Vulcan Materials Company (VMC) recently announced a quarterly dividend of one cent per share on its common stock payable on December 9, 2011, to shareholders of record at the close of business on November 23, 2011. This marks a drastic reduction from 25 cents per share paid on September 10, 2011.
The U.S construction industry is experiencing a trough for nearly a decade, despite stronger demand from public infrastructure projects in Texas, Virginia and South Carolina regions. Private construction contracts shrank considerably in recent times driven by deteriorating demand for new shopping malls, office buildings, hotels, motels and other commercial buildings.
Moreover, absence of appropriate government stimulus to revive the industry all over again has also weakened the industry further. In addition, Vulcan has been recently downgraded by Standard & Poor's.
Recently, Vulcan also entered into a new 5-year $500 million revolving credit facility with SunTrust Banks Inc. (STI) and Wells Fargo Bank (WFC) to replace its existing revolving credit facility maturing on November 16, 2012. This is expected to provide Vulcan with a stable source of financing for the next five years, thus allowing it to undertake potential investments in the long term.
Based in Birmingham, Alabama, Vulcan Materials is engaged in the production, distribution and sale of construction aggregates, and other construction materials and related services in the U.S. and Mexico. It is the nation’s largest producer of construction aggregates and a leading producer of other construction materials.
In the last reported quarter, Vulcan realized adjusted earnings of $9 million or 7 cents per share from continuing operations compared with $5 million or 3 cents per share in the year-ago quarter.
Net sales dropped 5.1% to $657.5 million from $692.8 million in the corresponding quarter of 2010. The year-over-year decline was primarily attributable to lower-than- expected demand, inclement weather conditions in the month of April, partly offset by stronger demand for public infrastructure projects in some markets and price rise across all the segments. Total revenues amounted to $702 million, including delivery revenues of $44.5 million.
The company retains a Zacks #3 Rank (Hold rating) over the short term (1 to 3 months) and we have reiterated an “Underperform” recommendation on the shares over the long term (more than 6 months).