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MDU Resources Reports Second Quarter Earnings, Reaffirms 2018 Guidance

Jul 31, 2018

MDU Resources Group, Inc. (NYSE: MDU) today reported second quarter earnings from continuing operations of $44.1 million, or 22 cents per share, compared to second quarter 2017 earnings from continuing operations of $43.8 million, or 22 cents per share. Including discontinued operations, MDU Resources reported second quarter earnings of $43.8 million, or 22 cents per share, compared to $40.6 million, or 21 cents per share, in 2017.

For the six months ended June 30, MDU Resources had earnings from continuing operations of $86.0 million, or 44 cents per share, compared to $79.3 million, or 40 cents per share, in 2017. Including discontinued operations, the company had earnings of $86.2 million, or 44 cents per share, compared to $77.8 million, or 40 cents per share, in 2017.

“We are pleased with our ongoing growth and solid operational execution,” said David L. Goodin, president and CEO of MDU Resources. “Our construction services business is experiencing an exceptional year, with to-date earnings nearly fifty percent higher than last year. We had a record combined backlog of $1.62 billion of work at our construction services and construction materials businesses at the end of the second quarter. We also recently announced our third construction materials acquisition of the year, and we continue to evaluate additional acquisition opportunities at both construction businesses.

“Our utility and pipeline businesses continue to successfully execute on several growth opportunities. Our two significant pipeline expansion projects underway this year are progressing on schedule and on budget, and we look forward to their completion later this year. With Bakken natural gas production at record levels, there is high demand for additional transportation capacity in the region. Construction also is progressing as expected on our wind farm expansion in southwestern North Dakota, with completion anticipated this fall, and on the 345-kilovolt transmission line partnership project from Ellendale, North Dakota, to Big Stone City, South Dakota. All our businesses are focused on growth, with significant opportunities ahead.”

Business Unit Highlights
Construction Materials and Services
The construction services business had earnings of $14.1 million in the second quarter, compared to $12.4 million for the same period in 2017. This business experienced tax benefits from the federal Tax Cuts and Jobs Act enacted in December. It also continued to see strong performance from its outside specialty contracting operations, including high demand for sales and rentals of the utility construction equipment it manufactures as well as electrical transmission, distribution and substation work. It also continues to perform a high volume of inside specialty contracting work, particularly for high-tech, health care and higher education customers. The construction services business had a record backlog of work at June 30 of $888 million, compared to $596 million in 2017.

Earnings at the construction materials business were $24.3 million in the second quarter, up from $21.2 million in the second quarter of 2017. The earnings increase reflects the benefits of federal tax reform. The company earlier this month announced that it acquired Molalla Redi-Mix and Rock Products Inc. south of Portland, Oregon, which is expected to be accretive to 2018 earnings. This acquisition follows two others this year, Teevin & Fischer Quarry LLC in northern Oregon acquired in April and Tri-City Paving Inc. in Little Falls, Minnesota, acquired in June. The construction materials backlog of work at June 30 was $731 million, compared to $766 million in 2017.

Regulated Energy Delivery
The electric and natural gas utility earned $2.3 million in the second quarter, compared to $5.0 million in second quarter 2017. Electric sales volumes were approximately 5 percent higher compared to the same period last year, and natural gas sales volumes were approximately 2 percent higher. Earnings for the quarter reflect adjustments related to the Washington Utilities and Transportation Commission's recent decision on the company's natural gas rate case, including the effects of federal tax reform, as well as higher operating costs.

The pipeline and midstream business earned $5.7 million in the second quarter, up from $5.3 million in 2017. The company transported record volumes of natural gas through its system for the fourth consecutive quarter, partly due to completing two expansion projects in 2017 that increased capacity. Construction continues this summer on the 38-mile Valley Expansion project in eastern North Dakota and western Minnesota and the 13-mile Line Section 27 Expansion project in northwestern North Dakota. These projects, for which the company has customer commitments, are expected to add more than 200 million cubic feet per day of natural gas transportation capacity, bringing the company's total capacity to more than 1.8 billion cubic feet per day.

Guidance
MDU Resources reaffirmed that it expects earnings per share in the range of $1.25 to $1.45 in 2018, based on these assumptions:

  • Normal operating conditions and weather conditions, including precipitation and temperatures, across all service areas.
  • No significant acquisitions or divestitures.
  • Investing $672 million for capital projects.
  • Construction services revenues in the range of $1.45 billion to $1.60 billion and construction materials revenues in the range of $1.8 billion to $1.9 billion, with margins comparable to or slightly higher than 2017.

Corporate Strategy
MDU Resources’ strategy is to increase market share and profitability in its regulated energy delivery and construction materials and services businesses, while enhancing value through organic growth opportunities and strategic acquisitions of well-managed companies and properties. The company, on a consolidated basis, anticipates 5 to 8 percent long-term compound annual growth on earnings per share.

Conference Call
MDU Resources will discuss second quarter results on a webcast at 2 p.m. EDT Aug. 1. The event can be accessed at www.mdu.com. Webcast and audio replays will be available through Aug. 15 at 855-859-2056, or 404-537-3406 for international callers, conference ID 2767248.

About MDU Resources
MDU Resources Group, Inc., a member of the S&P MidCap 400 index and the S&P High-Yield Dividend Aristocrats index, is Building a Strong America® by providing essential products and services through its regulated energy delivery and construction materials and services businesses. For more information about MDU Resources, see the company’s website at www.mdu.comor contact the Investor Relations Department at investor@mduresources.com.

Media Contact:Laura Lueder, manager of communications and public relations, 701-530-1095
Financial Contact:Jason Vollmer, vice president, chief financial officer and treasurer, 701-530-1755