and we've discussed here a little bit I mean housing has been under some pressure.
Given where interest rates are just general affordability issues. So.
And as law, and we've got healthy consumers healthy balance sheets.
No look I don't see a major change one way or the other in wallboard demand.
So when we do see affordability improve.
I think thats when wallboard volumes can really meaningfully move forward.
Frankly, but.
Okay, and then on cement I was curious if the the higher operating costs you called out were those temporary in the quarter.
It's kind of a hard crystal ball right now to figure out where homebuilding is going.
Certainly I think the spring selling season, what it wasn't as strong as the homebuilders had hoped for but still feel good about kind of the medium and longer term housing issue here in the U S with and we still feel like we're under built in.
Yes, Adam Great question. This is our quarter, we performed the vast majority of our annual maintenance programs.
And in production was lower during this quarter and so on a on a per unit basis that that lower production volume really hurts your fixed cost absorption, so pretty pretty unique to this quarter I wouldn't call out anything energy was pretty flat even.
And as long and we've got healthy consumers healthy balance sheets.
So when we do see affordability improve.
Think thats when wallboard volumes can really meaningfully move forward.
Okay, and then on cement I was curious if the the higher operating costs you called out were those temporary in the quarter.
Both on the fuel and electricity basis. It was just really the lower production volumes associated with those those annual maintenance programs.
Yes, Adam Great question. This is our quarter, where we perform the vast majority of our annual maintenance programs.
Got it thanks guys.
The next question will come from Philip King.
Please go ahead.
And in production was lower during this quarter and so on a on a per unit basis that that lower production volume really hurts your fixed cost absorption, so pretty pretty unique to this quarter I wouldn't call out anything energy was was pretty flat even.
Hey, guys answer Matt Michael I think if I heard you correctly your commentary on the outlook with capacity utilization high you were pretty upbeat on cement prices I don't know if that was a.
Our medium to longer term comment, but love to get your thoughts on how youre seeing cement prices evolve over the course of the year. It sounds like demand is reasonably good but prices slipped modestly sequentially. So just kind of give us a lay of land how youre thinking about cement prices here.
Both on a fuel and electricity basis. It was just really the lower production volumes associated with those those annual maintenance programs.
Got it thanks guys.
Yeah, Phil Thanks for the question.
When we look at it.
The next question will come from Philip <unk> with Jefferies. Please go ahead.
We'll look at.
Continuing to focus on is kind of the mid term and the long term side.
Hey, guys answer Matt Michael I think if I heard you correctly your commentary on the outlook with capacity utilization high you were pretty upbeat on cement prices I don't know if that was a medium to longer term comment, but love to get your thoughts on how you're seeing some net prices evolve over the course of the year. It sounds like demand is reasonably good but prices slipped modestly sequentially.
The market and when we look at it demand is staying pretty consistent and pretty stable.
We're happy with the volumes, we were able to ship and as I stated earlier.
It's pretty consistent across the country.
<unk>.
So.
From what we're hearing from customers and everything we think the demand profile in the midterm and the long term would be good which would lead to.
So I just kind of give us a lay of land how youre thinking about the net price this year.
Yeah. So thanks for the question.
More pricing.
Potential in the future as those supply demand dynamics tightened with it.
When we look at it.
We'll look at.
Continuing to focus on is kind of the mid term and the long term side.
No.
The shorter term timeframe, we have a good <unk>.
The market.
When we look at it demand is staying pretty consistent and pretty stable.
<unk> demand dynamic right now but.
But.
I think the shorter term.
We are happy with the volumes, we were able to ship and as of this date earlier it's.
I won't say it will be a little bit more challenging getting price increases through but it will be will be more pacing im looking at the fall to see what we do and what we implement during that timeframe.
It's pretty consistent across the country.
<unk>.
So.
From what we're hearing from customers and everything we think the demand profile in the midterm and the long term would be good which would lead to.
So really what I'm looking for is the midterm and the long term.
That has really more potential.
More pricing.
Outside on that.
Potential in the future as those supply demand dynamics tightened with it.
Okay.
Hoping you correctly, Michael this spring increase TBD its value fairly muted and it kind of depends on how the demand backdrop supply demand on fall kind of materializes and potentially that could give us some momentum on pricing for cement.
No.
In the shorter term timeframe, we have a good.
<unk> demand dynamic right now but.
But.
That's exactly correct okay.
I think the shorter term.
Okay, perfect and then.
I won't say it will be a little bit more challenge in getting price increases through but it'll be we'll be more pacing I'm looking at the fall to see what we do and what we implement during that timeframe.
A question for you Craig with the Bill change out there and you guys are obviously, making real investments in bulk cement and wall business anything to be mindful of from a cash flow standpoint, and potentially cash tax implications.
So really what I'm looking for is the mid term and the long term.
It's really more potential upside on that.
You hit the nail on the head Phil.
From a P&L perspective.
Just I'm interpreting you correctly, Michael the spring increase TBD, it's probably fairly muted and then it kind of depends on how the demand backdrop supply demand on fall kind of materializes and potentially that could give us some momentum on pricing for cement.
A big change, but with the accelerated depreciation being extended.
That should help reduce cash taxes paid not as significant here in fiscal 'twenty six.
That's exactly correct okay.
But when you consider a project like the mountain cement modernization of $430 million investment.
Okay, Perfect and then perhaps a question for you Craig with the Bill change out there and you guys are obviously, making real investments in bulk cement and wall business anything to be mindful of from a cash flow standpoint, and potentially cash tax implications.
Expected to be put in place in fiscal 2007 that would be an immediate full deduction. So it would significantly lower our cash taxes paid so and then the following year you would have the Duke wallboard expansion project coming online. In addition to your normal sustaining capital spending so it's.
You hit the nail on the head Phil Yeah.
From a P&L perspective.
Not a big change, but with the accelerated depreciation being extended.
That should help reduce cash taxes paid not as significant here in fiscal 'twenty six.
Yes, it will be it will be a nice boost to cash flow.
Is there a way to kind of size what that cash tax rate could look like in the next few years.
But when you consider a project like the mountain cement modernization of $430 million investment.
Our cash taxes paid frankly aren't that much different than our provision so kind of a low twenties.
Expected to be put in place in fiscal 2007.
And so of pre tax income that could be a pretty meaningful number okay.
That would be an immediate full deduction. So it would significantly lower our cash taxes paid so and then the following year you would have the Duke wallboard.
Okay Alright. Thank you I appreciate the color guys.
The next question will come from Keith Hughes with <unk>. Please go ahead.
Spansion project coming online in addition to your normal sustaining capital spending so it'll it'll be it will be a nice boost to cash flow.
Well. Thank you I just want to shift over to wallboard pricing was down in the quarter you talked about was there any mix impact on the numbers.
In the near term what do you think what do you think pricing will do.
Is there a way to kind of size up what that cash tax rate could look like in the next few years.
Yes, Keith really the decline year over year, yes sequentially pretty much flat.
Our cash taxes paid frankly aren't that much different than our provision so kind of a low twenties.
And so we had already seen that decline really in the second half of calendar 'twenty four and into our Q4. So.
And so pre tax income that could be a pretty meaningful number okay.
Chuck: At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir. Thank you, Chuck. Good morning.
Okay Alright. Thank you I appreciate the color guys.
<unk> been pretty range bound here with wallboard prices for quite some time.
The next question will come from Keith Hughes with true. Please go ahead.
And I think our outlook is for similar type of range bound until you have a meaningful move in volume.
Michael Haack: Welcome to Eagle Materials conference call for our first quarter of fiscal year 2026. This is Michael Haack. Joining me today are Craig Kessler, our Chief Financial Officer, and Alex Haddock, Senior Vice President of Investor Relations, Strategy, and Corporate Development. There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.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 this call. These statements are subject to risks and uncertainties that could cause results to differ for those discussed during the call.
Thank you I just wanted to shift over to the wallboard pricing was down in the quarter. You were talking about was there any mix impact on the numbers.
Okay. Thank you.
In the near term what do you think what do you think pricing will do.
Yes, Keith really the decline year over year, yes sequentially pretty much flat.
This concludes our question and answer session I would like to turn the conference back over to Mr. Michael Hecht for any closing remarks. Please go ahead Sir.
And so we had already seen that decline really in the second half of calendar 'twenty four and into our Q4. So.
Thank you check the first quarter was a solid start to our year, which is a testament to our operational resilience. We have maintained our clear operational strategic and financial goalposts, even as the economy and construction conditions evolve.
Been pretty range bound here with wallboard prices for quite some time.
And I think our outlook is.
Similar type of range bound until you have a meaningful move in volume.
<unk> continues to position itself for growth throughout the cycles, and we will keep focused on executing for outperformance.
Michael Haack: For further information, please refer to this disclosure, which is also included at the end of our press release.
Okay. Thank you.
Thanks also for everyone for joining the call today, we look forward to discussing our results again with you next quarter.
This concludes our question and answer session I would like to turn the conference back over to Mr. Michael Hecht for any closing remarks. Please go ahead Sir.
Michael Haack: Thank you for joining us today. I'm pleased to report that we had a solid start to our fiscal year 2026. We generated record first quarter revenue of $634.7 million and diluted net earnings per share of $3.76. Despite challenging weather conditions across many of our cement, concrete, and aggregate markets. Throughout our history, our low-cost producer position and operational focus has helped us weather tougher periods in the cycle and capture the benefits of stronger conditions. Regardless of specific near-term conditions, our operations maintain the same discipline focus every quarter and every year. Improving our operational metrics is always a key priority, and this long-term, multi-cycle approach to operational improvement is an important competitive advantage for Eagle Materials.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Thank you Jack the first quarter was a solid start to our year, which is a testament to our operational resilience. We have maintained our clear operational strategic and financial goalposts, even as the economy and construction conditions evolve.
Eagle continues to position itself for growth throughout cycles, and we will keep focused on executing for outperformance.
Thanks also for everyone for joining the call today, we look forward to discussing our results again with you next quarter.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Michael Haack: For me, that all starts with our safety performance. I'm pleased we continued our safety progress, maintaining our total recordable incident rate well below the industry average and near our all-time record as a company. And as always, we aim to do better to establish our safety culture so it is self-sustaining. The progress we've made is tangible, and I'm grateful to our employees for their relentless efforts.
Michael Haack: We've also made substantial progress on our sustainability initiative. Capturing the economic benefits of being a low-cost producer means sustainability has always been part of our operational DNA. We're always looking for ways to do more with less. Over the last five-plus years, we have expanded our investments that offer us good returns focused on improving our sustainability. I think our progress is evidenced in our results across several initiatives, which can be found in our newly published and updated sustainability report. To highlight just a few examples, we met our 2030 midterm cement CO2e intensity goal early. This does not mean we are done.
Michael Haack: We will continue to focus on efforts so we can improve this metric, operate more efficiently, and provide a return to our investors. We continue to enhance our reporting. For example, in our most recent report, we separate cement GHG emissions by fuel and process for the first time. We also made an investment in Terra CO2 as a lead investor to further our efforts to produce low carbon supplementary cementitious material to help meet the expected future demand for cement more broadly.
Michael Haack: Overall, I'm pleased with our progress and believe we still are in the early innings and will show further improvement.
Michael Haack: With that, let me turn to a few comments on our business environment. First, from a demand perspective, despite headline macroeconomic and policy uncertainty, we saw stable order trends across each of our major business lines. Our aggregate volumes improved meaningfully year over year, both from the integration of our two recently acquired quarries and on an organic basis. Our cement volumes also improved year over year, which is especially impressive given the major weather disruptions in several of our cement markets. This is the first quarter since December 2023 that we've seen a year-over-year increase in cement sales volume.
Michael Haack: Our Heaviside customers continue to express cautious optimism for their business outlooks as DOT state budgets remain healthy and infrastructure awards accelerate. Against this backdrop, once cement sales volumes rebound from the slower than anticipated consumption we had in calendar 2023 and 2024, we believe the high capacity utilization rates across the cement industry should also lead to an improved pricing environment.
Michael Haack: Our near-term outlook on volumes for the wallboard business remains more subdued. Single-family new home building constraints persist, primarily driven by affordability challenges for the new home buyer. For wallboard volumes to recover, interest rates and or home prices will need to come down to aid buyer demand more broadly. However, putting the current environment into context, annual consumption of wallboard sits at levels akin to the late 1990s when the U.S. had a much lower population base and despite the tougher residential construction environment, our wallboard business has performed exceptionally well. Even against a softer demand environment, we have been able to maintain our margin profile across our businesses given our operational advantages.
Michael Haack: Our cement footprint is more modern than prior cycles, thanks to strategic acquisitions. And in cement and wallboard, structural constraints on adding supply remain.
Michael Haack: We believe long-term demand fundamentals favor the consumption of our products. U.S. infrastructure assets and the U.S. housing stock continue to age, and the replenishment of our roads, bridges, and homes will require cement, concrete, and aggregates, and wall boards.
Michael Haack: That is why, as we look out over the next three to five years, we believe we can continue to grow and expand our margins further.
Michael Haack: We also continue to prudently invest our substantial excess pre-cash flow. I recently visited our Laramie, Wyoming cement plant, and I'm happy with the progress we are making on modernizing and expanding the plant. The project remains on budget and on schedule for late calendar 2026 commission. Construction for our Duke, Oklahoma, wallboard plant modernization will also commence this summer, and we have already begun purchasing major equipment. Both projects highlight our investment philosophy well. We plan to continue to seek strategic projects, whether acquisitions or organic opportunities, that meet our financial return criteria and position our company for the next 40 years or more.
Michael Haack: Alongside these projects, we plan to continue to invest in our company through opportunistic share repurchases as well.
Michael Haack: There's a lot of meaningful, value-creating work underway at Eagle Materials, and I'm excited to share our progress along the way.
Craig Kessler: With that, Craig, I'll pass it over to you. Thank you, Michael. As mentioned, first quarter revenue was a record $635 million, an increase of 4%. The increase primarily reflects higher cement and wallboard sales volume, as well as the contribution from the recently acquired aggregate system. Excluding acquired businesses, consolidated revenue was up 2%. First quarter earnings per share were down 5% to $3.76. The decrease was driven by lower earnings, mostly in cement, as a result of higher operating costs, partially offset by a 3% reduction in fully diluted shares due to our share buyback program.
Craig Kessler: Turning now to segment performance, highlighted on the next slide. In our heavy materials sector, which includes our cement and concrete and aggregate segments, revenue is up 5%, driven primarily by increased cement sales volume and a 21% increase in concrete and aggregate revenue. Aggregate sales volume was up 117%, including the contribution from the recently acquired aggregate business. Organic aggregate sales volume was up 29%. Operating earnings in the sector were down 5%, primarily because of the impact of lower production volumes on fixed costs, as well as increased raw material costs.
Craig Kessler: Moving to the light materials sector on the next slide. First quarter revenue in our light materials sector increased 1%, reflecting higher wallboard sales volume, partially offset by lower wallboard sales price. Operating earnings in the sector were down slightly, reflecting lower net sales prices, partially offset by lower input costs, primarily for recycled fiber.
Craig Kessler: Looking now at our cash flow. We continue to generate substantial cash flow and allocate capital in a disciplined way. In the first quarter, operating cash flow increased by 3% to $137 million, reflecting improved working capital management. Capital spending increased to $76 million as we continue to invest in and improve our operation. Most of the increase was associated with the modernization and expansion of our mountain cement plant and equipment purchases for the project to modernize our Duke-Oklahoma wallboard facility.
Craig Kessler: These two projects, as well as our sustaining capital spending, we continue to expect total company capital spending in fiscal 2026 to be in the range of $475 to $525 million. We repurchased 358,000 shares of our common stock for $79 million and paid our quarterly dividends. returning $87 million to shareholders during the first quarter. We have 4.3 million shares remaining under our current repurchase authorization.
Craig Kessler: Finally, a look at our capital structure. which continues to give us significant financial flexibility. At June 30th, our net debt-to-cap ratio remained at 46% and our net debt-to-EBITDA leverage ratio was 1.6 times. We ended the quarter with $60 million of cash on hand. Total committed liquidity at the end of the quarter was approximately $525 million, and we have no meaningful near-term debt maturity.
Chuck: Thank you for attending today's call. We'll now move to the question and answer session. Thanks. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2.
Chuck: And at this time, we'll pause momentarily to assemble our roster.
Trey Grooms: And the first question will come from Trey Grooms with Stephen, please go ahead. Good morning, everyone. Hey, if you could maybe touch on wallboard here. I mean, you guys are clearly outperforming the market. Maybe maybe touch on some of the drivers there. And, you know, maybe what you're seeing on the demand front, you know, housing continues to be pretty weak. But, you know, I said, you guys are outperforming there. So any, any color you can give us around that. Yeah, Trey, look, I think some of it is our geographic position continues to do well. You know, as you've heard me say this many times, also looking at volumes on a trailing 12-month basis is important.
Trey Grooms: You know, quarter to quarter, you could have weather issues, you could have projects that shift around, but, you know, we're happy with where our business is, our position, our facilities are in good condition, and the team's performing well. You know, no doubt, you know, and as Michael mentioned, the affordability issues continue to plague the housing industry, but, and wallboard volumes, you know, are still at very low levels in the grand scheme of things. So, we like our position, and as we can improve the affordability issue in the United States, I think our business is positioned very, very well.
Trey Grooms: Okay. And then kind of sticking with wallboard, you know, the margins there continue to be really good. Can you talk about anything on the cost front we should be kind of keeping our eye out for on the wallboard side? Any swings there? Any changes that you're expecting on that front?
Trey Grooms: All right, well, thanks for taking my questions.
Trey Grooms: I'll pass it on and jump back in, Keith. Thank you.
Brian Brophy: The next question will come from Brian Brophy with C-Fool. Please go ahead. Yeah, thanks. Good morning, everybody. The JV operating earnings were a little bit lower than the street was. I guess just curious to what extent that was a continuation of a drag from the slide facility ramp-up. And just any update on how you guys are thinking about that ramp moving forward here. Yeah, look, I think there were two things in the quarter. You hit on one of them, certainly, as we commissioned that facility during the winter, and it's really in start-up mode as we've gone through the spring and early summer.
Brian Brophy: So that did continue to be a drag on earnings. The business is starting up and will continue to improve, I think, as we go along this year. The other point, and you see it in the release, sales volumes were down 12%. Texas continued to see some weather issues across the whole state, and that certainly contributed to the decline in volumes. That's helpful.
Brian Brophy: And then on the flip side, obviously, there was a nice bounce back in profitability on the concrete and ag side.
Brian Brophy: Is this a good run rate to think about margins moving forward in that segment, or is there any kind of one-off benefits to call out this quarter? Thanks. Yeah, no one-time issues or one-time benefits. I would tell you, like many of these businesses that are outdoor sports, there will be some seasonality as you get into the December and certainly the March quarter. But here in the June and September quarter, you know, those businesses performed well. We'd had some unique items last year that we had highlighted several times. I think we're past many of those. So you're right, the business did perform very well.
Brian Brophy: They'll have natural seasonality to it. We're very happy.
Brian Brophy: Thanks, I'll pass it on.
Anthony Pettinari: The next question will come from Anthony Pettinari with Citigroup. Please go ahead. Anthony Pettinari, Citigroup.
Anthony Pettinari: I was wondering, with the strength you saw in cement volumes, if there was anything notable in terms of the cadence in the three months of the quarter and then maybe quarter to date here in July, whether, I don't know, the strength has built or there's any pattern there. And then I'm wondering if you could talk a little bit more about maybe some of the regional or, you know, state-by-state dynamics that you're seeing in the cement market. Yeah, thanks, Anthony. Like I would tell you, the volume cadence was pretty consistent throughout the quarter. And as we've highlighted for a while now, you know, the underpinning of cement demand is driven by infrastructure spending.
Anthony Pettinari: Those awards have continued to accelerate, and so feel good about where that business is from a volume perspective. You know, I think it's been pretty consistent throughout the quarter and expected to remain so, even in light of some weather pressures. And Michael mentioned that we had some areas of the country, especially in places like Oklahoma, where they saw a year's worth of rain in the first half of the year. So even with that environment, we continue to see a nice improvement in cement volumes, you know, steady.
Anthony Pettinari: Great, great. And is there any notable dynamic that you call out in the states that you serve, you know, areas that are stronger or maybe weaker? Now, really, you know, if you look across the country, you know, It's pretty consistent across the country with it. We don't have anything that I'd call out as specific that's a big deviation compared to any other location. Okay, that's helpful.
Adam Thalhimer: I'll turn it over. The next question will come from Adam Thalhimer with Thompson Davis. Please go ahead. Hey, good morning, guys. Nice quarter.
Adam Thalhimer: Craig, can you give us any high level thoughts on wall board volumes going forward? Yeah, Adam, look, again, very happy with how the business performed through the June quarter, as well chronicled, and we've discussed here a little bit. I mean, housing has been under some pressure, given where interest rates are, just general affordability issues. So, look, I don't see a major change, you know, one way or the other, in wallboard demand, frankly. But, you know, it's kind of a hard crystal ball right now to figure out where homebuilding is going. Certainly, I think the spring selling season wasn't as strong as the homebuilders had hoped for.
Adam Thalhimer: But, you know, still feel good about, you know, kind of the medium and longer-term housing issue here in the U.S. with, you know, we still feel like we're underbuilt, and as long, and we've got healthy consumers, healthy balance sheets. So, when we do see affordability improve, you know, I think that's when wallboard volumes can really meaningfully move forward.
Adam Thalhimer: OK, and then on cement, I was curious if the higher operating costs you called out, were those temporary in the quarter? Yeah, Adam, great question. You know, this is our quarter where we perform the vast majority of our annual maintenance programs, and production was lower during this quarter. And so, on a per-unit basis, that lower production volume really hurts your fixed-cost absorption.
Adam Thalhimer: So, you know, pretty unique to this quarter. I wouldn't call out anything. You know, energy was pretty flat, even, you know, both on a fuel and electricity basis. It was just really the lower production volumes associated with those annual maintenance programs. Got it. Thanks, Craig.
Philip Ng: The next question will come from Philip Ng with Jeffrey. Please go ahead. Hey, guys. On cement, Michael, I think if I heard you correctly, your commentary on the outlook with capacitalization high, you were pretty upbeat on cement prices. I don't know if that was a medium to longer term comment, but I'd love to get your thoughts on how you're seeing cement prices evolve over the course of the year. It sounds like demand's reasonably good, but prices slipped modestly, sequentially. So just kind of give us a lay of the land on how you're thinking about cement prices this year.
Philip Ng: Yeah, so thanks for the question. When you know, when we look at it, you know, if we look at the, you know, what I continue to focus on is kind of the midterm and the long term side of the market, you know, and when we look at it, you know, demand is staying pretty consistent and pretty stable. We're happy with the volumes we were able to ship. And as I stated earlier, you know, it's pretty consistent across the country, you know. So, you know, from what we're hearing from customers and everything, we think the demand profile in the midterm and the long term would be good, which would lead to more pricing potential in the future as those supply demand dynamics tighten with it.
Philip Ng: You know, you know, in the shorter term timeframe, you know, we have a good supply demand dynamic right now. But, you know, I think the shorter term, I won't say will be a little bit more challenging getting price increases through, but it'll be will be more pacing. I'm looking at the fall to see what we do and what we implement during that timeframe. So really, what I'm looking for is the midterm and the long term that has really more potential in upside on that. Okay, just I'm interpreting you correctly, Michael, the spring increase TBD, it's probably fairly muted.
Philip Ng: And it kind of depends on how the demand backtrack supply demand on fall kind of materializes and potentially that could give you some momentum on pricing for cement. That's exactly correct. So, okay, perfect.
Craig Kessler: And perhaps a question for you, Craig, with the bill change out there, and you guys are obviously making real investments in both your cement and wall business. Anything to be mindful of from a cash flow standpoint and potentially cash tax implications? You hit the nail on the head, Phil. Yeah, from a P&L perspective, not a big change, but with the accelerated depreciation being extended, that should help reduce cash taxes paid. Not as significant here in Fiscal 26, but when you consider a project like the mountain cement modernization, you know, a $430 million investment expected to be put in place in Fiscal 27, that would be an immediate full deduction.
Craig Kessler: So it would significantly lower our cash taxes paid. And then the following year, you'd have the Duke Wall Board expansion project coming online, in addition to your normal sustaining capital spending. So, yeah, it'll be a nice boost to cash flow. Is there a way to kind of size up what that cash tax rate could look like in the next few years? You know, our cash taxes paid, frankly, aren't that much different than our provision, so kind of the low 20s, and so, you know, of pre-tax income, that could be a pretty meaningful number. Okay. All right.
Philip Ng: Thank you. Appreciate it, Color Guys.
Keith Hughes: The next question will come from Keith Hughes with Truist, please go ahead. Thank you. I just want to shift over. The Wal-Mart pricing was down in the quarter.
Keith Hughes: Can you talk about, was there any impact on the numbers and what, in the near term, what do you think, what do you think pricing will be? Yeah, Keith, really, you know, the decline year over year, yes, sequentially, pretty much flat. And so we'd already seen that decline really in the second half of calendar 24 and into our Q4. So been pretty range bound here with wallboard prices for quite some time. And I think our outlook is for a similar type of range bound until you have a meaningful move in volume. Okay, thanks.
Chuck: This concludes our question and answer session.
Michael Haack: I would like to turn the conference back over to Mr. Michael Haack for any closing remarks. Please go ahead, sir. Thank you, Chuck. The first quarter was a solid start to our year, which is a testament to our operational resilience. We have maintained our clear operational, strategic, and financial goalposts, even as the economy and construction conditions evolve. Eagle continues to position itself for growth throughout the cycles, and we will keep focused on executing for outperformance. Thanks also for everyone for joining the call today.
Michael Haack: We look forward to discussing our results again with you next quarter.
Chuck: The conference is now concluded. Thank you for attending today's presentation.
Chuck: You may now disconnect.