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MDU Resources Reports Second Quarter Earnings; Reaffirms 2017 Earnings Guidance

Aug 01, 2017

MDU Resources Group, Inc. (NYSE: MDU) today announced that a strong second quarter at its utility and construction services businesses partially offset a slow quarter at its construction materials business caused by weather-related delays and increased competition. Second quarter earnings from continuing operations were $43.8 million, or 22 cents per share, compared to second quarter 2016 earnings from continuing operations of $46.1 million, or 24 cents per share.

Including discontinued operations, MDU Resources reported second quarter earnings of $40.6 million, or 21 cents per share, compared to a loss of $109.3 million, or 56 cents per share, in second quarter 2016.

Highlights from the second quarter include:

  • Electric and natural gas utility earns $5.0 million, up from $200,000 in second quarter 2016 based on stronger natural gas utility results. Pipeline and midstream results consistent with second quarter 2016, absent results from Pronghorn assets sold in early 2017.
  • Construction services earnings up $5.4 million, a 77 percent increase on 18 percent revenue growth. Construction materials earns $21.2 million. Combined construction backlog approximately $1.4 billion, up 4 percent from second quarter 2016.
  • Company reaffirms earnings guidance range of $1.10 to $1.25.

“Our second quarter results emphasize the benefits of our two-platform business model. Colder temperatures across our natural gas utility service territories and higher workloads and margins at the construction services business helped offset some of the impacts that above-average precipitation had on several markets where our construction materials business operates,” said David L. Goodin, president and CEO of MDU Resources. “Our operations continue to perform well and we are optimistic about growth opportunities as we continue Building a Strong America.

“Construction services is off to a strong start with record year-to-date revenue of more than $635 million and significant earnings growth, so we are increasing our revenue guidance for this business to a range of $1.2 billion to $1.3 billion. Workload remains strong for our construction businesses, as evidenced by a combined backlog that's approximately 4 percent higher than this time last year. Both construction services and construction materials increased backlog since the first quarter, reflecting an active bidding environment. Our utility companies continue to experience customer growth and pursue regulatory recovery, including two recently filed natural gas rate cases. Our pipeline and midstream business is moving forward with the Valley Expansion project and recently announced its Line Section 27 growth project, which has firm customer commitments backing the expansion.”

Business Unit Results

Regulated Energy Delivery

The electric and natural gas utility earned $5.0 million in second quarter 2017, compared to $200,000 in second quarter 2016. The utility's service territory experienced colder weather during the quarter, resulting in 19 percent higher natural gas retail sales volumes and higher retail sales margins, particularly in jurisdictions that do not have decoupling and weather normalization in place. Cost recovery through regulatory relief also contributed to the earnings growth. The electric utility saw an approximate 2 percent decline in retail sales volumes and recorded a true-up of interim rates to reflect the approved settlement of the North Dakota electric case. The utility continues to seek regulatory recovery for costs associated with upgrading and expanding facilities to meet customer demand. Customer growth is expected to average 1 to 2 percent per year.

Earnings at the pipeline and midstream business were $5.3 million for the second quarter, compared to $6.3 million in 2016. The decrease reflects the absence of earnings from the previously announced Jan. 1 sale of the company’s interest in the Pronghorn assets, for which the company received proceeds of approximately $100 million in the first quarter. Transportation volumes were up 7 percent for the quarter compared to last year, primarily in off-system deliveries.

Construction Materials and Services

The construction services business earned $12.4 million in the second quarter, up 77 percent from $7.0 million in 2016. The increase reflects higher earnings in all service lines, particularly in inside work where the company saw higher workloads and margins. With record year-to-date revenues of more than $635 million through June 30, revenue guidance has been increased to a range of $1.2 billion to $1.3 billion. Construction services backlog at the end of second quarter was $596 million, 17 percent higher than $508 million in the second quarter of 2016 and up from $529 million in the first quarter of 2017.

Second quarter 2017 earnings at the construction materials business were $21.2 million, compared to record second quarter earnings of $33.7 million in 2016. Although operations were impacted by above-average precipitation in a majority of markets and increased competition in some markets, the business was able to generate its second-best quarterly results for the second quarter since 2007. Due to the slow start to the construction season, revenue guidance has been lowered to a range of $1.8 billion to $1.9 billion. Construction materials backlog at the end of second quarter was $766 million, compared to $805 million for the same period in 2016 and up from $725 million in first quarter 2017.

Combined construction backlog of $1.4 billion at June 30 was up approximately 4 percent compared to the end of second quarter 2016.

Discontinued Operations and Other

The results of MDU Resources’ 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 costs and interest expense.

Earnings Per Share Guidance

The company reaffirmed its 2017 earnings per share guidance in the range of $1.10 to $1.25.

Conference Call

MDU Resources will host a webcast at 2 p.m. EDT Aug. 2 to discuss second quarter 2017 earnings results. 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 Aug. 16, is 855-859-2056, or 404-537-3406 for international callers, conference ID 40930145.

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