On this page of StockholderLetter.com we present the latest annual shareholder letter from Knife River Corp — ticker symbol KNF. Reading current and past KNF letters to shareholders can bring important insights into the investment thesis.
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3/29/2024 Letter Continued (Full PDF)
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More "Construction Materials & Machinery" Category Stockholder Letters
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KNF Benford's Law Stock Score = 98
3/29/2024 Letter Continued (Full PDF)
•
More "Construction Materials & Machinery" Category Stockholder Letters•
KNF Benford's Law Stock Score = 98KNF Shareholder/Stockholder Letter Transcript:
Annual Report Proxy Statement Form 10-K 2023 5,737 4 TEAM MEMBERS AT PEAK SEASON 1.1 billion tons of aggregate reserves th- largest producer of sand and gravel in the US People Safety Quality Environment 38% Adjusted EBITDA growth from 2022 to 2023 15.3% Adj. EBITDA Margins1, exceeding 2025 goal2 2023 revenue, net income, EBITDA and Adj. EBITDA records 1 3-year avg ROIC of 13.6% 3 Note: All data is as of 12/31/23, unless otherwise noted. FINANCIAL HIGHLIGHTS Overall 2022 2023 $2,534.7MM $2,830.3MM Net Income $116.2MM $182.9MM Adjusted EBITDA1 $313.4MM $432.4MM 12.4% 15.3% Revenue Adjusted EBITDA Margin1 Adjusted EBITDA Margin1 Adjusted EBITDA1 25% $500MM 20% 20.0+% 15% 12.4% 10% 15.3% $432.4MM $400MM $300MM $313.4MM $200MM $100MM 5% 0% 2022 2023 Long-Term Goal2 $0 2022 2023 Comparison of Total Stockholder Return $100 invested June 1, 2023, in Knife River was worth $188.98 at year-end 2023. $200 $180 $160 $140 $120 $100 $80 6/01/234 6/30/23 Knife River 9/30/23 S&P 500 Index 12/31/23 S&P 400 Materials Index Company Name / Index 6/01/23 6/30/23 9/30/23 12/31/23 Knife River Corporation 100.00 124.21 139.43 188.98 S&P 500 Index 100.00 105.55 102.09 114.03 S&P 400 Materials Index 100.00 109.31 104.63 120.11 Knife River Corporation | 1 Aggregate site (180 active sites) Ready-Mix plant (102 total plants) Asphalt plant (56 total plants) Northwest REPORTING SEGMENTS Pacific Mountain Central Energy Services HQ Aggregate site (180 active sites) Ready-Mix plant (102 total plants) Asphalt plant (56 total plants) Northwest Pacific Mountain Central Energy Services HQ Aggregate site (180 active sites) Ready-Mix plant (102 total plants) Asphalt plant (56 total plants) PRODUCT LINES AGGREGATES ASPHALT Downstream product used for smooth, durable surfaces on highways, streets and parking lots. 56 plants across 10 states. 1.1 billion tons of reserves with strategic locations near end users and/ or multimodal transportation. Reliable supply of high-quality materials is a competitive advantage. LIQUID ASPHALT READY-MIX CONCRETE CONTRACTING SERVICES Versatile and specialized value-added product. 102 plants across 13 states, and a fleet of delivery trucks. Reliable pull-through demand of materials. Public works focused; adds resiliency and contributes to ROIC. Binding agent used with aggregates to produce asphalt. 5 terminals across 5 states. COMPETITIVE EDGE - 2023 Initiatives Commercial and operational margin-expansion initiatives Training summit to align sales professionals with EDGE-related best practices on dynamic pricing and targeted bidding Process Improvement Teams visited each segment. Expanded team to standardize practices 2 | Knife River Corporation Strong balance sheet and disciplined allocation of capital Reduced net leverage to 1.1x, wellbelow long-term target of 2.5x2,5 Prudent management of our net working capital saw notable yearover-year improvement Ample liquidity and untapped revolver of $329MM Strengthen market position through organic and inorganic growth opportunities Refocusing on our acquisition pipeline after becoming a standalone publicly traded company Bolstered our Corporate Development team at the Corporate Office Be best in class in all aspects of the business Training and development for over 1,100 students took place at our world-class Training Center, focused on safety, sales, operational performance, and CDL training Continued improvement across key safety metrics, including RIR and LTAR Pacific 2023 SEGMENT RECAP 2022 2023 Change $418.1MM $462.2MM +11% $44.0MM $56.2MM +28% 10.5% 12.2% +170bps 2022 2023 Change $600.2MM $666.1MM +11% $103.9MM $121.1MM +17% 17.3% 18.2% +90bps 2022 2023 Change $542.0MM $634.0MM +17% $72.6MM $103.2MM +42% 13.4% 16.3% +290bps 2022 2023 Change Revenue $779.8MM $825.0MM +6% EBITDA1 $86.6MM $116.6MM +35% 11.1% 14.1% +300bps 2022 2023 Change Revenue $238.4MM $292.3MM +23% EBITDA $28.3MM $78.1MM +176% 11.9% 26.7% +1,480bps Revenue EBITDA1 EBITDA MARGIN Northwest 1 Revenue EBITDA1 EBITDA MARGIN Mountain 1 Revenue EBITDA1 EBITDA MARGIN Central 1 Energy Services EBITDA MARGIN1 1 EBITDA MARGIN1 PROGRESS ON STRATEGIC OBJECTIVES 2023 Guidance Revenue $2.7 BN $2.8 BN EBITDA1 $388 MM $418 MM Adj. EBITDA 1 $400 MM $430 MM Capital Expenditures $125 MM 2023 Result $2.8 BN 2025 Targets Competitive EDGE Progress STRONG AND BALANCED REVENUE GROWTH Increasing Mix of Aggregates SIGNIFICANT ADJ. EBITDA MARGIN EXPANSION2 $422.0 MM $432.4 MM 15% by 2025 ATTRACTIVE FREE CASH FLOW GENERATION2 Free Cash Flow Growth ~ in-line with Adj. EBITDA growth SUSTAIN / IMPROVE INDUSTRY-LEADING ROIC 3-Year Avg. ROIC 13.6%3 Long-term Vision $124.3 MM INCREASING AGGREGATE MIX 20%+ ADJ. EBIDTA MARGIN NO. 1 IN MARKETS OF OPERATION6 Knife River Corporation | 3