Zacks_Analysts' Blog : Vulcan to Merge Operating Regions - Analyst Blog

Vulcan Materials Company (VMC) recently announced its plan to consolidate its eight operating regions into four, namely East, South, Central and West. The strategic move on the company’s part is aimed at reducing overhead costs and increasing operating efficiency.

The preliminary decision was taken by the senior management during the first half of the year but the approval from the company’s Board of Directors was received at its quarterly meeting on December 09, 2011.

The company had long planned to decentralize its administration, especially its sales, marketing and operating functions in order to improve efficiency at a much lower cost. The recent announcement will enable Vulcan to execute its plan. 

The consolidation of operating regions is expected to generate an ongoing annualized pre-tax cost savings of roughly $30 million, apart from another $25 million in annual pre-tax overhead reductions already realized in the current year. Additionally, as a part of the process approximately 200 positions, including overhead and administrative staffs, will be laid off.

Vulcan is optimistic about each of its operating segments for the upcoming quarters. Almost all the segments are expected to witness higher volumes and higher prices for its products, offsetting higher costs.

Further, the company’s selling, general and administrative expenses in 2011 are projected to be approximately $25 million, which is lower than the prior-year level. Vulcan Materials anticipates capital spending of $100 million for the year.

Based in Birmingham, Alabama, Vulcan Materials, a Zacks #3 Rank (Hold rating) stock, is engaged in the production, distribution and sale of construction aggregates, and other construction materials and related services in the U.S. and Mexico.

Vulcan Materials is the nation’s largest producer of construction aggregates and a leading producer of other construction materials. The company’s key competitors include CEMEX, S.A.B. de C.V. (CX), Lafarge S.A. (LFRGY), Cement Roadstone Holdings and Martin Marietta Materials Inc. (MLM).