Vulcan Drives Inorganic Growth With Aggregates USA Buyout

Leading producer of construction aggregates in the United States, Vulcan Materials Company (NYSE:VMC) has been expanding its footprint in the best markets in America via acquisitions. In line with this expansion strategy, Vulcan has acquired Aggregates USA, LLC for $900 million.

With this addition, Vulcan will serve high-growth markets throughout the southeastern United States comprising Georgia, Florida, Tennessee, South Carolina and Virginia. The company will benefit the most from state highway funding programs in Georgia, Florida, South Carolina, Tennessee, and Virginia, and on the continued private sector growth across the region.

Notably, Vulcan will be able to serve Georgia with three granite quarries, two of which have rail capabilities, thereby expanding its reach in important markets. It will also have 16 rail distribution yards in Georgia, South Carolina and Florida.

Meanwhile, according to the planned agreement with the United States Department of Justice, Vulcan sold 17 Aggregates USA quarries and other facilities in Tennessee and Virginia to Blue Water Industries LLC for $290 million. The company divested 13 active quarries and yards and four inactive quarries in the Knoxville and Tri-Cities, TN, and Abingdon, VA, areas.

Inorganic Drive Strong

Vulcan has followed a systematic inorganic strategy since becoming a public company in 1956 for expansion. The company has wrapped up various bolt-on acquisitions that had contributed significantly to its growth.

In the first nine months of 2017, Vulcan closed acquisitions totaling $212.4 million. These include ready-mixed concrete facilities, an aggregates marine distribution yard and building materials yards from California, two aggregates facilities from Illinois, an aggregates facility from New Mexico, and two aggregates facilities, asphalt mix operations and a construction-paving business from Tennessee.

These buyouts boost Vulcan's ability to serve customers and bring in operational and commercial synergies.

However, the company is susceptible to bad weather conditions as most of its products are used outdoors in the public or private construction industry. Inclement weather affects both the company’s ability to produce and distribute products and also the demand, as construction work can be hampered by weather. In the third quarter of 2017, hurricanes Harvey and Irma had a major impact on Vulcan's operations and results. Aggregates shipments were lowered by at least 1.5 million tons during the quarter.

Vulcan’s shares have gained just 3.2% in the last one year compared with its Zacks Investment Research

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Written By: Zacks Investment Research