NYSE:
MDUR:
krc5

MDU Resources Reports 2016 Earnings, Initiates Guidance for 2017

Feb 01, 2017

MDU Resources Group, Inc. (NYSE: MDU) today reported 2016 earnings from continuing operations of $232.4 million, or $1.19 per share, compared to 2015 earnings from continuing operations of $175.7 million, or 90 cents per share. In the fourth quarter of 2016, earnings from continuing operations were $66.3 million, or 33 cents per share, compared to $55.7 million, or 29 cents per share, in 2015.

Including discontinued operations, primarily the exploration and production and refining businesses, MDU Resources reported 2016 earnings of $63.7 million, or 33 cents per share, compared to a loss of $623.1 million, or $3.20 per share, in 2015. In the fourth quarter of 2016, earnings including discontinued operations were $65.5 million, or 33 cents per share, compared to fourth quarter 2015’s earnings of $52.4 million, or 27 cents per share.

Highlights include:

  • Total construction materials and services earnings of $136.6 million, an increase of 21 percent.
    • Construction materials reported record earnings and record year-end backlog.
    • Construction services earnings increased 43 percent.
  • Total regulated energy delivery earnings of $92.7 million, an increase of 27 percent.
    • Electric and natural gas utility earnings increased 16 percent.
    • Pipeline and midstream business experienced a 59 percent increase in natural gas storage levels.
  • Completion of strategic exit of commodity price-sensitive businesses.
  • Initiated 2017 earnings per share guidance in the range of $1.10 to $1.25.

“We are building a strong America and have solid momentum going into 2017,” said David L. Goodin, president and CEO of MDU Resources. “We successfully completed several strategic moves, including fully exiting from our exploration and production business, the refining business and, more recently, our interest in the Pronghorn natural gas processing plant, which have lowered our business risk profile and positioned us for future growth.

“Our continuing operations increased earnings per share by 32 percent in 2016, led by record results at our construction materials business,” Goodin said. “As we move into 2017, we expect to build on our momentum through organic growth opportunities, and we are open to strategic acquisitions as they are identified by our construction materials and services and regulated energy delivery businesses. We previously announced our five-year, $1.9 billion capital plan with an additional $300 million available in 2017 and 2018 for high-value projects.

“Also in 2017, our construction materials business anticipates more projects being bid from the FAST (Fixing America’s Surface Transportation) Act, and our construction services business is focused on projects with strong margins. Our utility operations continue to pursue regulatory recovery for costs associated with serving steady customer growth. Our pipeline and midstream business also continues to work on projects to serve customer growth with added capacity and improved reliability, like the Valley Expansion pipeline in eastern North Dakota and far western Minnesota that’s expected to be under construction in early 2018,” Goodin said.

Business Unit Results

Construction Materials and Services

The construction materials business reported record earnings of $102.7 million for 2016, up 15 percent from record earnings of $89.1 million in 2015. This business saw higher construction margins and demand in all regions except the North Central, where activity was down in North Dakota. This business benefited from a $6.7 million (after tax) reduction to a previously recorded multiemployer pension plan withdrawal liability; while 2015 earnings reflect an increase to a multiemployer pension plan withdrawal liability of $1.5 million (after tax). In addition, asphalt and aggregate volumes and margins increased. Construction materials had record year-end backlog of $538 million, which is 10 percent higher than the previous record year-end backlog of $491 million set in 2015.

Earnings at the construction services business were $33.9 million, up 43 percent from $23.8 million in 2015 on 16 percent revenue growth. The increase was driven mainly by higher construction workloads and margins in the Western Region. In the fourth quarter, this business completed the sale of one of the largest community solar projects in the United States, on which it provided turnkey engineering, procurement and construction. This business ended 2016 with backlog of $475 million, down slightly from $493 million in 2015, but sees a strong bidding environment in 2017.

Regulated Energy Delivery

The electric and natural gas utility reported earnings of $69.3 million for 2016, up 16 percent compared to $59.5 million in 2015. The increase was driven mainly by cost recovery through regulatory relief. Customer growth and colder weather in certain regions also resulted in 4 percent higher natural gas retail sales volumes. The utility’s customer base grew 1.6 percent in 2016 to approximately 1.07 million customers, and it expects its customer base to continue to grow at a rate of 1 to 2 percent annually. The utility continues to seek regulatory recovery for costs associated with upgrading and expanding facilities to meet customer demand. Regulatory activity has resulted in $32.7 million in increases to final rates in 2016 and 2017 to date, including an electric rate increase of $2.7 million approved Jan. 18, 2017, by the Wyoming Public Service Commission that will take effect March 1.

2016 earnings at the pipeline and midstream business were $23.4 million, compared to earnings of $13.3 million in 2015. Higher customer utilization of natural gas storage services, which increased 59 percent in 2016, led to a slight increase in earnings even though this business recorded a $1.4 million (after tax) impairment in 2016 and a $10.6 million (after tax) impairment in 2015 associated with the sale of certain non-strategic assets. On Jan. 1, this business closed on the previously announced sale of its 50 percent non-operating ownership interest in the Pronghorn natural gas processing plant in North Dakota and the company received proceeds of approximately $100 million.

Discontinued Operations

The results of the company’s former exploration and production and refining businesses have been reported as discontinued operations. The company has included in the “other” category any continuing results from these businesses, such as general and administrative and interest expenses. These expenses are expected to diminish over time, with an estimated impact of 1 cent per share in 2017.

2017 Earnings Guidance

MDU Resources has initiated 2017 earnings per share guidance in the range of $1.10 to $1.25.

“This range reflects what we know today about our company’s operating conditions,” Goodin said. “While we are optimistic about what we anticipate will be positive impacts from potential tax reform, incremental infrastructure spending and regulatory changes proposed by our country’s new administration, these opportunities will be evaluated by our management team when they are enacted.”

Conference Call

The company will host a webcast at 10 a.m. EST Feb. 2 to discuss 2016 earnings results and 2017 guidance. The event can be accessed at www.mdu.com. Webcast and audio replays will be available. The dial-in number for audio replay, available through Feb. 16, is 855-859-2056, or 404-537-3406 for international callers, conference ID 33818055.

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.com or contact the Investor Relations Department at investor@mduresources.com.

Contacts
Financial: Doran Schwartz, vice president and chief financial officer, 701-530-1750
Media: Laura Lueder, manager of communications and public relations, 701-530-1095