Litigation and refinancing charges hurt Granite’s bottom line

Image: Granite Construction

US civil construction and materials company Granite made a $17 million net loss in the second quarter of 2023, after refinancing and litigation charges hit its bottom line.

Granite recorded a $50 million year-on-year increase in revenue during the quarter, taking revenue for the period to a total of $899 million.

Increases in its California and Mountain Groups offset a slight decrease in revenue in its Central Group.

But the business took a $51 million hit in the form of non-cash charges relating to refinancing of bonds and a $12 million charge for litigation.

Over the half-year to 30 June 2023, the company made a $40 million net loss, compared to an $8 million net loss in the prior year. Revenue was flat at $1.5 billion compared to the same period a year before, as project teams and plants rebounded from a weather-impacted first quarter of 2023.

Gross profit and gross profit margins during the three and six months ended 30 June 2023 were negatively impacted by additional costs on Granite’s I-64 High Rise Bridge project in Virginia, the company said. For the six-month period, the impact to gross profit was $32 million.

But on a brighter note, Granite pointed to record committed and awarded projects (CAP) of $5.4 billion, a year-on-year increase of $1.2 billion.

Outlook for 2023

Updating its guidance for the full year, the company forecast revenue in the range of $3.35 billion to $3.45 billion, with adjusted EBITDA margin in the range of 7.5% to 8.5%.

Kyle Larkin, Granite president and chief executive officer said, “Our public and private markets remain very strong across our geographies, and we believe we are winning the work necessary to meet our 2024 growth and margin targets.”

“In the second quarter, as we expected, the California and Mountain Groups grew construction revenue year-over-year, more than offsetting the decrease in revenue in the Central Group. Our materials business, which is integral to our home market strategy, showed impressive revenue and gross profit margin growth over the prior year as we recovered from a weather-impacted first quarter of 2023. I expect we will see continued year-over-year improvement in materials and construction revenue and gross profit in the second half of the year.”

Commenting on the outlook for the rest of the year, he added, “Although our teams recovered well from the wet first quarter and continued to win work across the company, we are lowering our expectation for the amount of work that will be completed in 2023.

“However, we continue to believe that our record CAP will drive expected revenue growth in 2024 and 2025. Additionally, we are narrowing the range of our guidance for adjusted EBITDA margin to 7.5% to 8.5% for 2023 primarily due to the losses incurred on the I-64 High Rise Bridge project. As I have discussed in the past, we are executing on our plan and believe that the work we have been adding to CAP supports our 2024 target of 9.0% to 11.0% adjusted EBITDA margin.”