Knife River Corporation

Knife River Corporation (NYSE: KNF) produces aggregates, ready-mix concrete, asphalt and related construction materials. It also performs construction work, including road building and paving. Its integrated model lets its contracting operations use its own materials, alongside sales to outside customers.

September-quarter performance

Three months ended September 30. USD millions, except diluted earnings per share.

EBITDA adds back taxes, net interest and depreciation, depletion and amortization. Adjusted EBITDA also removes selected investment gains or losses, stock compensation and the effect of selling acquired inventory marked up in purchase accounting. Acquisition expenses and higher fuel costs remain in the measure.

Materials and contracting

Aggregates are crushed stone, sand and gravel. Q3 volumes rose about 10%, with support from internal construction demand and third-party sales. Higher prices and lower variable production costs helped lift aggregate gross margin to 29.6%, from 27.2%.

After internal sales are eliminated, the broader construction-materials business generated gross profit of $236.4 million, versus $220.5 million. Contracting gross profit fell to $51.2 million from $63.8 million, absorbing most of that gain. Competitive bidding, delayed projects, work mix and higher fuel costs affected contracting results.

Regional results varied. The West earned a higher EBITDA margin despite lower revenue and less low-margin contracting work. Mountain revenue benefited from materials demand, more paving and earlier acquisitions. Energy Services EBITDA declined as lower sales in some markets and higher input costs offset opportunities elsewhere.

Forecasts and remaining work

In August, annual revenue guidance was $3.4 billion to $3.6 billion and adjusted EBITDA $520 million to $560 million. November's ranges are $3.375 billion to $3.425 billion and $475 million to $505 million. The profit midpoint falls $50 million to $490 million.

September contracting backlog was $857.2 million, compared with $994.6 million a year earlier. Expected margins on that work are lower. Approximately 82% relates to publicly funded projects. Backlog represents remaining contracted work, with revenue recognized as projects progress.

Cash, debt and investment

Cash excluding restricted deposits was $118 million at September 30, compared with $40.7 million in June. A further $59.3 million was restricted cash held by the captive insurer.

Net debt fell to approximately $1.45 billion from $1.59 billion in June. Net leverage, using trailing annual adjusted EBITDA, improved to 2.9 times from 3.2 times. Available revolving-credit capacity was $448.2 million, with no revolver borrowing outstanding.

Nine-month operating cash was $60.9 million, versus $82.6 million a year earlier. Capital spending was $208.6 million, comprising $127.6 million for maintenance and improvements and $81 million for organic growth projects. Acquisitions used another $185.7 million.

The $400 million increase in Term Loan B borrowing occurred in May. It financed earlier acquisitions, growth and other corporate needs, including repaying revolving credit. The amendment also reduced the loan's interest margin by 0.25 percentage points.

Acquisitions and operating priorities

Four first-half acquisitions added aggregates-based businesses in Montana, Utah and Oregon. They contributed $27.9 million of Q3 revenue and $1.8 million of net income. The $1.3 million of acquisition cash paid in Q3 settled a holdback on a 2025 deal.

The company is adding operational, commercial and organizational initiatives under Sharper EDGE, with further details planned for an investor day. The next results can test whether aggregate gains translate into broader profit improvement, contracting margins stabilize and cash generation supports the investment plan.