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Operator
Good day, everyone, and welcome to Eagle Materials' second quarter of fiscal 2025 earnings conference call.
This call is being recorded.
At this time, I'd like to turn the floor over to Eagle's President and Chief Executive Officer, Mr. Michael Haack.
Hi, Mr. Haack.
Please go ahead.
Micheal Haack - President and Chief Executive Officer
Thank you, Jamie.
Good morning.
Welcome to Eagle Materials' conference call for our second quarter of fiscal year 2025.
This is Michael Haack.
Joining me today are Craig Kesler, our Chief Financial Officer, and Alex Haddock, Senior Vice President of Investor Relations Strategy and Corporate Development.
There will be a slide presentation made in connection with this call.
To access it, please go to Eagle Materials' dot com and click on the link to the webcast.
While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call.
These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call.
For further information, please refer to this disclosure, which is also income traded at the end of our press release.
Let me start my comments by highlighting a very important meeting conducted a few weeks ago at Eagle Materials that being our annual health, safety and environment conference or what we term HSE each year.
I have the pleasure of spending two days with approximately 90 leaders in our organizations across the U.S. to discuss health, safety and environmental items facing Eagle Materials, we get to share best practices across the organization, discuss how we strengthen our safety culture and how we make a difference in our operation and for all employees.
We always prefer to look at leading indicators to eliminate items before they happen, but is also a time to reflect on the progress we have made in our lagging indicators.
Progress has highlighted in our sustained below industry average TRIR rate for safety.
Our enhanced sustainability report released last year, showing our continued progress and reduce CO2 emissions per ton of cementitious product and highlights investments in projects that not all a financial return but environmentally return benefits to Eagle.
Some of the projects highlighted in this conference include we started commissioning our joint venture, Texas Lehigh Slag Grinding facility in Houston that will provide the local market with over 500,000 tons of low-carbon intensity slag.
We have commissioned in the district additional alternative fuels theater and expand landed another facilities feeder to reduce our use of coal and coke.
At these facilities, we reduced the water usage at Republic paperboard facility BioPak approximately 40% through engineering redesign of an on-site water facility.
Our blended cement production surpassed 90% of our sales.
These items would not happen if we did not have the best people in the industry.
I want to thank all Eagle employees who contributed to the success of another great HSE conference and to their continued leadership on safety, efficiency and sustainability.
Now let me move on to the financial results for the quarter.
In our in our fiscal second quarter of 2025, we again achieved record revenue, reaching $624 million, an increase in cash flow from operations by 35%.
Craig will go through the financial results in his comments, but I wanted to specifically address a few items in my comments.
Our heavy side of the business was down 5% on a volumetric basis.
While our Concrete and Aggregates locations had a larger volume impact during this quarter across our network, but most dramatically in two locations, Denver and Kansas City.
Denver was enacted from reduced demand across the board, but more dramatically impacted by our aggregate supplied oilfield services customers.
This demand has not recovered. So the team has been diligently working on cost control measures and securing new customers in Kansas City.
Our concrete union operation has been in a work stoppage situation as we were negotiating the current contract. This has been resolved but impacted our volumes sold during the quarter.
Our drivers in this operation on there are no longer union. So this operation will be right-sized and focused on the non-union market in the future.
A few items I want to mention for the upcoming quarter are we currently are in process of replacing our clinker cooler at Texas Lehigh.
As I mentioned in several previous earnings calls, we have some maintenance to do at this facility and it was planned for this timeframe. We are currently wrapping up in the 40 plus day outage to do this extensive work will have further work at this facility in a few months.
As we address our mills, all the work is going as planned.
We also have a planned outage at our Tulsa cement facility to address an issue we had with our kiln. This work is going well and will be completed ahead of schedule. Both projects will add additional maintenance costs to our upcoming quarter.
We have been working with our customers to minimize the impact of sales volumes during these outages. It also should be noted that both projects are one-off in nature and will make the plants more reliable after completions.
Turning now to what we see ahead for our businesses and the demand outlook more broadly, I'll start with the infrastructure where we've been talking for a couple of years about the demand visibility afforded by us by both the trillion dollar federal infrastructure bill, IIJA and the health of State and local budgets for a variety of reasons from weather-related days to labor constraints, the level of IIJA . spending has been slower to materialize than previously anticipated.
Nearly 75% of IIJA . funding remains to be spent.
However, we believe it will continue to be spent beyond the bills expiration date in 2026.
Turning to nonresidential construction, demand has varied depending on the subsector. While certain sub tech sectors such as warehousing have been softer. We remain optimistic that announced large scale, manufacturing and industrial projects will continue to be strong as they are still benefiting from federal government bills.
Lastly, residential construction has held up relatively well in a tepid housing starts environment, and several factors suggested should rebound buying builder demand and lower rates as the US Federal Reserve moves toward more accommodative monetary policy are just a couple of factors that support a favorable residential construction landscape.
Against this end (technical difficulty) our specific businesses in our Heavy Materials business, project delays and weather continued to affect both cement and concrete and aggregate volumes in calendar 2020 for our Heavy Materials, volumes have not played out in the way we anticipated when we began the year.
In fact, Industry Association for cast originally projected cement volumes in calendar 2024 to be up by 1% to 2% in the now and are now forecasting a year over year decline across the industry.
While that view is consistent with what we're seeing within our own footprint, we believe the demand tailwinds will bounce back given the high level of IIJA . funds yet to be spent in the anticipated rebound in nonresidential and residential construction.
Our strong position in the U.S. heartland markets supports our outlook to an even greater extent as these markets currently have higher demand than the national average and are generally insulated from imports.
Considering these favorable conditions, we announced a price increase for early January 2025 across most of our markets and look forward to speaking more about them in the next quarter's call.
Turning to our Light Materials segment, residential construction and more specifically single family building activity is, as you know, the most important driver of wallboard demand.
As you can see from our sales volumes, the wallboard business has kept its consistent demand pace despite one of the most more restrictive rate environments we've seen in quite some time.
In some ways, current demand levels have played out as expected, since decades of underbuilding have created the need for new housing construction to keep pace with household formations.
Also homeowners with low mortgage rates are tending to stay in their homes longer, which in turn created better than expected new home construction resulting in better than expected wallboard demand.
What has not been a surprise to us is the overall steadiness of our margins, given significant cost pressures and constrained capacity brought about by the synthetic gypsum shortage for the rest of the industry. When demand turns higher, these pressures will become increasingly difficult for others to manage, and we feel Eagle is well positioned to capture future opportunities for our wallboard businesses.
With these supply demand dynamics, we have announced a wallboard price increase for early November, but most likely, this increase will be delayed to the first part of 2025.
All in all, we're excited about what's ahead, especially given our history of executing win and where it matters. At Eagle we're always looking for ways to improve our businesses and ensure they are sustainable for multiple generations of employees and investors. This can be demonstrated by several factors that makes us different.
We have long been a low cost producer in our industry because of the long track record of strategic decisions that has created structural advantages that are hard to replicate.
We are relentless in our operational focus to consistently improve our assets and footprint. Our businesses have high barriers to entry are process our necessities for the growth in renewables America.
Our healthy balance sheet gives us the flexibility to invest in growing our core businesses and finding inorganic growth opportunities.
Our acquisitions for and internal investments are designed to strengthen our current network, extend our healthy reserves position and to continuously for refresh chart infrastructure to keep it like new.
For example, this quarter, we acquired a small bolt-on aggregates business to help extend the customer each of our base real-time materials aggregate business in Louisville, Kentucky.
Our cash flow generation also means we can execute on these opportunities while still returning excess cash to flow to shareholders.
We have a long-term horizon when we think about where best to invest our capital, our businesses have been in some communities for nearly 100 years. Our investments are designed to help us maintain the viability of our assets for another 50 years or more.
This can be best seen with our recently announced upgrade to our Mountain Cement plant.
I'm pleased to say that we broke ground on this project with several foundations being put in place before the winter hits us.
Our pipeline of M&A opportunities remains robust, and our commitment to continuously upgrading our current asset base remains resolute.
As such, I'm confident we can sustain industry-leading margins and invest our cash flows to create value for our shareholders.
With that, I'll turn it over to Craig for some more details on our financial performance last quarter.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Thank you, Michael.
Second quarter revenue was a record $644 million, a slight uptick from the prior year. The increase was driven by higher cement sales prices and higher wallboard sales prices and sales volume, partially offset by lower cement sales volumes.
Second quarter earnings per share was $4.26, even with the prior year. The quarterly EPS reflects lower earnings, offset by 5% reduction in fully diluted shares through our share buyback program.
As we highlighted in the press release, we had to nonroutine expense items during the quarter.
First, $1.6 million of costs associated with selling acquired inventory. Afterwards, markup to fair value was a part of acquisition accounting plus related business development costs, and second, a litigation loss of $700,000.
Turning now to us, our segment performance highlighted on the next slide that are heavy materials sector, which includes our Cement and Concrete and Aggregates segment's revenue declined 2%, primarily because of lower cement sales volume, partially offset by cement sales price increases we implemented earlier this year.
Operating earnings were down 9%, primarily because of lower cement sales volume in addition to higher maintenance costs.
Moving to slide materials sector, the next slide.
Revenue in the sector increased 5%, reflecting higher wallboard and recycled paperboard sales volume and a 1% increase in wallboard sales prices.
Operating earnings in the sector were also up 5% to $98 million, driven by the higher wallboard and recycled paperboard sales volume and higher wallboard sales prices.
Looking now at our cash flow.
We continue to generate strong cash flow and allocate capital in a disciplined way in line with our strategic priorities and rigorous financial return criteria.
During the second quarter, operating cash flow increased 35% to $233 million, reflecting strong working capital management. Capital spending increased to $66 million.
As Michael mentioned, during the quarter, we began construction on our modernization and expansion project at our Wyoming cement plant.
This construction project accounted for approximately $27 million of the total capital spending this quarter.
We also acquired a small areas business for $25 billion.
The acquired operation is complementary to our existing aggregates business in Kentucky.
And finally, we repurchased 253,000 shares of our common stock for $61 million.
In addition to paying our quarterly dividends, returning a total of $69 million to shareholders during the quarter. We have approximately $5.3 million shares remaining under our current repurchase authorization.
Finally to look at our capital structure, which continues to give us significant financial flexibility.
At September 30th, our net debt to cap ratio was 41%, and our net debt to EBITDA leverage ratio was 1.2 times.
We end (technical difficulty) committed liquidity at the end of the quarter was approximately $679 million, and we have no meaningful near-term debt maturities giving us substantial financial flexibility.
Thank you all for attending today's call.
Jamie will now move to the question and answer session.
Operator
Ladies and gentlemen, at this time, we'll begin the question and answer session.
(Operator Instructions)
Our first question today comes from Trey Grooms from Stephens.
Please go ahead with your question.
Trey Grooms - Analyst
Hey, good morning, everyone.
So obviously, weather impacted cement and aggregates in the September quarter. So first off, was there any negative impact from the hurricane earlier this month on either the wallboard or the heavy business?
And then how has the volume been trending over the last, two or three weeks maybe or some since the weather's been cooperating, particularly in the heavy business?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes, it's a straight fortunately, the hurricanes that impacted our operations in terms of any of the equipment, but some certainly some of the heavy rainfall that even in the southeast did impact volumes, some of our eastern markets even really. And that's the case for cement and wallboard do a certain degree.
But then in terms of deal, both the quarter, October has been a little bit drier across new, certainly the middle of the country and have been very happy with the volumes here in October.
Trey Grooms - Analyst
That's encouraging.
And then so on the wallboard, pricing was new was up slightly year over year, down just a little bit sequentially.
It seems like we can have these small fluctuations like product mix, geographic mix, those types of things moving around, but you also push that new November increase out.
So are you seeing any real like-for-like pricing pressure or anything like that and wallboard, um, you know, and I guess what's the status there and maybe outlook for the new term pricing there in wallboard maybe until demand gets a little bit better?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
As we talk to you, we did implement a price increase in March, which is really driving this year over year improvement in pricing. As you said, sequentially, I think pricing is down less than 1%. So you have product mix, you have regional changes, those type of things have been very happy with the performance.
So that business, the resilience of pricing in what for the last 24 months has been a pretty tepid housing environment.
And so, as we look forward, as we mentioned, should be more accommodative monetary policy, which should help continue to spur some single-family construction activity.
And that's generally the formula for future pricing.
Trey Grooms - Analyst
Yes.
I just got a couple of questions about and want to make sure that we were on the same page there, but that's what I fully expected.
So thank you for that, Craig, and I'll pass it on.
Thank you.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Thank You.
Operator
Our next question comes from Brent Thielman from D.A. Davidson.
Please go ahead with your question.
Brent Thielman - Analyst
Hey, thanks.
Good morning.
And you want to follow up on not just the comment around the wallboard price increase missed most likely delayed into next year.
Is it your sense center that is also due to some of the disruptions from weather seen so far this year?
And I guess going to continue and in Denmark incident where that is simply the fact the end histories and waiting a little more momentum in new home construction in the next spring?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes.
Sorry, the outlook there's or I'm sorry, Brent, there's lots of other factors that influence pricing and timing and magnitude.
And so as we look at our wallboard business and pricing going forward, it is driven by single-family construction activity, but that's by far and away the largest driver of activity there.
Interest rates have moved around over the last several months. So you have clarity on the demand side. But again, over a broader time period, we think there's some structural reasons why pricing and therefore, our margins should remain higher.
Just a matter of timing is the are the only question.
Brent Thielman - Analyst
Okay.
And then maybe just on that and taking all your opening comments around the cement side, we haven't seen yet the full effects of IIJA yet here.
Can you talk around do you qualitatively your backlogs and visibility cost used cement platform?
Is it any worse than it was six months ago?
Is it better?
I mean, how does it look Q2 and into kind of calendar 2025?
Any initial comments there would be helpful just in terms of how that's evolved yet.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes, with high looking at Brent, looking at our backlog, we really don't carry backlog as much on the cement side.
We know projects and discussions with customers and stuff. Nothing has fundamentally changed there.
We still have, as I mentioned in my opening comments, a lot of, heavy industrial projects going on.
We have the IIJA . and that should be hidden.
I you know, overall, we see a very positive demand picture across every market that we operate in.
I you know, we were down a few percentage points and mostly affected by, as we said, weather and some delays in these projects, but these projects are going to go. So we think that, you know, over this next time horizon be at six months period in oh nine months with at these projects are queued up to start off.
And there's no doubt the 2020 for construction season got off to a very slow start across much of the country.
Then we've continued to face some of these weather headwinds even into the summer and fall. It is a relative comparison from the prior year. But I'll give you a point to the Portland Cement Association to some other industry views.
They continue to see growth not only next year, but in several years post that as these projects get going in earnest.
Brent Thielman - Analyst
Got it.
Appreciate that.
And just last one on Texas.
Should the investments I guess they had the big outage and the investments you're making here, lack of better word to recover you here for a while.
Maybe we should kind of get back to your normal maintenance cycle after this quarter.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes, this is a project we talked about for quite some time.
The timing was always a little bit of question.
Win equipment showed up and when contractors could be on size.
But as Michael mentioned, that's been done here in October and some So yes, these are this is a 50 year old plants. This is a 50-year old project.
You're going to replace that clinker cooler once every 15 years.
And so these are the investments that you make into a facility that age and the reliability should significantly improve.
Brent Thielman - Analyst
Got it. Okay. Thank you.
Operator
Our next question comes from Anthony Pettinari from Citigroup.
Please go ahead with your question.
Asher Sohnen - Analyst
Hi, this is Asher stone.
And on for Anthony.
Thanks for taking my question.
Magnets, increased maintenance costs that you're expecting in the upcoming quarter.
And then just generally the cadence of cement margins over the balance of the year.
And then stepping back kind of maybe what could be cement business margins, kind of look like flipping a long term?
It's a good question.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
I'll handle the last part of that First, as we've talked about for many quarters and years now of the cement industry is fundamentally changed over the last decade or more with some of the regulations that have been put in place that is really restricted new capacity being added.
It's been over a decade well over a decade since really the last greenfields cement plant was built in the U.S. And so you have some significant supply constraints.
Um, deal in today's demand environment is materially below where we've been in prior peaks.
And so as we think about this industry over a cycle over several cycles, we think the margin profile and the resiliency, those margins should be a much higher than what we've seen in prior cycles. And more specifically to our footprint.
We've more than tripled our cement capacity over the last decade plus. And so the quality of the assets that we operate today are in a much, much higher position. You think about the investment we're making at our Mountain Cement facility. Again, that will lower the cost structure that facility make it more resilient.
So we've positioned the business very well.
And in the industry at large, I think from a supply and demand dynamics of would favor a better margin business over the next.
So over the cycle.
And then as you think about just this next quarter, um, it will be between what Michael mentioned, the Texas Lehigh facility and then the Tulsa facility that we're also working on the kiln.
That'll have a six to $8 million type of impact here in the third quarter, but those projects will be complete.
Asher Sohnen - Analyst
Okay, great.
Thanks.
That's really helpful.
And then just a second one on some that I mean, it sounds like last quarter basically mid-tiers were kind of taken off the table.
So just looking forward to 2025 from the timing of potential cement high, does that do you think that's more of a January or in April?
Just kind of how those conversations are going so far.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
As Michael mentioned, we've put out price increases in most of our markets for early 2025 in January.
Asher Sohnen - Analyst
Okay. Thank you.
I'll turn it over.
Operator
And our next question comes from Jerry Revich from Goldman Sachs.
Please go ahead with your question.
Jerry Revich - Analyst
Yes, hi.
Good morning, everyone.
I just wanted to follow up on the disclosure about the slag capacity addition and in Texas.
Can you just take a step back for us and just update us on cement additives mix across your footprint?
Where do we stand now in, as you look at other potential additives on anything else that we should be on the lookout from a legal standpoint and for the next three to five years in terms of other cement additives could make sense.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Did a great question, Jerry.
We announced the slag cement facility in early 2024 or earlier this year.
Through our joint venture. It's down in the port. Houston will be receiving slag renewals over by freight, ocean freight.
And this is similar to a business we already operate and have operated for quite some time in the Chicago area. Slag is improves the durability of the country and will be very complementary to our cement business here in Texas.
We continue to explore those opportunities we announced against several months ago, a partnership with Terra CO2 as it relates to some. So alternative cementitious materials as well.
That's a little bit more out in front of us in terms of the opportunity, whereas the slag cement facility in Texas is being commissioned in October, but we continue to look to ways to grow our footprint, and I'm excited about them.
Jerry Revich - Analyst
Super.
And then in terms of just the cadence of cement demand over the course of the quarter, again, can you just comment on what the year-over-year performance looks like by month, just to give us a flavor?
I know you mentioned weather was an issue (inaudible).
We just to expand them how that played out?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes, Jerry, for example.
So the volumes are down for the whole group, down 5% in Texas. We had a hurricane in July. So your market to market, you face different headwinds, some of those weather and so that as Michael mentioned, we've just seen projects get pushed out.
Some of it is just a bureaucratic process to get money through the governmental system. In other cases, jobs get pushed further out reasons. But I was I wouldn't necessarily highlight the unique month because each market is very independent of each other.
So but certainly I think that's pretty much in line with what the Portland Cement Association has seen for calendar 2024 as well as you think about the national average,
Jerry Revich - Analyst
(inaudible) if we were just apply normal seasonality to December volumes and I think that would yield December cement shipments are down something like 10% or 11% year over year.
Is that we should be thinking about the cadence based on what you're seeing so far?
I'm just trying to understand that mix, Craig, in terms of what's pushing out versus webinar,
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
You have typically look for especially for those northern markets. This December quarter is dependent upon when winter shows up. We've seen years where winter doesn't show up till mid December. And then there have been other years by Thanksgiving, Chicago and Kansas City or winters hit. So it's somewhat weather dependent as you think about the rest of the second half of our fiscal year.
We also faced some pretty unique headwinds in our fourth quarter last year. Especially in the Midwest. So there is some adverse weather delays last year. Assuming we don't face that, you should have better results of this year.
Jerry Revich - Analyst
Appreciate the discussion.
Thank you.
Operator
And our next question comes from Adam Thalhimer from Thompson Davis.
Please go ahead with your question.
Adam Thalhimer - Analyst
Hey, good morning, guys.
Just a couple of quick ones that have been asked the on the aggregates acquisition you did. Can you give a little more color on that? We break anything into volumes there? Is that more long-term positioning.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
So it certainly contributed to come to the business. The aggregate side with volume in terms of the quarter, it's a little over 100,000 tons that came from that business. Longer term, we it will fit very nicely with the existing business.
I think in the quarter, revenue from that business was about $1.7 million. So it didn't close until the middle of the quarter. And so we see a better benefit as we go forward.
Adam Thalhimer - Analyst
Great.
And then these $6million to $8 million impact from Texas.(technical difficulty)
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
There's incremental relative to those two projects.
Adam Thalhimer - Analyst
Gotcha. Okay.
Thank you.
Operator
And our next question comes from [Selling] from Jefferies.
Please go ahead with your question.
Unidentified Participant
Good morning, guys. It's just the borrowing on for (inaudible). Just two quick ones from me. Maybe first, can you give us kind of just an update on the cost structure for both the cement and wallboard business, specifically on the energy side, kind of what you're hedged now?
And I have a quick follow-up.
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes. So on the cost structure within wallboard, again, for us, we're very fortunate that we either own or control arm gypsum sources. And so that's not a significant cost of component for us. And we have good surety around that.
So the other large pieces are paper, which again, is a source generally internally and then natural gas and in terms of kind of the hedge position across all of the legal for natural gas for right, around 50% of the year. And that's of about today's levels.
So feel good about where we are from that perspective.
They haven't seen a lot of volatility in natural gas prices recently. On the cement side of the larger components for costs or maintenance and energy. And in the energy side of things, it's a portion of that is fuels, which as we've talked about, we generally you have at least one to two year contracts for those prices. So they're relatively stable throughout the year. Then you do have electricity costs which are subject to market fluctuations.
Unidentified Participant
Got it. Thanks.
And then just last follow-up, just anything more that you can give on the impact from the KC. and then the issues that you had water side?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
I'm sorry, you broke up on the that segment.
Unidentified Participant
Second part of that question, does anything more that you can give on the Denver and Casey issues that you guys called out in the quarter?
Yes.
Micheal Haack - President and Chief Executive Officer
So on, yes, on the Denver issue, basically what we had as we add that we had an acquisition in that market. So this is a newer business with us. We're probably a little overweighted in one sector. So we are in that sector went down while we had to pivot and move to other sectors.
And there there are more residential and some other consumers of aggregates. So we're in process of doing that now. We're setting up that business to be a little bit more diverse than the previous owners had it in the Kansas City situation. You know, that's pretty much, yes, resolved. And now we're just refocusing that business on the non-union work in that market.
We'll be working to rightsize that business and get that business back up and running with more volume here as we speak.
Unidentified Participant
Thanks, (inaudible).
Operator
And we have an additional question from Tyler Brown from Raymond James.
Please go ahead with your question.
Tyler Brown - Analyst
Hey, good morning, guys.
Part of his or her.
Hey, Craig, just can you just talk a little bit more about the wallboard unit costs and maybe specifically about (inaudible)early in the year and it's kind of roll back over to Mike.
Can you just talk about how big paper is of that wallboard and cost structure and distinct comments?
Is OCC. a headwind right now we'll be building headwind and then maybe in a couple of quarters and actually becomes a tailwind again? Or just any color there?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes.
As I mentioned, paper is the largest component of our cost structure and it fluctuates in terms of where OCC pricing is.
It's a market-based price, not too dissimilar to natural gas or something along those lines. But you're right, OCC has been elevated. It's for really the first half of this year. And so we've talked about that. It does take a little bit of time to flow through into the wallboard business.
I will tell you here in October, OCC prices were down again, market was down of that benefit, takes a little bit of time to also flow through the business. But the I would say it's relatively elevated from, but it hasn't changed a whole lot over the last several months.
Tyler Brown - Analyst
Okay, not held this month in the last year to see update on CapEx from 25 and then no, 26 is still a ways away we can.
And should we think about CapEx in more than $300 million again in 2026, maybe a placeholder?
D. Craig Kesler - Chief Financial Officer, Executive Vice President - Finance and Administration
Yes, that's not a bad place to be.
So we've previously given some guidance that was north of $300 million for FY25, just based on timing and flowing of payments.
My guess is that numbers somewhere between $280million to $310 million for fiscal 2025 dealers and obviously that increase from the prior year associated with the investment we're making in layer me for that monetization project.
So a good place to start as some things. And that is a multi-year construction projects that will continue through fiscal 2026. So a good place to start is a pretty similar number. We can refine that as we get down there. Road, but that's not a bad place to start.
Tyler Brown - Analyst
Okay, cool. Thank you.
Operator
And I'm showing no additional questions at this time.
We'll conclude today's question and answer session.
I'd like to turn the floor back over to Michael Haack for any closing remarks.
Micheal Haack - President and Chief Executive Officer
Thank you, Jamie.
Thanks to everyone who joined us on the call today.
This past quarter continued to highlight the strength of our operational execution in our ability to capitalize on opportunities for our businesses. Great showcase our operational initiatives on today's call and in our annual HSC. conference.
Thank you again to every employee for their continued contribution to our success. We look forward to discussing our results again with everyone next quarter.
Operator
Ladies and gentlemen, that concludes today's conference call and presentation.
We do thank you for joining.
You may now disconnect your lines.