Granite Construction continued paving a profitable path in the second quarter while racking up a record amount of backlog and buying two aggregate suppliers.
The Watsonville, California-based road builder, materials supplier and infrastructure firm purchased Hattiesburg, Mississippi-based Warren Paving and Arroyo Grande, California-headquartered Papich Construction for a combined price of $710 million.
Granite’s continued investment in material suppliers reflects the firm’s bullishness on both public and private infrastructure work, along with the booming data center market. Those facilities, along with computer chips and racks of servers, need roads and parking lots to access them as well.
Two aggregate purchases
Warren Paving, which owns a quarry, 11 aggregate yards and three asphalt plants along with 170 owned and leased barges on the Mississippi River system, will expand Granite’s materials business in the Southeast, while building on its buying spree in the region.
In late 2023, Granite scooped up Lehman-Roberts and Memphis Stone & Gravel, both of Memphis, for a combined $278 million. Then last year, it acquired Brookhaven, Mississippi-based aggregate supplier Dickerson & Bowen.
On an earnings call Aug. 7 to discuss the firm’s second-quarter results, CEO Kyle Larkin said Warren Paving will complement those previous purchases.
“Warren Paving’s logistics expertise should allow us to supply materials to certain Lehman-Roberts and Dickerson & Bowen asphalt plants and positions us to expand the distribution network as we continue to grow our Southeast platform investment,” Larkin said on the call.
He also highlighted opportunities to supply data center jobsites in the region, which has been attractive to owners looking for cheap land, plentiful power and water and a robust labor pool.
“We believe private investment will ramp up in the region, whether through data centers or other large commercial developments.”
In California, Papich will expand Granite’s operations along the state’s Central Coast and Valley, an area where it currently has less of a presence. “It’s complementary to our current footprint,” Larkin said.
The addition of the two businesses will add approximately $425 million to Granite’s revenue annually, the company said. It raised its revenue guidance for 2025 accordingly to between $4.35 billion and $4.55 billion and anticipates approximately $150 million in revenue from the units in the remainder of the year.
By the numbers
The deal was the highlight of a quarter that also saw Granite grow its backlog — which the company calls Committed or Awarded Projects — to $6.1 billion, a company high. That’s $488 million more, or 9% higher, than a year ago.
Revenue of $1.13 billion increased 4% from $1.08 billion a year ago. The company also grew profits to $71.7 million, nearly doubling the $36.9 million of net income it reported for 2024’s second quarter.
Larkin attributed the higher revenue, backlog and profits to a robust bidding and funding environment, particularly in the company’s core infrastructure markets, as well as more efficient operations and integration within the company.
“In California and across our footprint, we continue to see a healthy list of project bidding opportunities in both the public and private markets,” Larkin said. He also said money from the Infrastructure Investment and Jobs Act, passed in 2021, hasn’t reached its apex, which he expects to come in 2026 or 2027.
“IIJA funding continues to be strong,” Larkin said. “I think that's pretty universal in all the markets that we're in. And just as a reminder, the spending to date on the IIJA is still less than 50%. And so we haven’t seen, in our opinion, that peak yet.”
