Back to top

Image: Bigstock

Monarch Cement (MCEM) Earnings & Sales Decline Y/Y in Q2

Read MoreHide Full Article

The Monarch Cement Company's (MCEM - Free Report) second-quarter 2024 earnings results reflect a challenging period, marked by a substantial drop in profitability despite effective cost management. The company's earnings per share declined sharply year over year on a significant decrease in net income, and modestly lower sales across both Cement and Ready-Mixed Concrete segments.

While operational efficiencies helped maintain the gross profit margin, the impacts of unrealized losses on equity investments led to a steep decline in overall earnings. This review delves into Monarch Cement's financial performance, segmental results and key strategic developments, providing crucial insights for investors navigating the current landscape.

The Monarch Cement Co. Price, Consensus and EPS Surprise

 

The Monarch Cement Co. Price, Consensus and EPS Surprise

The Monarch Cement Co. price-consensus-eps-surprise-chart | The Monarch Cement Co. Quote

Q2 Results

Monarch Cement reported second-quarter 2024 earnings per share of $3.14, a significant decline from $7.39 in the prior-year quarter.

The company's net sales for the quarter decreased 4.2% to $72.4 million from $75.5 million in the prior-year period.

The weak quarterly results reflect the impacts of reduced construction activities and competitive pressures in its operating regions.

Segmental Performance

Monarch Cement operates two main business lines — Cement and Ready-Mixed Concrete.

The Cement segment: This segment generated $50 million in net sales in second-quarter 2024, down from $51.7 million in the prior-year quarter. This 3.4% year-over-year decline was largely due to reduced demand in key markets, exacerbated by competitive pressures and sluggish construction activity.

Despite the decline in sales, the segment maintained a strong operating income of $19.1 million, a marginal decrease from $19.3 million in the previous year. This was supported by improved operational efficiencies and cost controls, which helped offset the impacts of lower sales volume.

The Ready-Mixed Concrete Segment: This segment also saw a 3% decrease in net sales to $29.5 million from $30.4 million in second-quarter 2023. The segment faced similar challenges, including a slowdown in infrastructure projects and heightened competition in the regions it serves.

The segment delivered an operating income of $3.8 million, up marginally from $3.7 million in second-quarter 2023, driven by effective cost management despite the year-over-year sales dip.

Financial Performance

The company's gross profit from operations increased marginally to $27.8 million in second-quarter 2024 from $27.7 million in the prior-year quarter despite the lower sales. This improvement was mainly attributed to cost-control measures. The gross margin for the quarter improved to 38.4% from 36.6% in second-quarter 2023, driven by a reduction in operating costs and favorable input prices.

Operating income remained relatively flat at $22.9 million in second-quarter 2024 compared with $23 million in the prior-year quarter. However, net income for the quarter saw a sharp 58% decline to $11.5 million from $27.4 million in second-quarter 2023.

The primary reason for this decrease was the significant unrealized losses on equity investments amounting to $10.6 million against growth of $9.9 million in the previous year. This led to a substantial reduction in other income, which stood at a loss of $8.7 million against a gain of $11.3 million in second-quarter 2023.

Costs

Operating costs for the quarter (encompassing cost of sales and selling, general and administrative (SG&A) expenses) totaled $49.5 million, marking a 6.3% decrease from $52.6 million in second-quarter 2023. The reduction was driven by effective cost controls, including lower raw material and energy costs.

SG&A costs increased 4.5% year over year to $4.9 million, reflecting management’s focus on maintaining operational efficiency while supporting business activities.

Cash, Debt Position & Capex

Monarch Cement’s cash and cash equivalents, including restricted cash, totaled $38.7 million as of Jun 30, 2024, a decrease from $57.3 million at the end of 2023. This reduction was primarily due to a quarterly capital expenditure of $31.8 million aimed at upgrading and maintaining production facilities. The company maintained a debt-free position, underscoring its strong liquidity and financial stability.

Other Developments

In the quarter, Monarch Cement continued its strategy of investing in its operational capabilities, with the capital expenditure surging to $22.5 million from $7.2 million in the prior-year quarter. This increase reflects the company’s commitment to maintaining and enhancing its production facilities to support long-term growth.

View

Monarch Cement's financial performance in second-quarter 2024 underscores its ability to manage operational costs effectively amid declining sales. The year-over-year reduction in operating costs played a critical role in maintaining the company's gross profit. Despite these efforts, the significant unrealized losses on equity investments highlighted the volatility in non-operational income, which had a substantial impact on overall profitability.

Management noted the importance of cost-control measures in offsetting lower sales volumes. The decline in the cost of sales was primarily caused by reduced raw material and energy costs, bolstered by successful hedging activities. However, slightly increased SG&A expenses indicate ongoing investments in sustaining business operations and market presence.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The Monarch Cement Co. (MCEM) - free report >>

Published in