Q2 2027 Eagle Materials Earnings Conference Call - EAGLE MATERIALS INC

Explicit Guidance:

• Capital Expenditures: Fiscal 2027 capital expenditures expected to range between $490 million and $525 million; spending anticipated to peak in fiscal 2028.
• Share Repurchases: Approximately 2.2 million shares remaining under current authorization; company will continue opportunistic buybacks absent compelling M&A opportunities.
• Pricing Actions: Price increases effective January 1, 2027, in most cement markets ranging from $10 to $15 per ton, driven by elevated utilization rates and cost pressures.
• Cost Reduction Timeline: Full realization of 25% cost savings at the Mountain Cement plant is projected to require selling the full capacity of the new facility over several years; modernization benefits expected to be accretive to margins by the latter part of fiscal 2028.
• Capex Timing: Significant step-down in capital expenditures anticipated in fiscal 2028 following completion of the Laramie cement plant construction.

Business-Segment Outlook:

• Cement & Aggregates (Heavy Materials): Demand for calendar 2027 expected to remain robust, supported by public infrastructure spending (approx. 50% of demand) and private non-residential activity (data centers). Volume held up despite challenging weather in the prior quarter.
• Wallboard (Light Materials): Demand expected to remain challenged in the near term due to the current interest rate environment capping residential construction; sector will benefit from a lowered cost base following the Duke wallboard plant modernization once the housing market turns.
• Operational Efficiency: Commissioning of the new Laramie cement plant expected to take about two quarters post-construction completion; no commercial disruption anticipated for customers due to network flexibility and ability to switch between old and new kilns.
• Margins: Full cost savings (25% at Mountain Cement) dependent on ramping full capacity of the new plant; interim commissioning phase may temporarily elevate freight costs to support customer volume.

Market and Competitive Outlook:

• Demand Drivers: Cement demand driven by state/federal infrastructure spending (IIJA funds) and data center activity; residential construction remains below historical trends (pacing at 2018 levels) but long-term undersupply persists.
• Pricing Power: Ability to implement price increases ($10–$15/ton) supported by high utilization rates in cement markets.
• Competition & M&A: Aggregate industry fragmentation creates opportunities; pipeline remains robust. Strategy focuses on "patient" capital deployment for differentiated value, requiring deals that strengthen low-cost footprint and meet return thresholds.
• Cost Structure: Elevated diesel prices and freight rates remain a significant headwind affecting all business lines; company relies on long-term raw material reserves and operational levers to mitigate cost spikes.

Macro / Industry Outlook:

• Interest Rates & Housing: High interest rates (mortgage rates above 7%) currently suppressing residential construction; a "step down" in activity observed from September to October.
• Infrastructure Policy: Continued resolution supporting federal and state infrastructure budgets; significant IIJA funds remain available for multi-year highway programs.
• Fuel Prices: Diesel prices remain elevated post-quarter, impacting transportation and raw material costs; management notes these can fluctuate based on global events.
• Regulatory Environment: Securing permits for new cement plant upgrades described as "extremely difficult."

Strategic Initiatives:

• Mountain Cement Modernization: Construction expected to be substantially complete by the next quarterly call (late calendar year 2026); commissioning to follow for ~2 quarters.
• Duke Wallboard Modernization: Completion expected approximately one year after the Laramie cement plant completion; completion and commissioning of this facility projected for mid-fiscal 2028.
• ERP Implementation: Rolled out to approximately 50% of the company; costs expected to remain at elevated levels in the near term.
• Capital Allocation: Priority sequence remains: 1) Balance sheet health (maintain net leverage at prudent levels), 2) High-return organic projects, 3) M&A in core businesses/aggregates, 4) Share buybacks.

Risks and Headwinds to Outlook:

• Commissioning Risks: Potential for temporary margin impact and elevated freight costs during the transition period while ramping the new Laramie kiln and managing volume from the older, unreliable 1960s plant.
• Input Cost Volatility: Sustained high diesel prices and rising freight rates for purchased raw materials; commodity price fluctuations for purchased raw materials expected to remain elevated.
• Regulatory/Permitting: Difficulty in securing permits for future organic cement plant upgrades limits growth options.
• Macro Sensitivity: Residential demand remains highly sensitive to interest rate improvements; significant pickup requires "much better improvement in affordability."

Management Tone on the Future:

• Confidence Level: High confidence in operational resilience and ability to navigate "choppy" markets; repeated emphasis on "Eagle way" of making the right investments regardless of the cycle.
• Strategic Outlook: Optimistic that the company will emerge from the current trough "stronger, better positioned, and more profitable."
• Execution Confidence: Expresses confidence in timely commissioning of the new cement plant due to extensive internal experience with plant startups and the ability to switch between kilns to mitigate downtime risks.

Miscellaneous:

• Safety Goals: Continuing effort to achieve zero incidents; recordable and lost time incident rates improved versus prior year, remaining well below industry averages.
• Financial Health: Net debt-to-cap ratio at 50% and net debt-to-EBITDA leverage at 2.1x as of Sept 30, 2026; $241 million cash on hand with nearly $1 billion in committed liquidity.