Eagle Materials Inc Stock

Eagle Materials Inc., through its subsidiaries, manufactures heavy construction materials and light building materials in the United States.

The company’s primary products, portland Cement and Gypsum Wallboard, are commodities that are essential in commercial and residential construction; public construction projects to build, expand, and repair roads and highways; and repair and remodel activities. The company distributes its products across many United States markets, which provides the company with regional economic diversification.

The company’s products are used in a variety of public infrastructure projects that are funded and financed by federal, state and local governments, including public construction projects and projects to build, expand and repair roads and highways. The company’s products are also essential to commercial and residential construction.

Acquisitions

On April 22, 2022, the company acquired the assets of a readymix concrete and aggregates business in northern Colorado (the ConAgg Acquisition).

On September 16, 2022, the company acquired a cement distribution terminal located in Nashville, Tennessee (the Terminal Acquisition).

On May 3, 2023, the company acquired a cement import distribution terminal located in Stockton, California (the Stockton Acquisition).

Segments and Sectors

The company’s business is organized into two sectors: Heavy Materials, which includes the Cement and Concrete and Aggregates segments; and Light Materials, which includes the Gypsum Wallboard and Recycled Paperboard segments. The primary end market for the company’s Cement and Concrete and Aggregates segments is infrastructure. The primary end market for the company’s Gypsum Wallboard and Recycled Paperboard segments is residential construction.

Heavy Materials sector

The company’s Heavy Materials sector provides cement and concrete and aggregates for use in infrastructure, commercial, and residential construction. This sector comprises the Cement and Concrete and Aggregates segments.

Cement

Cement is the basic binding agent for concrete, a primary construction material. The principal sources of demand for cement are public infrastructure, commercial construction, and residential construction, with public infrastructure accounting for nearly 50% of cement demand.

The company also produces and markets other cementitious products, including slag cement and fly ash. Slag granules are obtained from a steel company and ground in the company’s grinding facility. Slag is used in concrete mix designs to improve the durability of concrete and reduce future maintenance costs. Fly ash is a by-product of a coal-fired power plant and acts as an extender of cement in concrete.

Limestone Resources

The company mines primarily limestone at its quarry operations serving each of the company’s cement plants. The limestone mined at the company’s quarries is then converted to cement, as outlined above. Each of the company’s cement plants has its own dedicated limestone quarries, all of which have adequate access to highways and/or waterways. All of the company’s mines, with the exception of one, are surface mines, which are mined using open pit techniques. The company has one underground mine serving its plant in Sugar Creek, Missouri. All of the company’s limestone reserves are located on properties that are in the production stage.

The company’s total measured and indicated limestone resources were 683.4 million tons as of March 31, 2023.

Cement Plants

The company operates eight modern cement plants (one of which is operated through a joint venture), and one slag grinding facility. The company’s clinker capacity is approximately 6.7 million tons, which is approximately 6% of total U.S. clinker capacity. Clinker is the intermediary product before it is ground into cement powder. All of the company’s cement plants use dry-process technology, and approximately 80% of the company’s clinker capacity is produced from preheater or preheater/pre-calciner kilns, which are generally more energy-efficient kiln types. In addition to production facilities, the company operates over 30 cement storage and distribution terminals, including the Stockton, California terminal purchased on May 3, 2023.

The company’s cement companies focus on the U.S. heartland and operate as an integrated network selling product mainly in Colorado, Illinois, Kansas, Kentucky, Indiana, Iowa, Missouri, Nebraska, Nevada, Ohio, Oklahoma, Tennessee, and Texas. The company’s Joint Venture includes a minority interest in an import terminal in Houston, Texas, from which the company can purchase up to 495,000 short tons annually. The company’s slag facility is located near Chicago, Illinois and has 500,000 tons annual grinding capacity.

All of the company’s cement subsidiaries are wholly owned except the Buda, Texas plant, which is owned by Texas Lehigh Cement Company LP, a limited partnership joint venture (the Joint Venture) owned 50% by the company, and 50% by Lehigh Cement Company LLC, a subsidiary of Heidelberg Cement AG.

The company’s cement production, including its 50% share of the cement Joint Venture production, totaled 6.7 million short tons for fiscal 2023. Total net Cement sales, including the company’s 50% share of cement sales from the Joint Venture, were 7.1 million short tons in fiscal 2023 (the year ended March 31, 2023). Total net Cement sales exceed production primarily because of imports through the Houston import terminal.

Demand, Sales, and Distribution

The company has over 30 cement storage and distribution terminals, including the Stockton, California terminal that was purchased on May 3, 2023, that are strategically located to extend the sales areas of the company’s plants.

The company is leasing the terminal in Fairfield, Ohio under an initial term of four years, with two one-year options, which expire in fiscal 2025. The terminal in Lexington, Kentucky is being leased under an initial term of five years and will be up for renewal in fiscal 2024. The terminal in Mt. Vernon, Indiana is leased through fiscal 2031, and contains options that will allow the renewal of this lease for an additional twenty years. The terminal in Stockton, California is leased through 2035.

Cement and slag are distributed directly to the company’s customers mostly through customer pickups, and also by common carriers from the company’s plants or distribution terminals. The company transports cement, slag, and fly ash by truck, barge, and rail to the company’s storage and distribution terminals.

Environmental Matters

The company’s cement operations are subject to numerous federal, state, and local laws and regulations pertaining to health, safety, and the environment. Some of these laws, such as the federal Clean Air Act (CAA) and the federal Clean Water Act (CWA) (and analogous state laws) impose environmental-permitting requirements and govern the nature and amount of emissions that may be generated when conducting particular operations.

Concrete and Aggregates

Readymix concrete is a versatile, low-cost building material used in almost all construction. The production of readymix concrete involves mixing cement, sand, gravel or crushed stone, and water to form concrete, which is then sold and distributed to numerous construction contractors. Concrete is produced in batch plants and transported to customers’ job sites in mixer trucks.

The aggregates business consists of mining, extracting, producing, and selling crushed stone, sand, and gravel. Construction aggregates of suitable characteristics are employed in virtually all types of construction, including the production of readymix concrete, flexible base, and asphaltic mixes used in highway construction and maintenance.

The ConAgg Acquisition included three concrete readymix locations, two aggregate mining operations, three aggregate recycling locations, and approximately 24 concrete trucks.

Aggregate Resources and Reserves

The company’s total measured and indicated aggregates resources were 145.3 million tons at March 31, 2023. The company’s total net Aggregates sales (excluding intercompany tons sold) were 2.9 million tons in fiscal 2023.

Concrete Plants

The company produces and distributes readymix concrete from company-owned sites in Central Texas; the greater Kansas City area; northern Colorado: and northern Nevada.

Demand, Sales, and Distribution

The company sells readymix concrete to numerous contractors and other customers in each plant’s marketing area. The company’s batch plants in Central Texas, the greater Kansas City area, northern Colorado, and northern Nevada are strategically located to serve each marketing area. Concrete is delivered from the batch plants primarily by company-owned trucks. The company sells aggregates to building contractors and other customers engaged in a wide variety of construction activities. Aggregates are delivered from the company’s plants by common carriers and customer pickup.

Light Materials sector

The company’s Light Materials sector comprises the Gypsum Wallboard segment, which produces gypsum wallboard used in residential and commercial construction and repair and remodel activities, and the Recycled Paperboard segment, which produces paper primarily used in the manufacture of gypsum wallboard. Operations in this sector are concentrated in the Sun Belt of the United States, which the company defines as the lower half of the United States, but not California.

Gypsum Wallboard

Gypsum wallboard is used to finish the interior walls and ceilings in residential, commercial, and industrial structures. The company’s gypsum wallboard products are marketed under the name American Gypsum.

Gypsum Wallboard Plants, Resources and Reserves

The company owns and operates five gypsum wallboard plants, outlined in the table below. The company anticipates running all its facilities at the level required to meet customer demand, up to maximum capacity. The company’s gypsum wallboard is distributed in the geographic markets nearest to the company’s production facilities.

Four of the company’s five gypsum wallboard plants are supplied with gypsum from the company’s nearby gypsum quarries, while the company’s wallboard plant in South Carolina is supplied with synthetic gypsum under a long-term supply contract with a third party. The company has adequate access to all of the company’s quarries.

The company’s total measured and indicated gypsum resources were 151.9 million tons as of March 31, 2023.

Demand, Sales, and Distribution

The company sells gypsum wallboard to numerous building-materials dealers, gypsum wallboard specialty distributors, lumber yards, home-center chains, and other customers located throughout the United States, with the exception of the Northeast. Gypsum wallboard is sold on a delivered basis, mostly by truck. The company generally uses third-party common carriers for deliveries.

Although gypsum wallboard is distributed principally in local areas, certain industry producers (including the company) have the ability to ship gypsum wallboard by rail outside their usual regional distribution areas to regions where demand is strong. The company’s rail distribution capabilities permit the company to service customers in markets on both the east and west coasts, except for the Northeast. Less than 5% of the company’s Wallboard volume sold during fiscal 2023 was delivered via rail.

Recycled Paperboard

The company’s Recycled Paperboard manufacturing operation, which the company refers to as Republic Paperboard Company, is located in Lawton, Oklahoma and has a technologically advanced paper machine designed primarily for gypsum liner production utilizing 100% recycled paper. The company estimates the annual capacity of its paper mill to be approximately 390,000 tons.

Demand, Sales, and Distribution

The company’s manufactured recycled paperboard products are sold to gypsum wallboard manufacturers and other industrial users. During fiscal 2023, approximately 45% of the recycled paperboard sold by its paper mill was consumed by the company’s Gypsum Wallboard manufacturing operations.

History

Eagle Materials Inc. was founded in 1963. The company was incorporated in 1995.