Granite nixes plans to sell water, mineral units

Diving brief:

  • Granite Construction backtracked on plans to sell its water resources and mining services businesses on Monday, saying current market conditions undermined its efforts “to secure appropriate value for businesses.”
  • The company will reintegrate the companies’ financial results into its continuing operations and no longer classify their assets and liabilities as held for sale. The move means it will file quarterly segment information for units for previously reported quarters in 2021 and 2022, and full-year results for 2020 and 2021.
  • Kyle Larkin, president and CEO of Granite, said the company was seeing significant interest in the units, but the time to sell them was ultimately not the right one. “Both companies have performed very well this year, supported by strong underlying market demand which remains resilient,” Larkin said in a statement. “Ongoing drought concerns across much of the country, coupled with strong demand for mineral resources, make us optimistic about the prospects for these companies.”

Overview of the dive:

Granite announced in February that the units were on the sell block as part of its new strategic plan, following the sale of its trenchless rehabilitation services and inliner pipe unit to JF Lehman & Company for 159, $7 million.

The about-face now comes as the company has made progress in refocusing on smaller, less complex projects that it can complete quickly. Selling plans fell apart as borrowing costs for financial capital rose, due to the Federal Reserve raising interest rates in its bid to rein in runaway inflation.

Since an accounting scandal in its heavy civil group in 2019, Granite has had to restate three years of its financial results. More recently, he agreed to pay $12 million to the Securities and Exchange Commission to settle the charges against him.

But the rollback of the announced sale plan also comes as funds from the $1.2 trillion Infrastructure Investment and Jobs Act begin to flow to states. This could ultimately mean increased opportunities for business units.

“The ability of our teams to identify and develop new water sources and deliver clean water to communities complements our civil construction activity,” Larkin said. “We believe these businesses will generate greater shareholder value and contribute to the EBITDA margin.”

In unrelated news, Granite announced winning a $20 million airport runaway project in Tucson, Arizona and a $17 million job to upgrade the Duncan Creek diversion dam near Foresthill. , in California.

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