Vulcan Materials Company (NYSE: NYSE:VMC) has reported a solid start to the first quarter of 2024, with key financial metrics indicating progress towards a fourth consecutive year of double-digit adjusted EBITDA growth. The company generated $323 million in adjusted EBITDA and saw improvements in its adjusted EBITDA margin.
Despite a 7% decline in year-over-year shipments in the Aggregates segment, Vulcan Materials improved its Aggregates cash gross profit per ton and remained on track to meet its target range. The pricing environment continued to be favorable, and the company successfully closed a bolt-on acquisition in Alabama. Looking ahead, Vulcan Materials expects demand to be flat or decline by up to 4% for the year, with single-family construction and public demand anticipated to counterbalance the weaker non-residential and multifamily construction sectors.
Key Takeaways
- Vulcan Materials achieved $323 million in adjusted EBITDA for Q1 2024.
- Adjusted EBITDA margin improved, maintaining a positive pricing environment.
- Aggregates cash gross profit per ton increased, despite a 7% drop in shipments.
- A bolt-on acquisition in Alabama was completed.
- Demand is projected to be flat or decrease by up to 4% for the remainder of the year.
- Adjusted EBITDA forecast for the full year is between $2.15 billion and $2.3 billion.
- Capital expenditures for the year are planned to be between $625 million and $675 million.
- Net debt to adjusted EBITDA leverage stands at 1.5x.
- Mid-year price increases are under discussion, with an update on pricing guidance expected in August.
- Full-year cost increases are anticipated to be mid-single digits, with a deceleration in the following quarters.
Company Outlook
- Vulcan Materials reaffirms full-year adjusted EBITDA guidance of $2.15 billion to $2.3 billion.
- Capital expenditures for the full year are projected to be between $625 million and $675 million.
- Net debt to adjusted EBITDA leverage is at 1.5x.
Bearish Highlights
- Year-over-year shipments in the Aggregates segment declined by 7%.
- Demand is expected to be flat or decline by up to 4% for the remainder of the year.
Bullish Highlights
- Positive pricing momentum with a 10% increase in prices across all markets in Q1.
- Improvement in Aggregates cash gross profit per ton, with progress towards the $11 to $12 per ton target.
- Positive outlook for single-family construction and public demand.
Misses
- Non-residential and multifamily construction sectors face headwinds.
Q&A Highlights
- Mid-year price increases are being considered, with an update on pricing guidance due in August.
- Costs are expected to rise mid-single digits for the full year, with a deceleration in cost increases over the next quarters.
- Diesel prices provided a slight tailwind in Q1, while parts and services costs remained high.
- Vulcan Materials is focused on aggregates as their core business and will divest sectors or geographies not yielding appropriate returns.
- The company expects sequential growth in Q2 and Q3, with less growth in Q4 due to seasonality.
- Interest rates and the election year have not significantly impacted pricing dynamics.
- The company's revenue benefits from states with strong Department of Transportation budgets.
- Vulcan states have received 67% of the Infrastructure Investment and Jobs Act (IIJA) dollars, indicating a strong position for public infrastructure projects.
InvestingPro Insights
Vulcan Materials Company (NYSE: VMC) showcases robust financial health and investor-friendly moves, as evidenced by the data and tips provided by InvestingPro. With a market capitalization of $34.89B and a Price/Earnings (P/E) ratio of 37.77 as of the last twelve months ending Q4 2023, the company stands as a significant player in the sector. The P/E ratio slightly adjusted to 38.27 for the same period, indicating the company's earnings valuation in the market.
An InvestingPro Tip that stands out for Vulcan Materials is its consistent history of dividend growth, having raised its dividend for 10 consecutive years and maintained dividend payments for 54 consecutive years. This demonstrates a commitment to returning value to shareholders and suggests financial stability and confidence in future earnings. Vulcan's dividend yield as of the latest data was 0.71%, with a notable 15.0% dividend growth in the last twelve months as of Q4 2023.
Another highlight is Vulcan's stock performance, with a significant price uptick of 26.06% over the last six months, and a year-to-date price total return of 14.61%, reflecting strong investor confidence and market momentum.
For readers interested in more in-depth analysis, there are additional InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/VMC. These include insights on earnings revisions, trading multiples, price volatility, and liquidity. For those looking to deepen their investment research on Vulcan Materials, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With a total of 15 InvestingPro Tips listed for VMC, investors have a wealth of information at their fingertips to make informed decisions.
Full transcript - Vulcan Matrls (VMC) Q1 2024:
Operator: Good morning and welcome, everyone, to the Vulcan Materials Company First Quarter 2024 Earnings Call. My name is Jamie, and I will be your conference call coordinator today. Please be reminded that today's call is being recorded and will be available for replay later today at that company's website. All lines have been placed in a listen-only mode. After the company's prepared remarks, there will be a question-and-answer session. Now, I will turn the call over to your host, Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.
Mark Warren: Thank you, operator, and good morning, everyone. With me today are Tom Hill, Chairman and CEO; and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, vulcanmaterials.com. Please be reminded that today's discussion may include forward-looking statements, which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the Company's earnings release and in other filings with the Securities and Exchange Commission. Reconciliations of non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation, and other SEC filings. During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available. And with that, I'll turn the call over to Tom.
Thomas Hill: Thank you, Mark, and thank all of you for joining our Vulcan Materials earnings call this morning. Our first quarter results moved us towards delivering on a fourth consecutive year of double-digit adjusted EBITDA growth. Although the weather was unusually cold and wet across many geographies for much of the quarter, our teams executed well and improved our Aggregates cash gross profit per ton by 10%. Their commitment to our Vulcan Way of Selling and Vulcan Way of Operating Disciplines is driving solid results. In the quarter, we generated $323 million of adjusted EBITDA and expanded our adjusted EBITDA margin. Importantly, several key trends continue: pricing momentum, cost deceleration, unit profitability expansion, robust cash generation, disciplined capital allocation and return on invested capital improvement. In the Aggregates segment, year-over-year shipments declined by 7%, but the durability of our Aggregates business and the consistency of our execution stood out in a weather impacted quarter. We again improved our trailing 12 months Aggregates cash gross profit per ton, pushing it to $9.66 per ton and making further progress toward our current $11 to $12 target. The pricing environment remains positive and year-over-year Aggregates cash cost of sales continues to moderate. Aggregates freight and adjusted price improved 10% in the quarter and increased $1.25 per ton sequentially from the fourth quarter, a clear illustration of the success of January increases and the continuous execution of our Vulcan Way of Selling disciplines. Our first quarter cash cost of sales performance resulted in a fourth consecutive quarter of trailing 12 months cost deceleration and improving sequentially by another 230 basis points. Our relentless focus on improving efficiencies in our plants through our Vulcan Way of Operating Disciplines remains a key driver of managing costs, expanding unit profitability and ultimately generating attractive free cash flow. There is a healthy pipeline of opportunities to deploy this free cash flow for both attractive acquisitions and complementary strategic greenfield development. These targeted opportunities are at varying stages. But as an example, earlier this week, we closed on a bolt-on Aggregates and Asphalt acquisition in Alabama, a top 10 state. I'm proud of how our teams continue to execute our two-pronged growth strategy. They are focused on expanding our reach in addition to enhancing our core with consistent expansion of unit profitability by controlling what we can control, even in a dynamic macro environment and demand environment. On the demand side, I want to provide a few comments about each end use, starting with private demand and then moving to public. Momentum in single-family continues to accelerate across our footprint and points to growth in 2024. However, we continue to expect weaker multifamily residential construction to largely offset the single-family approval this year. Overall, affordability and elevated interest rates remains a challenge, but the underlying fundamentals of population growth and low inventories in Vulcan markets support recovery in residential construction. An improving residential backdrop is also a positive sign for future activity in certain categories of non-residential construction. And recent data has shown some signs of stabilization in overall starts. However, the landscape continues to vary across categories. As expected, continued moderation in warehouse starts will be the biggest headwind to private and non-residential demand this year. Currently, light commercial activity remains weak, but over time, we expected to follow the positive trends in single-family housing. We continue to see and capitalize on opportunities in the manufacturing category. Our unmatched Southeastern footprint and unique logistics capabilities positions us well to service these large aggregate intensive projects. Our footprint is also an advantage on the public side with over two-thirds of federal highway spending allocated to Vulcan states. Additionally, other public infrastructure activity, which benefits from IIJA funding is growing faster in Vulcan states than the country as a whole. A sustained elevated level of highway starts of over $100 billion, coupled with record 2024 state budgets, supports healthy growth in highway and infrastructure demand both in 2024 and for the next several years. Now I'll turn the call over to Mary Andrews for some additional commentary on our first quarter. Mary Andrews?
Mary Andrews Carlisle: Thanks, Tom, and good morning. Tom discussed our solid Aggregates results in the quarter and shared some important ongoing trends. In addition to providing a few more details about our first quarter results, I'd like to first expound upon four of the trends Tom highlighted earlier in his remarks, unit profitability expansion, robust cash generation, disciplined capital allocation and return on invested capital improvement. For the last four quarters, we have consistently expanded our trailing 12-month unit profitability in all three of our operating segments. Increasing cash unit profitability by nearly $1.50 per ton in Aggregates, almost $6 per ton in Asphalt and nearly $5 per cubic yard in Concrete. Our trailing 12 months gross margin has also steadily improved in each product line. This organic growth is underpinned by our daily focus on execution and driving results through our Vulcan Way of Selling and Vulcan Way of Operating Disciplines. Better unit profitability yields better free cash flow. Our free cash flow conversion over the last five years has averaged over 90%, enabling us to strategically allocate capital to reinvest in our franchise, grow our business and return cash to shareholders. During the quarter, we invested $103 million in capital expenditures and returned $81 million to shareholders through dividends and share repurchases. We continue to expect to spend between $625 million and $675 million on capital expenditures for the full-year. Our current balance sheet positions us well to continue to deploy capital to each of our priorities. At the end of the first quarter, our net debt to adjusted EBITDA leverage was 1.5x, with $300 million of cash on hand, following the March 1 redemption of our 2026 senior notes at par for $550 million. Our liquidity position and financial flexibility are competitive strengths as we look to continue to grow and create value for our shareholders. Over the last 12 months, we've achieved a 260 basis points improvement in return on invested capital. Invested capital has increased less than 1%, while adjusted EBITDA has improved 20%. Adjusted EBITDA margin has also improved by 350 basis points through consistent operational execution and disciplined SAG cost management. SAG expenses in the quarter were in line with our expectations, and we continue to expect to spend between $550 million and $560 million for the full-year. Most importantly, we reaffirm our expectations of delivering adjusted EBITDA between $2.15 billion and $2.3 billion for the full-year. At the mid-point, a double-digit year-over-year improvement for a fourth consecutive year. I'll now turn the call back over to Tom to provide a few closing remarks.
Thomas Hill: Thank you, Mary Andrews. At Vulcan, our number one priority will always be our people, keeping them safe and fostering our Vulcan culture. They are the foundation of our great company. As a team, we are focused on the daily execution of our Vulcan Way of Selling and Vulcan Way of Operating Disciplines to ensure attractive cash generation in any macro backdrop. We will be strategic and disciplined in allocating capital to continue to grow our business and deliver value for our shareholders. And now, Mary Andrews, now will be happy to take your questions.
Operator: Thank you. [Operator Instructions] We'll take our first question from Stanley Elliott with Stifel.
Stanley Elliott: Hey. Good morning, Tom. Good morning, Mary Andrews. Thank you for the question. Tom, I started the year very clean quarter despite kind of some of the weather issues, I think a lot of people had and some of the comp issues. Can you talk about how the rest of the year plays out, thinking about this more like maybe from a demand standpoint? And then to any extent commentary you could share on April would be great.
Thomas Hill: Sure. Looking at the quarter itself, I'd call the quarter – volumes in the quarter as expected within the margin of error. We had less shipping days in March, but about the same amount of shipping days in the quarter overall. January was a slow start, really due to wet weather and cold weather. February and March, I call it a bit better – better on a daily shipping basis. So Q1 – all things considered as expected. As we look forward to the rest of the year, I don't see any real change in our thinking on demand. We would still guide to the flat to down 4 and the dynamics are very similar to what we said last quarter, headwinds in non-residential, some challenges in multifamily. We've got recovering single-family construction and growing public demand. I think that our position – our superior position in the Southeast really helps the footprint makes a difference. And that southeastern market is probably the healthiest market in the country. I think our Vulcan Way of Selling disciplines and tools are very helpful with this. So at this point, I'd call confident for volume outlook. As far as going into the second quarter, I'd call it this way, when the sun comes out, we're shipping very well.
Stanley Elliott: Great, guys. That's nice to hear. Thanks so much and best of luck.
Thomas Hill: Thank you.
Mary Andrews Carlisle: Thanks, Stan.
Operator: We'll go next to Jonathan Bettenhausen with Truist Securities.
Jonathan Bettenhausen: Hey, guys. Thanks for taking my question. I'm on for Keith Hughes this morning. I'm curious about your outlook on mid-year pricing. Have you had any conversations with your customers about mid-year and also wondering how much of that is baked into your guide?
Thomas Hill: Yes. I'd start off with saying that I think the fundamentals in pricing remained very good and very healthy. As you saw, we had a solid start in Q1 with prices a little north, 10%, that was really across every market. And so it's a really good start and supports our full-year guidance. Mid-year price increases are not in our guidance at this point. We're having those mid-year price discussions right now, so it's a little too early to call. Remember, the mid-years will be good for 2024, but they're going to be even better for 2025. So our teams are working really hard on this, and I think I'm sure they'll deliver. The most important thing, though, I think, is that the fundamentals for pricing remain very healthy. And so I think when it comes to mid-years, we'll revisit pricing guidance in August and give you an update.
Mary Andrews Carlisle: And one more thought on price. We always like to point out how important it is to remember that regardless of what the level of pricing is, the key is really how much price we're able to take to the bottom line. In the first quarter, we achieved 10% improvement in cash gross profit per ton and some aggregate margin expansion even given the lower volume quarter due to the weather. Overall, gross margin also improved by 140 basis points and adjusted EBITDA margin expanded as well. So importantly, we expect this margin expansion to continue and to improve further through the balance of the year.
Jonathan Bettenhausen: Perfect. Thanks for the color.
Thomas Hill: Thank you.
Operator: We'll go now with Anthony Pettinari with Citi.
Anthony Pettinari: Good morning.
Thomas Hill: Good morning.
Mary Andrews Carlisle: Good morning.
Anthony Pettinari: Hey. I'm wondering if you could talk a little bit more about how costs have kind of been trending among your major cost categories. If you can touch on maybe some of the non-energy categories. And then also just with higher diesel, how that's impacted conversations around price increases or just how you think about the full-year from that context?
Thomas Hill: Yes. I think the first quarter for cost is always tricky as volumes and weather definitely had an impact on costs in the first quarter. That said, I think we're still comfortable with the cost guidance of up mid-single digit for the full year. As always, we would get you to look at costs on a trailing 12-month basis because it's just going to be choppy on quarter-to-quarter. And if you look back on a trailing 12-month basis over the last year, cost increases have fallen from, I'd say, mid-teens to single-digit. So as we said in the prepared remarks, we've seen four quarters of decelerating cost and as we march through this year, we should see that those increases decline as we march through the year, next quarter better, next quarter better, next quarter better as we saw over the last four quarters. So I think we're on a good path to that mid single-digit cost for the full-year. As far as different pieces of this, diesel was probably a slight tailwind in the quarter. What stays up is parts and services remain elevated, but our comps are getting easier. And I think that we also through the Vulcan way of operating, we're improving our operating efficiencies and will continue over the next two years with that to offset those inflated parts and services. So I think we're in a good place, and I think the teams are working through this, and I'm pleased with what I see.
Mary Andrews Carlisle: Yes. And in terms of diesel, Anthony, we do assume in our plan that it will move somewhat higher through the rest of the year. And you're right, while diesel prices for us – well, they're always hard to predict and – but they can really be a good thing in this business since we have the ability to catch it with pricing as it goes up and also take advantage of it when it goes down.
Anthony Pettinari: Got it. That's very helpful. I'll turn it over.
Thomas Hill: Thank you.
Operator: We'll go now to Kathryn Thompson with Thompson Research Group.
Thomas Hill: Good morning, Kathryn.
Mary Andrews Carlisle: Good morning.
Kathryn Thompson: Good morning. Thank you for taking my question today. Stepping back, just looking at the bigger picture. In last year, you divested mainly downstream ops just in terms of optimizing portfolio. As you look into 2024 and beyond what are your priorities in terms of overall Vulcan materials and product mix? And how does this mix strategy – how do you think about that against the backdrop of a broad reindustrialization of the U.S. and putting Vulcan in the best position possible? Thank you.
Thomas Hill: Well, as always, we would tell you that it's Aggregates and we are an Aggregate company. We have the highest percentage of EBITDA in Aggregates of probably anybody in the sector. And that's what we do. Now we have strategic downstream. And as we always say, it's a portfolio, we look at it as a portfolio and if one of those sectors or geographies doesn't – doesn't earn appropriate return or worse to somebody else would divest of it and plow that money back into our Aggregates business. So I think that nothing has changed as far how we look at the world. And as we look at the growth part of the M&A in greenfields, it will be aggregates-focused.
Kathryn Thompson: Perfect. Thank you so much.
Thomas Hill: Thank you.
Operator: We'll turn now to Trey Grooms with Stephens.
Thomas Hill: Hi, Trey.
Mary Andrews Carlisle: Good morning.
Trey Grooms: Hey. Good morning. I kind of want to follow-up on the comment, Mary Andrews, you had earlier about cash gross profit per ton. Clearly, it was up 10% in the quarter. I think you were maybe initially looking for mid to high single-digit improvement. So maybe a little better there. And then full year is mid – I think looking for mid-teens type of improvement. So I guess the first one is kind of how we see that progress. I think it's going to accelerate somewhat as we go through the year, but any way to help us kind of think about that as we progress through the year to get to that mid-teens for the full-year? And then maybe stepping back a little bit longer term. These are clearly better numbers of better performance than the historical kind of average of profitability improvement. How are you thinking about that longer term? Do you think it has the opportunity to kind of see a long-term better kind of consistent improvement versus kind of historicals?
Thomas Hill: Yes. Let me take your last question first about long-term. This is why we have developed the Vulcan Way of Selling and Vulcan Way of operating disciplines. I think they secure our ability to improve cash gross profit per ton, which we've done trailing 12-month basis every quarter except for one flat for five years. That's pretty good consistency even with some of the dynamics that are out there. So I think that overall in history, versus history, we're in a better place for higher improvements in cash gross profit per ton, and that's not by accident, that's by design, and we've been working on that now for years, and it is working and those tools are only getting better or we're getting better implementing them. I think as far as this year is concerned, as we talked about, as we progress through the year, you've got cost increases decelerating and as inflation comps get easier and our operating efficiencies get better. So that's one piece of that. And then I think as we march through the year, we have the ability to continue to raise prices, both in what we do on project work, but also a fixed plant. So you put all that together, I think as we progress through the year, we have the opportunity to continue to march our unit margins improvement through the year.
Trey Grooms: Okay. Got it. All right. Thank you very much. I'll pass it on.
Thomas Hill: Sure.
Operator: We'll go next to Jerry Revich with Goldman Sachs.
Thomas Hill: Hi, Jerry.
Mary Andrews Carlisle: Good morning.
Jerry Revich: Hey. Hi, Tom, Mary Andrews. Good morning everyone. I'm wondering if you could just talk about how you expect the pricing cadence to play out this year over the past couple of years, third quarter versus second quarter, we saw a big $0.60 type step up in pricing. Is that feels like that's what you're assuming this year to get to the guidance. But maybe Mary Andrews, you could expand on how you expect the cadence to play out? And how much higher could that be if we do implement midyear price increases? Thank you.
Mary Andrews Carlisle: Yes, sure. I would expect a cadence of Jerry likely some sequential growth in the second quarter, more in the third quarter, as you referenced, and then we would typically see less in the fourth quarter due mostly to seasonality. And the magnitude of the mid-years, which as Tom referenced earlier, it's just too early to call at this point, but that's what would influence that third quarter sequential improvement and to what level that gets and where we fall out overall.
Jerry Revich: Okay. And then in terms of just the exit rate with double-digit pricing growth exiting the year and potential midyear is on top of it, I guess that suggests the starting point for 2025, should be in the high single-digit pricing range just from a carryover effect. And I just want to make sure that, that's consistent with how you folks are thinking about it?
Thomas Hill: Yes. I think when it comes to mid-year, we're going to call that when we earn it. And I think we feel good about midyear, and I think those conversations are going fine. As I said, they mean a lot for 2025. I do think it's a bit early to call what 2025 is going to start out. We got to get mid years under our belt and take a look at what we're going to do in the first part of 2025. But I do think it's – I do think that I feel good about the midyears and I think it is a good omen for 2025 pricing.
Jerry Revich: Okay. Thank you.
Thomas Hill: Sure.
Operator: Next, we'll hear from Mike Dahl with RBC Capital Markets.
Thomas Hill: Hey, Mike.
Michael Dahl: Tom, Mary Andrews. Thanks for taking the question. I'm going to follow up again on kind of midyear. I think last quarter, you talked about how those conversations would be April conversations, so maybe it's just semantics and you want to have those really finalized before you communicate to us. But I'm wondering if just given some of the wet weather to start the year, if some of those conversations perhaps got pushed out a little bit relative to your expectations or how you characterize that? And any other regional differences in pricing that you may be experiencing relative to what you thought coming into the year?
Thomas Hill: I don't think weather had anything to do with it. I think you may have read a little bit too much into the April month comment. You send the letters out in April, you spend May having those conversations and you finalize in end of May, kind of beginning of June. So I don't see anything different in timing or sequencing versus what we did last year. Like I said, I think I'm encouraged by the conversations that we're having, and I think that we will implement a solid midyear price increases. But I wouldn't read anything into the comment on weather versus – excuse me, comment on April versus how this goes. It's really kind of a process. We introduced it in April, have a conversation in May and again, finalize it in June.
Mary Andrews Carlisle: And one other thought on pricing for the rest of the year is that we've had positive momentum over the last 12 months in our bid work, and that should also be a good catalyst for us from where we ended Q1 to where we expect to be for the full-year in addition to whatever is realized on midyear increases.
Michael Dahl: Okay, great. Thanks for that.
Thomas Hill: Sure.
Operator: We'll go now to Garik Shmois with Loop Capital.
Garik Shmois: Hi. Thanks for taking my question. I wanted to ask on the M&A environment. If you could provide a little bit more color on the bolt-on that you just completed? And is it possible at all to maybe size how much, you anticipate spending on acquisitions this year and the types of deals you're looking at?
Thomas Hill: Yes. As you saw, we had a small but strategic bolt-on kind of northeast of Birmingham up towards Guntersville. It's about 2 million tons of aggregates and just under 0.5 million tons of asphalt. It fits us well. I think as you look at the full-year, in the next 12 months, M&A outlook is quite good. So more to come. And having a lot of those conversations and very encouraged by it. I think it's always M&A will be aggregates-led and conducted with discipline. But I think we feel very confident that this will be a busy M&A year for us.
Garik Shmois: Okay. Very good. Thank you.
Thomas Hill: Thank you.
Operator: And now we'll go to David MacGregor with Longbow Research.
David MacGregor: Yes. Good morning everyone. Thanks for taking the questions. Tom, I guess I wanted to kind of tap your many years of experience in this business with respect to the second half of this year in election years. And in an election year, do you find that projects kind of accelerate as people kind of focus on work? Or do you think things maybe slow down a little bit as people get a little more [indiscernible] and wait to see how the election plays out? I'm just trying to get a sense of how you're thinking about the risk around second half volumes in public sector spending?
Thomas Hill: I don't see – I will take it in pieces. Overall, I don't see any impact with the election year on our demand. I think that our guidance is – has taken the factors into account. I don't think election year moves the needle on that. I think on the public side, it is really the DOTs trying to get highways dollars into lettings and into projects. And I think that's happening. And I think we call that, as you know, mid-single digit on the private side, I think, as we said, we've got some challenges on – on non-resi and multi. And I think that single-family is recovering with health. So that's how I look at it with not much impact from the election year.
David MacGregor: Thanks very much.
Thomas Hill: Thank you.
Operator: And next, we have Timna Tanners with Wolfe Research.
Thomas Hill: Good morning, Timna.
Mary Andrews Carlisle: Good morning
Timna Tanners: Hey. Good morning. Thanks a lot. I wanted to ask about a little bit more on the demand side as well. How is the government infrastructure dollars, how are they flowing through? How are you seeing the pace of that activity? Any evidence of some of those larger IRA projects? And any sign that data centers could make much of a dent against the decline in warehouse demand? Thanks.
Thomas Hill: Yes. I will start with highways. We're seeing the IIJA money and the local funds flow into lettings. At this point, we'd stick with that mid-single-digit growth on the public side this year, which is both non-highway infrastructure and highways. And we see that kind of steady growth for years to come. We also are seeing additional state funding come into play. We've got three states with some big dollars. Tennessee added $3 billion, Florida I think added $4 billion and Georgia just added $1.5 billion to their funding. I think when it comes to public demand, slow and steady wins the race on this, and particularly when you're compounding your margins like we are, so I think a good healthy sector with steady growth for years to come. And I think the DOTs will continue to work hard to get those dollars into lettings.
Mary Andrews Carlisle: And Timna, you also mentioned data centers, which have really provided some good opportunities for us in some markets. I can think of some projects we booked recently in Virginia, Alabama, Georgia. And it's obviously a subject that's getting a lot of press. But I do think it's important to remember that the square footage according to Dodge for data centers is only a low single-digit percentage of total non-res start. So as you know, there are a lot of different categories and dynamics and private non-res, so data centers may not move the needle overall. But overall, for us, in non-res, right – so far, it's playing out as we expected with kind of all those different dynamics.
Timna Tanners: Okay. Helpful. I'll leave it there. Thanks again.
Operator: We'll go now to Tyler Brown with Raymond James.
Thomas Hill: Hi, Tyler.
Tyler Brown: Good morning.
Mary Andrews Carlisle: Good morning.
Tyler Brown: Hey. So you all are doing a great job on unit margins. But I am curious what you're seeing on the plant productivity side. Because If I go back, Tom, to the Vulcan Way of Operating, some of the technology rollouts in the plants that you talked about at the Analyst Day, I'm just kind of curious how those are tracking if you're seeing improved plant utilization? And is that kind of a continued good guidance to 2025?
Thomas Hill: Yes. I think that where we are on that, and you're talking about the process intelligence on those plants. As we said, we did that in our top 100 plants, which is about 7% of our – roughly 7% of our production. The tools are all there. About 25%, 30% are actually – of those plants are actually fully utilizing those tools. And there's a lot of work that has to go into that to get the screens right and everybody trained in those, we're seeing marked progress as we march through kind of this year, maybe the first part of next year, we'll get up to 100% of those. But – and as we do, we'll see improvement. So where it's working. I think it's working well, maybe a little slower than I would have wanted it to go through as far as full implementation, but we're getting there. And I think we'll see that. As you said, we'll see progress to that show up in our numbers in 2024 and in 2025 and into 2026, to be honest with you. So, so far, so good, and we'll keep plugging at it.
Tyler Brown: Yes. Perfect. Thank you.
Thomas Hill: Thank you.
Operator: And now we'll hear from Adam Thalhimer with Thompson Davis.
Thomas Hill: Hi, Adam.
Mary Andrews Carlisle: Good morning.
Adam Thalhimer: Good morning, guys. Great quarter.
Thomas Hill: Thank you.
Mary Andrews Carlisle: Thank you.
Adam Thalhimer: Hey. On the demand side, I guess I wanted to hit that as well. There's a lot of angst out there about just private construction demand in general. Are you guys seeing any incremental weakness or strength there?
Thomas Hill: Well, I think it depends on which part of it you're talking about, and I'll take them a piece at a time. We're seeing – on the non-res side, you've got weakness in warehouses and kind of traditional light non-res. That being said, the warehouses, we – if you look at starts, they are – the fall is decelerating. It's getting better as you look at starts on a short-term basis. So hopefully, that will get better. You've got strength in large manufacturing projects, which we've got 11 of those big projects, and we're shipping on them now and I think more to come. So it's too early to call whether it's getting better or getting worse, but that's kind of how we call it for – on the non-res side. On highways – excuse me, on housing, I would tell you the weakness is in multifamily and continues that. I think it doesn't last too long, we'll be past that, I think, 2025. And then single-family res is recovering, and I think recovering with some momentum.
Adam Thalhimer: Sounds pretty good. Thanks, Tom.
Thomas Hill: Thank you.
Operator: We'll go now to Phil Ng with Jefferies.
Thomas Hill: Hi, Phil.
Mary Andrews Carlisle: Good morning, Phil.
Philip Ng: Hey, guys. Congrats on a really strong quarter.
Thomas Hill: Thank you.
Philip Ng: I had a question. I mean, a competitor of yours has just closed on a deal in the Southeast, and they've already announced price increases for midyears in those markets and called out how pricing there is for us below their corporate average. I've always thought that the Southeast is actually a pretty good pricing market. Do you see that dynamic improving the backdrop on pricing, anything on the structure side of things? And then similarly, California, I think pricing still kind of below what that market probably should warrant just given the cost and demand profile. Any thoughts on the momentum on pricing around California as well?
Thomas Hill: Yes, I think we've got to be thoughtful when we call out pricing on individual markets. But that being said, the Southeast is very good pricing, some of the best we have. And I think that if you look at the western part of the United States, I think we're seeing marked improvement in pricing, and we'll continue – that momentum will continue.
Philip Ng: Okay. Appreciate the color.
Operator: And now we'll go to Angel Castillo with Morgan Stanley.
Thomas Hill: Good morning.
Mary Andrews Carlisle: Good morning.
Angel Castillo: Good morning. Thanks for taking my question. Just wanted to maybe expand a little bit on some of the dynamics. First, just a quick clarifier. For pricing, is the assumption still 10% to 12%, given the kind of unchanged topline? And then you mentioned kind of no impact from election year. Could you maybe talk about some of the other dynamics that are at play here in terms of the weakness you're seeing in non-resi and just interest rate environment and kind of some of those challenges? Is that having any kind of impact on your midyears? It sounds like the discussions there have been quite constructive. So just any kind of color there would be helpful.
Thomas Hill: Yes. I think you're seeing improvement. We're seeing improvement in single-family, which is always helpful. And the most important thing is that you see growth in public demand, which is still visible and it is a very good foundation for pricing. I don't know that interest rates have had a big impact on pricing. Obviously, they'll have – they've had impacts on demand and volumes. But I think – so I think that – and I don't think that the election year has had any impact on pricing dynamics. So I think that the fact that we've got strong, very visible public demand for a long time is good. I think you've got some improvement in res. All of that is helping the pricing dynamics. And I think we feel pretty good about a midyear at this point.
Angel Castillo: Very helpful. Thank you.
Thomas Hill: Thank you.
Operator: We'll go now to Michael Dudas with Vertical Research.
Thomas Hill: Good morning.
Michael Dudas: Good morning. Mary Andrews, Mark, Tom.
Mary Andrews Carlisle: Good morning.
Michael Dudas: So it's an interesting highlight on 67% of your of the IIJA dollars are going to the Vulcan states. So you can talk a little bit about what states does that matching up with some of the DOT budgets in some of your important states? And what it may be throughout the business, what regions or states maybe are lagging a bit that may have some opportunity to catch up as we move into the next several quarters?
Thomas Hill: Well, I think a big part of that is you've got the big DOTs, Caltrans and TxDOT and Georgia DOT and Virginia. Obviously, Tennessee, obviously, have excellent funding, both state and local. I think that probably the most – the best – DOT is best at getting money through at this point because they started earlier with their own funding with Texas. Georgia had some struggles, but I think is catching up with that. So I think Caltrans is doing a good job getting their money in. Illinois, I think, has struggled getting some of their funding out. So that's how I call it. But I think they're all plugging at it, and I think they're all getting better at it. It is coming through with improvement in lettings. I think that all of them are going through the 2025 budgeting right now, a little too early to call, but I don't see them going down. I would expect most of them to go up. So as we said, I think that it's a long road. I think it's steady growth in public, and it's not just highways, it's also the infrastructure, which is ports and airports and water and sewage and that will be substantial growth, I think, this year and for years to come.
Michael Dudas: Thank you, Tom.
Thomas Hill: Thank you.
Operator: And at this time, that will conclude our question-and-answer session. I'd like to turn the call back over to Tom Hill, Chief Executive Officer, for any additional or closing comments.
Thomas Hill: I thank all of you for your time this morning and your interest and support of Vulcan Materials Company. We hope you and your families are healthy and safe and stay that way through the quarter, and we look forward to talking to you over the next few months. Thanks.
Operator: Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time.
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