On this page of StockholderLetter.com we present the 6/23/2023 shareholder letter from EAGLE MATERIALS INC — ticker symbol EXP. Reading current and past EXP letters to shareholders can bring important insights into the investment thesis.

 •  6/23/2023 Letter Continued (Full PDF)
 •  6/17/2024 EXP Stockholder Letter
 •  6/23/2025 EXP Stockholder Letter
 •  More "Construction Materials & Machinery" Category Stockholder Letters
 •  EXP Benford's Law Stock Score = 97

EXP 6/23/2023 Shareholder/Stockholder Letter Transcript:

2023 ANNUAL REPORT AND FORM 10-K

LETTER TO OUR SHAREHOLDERS
Eagle Materials chalked-up another banner year, again setting new performance records. We have grown
our annual revenues to above the two billion dollar level and our year-over-year EP   is up 36%. These
results have been achieved in a year that prognosticators anticipated would be an especially challenging one
for construction materials companies, especially due to sharply rising interest (mortgage) rates.
We are frequently asked about our secret to success. The short answer is that the    secret    is not just one
thing but rather numerous things, each done better than we did them before, wherever and whenever
possible. Let us share some of the specific differentiating factors that we feel are among the most important
for us, and some of the ways that we think about things perhaps a bit differently than others. These
differences are reflected in our operating model and, hence, in our track record of results.
Strength from the Core
We believe we operate in commodity industries. We are not ashamed of this fact. Construction materials
like Portland cement and gypsum wallboard are necessities, not luxuries, and are essential to the growth and
renewal of America, and especially to the paths that create a net zero carbon future for our country.
Our two core businesses are well-defined, well-established and well-positioned. These businesses have a
lot in common. Each manufactures products with defined performance standards that must be faithfully met
without fail, in commercial, residential and non-residential (infrastructure) construction applications. The lifeblood for both businesses is mined soft minerals, notably limestone and gypsum. Market selection is
important for both because we sell low-value-to-weight products for which transportation distances can make
or break the economics. Both businesses operate in consolidated U   industries with fragmented buyerbases     and both are in cyclical sectors, so cycle management skills are important -- and this is an area in
which we excel.
There is one more notable way in which these two core businesses are becoming even more alike. For
some time U   manufacturing response to higher demand in cement has been constrained due to stringent
regulation and high capital barriers to entry or expansion. In more recent years the gypsum wallboard
industry has faced new constraints to capacity addition or to full capacity utilization, notably due to the
declining availability of synthetic gypsum, which is generated through the environmental scrubbing
processes at coal-fired power plants. The competitive dynamics of    scarcity    can be powerful, and some
version of these dynamics is arguably developing not only in the U   cement industry, but also, albeit for
different reasons, in the gypsum wallboard industry as well.
Over the past five years we have invested nearly $48    million to strengthen and improve these core
businesses and to ensure their sustainability. These priority investments ensure we own many decades of
quality raw materials that are highly proximate to our plants. We maintain our plants in    like new    condition
and invest in technologies that will enable higher throughput, lower costs and in some cases, create
opportunities for value-added products.
These core improvement investments are -- and will remain -- among our top capital allocation priorities.
Growth is an important tandem priority. We have invested nearly $86    million in prudent acquisitions to grow
our heavy-side business system over these same five years. Our cash flows give us tremendous financial
flexibility to capture opportunities that arise. We have invested over $  .7 billion dollars in share repurchases
over this same five-year interval, which is another way in which we are demonstrably investing in our    core   .

These investments over the last five years (capital improvements, acquisitions, and the return of cash to
shareholders) totaled over $3 billion. It is worth noting that we ended this fiscal year with a net leverage ratio
of   .4x, which is virtually the same as our leverage ratio five years ago. This is another vivid testament to the
cash generation capability of our company.
Superior Execution
  ince we are in commodity industries it follows that the way to outperform the competition through cycles is to
be a low-cost producer and work to continually expand that low-cost advantage. Our EBITDA margins are
industry leading. Analysis of   5    building products industry players consistently puts us at or near the top of
the group depending on the quarter. The reasons for this are partly culturally related. We are a    no-frills
culture    and we are relentless about focusing on value-adding activities, which also means we are scrupulous
about not indulging in activities and initiatives that are not value-adding. There is an intense intolerance for
bureaucracy at Eagle. We also lean on process disciplines and reliable methods and expect team members to
be good teachers and mentors about these process disciplines, most notably safety, environmental and
operational disciplines.
Effective Engagement
We have a three-part saying at Eagle that embodies our success philosophy and it also reflects where we
spend our time:    Choose the value to create    (wisely, strategically),    create the value    (superior execution) and
   communicate the value   . We believe that doing all three exceptionally well is essential to our success.
   Communicating the value    is important in a number of ways. It is essential to level-set the understanding of all
team members that have a role in creating the value (which at Eagle means all team members, since if it is not
a vital role it is not a position). It is essential to communicate our product and service value proposition to
customers so they choose us as a supplier and reward us for the value created. It is essential to communicate
with investors so they can evaluate our company   s value proposition in light of their other investment options.
A great example of    communicating the value    this year has been our roll-out of Portland Limestone Cement
and the work to provide the right information and perspectives about this product so that   tate Departments of
Transportation can make prudent decisions about its adoption.
We set an internal goal of making a product mix shift to         % Limestone Cement for all construction grades
(which entails   tate DOT approvals) and we are well ahead of plan here. This is an important initiative for two
reasons. First, it makes our finite clinker production go farther, in effect increasing our salable cement
capacity, and second, in conjunction with related actions, implies a 2   % reduction in CO2 per ton from our
2        baseline.
This fiscal year has been a stellar year of accomplishment in which our team takes great pride. And our track
record gives us conviction in saying that the best is indeed yet to come.

  eturn on Equity
Percentages, LTM Quarters Ending
4   
EXP
35
3   
25
2   
  5
Key
Peers

5

MA   '2   JUN '2  
  EP '2   DEC '2   MA   '22 JUN '22   EP '22 DEC '22 MA   '23
Pre-Tax Margins
Percentages, LTM Quarters Ending
3   
EXP
25
2   
Key
Peers
  5
5

MA   '2   JUN '2  
  EP '2   DEC '2   MA   '22 JUN '22   EP '22 DEC '22 MA   '23
Key Peers included on these graphs are Martin Marietta Materials, Vulcan Materials,   ummit Materials and Arcosa
  ource: Fact  et



 6/23/2023 Letter Continued (Full PDF)