Good day, everyone, and welcome to Eagle Materials' third quarter of fiscal 2026 earnings conference call. The call is being recorded. At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Hack. Mr. Hack, please go ahead, sir.
Thank you, Drew. Good morning. Welcome to Eagle Materials' conference call for our third quarter of fiscal year 2026. This is Michael Hack. Joining me today are Craig Kessler, our Chief Financial Officer, and Alex Haddock, Senior Vice President of Investor Relations, Strategy, and Corp. A slide presentation accompanies this call. To access it, please go to eaglematerials.com and click on the link to the webcast. While you're accessing the slides, 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 from those discussed. For further information, please refer to this bill included at the end of our press release. In 2016, despite the mixed construction environment, our businesses continue to perform well. We generated $556 million in revenue, our earnings per share were $3.22, and we delivered a gross profit margin of 28.9%. In these choppy times, EGLE will continue to operate as it always has. We will control what is in our control and adjust to current market conditions to maximize profitability in both the short and long term. Our strategy is consistent. We will invest in the health and safety of our largest differentiating asset, our people, customers through increased reliability, efficiency, and capacity. our short- and long-term strategy with return-focused projects or acquisitions. All of this while ensuring our balance sheet remains in pristine condition. Foundational to everything we do is maintaining the highest standards of health and safety. Our annual safety conference was held in December. It is always a great opportunity to interact with the leaders of the organization to review our safety and environmental performance, pass along some important messages, and set our path for continued improvement. Our journey to zero incidents is ongoing, but every employee at Eagle understands that the safety of our people always comes first. To perform a job safely, we will not perform the job. These meetings, with the best practice sharing and commitment from the team, have allowed Eagle to maintain an industry-leading safety record. to say the least and the safety culture we have built regarding our plants we work to maintain the reliability of our assets increase efficiency and capacity which gives us operational flexibility to execute efficiently through economic cycles past quarter we advanced several initiatives that convert our waste streams into revenue streams to help further improve our low-cost producer position. Let me give a few examples. In cement, we have been able to reclaim decades-old waste streams that can be used in our production process. In our aggregates operations, we have begun using fines and overburden to support our raw material to extend our reserves at our cement plants and aggregate facilities. We are expanding the capabilities of our Republic paper mill to repurpose non wallboard grade paper and trim rolls in the higher value add product American gypsum we are recycling a hundred percent of our waste wall board back into the production process except at our Duke facility which will also be at a hundred percent following the completion of our modernization there importantly many of these projects require minimal or no capital investment while having an outsized positive benefit on our operations. These initiatives complement some larger strategic projects we have underway that benefit our overall system reliability, capacity, and profitability, namely the modernization of our mountain cement plant and the Duke wallboard facility. We made good progress on both projects during the quarter, which means that our Laramie, Wyoming cement plant should be going through its commissioning late this calendar year followed by our Duke, Oklahoma, commissioning in the 2027. Each investment will be a competitive position and deliver a strong return on investment. I'm really excited for what's ahead, as we are experiencing some downtime at the mountain cement kilns recently, increasing the justification for the modernization project. In the meantime, we can use our network of cement plants to meet our customer needs, albeit at an increased cost. We'll continue to report on progress as we approach the end of each plant's construction timeline. In the next 18 months, let me pivot now to where we think we are in the economic cycle. At Eagle, we don't operate in a way that is overly focused on short-term demand cycles. Our primary products are essential commodities, meaning demand will fluctuate. That being said, heavy materials and wallboard appear to be at different inflection points today. Our cement and aggregate sales volumes grew from federal, state, and local infrastructure spending on key non-residential end markets will continue support for our heavy materials business. As discussed last quarter, we have announced price increases for the first quarter of calendar 2026 in most of our markets, further reflecting our volume expectations for our heavy materials business. At the same time, residential construction, which drives wallboard volumes, was challenged last quarter. Current housing data reflects the affordability issues that have been plaguing the home building industry for quite some time. Recent housing policy announcements, combined with more accommodative monetary and fiscal policy, recognize the fundamental need for new home construction in the U.S., so we are monitoring these developments closely, not on predicting demand. Over decades, we've demonstrated that we can operate equally well in strong economic environments and in mixed construction environments. Cost producer position gives us opportunities and advantages for managing cost. In a wall board, our sustaining maintenance costs are already low, and we benefit from the ability to flex production to match sales. Finally, as I mentioned earlier, our focus on financial discipline and balance sheet strength remains during the quarter we strengthened our already solid financial position issuing 750 million dollars in 10-year senior notes aligning our capital structure with our ongoing investments at the Laramie Wyoming cement plant and Duke Oklahoma wallboard plant while making significant progress on our major capital projects we increased our return of capital shareholders. We return nearly $150 million to shareholders through our dividend and share repurchases. Our leverage ratio of 1.8 times allows us to navigate cycles and stay in growth mode, even as our end markets have endured choppiness. Craig, with those comments, I will now turn it over to you.
22 cents, down 10% from the third quarter of fiscal 2020. Fully diluted increases have been announced in 16% to 200 discipline way in line with our strategic priority spending in fiscal 2026 million dollars. 50 million dollars to shareholders through our quarterly dividend payment and the repurchase of approximately 648,000 shares of our common 26 million shares or 4% of our outstanding authorization which continues to give us significant financial flexibility. As Michael mentioned financial position of 10-year senior notes with an interest rate of five chances are debt maturities we're making at our mountain cement plant and do
$2 billion. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. 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 two. At this time, we will pause momentarily to assemble our roster. The first question comes from Trey Grooms with Stevens, Inc. Please go ahead.
Hey, good morning, Craig and Michael. So, cement, if we could start there, the cement volume up nicely again in the quarter, also, you know, organic aggregates volume as well. Can you touch on a few things there in the slide deck, rather, where you were seeing some strength, maybe infrastructure, data centers, those types of things. Can you talk about, you know, is that demand pretty well widespread across your markets, or is it more isolated to, you know, some specific geographies? And then, you know, has that strength kind of continued as we've started off here into calendar 26?
Yeah, Trey, look, I would tell you it's pretty broad-based. Some of the non-residential key markets and they'll continue to have that optimism. Good deal. Okay. And kind of sticking
with cement, you know, the margins impacted a bit here, down a little bit here. Understand there was, you know, maybe a slight decline in pricing, but volume again here was strong, like we discussed. Can you talk about, you know, what's driving the margins there? I didn't see anything kind of unusual called out in the in the press release as far as you know maintenance or anything but just
if you can maybe touch on the uh the margins in cement yeah i mean look costs were largely in line um we did have some ross that were up this quarter uh you know nothing nothing um okay fair enough
and then uh last one for me is on on wallboard pricing you know you saw a little bit of a decline there sequentially. I think it was about, you know, 3% or so, and not overly surprising, but, you know, have you, has this kind of pricing trend maybe continued into January, or how should we be thinking maybe about the kind of directionally, at least, with wallboard, you know, around wallboard pricing here in the near term as we kind of, you know, bump along at these lower, you know, demand levels with, you know, nothing looking to change drastically on that front, at least in the near term, any color you can give us on how we should be thinking about that.
But, you know, you hit on it, Trey, you know, the annual shipments for a feed, you know, that's, you know, not at all.
Yeah, yeah, but I assume it's still your take that, you know, there's been a lot of changes in the industry and with the cost structure and, you know, that we've talked about for years that have, I think, maybe changed, you know, made some changes with pricing over the long term of being, you know, somewhat structurally higher, just given the backdrop of some of those things. So is it still your take that, you know, modest declines could be expected, but uh these these changes are still in place such that we shouldn't be expecting any any kind of replay of some of the uh more drastic price swings that we saw you know maybe go back you know 10
plus years ago yeah no exactly um you know given all the change thank you craig uh michael best
Next question comes from Brent Thielman with DA Davidson. Please go ahead.
Hey, thanks. Hey, just to follow up on the wallboard side, just the down 14% in terms of shipments. Just thoughts in terms of whether that's consistent across the footprint or you've got some, you know, potentially some regions outperforming that.
That was pretty consistent across our regions. And if you look at, you know, the total GA numbers, they were down 8%. Our regions, our business was pretty much in line with the regional performance.
And then on the Lehigh JV, Craig, you know, I guess I've been anticipating some improvement in terms of the profit contribution. Just want to get a sense of, you know, what we're seeing here in the December quarter, sort of indicative of the market trends or there's still some operational noise under the hood there?
yeah so with the jv itself you know forming better you know texas was probably our most challenged market pricing standpoint and some on demand and uh it's competitive nature with it so you know i know trey asked the previous question about you know across the u.s where we see uh you know kind of our demand and our pricing and everything with it and you know we've been very stable, and every location except Texas had the most pressure. So you could really look at this as more of we had to adjust our pricing more in that area, which offset some of the benefits you'd see from our plant operating better on the profit side.
All right, appreciate that. Maybe just a last quick one. Just in terms of the proposed price increases in cement here to start the year, I think typically you do some in January and some in spring? I mean, just from past experience, obviously terrible weather across the country. Does that potentially push some of this more into the spring? Any thoughts around that?
Every January and February, that's a good sign, calendar 26.
Okay, thanks so much, guys.
The next question comes from Anthony Patanari with Citigroup. Please go ahead.
Yeah, hi, this is Asher Sonan on for Anthony. Thanks for taking my question. I was just wondering, you know, how we should think about maybe natural gas costs for wallboard and cement in the fiscal fourth quarter. I think, you know, natural gas prices have risen pretty meaningfully in recent weeks. I'm just wondering how you guys are looking at that.
Yeah, you know, it's really typically more solid fuels than natural gas. In wallboard, we do have a hedging program, 50% hedged here through the winter, which is where we like to be. Because you will see these spikes when you get these winter storms that pop up. And I think that's what last week or so with the colder temps, you know, fully expect that to come back down, you know, more in line. There's not something that's structurally changed in the natural gap during the winter.
Okay, great. And then one more from me. I mean, with the pressure in wallboard, it seems like it's coming a lot from new build. But I was wondering if you could talk about roughly what portion of the business is repair and remodel. I know it's a little bit smaller, maybe harder to estimate. and then what trends you might be seeing in that end market if you're able to get that visibility?
Yeah, no, it's a good question. We talk about a lot of the new residential construction activity, but repair and remodel is profiled for wall board, and it's certainly meaningful and has been growing over the last many, many years.
Thank you. I'll turn it over.
The next question comes from Tim the Tanners with Wells Fargo. Please go ahead.
Yeah, hey, good morning. I was hoping to follow up on the comments or questions about the upcoming quarter, if you had any specific observations on any impact to your operations from these storms. Anything you can comment on there?
You know, as it relates specifically to the winter storms, our folks have done a really, really...
Okay. I appreciate that. And then I was wondering if you can get into some more specific about what you're seeing about cement imports. I think that's what you're alluding to in terms of Texas and California, but any updated observations there?
uh yeah you know really how you look at it is you know any of the markets that can be served by imports of course you know uh it all depends on the freight rates and everything coming in uh you know texas is is is not just impacted by imports though with my comments there with it you know there's been a structural change in the the market in texas a little bit with the ownership uh you know and every time there is changes in it you know people operate their plants a little bit differently and look at markets a little bit differently. So I think there's been some structural changes on how those plants that changed ownership, which is a significant portion of the production in the Texas market between the two facilities, have different owners that they look at different. So we've just had different competitive pressures in Texas. As you get closer to the coasts. Imports definitely do have an impact, but it's kind of a, it's not just one thing that's affecting Texas. It's more, and that led us to respond to some competitive pressures.
Got it. Helpful. And then just finally from us on the CapEx comments, it seems like it was lowered from prior numbers. I'm just wondering if there's any basis or explanation for that.
No. Thanks, Tim, for bringing that up. Yeah, we have been forecasting closer to 500 million. It's just timing. We've done a good job of which ends up with this. Okay. Helpful. Thank you.
Next question comes from Adam Dahlheimer with Thompson Davis. Please go ahead.
Morning, guys. Morning. I wanted to start on capital allocation. How are you guys thinking about share repurchases and acquisitions after the November bond deal? A lot of our time.
You know, we've positioned the assets well. We've got a good group of operators, but, you know, with a – whether that's M&A balance sheet that we can – and then you'll have our continue to kind of have a balance sheet.
Great. Thanks for that. And then I wanted to ask about wallboard margins. Can you talk a little bit about the puts and takes there? And I guess what I'm really getting after is if margins could stabilize at that Q3 level. Yeah.
You know, look, I think we talked about, we saw signs there. I rated given the changes that have occurred. You know, OCS, again, it fluctuates a little bit during the winter, but don't see that as a long-term change. You know, we own our primary, you know, but in a, you know, we've positioned to continue to perform at this high level, even in this difficult environment for residential construction. So, you know, I think we'll continue to see good performance.
And last one for me, the wallboard comps get a lot easier starting in late calendar 26. I'm just curious if there's any reason for optimism on volume stabilization or maybe even a little bit of growth as we get to the back half of the year.
There's a lot of moving parts in the position, the cash flow that we're generating, even in this environment, and our ability to continue. When it does recover meaningfully, a significant upward inflection there, but maybe a little early.
Got it. Thanks, Greg. Next question comes from Philip Ng with Jeffries. Please go ahead.
Hey, guys. Michael, Greg Culler on the Texas market for cement. Are you seeing any other regions where you're seeing price competition be a little more elevated, perhaps in the West? I know the last earnings call, you guys announced a $8 per ton cement price increase in all the markets, Texas and the West. Have you announced, you know, price increases in those markets and any early read on how the JAN increase is progressing? Are you seeing any traction or are you seeing some pushback here?
You know, it's a great question. You know, when we look across the U.S., you know, we're very happy with the remainder of our markets. I mean, some markets, you know, each market is independent of each other, you know, when you look at the supply-demand dynamics with it. But for the most part, you know, we've announced price increases across the majority of our network with it. You know, I highlighted, you know, Texas is the one that's the most challenged. Every other market structurally is in very good position, we feel. So there's nothing I would point out there. You know, what's really going to – what we're really going to determine over this next, you know, month is, you know, which ones, you know, as we talk with our customers, what that number is and if it's a January increase or an April increase, you know, and that will be determined by individual markets.
That's helpful. And then I guess a question for you, Craig. Walbur prices bled a little bit, right? No surprise there, just given the dynamic on the home building side. Are you expecting prices to kind of stabilize here and some of the weakness? Is that destocking related, or it's just kind of normal trends in terms of underlying demand? How should we think about the Walbur side of things?
Yeah, not really destocking in my view. Just it's a perishable product. so either you don't you can't storm you know look as we said in the beginning but not down anything like what we utilization rates are higher just given some of the raw material gotcha and just
kind of one one final question on the wallboard side uh two two of i believe your larger customers on the pro distribution side now are owned by big box i'm just curious as you kind of you know uh looking at 2026 have that relationship dynamic change any uh any way in terms of how you're talking about procurement conversations is it the same people or it's kind of you know merge where you have you know the retail side versus the pro side having one conversation and any movement from a placement standpoint we
should be mindful of this year yeah Phil I think it's probably a little early to have that definitive you know see how though again you mentioned it and you know the traditional retail versus you know the mass distribution you know It's something that we'll continue though early to talk.
Thank you. Appreciate it, caller.
Next question comes from Keith Hughes with Truist. Please go ahead.
Thanks. A couple of questions on the wall board. Given the volume, did you have to take extra downtime in the December quarter? You kind of weren't expecting anything on the March quarter. We have some of that just given where housing is and where the trends are.
You know, Keith, like we've always done, you match the production with the sales opportunity. You know, you'll certainly modulate shifts.
Okay, and switching back over to cement. On the cement side, I know you've got price increases out. When will you kind of be able to definitively tell what pricing is going to be like for the year? Is that something that becomes evident in March, or does it take well into the second quarter before the price settles in?
Keith, really, it's going to be dependent on our conversations we have with our customers and what those individual markets are. You know, you'll see, we'll update you, you know, on each quarter on, you know, and you'll see it in the financial results with where we did the price increases and when. You know, really our conversations right now are on timing. We've announced them in those markets, and it's just on what timing we implement that makes sense for us.
Okay, thank you.
The next question comes from Garrett Greenblatt with J.P. Morgan. Please go ahead.
Hey, good morning, guys. I was wondering if you just touched on cement pricing once again in terms of what have you announced in your current letters that you've already sent? And then maybe, you know, in something like a low single-digit volume growth year for cement, what has been the historical realization rate?
Michael said it earlier, but it will be determined regionally. You know, look, that has certainly improved utilization rate, continuing to grow.
Thanks. And then just a follow-up on Wallboard, how did those demand trends, I guess, progress through the fourth quarter? Was there any momentum coming into calendar one, Hugh?
You know, look, it's been pretty kind of the year. You know, we expect to continue to see us.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Michael Hack for any closing remarks.
Thank you, Drew. As we enter the final quarter of our fiscal year, we continue to prioritize health and safety, operational excellence, and financial discipline while seeking growth opportunities that meet our strategic and financial criteria. I look forward to elaborating more on our strategic priorities next quarter as we wrap up our fiscal year 2026. Thanks to everyone for
joining us. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.