Investors sold off shares of
Thursday after the cement and asphalt maker issued a statement that nearly cornered the market on the kinds of bad news a company can release at any one time.
First, it said it plans to sell 11.5 million new shares to the public, adding to the company's shares outstanding by about 10%, in order to pay down debt.
Second, it cut back its quarterly dividend by nearly half -- to 25 cents a share from 49 cents.
And third, and probably most importantly, Vulcan said that slumping demand will lead to lower-than-expected earnings for the second quarter and for the rest of the year. Shipments of aggregates in the period could be 25% to 32% less than a year ago. The company blamed the declines not just on the recession, but also on a bout of heavy rains "in key markets" (wet weather plays havoc with the pouring of concrete).
Vulcan expects business to improve in the second half of the year, but not fast enough to prevent year-over-year profit declines.
The company reduced its per-share profit forecast for the current quarter to a range of 15 cents to 30 cents. That's as much as 65% below Wall Street's consensus target of 44 cents. For the full year, earnings will likely come in at 70 cents to $1 a share, the company projects. Analysts were looking for $1.13.
After the final bell Wednesday, the Birmingham, Ala., company issued a press release entitled "Vulcan Materials to Enhance Financial Flexibility." It said that it will raise $500 million through the stock offering, which it will use to clean up its balance sheet, cutting its debt-to-equity ratio to 44% from 50%. As of the end of the first quarter in March, the company had total cash of nearly $60 million, and total debt of $3.5 billion.
"Today's actions will position Vulcan to participate more effectively in the nation's economic recovery," Vulcan chief Don James said in a statement.
Many investors had been hoping that the U.S. government's stimulus package would produce a boom of road building, lifting Vulcan's business in the process. But it appears that the government's infrastructure plan has moved away from massive new construction projects, instead focusing on repair, maintenance and efficiency. That would still help Vulcan, but perhaps not as much as some had hoped.
In midday trading Thursday, Vulcan shares were changing hands at $41.72, down 5%, or $2.25, on volume of 2.2 million shares, already eclipsing the daily average turnover of about 1.6 million.
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