Shares of The Monarch Cement Company (MCEM Quick QuoteMCEM - Free Report) have gained 2.8% since reporting earnings for the first quarter of 2025. This compares with the S&P 500 index’s 4.3% growth over the same time frame. Over the past month, the stock has jumped 8% compared with the S&P 500’s 11.4% rally.

Revenue & Earnings Tumble on Weather-Related Headwinds

In the first quarter of 2025, Monarch Cement reported net sales of $38.7 million, representing a 22.7% year-over-year decline from $50.1 million in the prior-year period. This drop was broad-based, with revenues from the Cement Business falling $2.3 million and the Ready-Mixed Concrete Business revenues decreasing $9.1 million.

The decline in volumes due to adverse winter weather and rainfall weighed heavily on both segments. Basic earnings per share dropped sharply to 72 cents from $4.53 in the prior-year quarter, driven by a significant 84.1% decline in net income, which fell to $2.7 million from $16.6 million in the first quarter of 2024.

Weaker Sales, But Cement Margin Mix Remains Resilient

Despite lower sales volumes, Monarch Cement's gross profit rate held up relatively well. The overall gross margin rose to 30.2% from 28.8% a year earlier. The Cement Business recorded a gross margin of 44.3%, down from 44.9%. However, the Ready-Mixed Concrete Business saw a notable contraction in the gross profit rate to 5.8% from 10.3%, reflecting a 46.6% drop in volume sold that was only partially offset by pricing increases and reduced material costs.

Selling, general and administrative expenses were unchanged year over year at $6.6 million, remaining consistent with the company’s view of these as fixed costs. Total operating income fell to $5.1 million from $7.4 million in the prior-year period.

Investment Portfolio Swings Drive Net Income Volatility

The most significant factor impacting the bottom line was a sharp reversal in the company’s investment performance. Monarch Cement recorded a $12.3-million unrealized loss on equity investments in the first quarter of 2025 compared with a $10.9-million gain in the year-ago period.

Although the company realized $9.5 million in gains from equity sales in the quarter (versus $0.6 million last year), the volatility in equity valuations substantially compressed reported earnings. Dividend income from investments also dropped year over year to $0.1 million from $1.1 million.

These swings in investment income significantly reduced pre-tax earnings to $2.8 million from $20.6 million in the prior-year quarter. The effective tax rate rose to 26% from 21% a year ago, contributing to the net income decline.

Management Commentary: Seasonal Patterns & Capital Plans

Monarch Cement acknowledged the seasonal nature of its operations, which are typically constrained in the first quarter due to weather conditions. Management reaffirmed that the business typically peaks in the second and third quarters when construction activity ramps up. The company noted that high rainfall can also hamper operations during these peak periods.

On the capital expenditure front, Monarch Cement spent $10.1 million in the first quarter of 2025 — $7.1 million on cement production facilities and $2.9 million on equipment for its ready-mixed concrete Business. The full-year capital investment plan totals $40.1 million, signaling a continued commitment to operational upgrades and long-term efficiency.

Liquidity Remains Healthy Amid Revenue Dip

Despite the decline in earnings, Monarch Cement maintained a strong balance sheet. Working capital rose to $148 million at the end of March 2025 from $141.2 million at the end of 2024. Cash and equivalents stood at $50.7 million, up from $45.8 million a year earlier.

Inventories increased by $6.3 million, and receivables moved up $4 million, reflecting typical seasonal trends. Current liabilities rose $4.5 million, primarily from higher accounts payable and accrued expenses due to timing.

The company reported no off-balance sheet arrangements and does not face any significant debt-related constraints. The dividend policy remains intact, with distributions typically occurring in March, June, September and December.

Other Developments

Monarch Cement executed a strategic transaction in late 2024 involving the formation of RMCMO Holdings, LLC, a joint venture with AYG, Inc. Under the agreement, MCEM contributed full ownership of three subsidiaries — Springfield Ready Mix, LLC; City Wide Construction Products, LLC; and Kay Concrete Materials, LLC — along with 114,618 shares of its capital stock (valued at $217.49 per share), in exchange for a 49% stake in the new venture.

In the first quarter of 2025, Monarch Cement recorded $154,342 in equity income from this joint venture. No additional acquisitions or divestitures were disclosed for the reporting period.

In summary, Monarch Cement faced weather-induced operational headwinds and investment losses that significantly dampened its quarterly results. However, the company continues to maintain a robust liquidity position and has laid the groundwork for longer-term operational resilience through strategic capital investments and its recently formed joint venture.