Granite hails strong Q3 as it continues shift away from design-build projects

Image: Granite Construction

US contractor Granite has hailed a strong performance in the third quarter of its financial year, with revenue up 12% year on year.

Revenue was US$1.1 billion, up $108 million on the same period in the prior year. Both its construction and materials segments posted year-on-year increases, with the California and Mountain groups up 15% and 11% respectively.

Adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) were $124 million, compared to $91 million for the same period in the prior year.

Speaking to investors, Granite president and chief executive officer Kyle Larkin said he was “pleased” with the performance.

He said, “Just over two years ago, we stated that our goal was to transform Granite from what had become a volatile business into a business that earns predictable strong financial results, while also producing consistent, sustainable growth.

“To support this effort, we took significant actions both on the construction and materials side of the business. For construction, the first step we took was to derisk our committed and awarded project portfolio (CAP). We moved away from complex design-build projects and shifted our focus to best value and bid build projects and best value projects such as construction manager general contractor (CMGC) where we are better positioned to succeed as we worked collaboratively with the client to mitigate risk for the project.”

Larkin said that although some best value projects have high total contract values, they are often separated into smaller work packages that are reviewed through multiple project workshops.

“We have constructed more than 60 best value projects and they are generally completed quicker and with fewer claims,” he said.

Larkin also suggested that Granite was in its strongest position for growth and profitability in over a decade as a result of the US government’s focus on infrastructure spending through the Infrastructure Investment and Jobs Act (IIJA).

For the nine months to 30 September, Granite saw its revenue increase $63 million to $2.6 billion, compared to $2.5 billion for the same period in the prior year.

Adjusted EBITDA totalled $195 million for the period, compared to $160 million for the same period in the prior year, despite the negative impact of the I-64 High Rise Bridge project in Virginia, which reduced gross profit in the third quarter by $8 million and by $40 million over the nine-month period. Final completion for the project is expected in the fourth quarter.

Granite added that higher asphalt and aggregate sales prices had helped to drive materials revenue and gross profit, while energy and oil costs have normalized compared to the inflation in 2022.