Question-and-Answer Session
Operator
(Operator Instructions) Our first question is from the line of Kenneth Zener with Merrill Lynch. Please go ahead.
Kenneth Zener – Merrill Lynch
Given the pricing trend that occurred could you – following last quarter I think there was a lot of confusion about product mix and regional mix. Could you talk about what your perspective pricing in California? I saw that you announced a $5 increase but could you also address the kind of product mix as you move more towards the bulk area and how much of your new volume you’ve already established through contracts? Because, I think a lot of people are concerned about price deflation notwithstanding price increases that you’re talking about.
Melvin G. Brekhusthat
The price decrease that you saw year-over-year is a result of us selling more cement in Texas than we sold in California and selling less packaged cements and more bulk cement. That is the reason for the year-over-year difference.
Kenneth Zener – Merrill Lynch
Right. That I understand. I guess when you’re looking at it prospectively though for the new volume, just looking at California how do you think that mix is going to be impacting the pricing in the California markets? So, if pricing was $105 a ton does it look like your new contracts are going to be lower because you’re going to have such a greater mix from bulk?
Melvin G. Brekhusthat
No, no that’s not what’s going to happen. What’s going to happen is as we bring the California production on line and to market the sequential pricing trend will be up. We’ll be selling more cement in California as our mix and we’ll be selling additional product.
Kenneth Zener – Merrill Lynch
Okay. Could you just maybe some of the cost components here with coal for instance, how much you think that is going to be squeezing the cost side?
Melvin G. Brekhusthat
I will but I’ll answer it this way, the cost of energy is going up. The cost of oil is over $100 a barrel, the cost of natural gas is as high right now as $0.10 a million, the cost of coal is likely to go up also over time and that’s why we believe that the pricing initiatives that we have announced in Texas and in California have a good chance for traction because the industry needs to recuperate the cost increases and the effect that that has had on margins.
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