Dive Brief:

• Taking the final steps to bring its books back into compliance after accounting irregularities forced it to restate its financials going back to 2017 while voicing optimism that the outlook is improving quickly in 2021, Granite Construction reported fourth quarter 2020 revenue of $945.6 million, up 6.8% from $885.6 million a year earlier, and full year 2020 sales of $3.6 billion, an increase of 3.4% from the $3.4 billion it took in for all of 2019.
• The Watsonville, California-based contractor’s backlog dipped slightly at the end of the year to $4.3 billion, a 2.3% drop from the end of 2019, when it had $4.4 billion of future work on its books. Executives attributed the decrease to working through the firm’s “old risk portfolio” of large, complex projects with a value of $500 million or greater in its heavy civil operating group, where its accounting woes originated. It’s now pursuing smaller projects valued below $500 million, where it feels it can better achieve pricing that reflects the risks of those jobs. 
• The company sounded an optimistic note on the current bidding environment, and what it has seen thus far in 2021. “Three months into 2021, we’re actually seeing today across all of our businesses improved bidding, in terms of the amount of work that’s out there,” said Kyle Larkin, Granite president, on an earnings call Tuesday. “We’re kind of back to pre-pandemic levels, for sure. And if you look at bookings, we’re well ahead of where we thought we’d be.” 

Dive Insight:

Granite refers to itself as “America’s infrastructure company,” and with $2 billion in revenue in its transportation segment in 2020, or 55% of its overall sales, the firm is first and foremost a road builder. Larkin ticked off evidence of an improved outlook for the sector in 2021, after the coronavirus pandemic impacted lettings at state departments of transportation across the country in 2020.

“We are encouraged by the public funding environment at the federal, state and local levels,” Larkin said, noting that the company is waiting “optimistically” for the federal government to align around an infrastructure bill, which President Joe Biden is slated to outline in Pittsburgh on Wednesday. “I believe our teams are poised to capitalize on the many outstanding transportation opportunities in all of our markets, and I believe the transportation segment will continue to be the primary driver of profitability and cash flow for Granite in the future.”

Asked where activity is the strongest, Larkin pointed to the California Department of Transportation's spending projections of $6.2 billion over the next five to seven years. But he also noted a widespread resurgence across the western half of the country, including the Pacific Northwest, as well as Chicago and the Midwest, and even a $160 million dam project in Texas.  

“It’s really across the entire portfolio,” Larkin said. “We’re seeing a nice, nice uptick in bidding.”

Material production

With sales from its material segment representing $380.8 million in revenue in 2020 — a 6.6% jump from 2019 — Larkin also highlighted the brisk business Granite has selling aggregate and asphalt produced at its captive quarries over the past year. The trend quickly accelerated in the fourth quarter, when sales grew 18.2% from a year earlier to $104.9 million.

As deferred material shortages from the pandemic have emerged throughout the construction supply chain in 2021, contractors are scrambling to make sure they have the raw materials they need to keep building. But Larkin said Granite was well positioned as a supplier of aggregate to itself and others, with 125 million tons of permanent aggregate reserves in its stores.

“As of December 31st, 2020, construction materials orders are up 34% year over year,” he said. “As we move into 2021, demand in our markets for construction materials, both from internal construction projects and from external customers, remains strong.”