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Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. First Quarter 2021 Earnings Conference Call. My name is Mallory, and I will be your conference call coordinator. As a reminder, today's call is being recorded. Now I would like to turn the call over to your host, Gail Peck, SVP Finance and Treasurer for Arcosa. Ms. Peck, you may begin.
Good morning, everyone. Thank you for joining our first quarter 2021 earnings call. With me today are Antonio Carrillo, President and CEO; and Scott Beasley, CFO. A question-and-answer session will follow their prepared remarks. A copy of yesterday's press release and the slide presentation for this morning's call are posted at our Investor Relations Web site, www.ir.arcosa.com. A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our Web site under the News and Events tab.
Today's comments and presentation slides contain financial measures that have not been prepared in accordance with generally accepted accounting principles. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. Let me also remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the earnings press release we filed yesterday, and our Form 10-Q expected to be filed later today.
I would now like to turn the call over to Antonio.
Thank you, Gail. Good morning, and thank you for joining us to discuss Arcosa's first quarter results and our updated outlook for 2021, following the recently completed acquisition of StonePoint Materials. Our first quarter financial performance exceeded our expectations despite continued challenges related to COVID-19 and the impact from winter storm Uri in February. These results speak to the strength and resilience of our portfolio of core infrastructure products and to the strategic investments we've made to reduce cyclicality, drive growth and enhance margins.
Turning to Slide 4. Let me discuss a few key takeaways. Our results were better than expected during the quarter, driven by strong Construction Products performance. In particular, the construction businesses benefited from strong demand and construction activity. Within Engineered Structures, our order activity for the utility, traffic and telecom structures business held strong throughout the quarter. The fundamental drivers for these businesses remain very healthy given the investment in grid hardening, increased demand coming from renewable expansions and the wireless buildout. The Transportation segment continues to be impacted by the rail cycle and high steel prices. However, we believe the rail cycle is reaching its lowest point and will start recovering and once steel prices normalize, significant pent-up demand for barges will convert to new orders. In the meantime, we're taking steps to maintain manufacturing flexibility, and at the same time, we're focusing on managing our costs.
In April, we completed the previously announced acquisition of StonePoint Materials, a top 25 US platform that advances the repositioning of Arcosa. StonePoint is a premier asset that accelerates the growth and scale of our construction materials platform, adding market leading positions in attractive new geographies, more than 40 years of reserves and an experienced team. Our short term focus will be integrating StonePoint and building on this platform. [Still], we continue to seek out higher margin and higher growth opportunities to further expand our portfolio. To that end, we're pleased to have a robust pipeline and will continue to apply a rigorous analysis to every new project, organic and inorganic, and to evaluate whether that particular investment meets our street requirements for long term strategic value and return potential. Our businesses must compete for capital to ensure that we invest in those opportunities with the highest long term potential. Also, as I will discuss later, we published our first full year sustainability report, underscoring our commitment to ESG.
Turning to Slide 7. There is an overview of our results for the quarter. While revenue was down 10% year-to-year, this was consistent with our expectations. Adjusted EBITDA of $56.5 million was ahead of our forecast, even after $4 million to $5 million negative impact from winter storm Uri. The storm increased our natural gas costs significantly and shut down many of our facilities for over a week. On the positive side, our construction segment performed better than expected during the quarter and helped us compensate for the effects of the storm. I will now turn over the call to Scott to discuss segment performance, and then I will return to update you on the outlook for the business. Scott?
Thank you, Antonio, and good morning, everyone. I'll start on Slide 8 and review our segment results from the first quarter. Construction Products revenue grew 3% to $153.2 million and adjusted EBITDA increased 2% to $32.9 million despite the negative impacts from winter storm Uri. We estimate that the winter storm impacted Construction Products' EBITDA by roughly $3 million to $4 million, although, dry weather in March helped us recover well. Segment EBITDA margin of 21.5% was flat versus last year, another noteworthy accomplishment given the February storm. Let me discuss a few highlights from the quarter. Volumes in our legacy natural aggregates business were up organically and through bolt on acquisitions, driven by higher infrastructure related work in Texas. We continue to drive our cost per ton lower through operating efficiencies, lower maintenance costs and lower fuel costs versus the first quarter of 2020. We continue to see nice price increases across our footprint, although, a mix shift to a few lower ASP plants resulted in a lower overall ASP.
The primary headwinds in our aggregates business were oil and gas markets, which were stronger in Q1 of 2020, but the overall performance in aggregates was excellent. The market for recycled aggregates also continues to be very healthy in both Houston and Dallas. Margins were pressured in these businesses given the impact of the storm but end markets are healthy, and we recovered well in March as the weather improved. Finally, we're very encouraged that the two businesses that were most impacted by COVID, lightweight aggregates and trench shoring products have both recovered nicely and are now performing close to or above prepandemic levels. Our lightweight aggregates business was roughly flat with the prepandemic first quarter of 2020 and trench shoring EBITDA was above the first quarter of 2020. The recovery in these businesses gives us confidence in the underlying health of our infrastructure markets and provides additional stability to our overall portfolio. We closed on StonePoint in April so the acquisition's contribution will begin in Q2.
Turning to Engineered Structures on Slide 9. Revenue in Q1 declined moderately to $207 million but was roughly flat sequentially with Q4. Adjusted EBITDA was down year-over-year to $26.4 million. There were several unusual items in the quarter. We were helped by the sale of a nonoperating facility that produced $3.9 million gain, but we were impacted by several unplanned expenses from winter storm Uri, most notably larger natural gas bills in several facilities. Those bills increased our cost by approximately $1 million in the quarter. Our operating teams did an excellent job recovering from the storm and we were able to meet customer deliveries despite challenges throughout the supply chain, particularly for steel. Our revenue decline was roughly in line with expectations. We continue to ramp up a wind tower plant that we took off line in Q4 of last year in order to retool for larger towers. We were near full production at the plant in March, and it has started to contribute positive EBITDA after several months of drag.
We also made progressive improvement on the reopening of our Mexico utility structures facility, but it contributed to the year-over-year margin decline. Our 12.8% adjusted EBITDA margin in the quarter, once adjusted for these positives and negatives, was near the bottom end of our 12% to 13% range but we continue to expect 12% to 13% margin for the full year in 2021. Demand across transmission, wind towers, telecom and traffic structures has remained strong with healthy levels of inquiries across all of those product lines. The combined backlog for utility, wind and related structures increased to $379.5 million from $334 million at the end of 2020. Additionally, our storage tank product lines in the United States and Mexico continued to perform extremely well. We have been able to pass through higher steel prices and have also benefited from strong residential and commercial demand for propane tanks, driven by COVID related deurbanization.
Moving to transportation products on Slide 10. Our year-over-year results reflect cyclical downturns in both our barge and rail components businesses. Revenue was down 31% and adjusted EBITDA was down 53% as margins compressed from lower utilization in both businesses. The barge business received $16 million of orders in the quarter, and backlog decreased to $133.2 million. High steel prices continue to pressure the conversion of inquiries into new orders, although, we are confident in the eventual recovery that will likely be led by the dry barge market. As we have noted on the last several calls, we have reduced our capacity and cost structure in barge and rail components, and we made the difficult decision to announce the planned idling of our Louisiana barge facility unless demand recovers in the near term. I'll note that both businesses continue to be EBITDA positive, and we maintain our expectation for the segment to generate $35 million to $40 million of EBITDA this year. EBITDA will likely be near the low end of this range if steel prices do not moderate in the near term.
Finishing on Slide 11. In early April, we closed our inaugural bond offering of $400 million of eight year unsecured senior notes to fund the StonePoint acquisition. We were able to price the offering with4.375% coupon, an attractive rate of long term financing. We received public debt ratings of BB, providing us strong access to capital and the flexibility to pursue our disciplined growth plans. Following the acquisition and offering, our net debt to adjusted EBITDA stands at roughly 1.9 times, below our long term target of 2.0 to 2.5 times. We had lower than expected free cash flow in Q1, partially due to higher accounts receivable from delayed shipments due to winter storm Uri as well as strategic steel purchases. Even with this usage of working capital in Q1, we expect to be back to roughly working capital neutral for the full year.
I will now turn the call back over to Antonio for more on our business outlook.
Thank you, Scott. As Scott detailed, our results exceeded our expectations in the first quarter despite continued COVID related market challenges and the negative impact from winter storm Uri. Before turning to our near term outlook, Slide 13 details the StonePoint acquisition that closed in April, which was an important addition for Arcosa. Please turn to Slide 14. As we look towards the remainder of 2021, our near term view of our markets has not changed materially from the update we provided on our fourth quarter conference call in February. We continue to see robust and resilient construction activity in our key markets through Texas and the Gulf Coast benefiting our Construction Products business. I'm particularly excited about the growth opportunities from our acquisitions over the past 18 months, including Cherry, Strata and StonePoint, which have significantly expanded our aggregates platform, adding complementary products in attractive new geographies. Benefiting from favorable infrastructure spending trends in Texas, our largest market, as well as on a national scale, the outlook for our Construction Products segment remains strong.
Within our Engineered Structures segment, demand trends are positive. We received healthy orders for wind towers and utility structures during the quarter, as well as in our new offerings in traffic and telecom markets. We're also seeing steady demand and rising backlogs for storage tanks in both the US and Mexico. While elevated steel prices remain a headwind in this segment, we will continue to stay focused on passing through price increases as much as possible. From the demand point of view, I'm encouraged by the levels of backlog and inquiry volumes overall that we're experiencing, which reflect continued interest in investment in renewable energy, grid hardening and other power reliability initiatives. As we discussed last quarter, our transportation segment continues to face COVID related market challenges.
Utilization rates in the liquid barge market while improving remain low and high steel prices have impacted demand for dry cargo barges. Although, steel components revenue declined year-over-year in the first quarter, revenue grew sequentially from the fourth quarter, suggesting this market may be turning the corner. In addition, we have expanded our products and customer base to nonrail markets, which should increase our operational leverage once the rail market demand normalizes. In this environment, we're taking steps to manage our expenses prudently and maintain manufacturing flexibility. It's important to remember that ramping production at the barge plants up and down is something we know how to do very well. We remain confident in the medium and long term fundamentals of our Transportation Products business. Depressed demand now due to high steel prices and COVID related factors should translate into a strong market once these conditions abate.
Please turn to Slide 15. On our financial guidance for the year, the growth businesses were focused on building Construction Products and Engineered Structures are well positioned for the future. And as I noted, we also expect a good recovery in the businesses that make up Transportation Products once short term conditions improve. Given the completion of the StonePoint acquisition on April 9, we're increasing our full year revenue guidance. We now expect revenue to be between $1.88 billion and $2 billion, up from our prior guidance of $1.78 to $1.9 billion. We're also increasing our 2021 adjusted EBITDA guidance. We now expect EBITDA to be between $270 million and $290 million, up from our prior guidance range of $250 million to $270 million. We anticipate that StonePoint will contribute approximately $20 million in adjusted EBITDA for the full 2021, representing about eight months of ownership. Overall, this provides forecast positions us to meet or potentially exceed our 2020 results.
Turning to Slide 16. Finally, I'd like to highlight some achievements we've made with respect to our environmental, social and governance efforts, which represent a fundamental component of our long term strategy. 2020 marked our first full year of ESG disclosure. And while we're early in the process, we believe strongly in the long term value that ESG brings to our stakeholders and the communities in which we operate. To that end, last week, we published our first year sustainability report, which details the many ways in which Arcosa prioritizes ESG across the company. At Arcosa, there is no higher priority than employee health and safety, and I am pleased with the progress we've made in this area, following the 2019 launch of ARC 100, our enhanced safety initiative. Arcosa team members achieved 56% reduction in the total recordable incident rate in 2020, demonstrating the impact of our ARC 100 on improving our safety culture.
From a sustainability standpoint, our plant operations take an active role in pursuing initiatives that promote environmental responsibility. Last year, for example, Arcosa achieved 12% reduction in greenhouse gas emission intensity through a range of energy reduction investments across our facilities. In addition, we recorded 16% reduction in municipal water intensity due to our conservation efforts focused on water consumption and water recycling. Our sustainability focus also plays a part in our capital allocation strategy. As we prioritize on building and expanding our growth businesses, we evaluate investments with an eye towards sustainability as well as economic returns. Our growing recycled aggregates business is a perfect example of how Arcosa can enhance sustainability within our operations while generating above average margins and returns.
Please turn to Slide 18. In closing, our long term vision remains unchanged. We will continue to pursue growth in attractive markets where we enjoy sustainable competitive advantages while reducing the complexity and cyclicality of Arcosa. In addition, we remain committed to improving our returns on capital and integrating environmental, social and governance initiatives into our culture.
Operator, I would like to open the call for questions.
[Operator Instructions] Our first question from Ian Zaffino from Oppenheimer.
I wanted to ask you guys, and I know it's a little early, but if we were to kind of focus on the infrastructure bill or what it could bring to your business. Can you maybe walk us through where you think it would help you, what we should expect? And I believe most of the projects are probably funded through year end, so maybe it doesn't hit until 2022. But maybe if you could discuss the timing as well as far as what you'd anticipate. Then I've a follow up.
The guidance that we gave and the optimism we're showing in our construction and our Engineered Structures business are not related to the infrastructure bill. We are very optimistic on where the businesses are with or without the bill. And just simply seeing the conditions and the backlogs and the interest in the products that we're seeing the health of the market, so the markets we see them as very healthy. Now having said so, if an infrastructure bill comes, I think when you read it, you can also track most of our products across the whole bill. So it would have very positive impacts across the organization. But as you said, most of these projects are things that take time to come through, to materialize, in many cases, transmission lines to get permitted and projects to be developed. So I think you're right. I think 2022 -- probably midyear '22 is where we would see some of this bill to start trickling down to where we can see it in our backlogs and translating actual orders. But overall, we're positive with or without the bill. Of course, the bill would help us in the medium term.
And on the barge side, is there a magic number steel needs to decline to get orders back or maybe restart Madisonville? And then also, prices have improved. The market is getting better. Has that translated, or do you think that's going to translate into orders, kind of what are your customers telling you?
So I don't think there is a magic number. But let me give you some of what we're seeing. We are seeing good inquiries on the dry cargo side. So there is an interest in barges. But if you think about the percentage of the cost of a barge that steel represents, and that's why barge is such an important thing, steel is such an important component for barge, it's a huge percentage of the barge total cost. So that's why there's two pieces to the steel question. One is steel prices are too high, and I believe they're too high in every sense of -- we've been doing this for a long time and I've never seen hot rolled steel at these prices. And it's not only that they're high they went up very, very fast. But the other thing is, we're coming from a very low place. So if you look at a year ago, prices of steel were less than half of where they are today. So our customers have to, on one side, get away from the thought that we're going to get steel at $500 again because that's not going to happen and on the other hand, steel mills have to come down from their expectation that people are going to buy anything at $1,300 a ton, that's not going to happen. So I think there is some movement on both sides that needs to happen. Having said so -- and it will come down. It's just a matter of time. It always happens. This goes up and it will come down. These are cyclical markets and it will come down.
Is it going to be in three months or six months? I cannot tell you. But I'm optimistic that by the end of the year, we're going to see trends in a better direction. On the demand side, from our customers, I agree with you. I think oil prices have improved. When you look at the utilization rates from our customers, they are going up. They're still in the 80s but some of our customers just publish results and they are saying they expect them to be in the 90s. And that's what really drives demand for barges. When the utilization rates are very high, people need them. And our customers, they want to save some money on the barge, but they really want to make money on their own business, which is moving stuff, soil or grains or anything you want. So if demand improves like it's improving, at some point, the steel price becomes a secondary issue. And we believe demand will come back. And as we've talked over the last few years, there has been several years already where demand is too low and the replacement cycle has been delayed. So we expect significant pent up demand once these things abate. So long answer to your question but we're optimistic on steel prices coming down and the demand is there and will be there in the short term.
One more would be on just kind of capital structure. How are you thinking about that? And I know there's some pieces of the business that may not be with you in the long term, but I guess, those are sort of troughing out now. How are you thinking about maybe kind of sources of liquidity? And then also on the outflow side, any other acquisitions? I know you've been busy. But how are you kind of thinking about incremental deals?
On the capital structure, we did our inaugural bond offering. Feel very good about our balance sheet. We stood at 1.9 times net debt to adjusted EBITDA after the offering and the acquisition. That's still below our long term target. So we do feel some headroom to make disciplined acquisitions if they come up. We feel equally good about our liquidity. By doing the offering, we were able to enhance our liquidity. So liquidity is not an issue. And the third part of your question was cash flow, where we still expect to have very healthy free cash flow from our businesses that can fund both organic growth and then potential acquisitions. So even after this acquisition, we feel very good about our balance sheet and liquidity.
And we will take our next question from Brent Thielman from DA Davidson.
Scott or Antonio, I guess, with respect to the guidance. Has there been a change in what you expect from the barge business versus a couple of months ago?
I'd say, like I said in my prepared remarks, we gave the range of $35 million to $40 million of transportation EBITDA for the full year. And given that steel prices have continued to move higher in the last eight weeks since we talked, we said we expect to be now at the low end of that range, closer to 35% than 40%. We do have some unsold capacity and some slots in the fourth quarter. If steel prices moderated in the near term, we'd be more optimistic about selling those lots. They stayed high. Likely, those production slots will go unfilled and wind up at the bottom end of that range. So as Antonio said, we feel good about the underlying health of the markets. And as demand continues to improve and as steel prices will eventually moderate that business will recover. It just may not be in time for calendar year 2021.
But the range is still in plan. I guess the second question is on the energy structures business. It doesn't look like steel prices are having a big effect, but maybe you could talk about any concerns on margins in the next couple of quarters as that flows through. Should we be worried about that?
On the Engineered Structures, we have -- across the company, let me explain to you the three types of businesses and how we treat steel. So the first thing is we do not speculate with steel. We don't buy steel expecting it to go up. And so that's not our business. Our business is on making stuff and providing good value to our customers. So we have three types of business. Starting with the simplest one, the tank business, which is a made to stock business. We buy steel and we sell things into the market without having an idea of the price when we're selling. So that's a business that you have to be careful because you have to adjust prices and pass them through to the customer really fast and we've done that. As Scott mentioned that in his remarks that business has performed very well. We've been able to pass the steel prices to customers. And there's significant demand for tanks right now, which is not normal. Normally, tanks are not sold during this month because they're winter products, but demand continues to go up and our backlog is very, very strong. So the market is allowing us to pass through the prices and we expect that to continue to be. So we are not concerned about that.
The second type of business is contract business where we have wind towers and barges are that type of business where we buy steel tied to a contract. So we know what price of steel we have in order for a barge or a wind tower and we buy steel for that price. And we pass it through to the customer, and there is no uncertainty around it. And then the third type of business is our utility structures. In that business, we also have contracts with customers and we can pass through the steel prices but there is normally a lag. We have contracts that are three month contract, depending on the type -- of the customer, three months, six months, yearly contracts. And there is a pricing mechanism and there can be some delay. And I think we have thousands of orders coming through every day. And I think a little portion of the lower margins you're seeing is related to that. I expect that to continue to be the case where we have some hiccups here and there. But the margin, as Scott said, we expect the margin to stay within that range of 12% to 13% for the remainder of the year. I think the first quarter was on the bottom end. But we are going to recover, and we have healthy backlogs that should allow us to pass through those price increases. So long answer again, but we're not very concerned. It's something we have to watch. Steel prices have risen very fast. So we just have to stay on top of it.
We will take our next question from Julio Romero from Sidoti.
I wanted to ask about the cash flow in the quarter. Your payables continue to make progress. I think you ended days payable in the 40s. Maybe if you could talk about what you did there, and then secondly, how should base payable, and more broadly cash flow, trend over the next few quarters?
So for free cash flow in Q1, it wasn't a great quarter. We did have EBITDA above our expectations. We had CapEx in line with our expectations. But our challenge was on working capital, where we consumed about $40 million of cash in the quarter. You're right, we did make some good progress in payables and extending terms to what we call more industry norms. But then we had challenges on both receivables and inventory. Part of that was winter storm related. So we had shipments that slipped later in Q1 and therefore, the receivables into Q2, we don't expect any issue collecting those, and those will normalize over the course of Q2. Part of our inventory build was steel related where we brought in some inventory in Q1 ahead of price increases in April. But we'll continue to be very focused on working capital. We said even with the $40 million drag in Q1, we expect to be roughly working capital neutral by the end of the year and so we expect to make part of that back up in Q2, Q3 and Q4. So by the end of the year, we'd be back to roughly neutral.
And I guess my second question, I know this has been asked kind of a couple of different ways already. But in the barge business, in a scenario where steel remains elevated for 12 to 18 month period, I mean, how do barge -- how does dry barge trend there? I mean, do those inquiries -- do people eventually give up and convert that into orders or conversely do inquiries go away? If you could just talk about a scenario where the steel remains elevated, how dry barge orders play out.
And we have received orders at these steel prices. So we do have orders coming in, they're just not very large. The first quarter, for example, was really bad for barge orders. Most of the things that you saw in the numbers are components, not barges. But in the second quarter, we continue to receive orders with a certain frequency. So it's not completely dead. As I mentioned before, I think the big positive thing going on for us is that markets are recovering. What you have to watch for is the health of our customers. And as long as our customers are healthy, they're going to do the best thing for their business. And what their business is focused is on moving these products across the river system. So if our customers are healthy and you see utilization improving, you see the grain markets being very healthy, you see grain exports growing, that's going to be the most important decision making point for them.
Now I think lower steel prices absolutely will help. But I think at some point, our customers will start making decisions with or without price reductions. When will that be? I cannot tell you. But I don't think this is an 18 month, let's say, dry spell for our barge business where we have to completely shut down but we'll keep an eye, and we have flexibility. We can still lower our production rates. We have production capacity to ramp up in case these thing improves also. So over the last few years, we've invested in our plants and we can ramp up and down production faster and better. And I think we're in good shape. So I just hope steel prices moderate and we can start talking about how to increase capacity.
We will take our next question from Justin Bergner from G. Research.
So in terms of the guidance, just to clarify some of the sort of small puts and takes. Was the $3.9 million gain and sort of an equivalent amount of winter storm headwinds, it looks like, anticipated when you gave the guidance back end of February, or are either of those elements new as part of the revised guidance?
I'd say neither were incorporated in the guidance that we gave in February. But they roughly offset each other. So in Q1, we had about $4 million to $5 million of storm impact. We had the $4 million gain for the nonoperating plant. So that's one of the reasons we still feel like our full year guidance range is intact because they roughly offset each other.
And then bigger picture, the deals that you remain open to, are these more in the vein of bolt-ons, the StonePoint deal or would you consider another deal at or near the size of StonePoint in the quarters ahead?
As Scott mentioned, we have some room in our leverage, but we don't have an enormous amount of room. So right now, we don't have room to do another StonePoint-sized deal. So we're going to remain disciplined. I think what you should expect to see is things that would enhance our current platforms that we've acquired over the last few years, that's what we're focusing on. StonePoint brought some ideas. Cherry brought some ideas. So that's what we're focusing on. And it would be more bolt-on. There are some smaller and some bigger bolt-ons, but it would be some, let's say, additions to our platforms.
And then just lastly, I know you were asked about infrastructure. And it didn't seem like there was anything too surprising in the bill versus sort of whisper commentary we had heard beforehand. But is there any part of the bill or any part of your business where sort of the language or amounts in the draft proposal positively or negatively surprised where you thought things would turn out?
No, I think it was more or less, as I said, in line with everything we had heard or expected. Probably the only thing we've seen, some more bullish language in short term deployment of capital for some transmission lines for renewables, that's the only thing that has been probably more unexpected. I'm not sure how that happens, how that translates into actual work, and I think there's a lot of things behind it yet. But that's probably the only thing that was a little more bullish than we expected.
Are you referring to the DOE loans in terms of the short term bill of renewables?
Yes…
We will take our next question from Stefanos Crist from CJS Securities.
First, can we talk about the difference in the legacy natural aggregates versus the specialty materials and maybe why specialty was down year-over-year? Is that just the geographic mix or is there something else driving that?
The legacy business was up strongly really in all three parts of the end market, where very strong infrastructure driven work, strong residential demand, a lot of that's been driven by deurbanization. And then the nonresidential demand has been strong, too, with a lot of distribution center and data center work. So that's all been healthy. Specialty products has a bit more building products focused, and we've talked about -- there was destocking throughout the supply chain last year. There were a number of construction delays throughout the supply chain. That was, therefore, impacted more by COVID and has been slower to recover. We'd say the good news is in Q1, our lightweight business was at or above where it was in the prepandemic Q1 of 2020. So that gives us increased confidence that we're coming out of a lot of the worst COVID impacts, and that's one of the reasons we're particularly optimistic about this year.
Stefano, let me just add one thing. Our specialty materials in the first quarter was where we had the biggest impact from the storm in terms of natural gas prices. We had a plant that normally had $30,000 bill and it went to hundreds of thousands. So We have a few of those and specialty materials is where we felt the biggest impact from the natural gas side.
And just one more, back on barge. With steel prices so high and barge utilization low, are you seeing any customers scrapping their older barges?
Yes. I'm glad you asked that because the good news is -- I mean, steel prices are going up, but scrap prices are also very, very high. There's been times where we buy steel at the price you can buy scrap right now. So we are seeing scrap rates increase. Last year was a year where there were more barge scrapped than built and it's been already a few years. So that's good. That's why we are saying that the pent up demand for barges is accumulating, the replacement cycle is coming. It's been delayed by several factors. We were very bullish a couple of years ago when we opened the plant because we see it coming. We just didn't expect COVID to reduce the utilization so much. And we didn't expect, of course, steel prices to grow like they are going. But these are temporary things and it's like everything. We just have to wait a few quarters for this to pick up, I think.
It appears that we have no further questions at this time. I will now turn the program back over to Gail Peck for any additional or closing remarks.
Thank you, Mallory, and thank you, everyone, for joining us today. We look forward to speaking with you again next quarter.
This does conclude today's program. Thank you for your participation. You may disconnect at any time.