Titan America Q1 2025 Earnings Call Transcript

There are 9 speakers on the call.

Operator

Greetings, and welcome to Titan America earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.

Operator

Daniel Scott, Investor Relations. Thank you, Mr. Scott. You may begin.

Speaker 1

Thank you, operator, and good afternoon to everyone on the line. Thank you for joining us for Titan America's first quarter twenty twenty five conference call. I am joined by Bill Sarkalis, Chief Executive Officer of Titan America and Larry Wilk, Chief Financial Officer. 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. This call is being recorded and a replay will be made available on our Investor Relations website.

Speaker 1

During the call, we will present both IFRS and non IFRS financial measures. The most directly comparable IFRS measures and reconciliations 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. Such 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 1

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. For more information about factors that may cause actual results to differ materially from forward looking statements, please refer to the press release we issued 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.

Speaker 2

Thank you, Dan. Good afternoon, everyone, and thank you for joining us today for our first quarter twenty twenty five financial results call. If you turn to Slide four in the presentation, I'd like to begin by highlighting our key messages for the quarter. In the first quarter, we delivered solid revenue, net income and adjusted EBITDA despite adverse weather conditions across most of our operating regions. This performance demonstrates the resilience of our business model and our ability to execute effectively under challenging market conditions.

Speaker 2

Importantly, we've seen resilient pricing across our product lines, which helped offset weather related softness in demand in affected regions. This pricing resiliency reflects both the continued strong underlying demand fundamentals in our key markets and the strength of our market position. Notably, pricing across all our product lines was up sequentially from the fourth quarter of twenty twenty four. I want to draw your attention to our strategic investments in aggregates capacity, which are driving improved volumes, up 23.6% compared to the first quarter of twenty twenty four, along with improved margins. This significant growth validates our investment strategy, which we believe positions us well to capture additional value in 2025 and beyond.

Speaker 2

Finally, I'm pleased to note that we are reaffirming our full year 2025 outlook, reflecting our confidence in the underlying demand trends and our ability to execute our strategic initiatives throughout the remainder of the year. 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 abates. Apart from the inclement weather affecting available workdays in the first quarter of this year, at the moment we are faced with a number of headwinds, including macroeconomic uncertainty, deteriorating business and consumer sentiment, as well as sluggish residential end markets where recovery has been delayed by persistently high mortgage rates and low housing affordability. Offsetting 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 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.

Speaker 2

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. At Titan America, we believe we are well positioned to continue building upon our strong market position, thanks to our value added products, solutions and services combined with our unparalleled logistics network. On 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 Web Services or AWS.

Speaker 2

Titan is continuing our long standing customer relationship with AWS, supplying multiple new data center projects in Virginia. Each facility is being built with the latest low carbon concrete technologies, including our proprietary GreenCrete products, reinforcing our leadership position in sustainable construction. The data center market remains strong, driven by a persistent demand for cloud infrastructure and AI related growth. The second project is at the state of the art Enobah Alexandria Hospital in Northern Virginia. We are proud to announce the start of construction of this healthcare facility, which will serve the growing needs of the region's expanding population and marks another milestone in our commitment to critical community infrastructure.

Speaker 2

In addition to our standard suite of products, this project features advanced ultra high strength and heavyweight concrete mixes developed using novel technologies to meet stringent specifications set by our customer. 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. He brings a wealth of experience to the position, having previously been a key member of the leadership teams of Holsing, Summit, and recently as CEO of Black Mountain Sand. Jason succeeds Randy Danlop, who is transitioning to serve as Executive Director, Growth and Strategy and will focus on strategic growth efforts across our company.

Speaker 2

Both Jason 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. Larry will now provide a more detailed breakdown of our financial results and segment performance. Larry?

Speaker 3

Thank you, Bill, and good afternoon, everyone. Moving to Slide eight, let me share an overview of our first quarter financial results. Revenue was $392,400,000 compared to $400,100,000 in the first quarter of twenty twenty four. Despite the slight year over year decline in revenue, we delivered solid growth in profitability with net income of $33,400,000 an increase of 13% compared to the first quarter of twenty twenty four and earnings per share of $0.19 up from $0.17 in the prior year quarter. Notably, adjusted EBITDA increased 11.7% to $79,800,000 and our adjusted EBITDA margin expanded to 20.3% compared to 17.9% in the first quarter of twenty twenty four.

Speaker 3

This margin expansion reflects the benefit of higher aggregates volumes, a timing difference for the planned maintenance outage at our Pinsuko cement plant and resilient pricing for our products. As we discussed on our fourth quarter twenty twenty four financial results call, the first quarter of twenty twenty five was impacted by unusually adverse weather conditions, particularly in our Mid Atlantic region where we experienced some of the coldest temperatures in over a decade in January and unusually wet weather in February. These conditions temporarily affected construction activity across our operations. However, as conditions gradually started to improve in March, we saw demand recover and our project order book remained strong. Turning to slide nine, let me walk you through our Q1 volume comparisons.

Speaker 3

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. However, we saw exceptional performance in our aggregates business with volumes increasing 23.6% compared to the first quarter of twenty twenty four. This substantial growth was primarily driven by recent investments at our Pansuco facility. Ready mixed concrete volumes declined by 2.2% as strength in public and private non residential demand was offset by softness in residential. Concrete block volumes were down 11.9% reflecting the referenced ongoing trends in residential construction activity.

Speaker 3

Our fly ash volumes improved by 15.4% compared to the prior year period. On slide 10, we're encouraged by the resilient pricing across our product portfolio, which speaks to the strength of our market position and our differentiated value proposition in a period affected by softer demand. Cement 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. Fly ash saw a significant increase of 28.8% reflecting favorable geographic mix.

Speaker 3

One important note that we show at the bottom of slide 10 is a sequential improvement quarter over quarter in pricing across all our product lines. Turning to slide 11, let me share some highlights for our Florida segment. The Florida market was characterized in the quarter by positive momentum in infrastructure and commercial offset by continued softness in residential. The Florida region delivered 253,200,000 in revenue for the first quarter, a slight increase of 0.3% compared to the first quarter of twenty twenty four. However, we experienced strong segment adjusted EBITDA growth increasing 25.9% to $70,800,000 from $56,200,000 in the prior year quarter.

Speaker 3

This segment adjusted EBITDA growth was driven by several factors including improved aggregates volumes enabled by strategic investments at our Miami area quarry, the timing of our Pansuko cement plant annual maintenance outage and improved logistics costs. The Pansuko outage occurred in April versus mainly in March, 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. Much like Florida, demand was stronger in the commercial and infrastructure sectors, while residential recovery remained delayed. As mentioned previously, the Mid Atlantic segment was more affected by harsh winter weather conditions with revenue totaling $139,200,000 for the first quarter compared to $147,300,000 in the prior year quarter.

Speaker 3

Segment adjusted EBITDA was $10,900,000 compared to $18,200,000 in the prior year quarter. Now, turning to our balance sheet and cash flows on slides 13 through 15. As of 03/31/2025, we had $143,200,000 in cash and cash equivalents and total debt of $462,000,000 Our net debt position was $318,700,000 representing a ratio of 0.84x trailing twelve months adjusted EBITDA, down significantly from 1.21x at the end of twenty twenty four. This improvement in our leverage ratio reflects both the proceeds from our successful IPO in February and our improvement in adjusted EBITDA performance. For the quarter, cash flows provided by operations was $35,200,000 and net capital expenditures were $32,500,000 resulting in free cash flow of $2,700,000 Our capital expenditures for the quarter were mainly focused on our ongoing strategic initiatives to expand our capacity and improve our operational efficiencies across our network.

Speaker 3

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. 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. Second, pursuing strategic M and A opportunities that build upon and expand our existing positions or provide access to adjacent value chain opportunities, all while maintaining a healthy leverage profile.

Speaker 3

And third, providing returns to shareholders through our regular quarterly dividend. Subject to the approval of shareholders at tomorrow's Annual General Meeting, our Board of Directors has recommended a $04 per share distribution for Q1 and Q2 twenty twenty five, a total of $08 per share. With that, I'll turn the call back to Bill for his closing remarks.

Speaker 2

Thank you, Larry. Before we move to the Q and A portion of our call, on Slide 17, we are reaffirming our full year 2025 guidance of mid single digit revenue growth with modest improvement in adjusted EBITDA margins compared to full year 2024, all assuming no severe economic downturn. While our first quarter was impacted by weather related challenges, we believe 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. In closing, I want to thank everyone for joining us today for our first quarter financial results call. We are pleased with our solid start to 2025, particularly our ability to deliver improved profitability on top of challenging weather and macroeconomic conditions.

Speaker 2

The strategic investments we made in our operations, particularly in aggregates capacity and logistics are already yielding results and we remain well positioned to capitalize on the strong underlying demand trends in our markets. Looking ahead, we remain focused on executing our strategic initiatives to drive top line growth, margin expansion and strong returns on invested capital. We are confident in our ability to create substantial value for our shareholders in 2025 and beyond. With that, I'll turn the call over to the operator for the Q and A session. Operator?

Operator

Thank you. We will now be conducting a question and answer You may press 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question comes from the line of Anthony Pettinari, Citigroup.

Operator

Please go ahead.

Speaker 4

Good evening.

Speaker 5

Bill, could you talk a little bit about quarter to date trends, April, May? And I guess, specifically, I'm curious if you saw an impact following the Liberation Day tariff announcements in terms of your order book? Did you see any pullback or disruption? Or just how do characterize trends quarter to date?

Speaker 2

Thanks, Tony. First, let me say that with weather improving in March, we saw the demand momentum picking up, and this continued into April. As far as impacts from tariffs, we didn't see any specific impact. Keep in mind that the announcement about tariffs essentially came in early April, only to be rescinded practically on April 9, moving into the blanket and also allowing for a period of four months, if I'm not mistaken, into July. So the answer is no.

Speaker 2

We haven't seen any specific impact from the tariff announcement.

Speaker 5

Got it. Got it. And then with the deferred maintenance at Pansuko, is there an impact to margins in 2Q? And is it possible to just kind of quantify, if so?

Speaker 3

Tony, it's Larry. Good to hear you. The impact, as I described in the discussion, the prepared comments, last year's shutdown spanned a little bit of Q2 as well as Q1. The net impact, we think, will be roughly $8,000,000 in that range, the impact year over year.

Speaker 4

Got it. Got it.

Speaker 5

That's very helpful. I'll turn it over.

Speaker 2

Thank you, Don.

Operator

Thank you. Next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Speaker 6

Yes. Hi. Good afternoon and good evening. I ask in terms of the Bill. In terms of the tariff timing and implementation, the 10% version of the tariffs, we're hearing there's a seaborne exemption that will essentially mean no tariffs until May 27.

Speaker 6

Is that consistent with what you're expecting? And can you just spend a minute, Bill, just talking about if tariffs are implemented at that date, just the flexibility that you folks have? And how do you feel your position in that environment if we do move in that direction?

Speaker 3

Sorry, it's Larry here, Jerry. So I think on the tariffs, Bill mentioned the general tariff of 10% as opposed to the product of cement for products that left the port headed to The US after April. So we haven't seen any financial impact per se so far, but it'll come later in the second half, provided that the tariffs stay at the level where they currently are. So at this point, it's capitalized in the inventory, if you will, through this part of April. So that comes at a later point.

Speaker 6

And Larry, sorry, just to clarify what we're hearing from other companies is as long as product arrives by May 27, there's no tariff impact. So that gives you that would give you, if that applies to your business, a longer window before you start accruing tariffs. Can I just get a clarification on that what you're seeing as well? Or is your product category different?

Speaker 2

Exactly, Jerry, this is Bill. This is what we see, and everybody is in a wait and see 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 wait and see mode. In the meantime, as we discussed last time, and I'm sure you remember, we've taken all the necessary steps to prepare for any kind of scenario, And as we discussed, we have flexibility, we have options, and we prepare for any kind of scenario after July.

Speaker 6

Great. And then nice to see the aggregates volume ramp in Florida with investments that you folks have made. The 26% tailwind that we saw in the quarter to volumes, is that the way we should be thinking about in coming quarters? Did you get a full quarter of impact? And what's the benefit in terms of unit profitability to you folks at the higher volumes, presumably that's coming at accretive margins, but maybe Larry I could trouble you to expand on that please.

Speaker 3

Yes, Jerry, we don't break out margins by product line. We operate this vertically integrated model that we've shared so much about. It has a positive impact for sure relative to the average margins that we would have. Whether it's a full quarter that comes in, we don't say at this point exactly what the volumes would be across that same category next quarter. But you've heard about the investments we made and the capabilities that are there.

Speaker 3

You saw in the fourth quarter some impact. So the second quarter we expect positive contribution as well.

Speaker 6

Thank you.

Speaker 2

Thank you, Jerry.

Operator

Thank you. Next question comes from the line of Philip Engie with Jefferies. Please go ahead.

Speaker 7

Hey, guys. Congrats on a strong quarter despite all this wet weather.

Speaker 3

Hi, Philippe.

Speaker 7

Bill, can you give us an update on pricing? Really good to see the resiliency on pricing. I think last quarter you guys were talking about a January '9 dollars cement price increase in Florida and $8 in Mid Atlantic for April. Any color on where that's kind of landing on the cement side, the traction? And then certainly, it was encouraging to see ready mix prices go up sequentially, but any more color on where we how we should think about ready mix prices?

Speaker 2

Philippe. I mean, obviously, you saw the quarter on quarter from Q4 to Q1 improving price. Also, Larry mentioned clearly that although albeit aggregates appear to be at practically flat price, This is an issue of the new product mix we have with different products as we increase capacity at Penzuko. Overall, what we saw, as you recall, our price increases in the Mid Atlantic will take effect in the second quarter. In relation to Florida, however, with the impact of the weather, as we discussed in the previous call, we had unusual precipitation in what is usually a dry season, which affected demand in Florida in January and in February, and that, in conjunction and in combination with the softness and delay in the recovery of residential sector, meant that pricing in Florida remained soft, flat essentially in Q1.

Speaker 2

However, the pricing power and the resiliency of our pricing is there, driven essentially by the favorable supplydemand balance, also by the fact that there is increasing demand both from infrastructure, but also from private, non residential, 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 7

Okay. So we should assume you get some traction in 2Q? Or is it more of a back half event for Florida?

Speaker 2

You're going to see some traction in the quarters to come.

Speaker 7

Okay, super. And then a question for Larry. I appreciate EBITDA improvement is going be more back half weighted and just and certainly very encouraging 1Q was up. Given some of the timing of the maintenance with Pinsuko spilling over to 2Q, do you have the ability to grow EBITDA on a year over year basis in 2Q? Or actually, it's going to be down a little bit this year?

Speaker 3

Look, think we'll report Q2 when Q2 comes with the headwind is $8,000,000 as I described before.

Speaker 7

Okay. And just one simple housekeeping question. If I look at your Mid Atlantic results, your decrementals were like 90% give or take if I did my math correctly. What's driving the outsized decrementals in 1Q for Mid Atlantic? I know weather was an issue, but just still seems pretty outsized.

Speaker 7

Should we assume that decremental profile for Mid Atlantic normalizes in the coming quarters?

Speaker 3

It will become more normal. I think that would be our expectation. Certainly, the Q1 was difficult because of the weather impact primarily.

Speaker 2

Philip, usually in the Mid Atlantic, the first quarter is very small quarter. So it's very sensitive to phenomena like the weather. I mean, we lost more than one third of the working days due to the weather in the Mid Atlantic in the first quarter. So in small quarter like this, losing 30% plus working days But you cannot drive conclusions about the rest of the year from that.

Speaker 7

Okay. Thank you, guys. Really appreciate it.

Speaker 2

Thanks, Philippe. All the best.

Operator

Thank you. Next question comes from the line of Chad Dillard with Bernstein. Please go ahead.

Speaker 8

Hi, good evening guys. So you talked about mid single digit revenue growth for the balance of the year. How does that 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 tariffs into your guide?

Speaker 3

Yes. So look, on the first part of the question, choose not to break down at this point what percentage comes from volume and what percentage would come from price, Chad, but we are confident and comfortable with the forecast we provide of this low sort of mid single digit range of price increase. That's where we are on that one. The tariff, if you think about the tariffs, you can put them into a couple of buckets, Chad, sort of primary, secondary and tertiary, right? If you think about primary tariffs, these are going be things on the direct imports that we carry a tariff at that 10% rate.

Speaker 3

This would be something in the order of $8,000,000 we think, for the balance of the year. And yes, that would be in our forecast if we were to see that.

Speaker 8

Okay, that's super helpful. And just a question on aggregates, seems 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 look forward, as you're adding more capacity, how do think about the mix of that business relative to the rest? And is there a potential upside from just better margins in that product?

Speaker 3

Certainly better margins. And if you put in an order, as we've said before, cement aggregates would be at the top of it and block doesn't fall far behind. And then obviously ready mix would be the fourth of those in terms of margin profile, as we've said before. In terms of percentages, the aggregate business has two contributions. The more we produce, the more we can consume internally.

Speaker 3

This helps our business overall. And then we also have some excess product then to sell, and that sells into the open market come in demand areas 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 our business presently, as you know. Thank you.

Speaker 3

Thank you, Richard.

Operator

Thank you. Next question comes from the line of Brian Profi with Stifel. Please go ahead.

Speaker 4

Thanks. Good evening, everybody. Bill, you talked about adoption 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? And how we should be thinking about adoption from those customers over time?

Speaker 4

Thanks.

Speaker 2

We have said in the past, Brian, that adoption in The States is at lower rates as compared to what we see, for example, in Europe, where it's driven mainly by the cost of carbon emissions. Here in The States, we see mainly adoption and pull from major customers like Microsoft and Amazon and companies overall who have a clear blueprint for net zero emissions by 02/1950. So this is the main pull come from customers like this and in major projects like we see in warehouses, in data centers, in health centers, in elements like this. Overall, we're happy with the demand that we see. And as we have discussed, we are the first company in our country that went into 100% limestone cement, also with a 14.7% substitution.

Speaker 2

So a major contribution in meeting the needs of our customers for high performance and ultra high performance products with low carbon profile. And we continue now to develop new products, like blended cements 1T, with a reduced carbon profile of about 40%. And this is the products we move to meet the needs of these customers that require ultra high performance with low carbon profile. So we're happy about what we see in terms of the rate of adoption, and we intend to continue accelerating in these segments.

Speaker 4

Thanks. That's really helpful. And then just one on CapEx. 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 CapEx for the rest of the year.

Speaker 4

Thanks.

Speaker 3

Yes. You're right to observe that it was down for some expectations, but it's still a strong CapEx profile that enables us to meet our growth targets. We expect it to grow as the year goes on. We just had some delays in the start of some of those capital projects that you would see. So we'll give some updates as we go along quarter by quarter.

Speaker 4

Okay, thanks. I'll pass it on.

Operator

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 Zirkalis for closing comments.

Speaker 2

Thank you, operator. 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.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Earnings Conference Call
Titan America Q1 2025
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