Vulcan Materials 4 May 232023 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Vulcan Materials Company's First Quarter 2023 Earnings Call. My name is Travis, and I will be your conference call coordinator today. [Operator Instructions].

Now, I would like to turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. sir. begin, may you Warren,

Chief Good morning Materials. and interest Vulcan President for and thank me today you and Vice With Senior Chairman Andrews your Officer. are Mary in Carlisle, and Financial Tom CEO; Hill,

release Today's presentation a posted a vulcanmaterials.com. supplemental website and call our by is accompanied press to

will recording call for later be a Additionally, this today, replay, available of at website. our

are risks with that forward-looking the release statements, Commission. subject Securities disclaimers, to include other in today's along which and risks, may and in discussion reminded These company's be and Please filings uncertainties. detail in Exchange described legal with are earnings other the

Reconciliations of our please time Q&A for participation presentation, in supplemental and during reconciled any other This more to SEC questions one limit and your question. the non-GAAP will time, measures defined filings. allow together. earnings of our are our release, In financial interest

With that, Tom. to I over will the call turn

of call and our you thanks joining you, Thank all Mark, for morning. this

growth got generated $X.XX year, billion million well-positioned to billion first expect versus of year. XX% between to improvement deliver Vulcan start year. improvement a adjusted a the prior EBITDA to In in quarter EBITDA, the and XXXX. XX% the off prior in deliver and we Materials in XX% solid a to now is attractive quarter, this We adjusted $X.XX $XXX over the

points. adjusted average XX% in by they the basis major products XX% our total as profit gross on of operating XX and in pleased disciplines. team's in lines, by and margin of The XX% product selling Despite environment Vulcan quarter. lower concrete. in our and healthy. expanded improved in our pricing focused each volumes improved XX% of improved with Vulcan remain Year-over-year gross downstream is price execution I'm our asphalt Prices also way

are our on controlling always, expand As focused to margins. pricing on capitalizing and costs momentum we

across wide prior Aggregates improved declined segment, markets. by margin a basis with points. versus the year X% variations Shipments In gross XXX

Some wet challenged and like carryover shipments weather the Texas areas were excessive benefited by from Others quarter. and fourth rainfall. from favorable California

And profit cash ton quarter, gross All delivered trading ton basis. surpassing double-digit by price improvement. in geographies improved importantly, the XX-month $X per on XX% our a per

points margins asphalt improved and Cash gas improved cost and volumes. by Prices and lower asphalt, natural by in Arizona asphalt profitability XXX offset negatively Significant materials impacted basis improved XX% costs. gross our XX% despite quarter. markets. XX% higher raw higher in In by liquid California and the asphalt more than largest shipments unit in rainfall

New by California, our and cash resulting XXXX profit segments the operations, volume impacted of cost challenges. concrete the was and New gross as divestiture Pennsylvania impacted as Texas negatively The in York, Jersey, well weather and

demand which timing. Now remains shifting users to environment, the in mixed, end and of terms dynamic both

but public growth in We private demand. demand overall expect modest in contraction

starts fall, decelerating Multi-family begun continue negative. While starts have have housing early to some markets declines. turned single-family to show housing signs of recently

single-family remained However, to levels, continue some in and markets of Vulcan they high the of impact particularly at weakness. dampen

growth in construction. of new is in to markets trends inventories, for employment our Low demographic the Affordability activity. declines residential favorable driver and continue the demand support single-family fundamental

While management, base of in the among increasingly XX% trend remain non-residential positive drivers the starts. this construction shift the starts investment is onshoring pipeline months. of in manufacturing for and than Recent construction. projects recent catalysts more supportive and trends are clean for count chain of A now private, the have energy non-residential supply eased in Industrial of broad near-term of in non-residential activity demand starts. projects composition

Our capabilities geography to on capitalize us and these enable service projects. large

such of facilities as these facilities, electric of warehouse and our markets, booked to We shipping currently projects LNG parks. key large vehicle are have many and plants, number battery a in manufacturing

The billion. trailing XXXX aggregate with public exceeding on into upon of flowing. $XXX the Jobs awards dollars can The construction momentum impact shipments. quickly turn shipments Act is building depend levels these in On public of side, highway historic infrastructure will XX-month investment now are how starts starts

with addition water, are construction energy, starts to timing dependent highway revenue Other demand depth up XX also funding of trailing starts to residential and airports, continues the for activity in decline support, infrastructure IIJA XX%, investment. growing significant months ports, and aggregate state the Aggregates strong of non-highway for converting upon Overall, infrastructure in shipments. XXXX into starts municipal and be

best-in-class and navigate successfully business shifts Aggregates to durable well any in us execution demand. Our position

the Mary to performance outlook. and Andrews Mary some quarter on first turn over I'll call Now, Andrews? our XXXX update for additional commentary

good Tom, Thanks, morning. and

solid quarter, XXX margin our In SAG disciplined and the adjusted operational expanded cost EBITDA with first execution basis points management.

XX Our needs. percentage while making X% strategic basis by moved continuing our business XX-month in support of points basis. below leverage remain a focused base as and SAG quarter SAG in a on improved to on We revenue and cost to technology our trailing talent the expenses investments

within to X.Xx stated target of squarely quarter at X.Xx. debt our to was adjusted EBITDA end Net Xx range

investment optionality grade inorganic balance gives Our us and continue organic in investing flexibility and opportunity. both sheet to

we million capital $XXX and between expenditures continue in and quarter, million to invested million the for the $XXX During spend full-year. $XXX expect to

basis, year-end As return capital return basis improved XX we to by focused allocate from our XX.X%. on points capital, trailing are on on invested we On XX-month sequentially capital. our a improving invested

outlook EBITDA with adjusted increased shared you for our XXXX. Tom

mix with the and expect adjusted expect XXXX for XX% prices improvement. full-year. the heels improvement, the strong improved on that improve now the sequential first of success XXXX adjusted in quarter, our in we Based exceed to efforts which yielded XX% to year-over-year EBITDA by XX%, XX% pricing of in approximately which a to growth we improvement Aggregates XX% now On XX%

stronger our our operational aspects deliver improvement unchanged. expect per February guidance industry-leading execution, we communicated to in the ton Coupling the year-over-year momentum remain cash of strong profit even original in other gross All pricing with guidance. we full-year than

turn now some Tom for back call I'll the remarks. to over closing

Thank Andrews. you, Mary

day. we each focused that every two you of things on I want are and closing, In to remind

First, keeping our people safe.

and of Our the our culture. our business people are lifeblood

regardless and earnings demand profitability unit growing environment. of the improving Second,

led our Our driving us for best-in-class for Aggregates and business value all execution stakeholders. our sustainable well positioned long-term of

be and happy take to Andrews I'll And now, questions. your Mary

Instructions]. [Operator

question comes first Stephens. Grooms, Our Trey from

on Nice and quarter strong. the Aggregates particularly pricing work

off to specifically And strong the talk rest the the the the year as I hoping team more your Tom, you through year hats pricing. execution look a was balance little kind you for pricing could for the environment there. of So overall maybe about on and of such thoughts and of we

Sure, Trey.

XX% the mix you As prices up for quarter. adjusted saw,

start. So a great

Our January and broad really price they successful were base. X were increases

that and XX% So I appreciate our full-year. on based success, saw us raise the team's on earning guidance price to you work for hard the

as comps get of will tougher lot pricing in said, the second As we a the half -- Trey, the year.

first by with quarter work. at unit ops our And in start always bottom was our but way the we guidance. remember, where happened And margin that's we the good in to in to bulk is to selling a you which feel have some to improved is still the that it's generally done just And XX%. really way the line, XX%. what to consistent bulk be margins unit take kind of about price good So the what expansion But earn of the of year, that price. worked

being thing to last XXX Aggregates we other in each on were to year. for expand margin one gross quarter compressed that pleased points quarter on the Trey, margin year-over-year the after basis note, side, first

the in that now to progresses. through the talked has and growth. XXXX, year costs rising P&L into XXXX and And rapidly as pricing to those our took Tom we the to returned gross accelerate about we continue would improvement As us expect efforts margin begun year-over-year

question next Stifel. Our comes Stanley from Elliott,

start. the other as thoughts strong within Hey, happening different around there's be that's moving on private your good to morning, of love you the everyone. past. we're nuances looking kind because for to the you what's Thank the non-res Would some Tom, side market I some maybe and think this get question forward. mentioned end thing kind that's year more cycles congratulations parts seems one in on since the versus of developing

Good the and in to industrial. driven non-residential really that continues to We distribution, healthy year. that as we levels And and last and the sector quarter. of would really now by first it's Non-res warehouses, maintain continue came construction be shipments you're morning, off Stanley. expect to we saw manufacturing Yes, evidenced the high right. really

risk and risk that slowing in reward sector I some sector, put include to the would would had maybe that I in If warehouses.

the We yet, to start have not question I we're non-res And have seen it. would it other that that is, that light does it. Haven't watching yet, seen but watching does but subdivision, slow follows again?

me in to in ship. starting that are me, tons. excuse shipments now give our some major horizon X.X flip construction massive some industrial total for projects include of around potential we that -- non-residential you manufacturing of projects To Now have industrial the side, to or just most and the which have color some XX are number would on upside backlogs million that, the the XX

projects. are that's All not those in to some Now, of going XXXX. multi-year go

So describe demand I healthy good now healthy as XXXX. non-res would so non-residential far, in right a so for very

Our next question Anthony comes Citi. from Pettinari,

public previously had cadence half. especially the projects? think the XXXX the the I IIJA to year, first flow-through be thoughts How to Hey, I remaining if And of shipments low-single-digits and any wondering those should the updated maybe quarters we over IIJA talked of was or second projects of back volumes public in half sort between with on about through maybe expected ag about flowing the you in with think up you maybe the half.

the Funding -- tell for And levels. I of highway to at particularly the at sector you future. funding are would record is of set sector, is highways three government back whole all-time half areas but really is simple answer really record all that robust up levels. sector Yes. a importantly, public loaded question, the

that got highs. all flow federal, all at to is And and starting all-time municipal of lettings. into state, You

California. billion, around a fourth of year, last quarter really little over color all-time an is first quarters in high year California. healthy two those lettings, will be quarter this which you the lettings the And for are in $X which of Give combined

to better. all-time lettings of Moving the even $X is the be again, some quarters almost billion, two first at And will XXXX, Texas high.

but we as and solid a it in for just time now see how big indicative highway XXXX, that billion. So awards we'll we'll to -- a larger much are $XXX And in shipment, much XXXX lettings takes We is we so of growth XXXX. the those contract low-single-digit, see predict -- -- still flow-through said is still so shipments. over that

Our next Revich, comes Sachs. Goldman question from Jerry

Jerry. Hi,

morning. Good

to quarter. of Tom, things the just actually year-over-year your normal your up nice quarter be we the the good seasonality rate, quarter cadence Thank up Normally second your consistent quarter. couple And the in similar strong you. Andrews, the wondering about Hi here is And that think cadence side, if volume margins the run be wondering, XQ. a that Aggregates of seeing with could in really morning, just we And versus on should in vein volumes out XQ well? you're I'm first in as are I gross Mark, Mary points, margins off wanted stood ask that is the I'm suggests XX thinking about quarter. for business? that

I'll the handle the and margin. Andrews take Mary let Yes, volume

were and volumes East into I Southeast year, in on the last big first us. had wet this volume of in were really and down the But probably think Texas weather positive. some X% California weather in the on Southeast from had were weather we And which year. fourth that had Weather quarter and and the quarter, the play really we the quarter pushed drag East in and a Arizona that. the were a

is it outlook but six, is say two which it hasn't negative you heard our me second single-family, time. be as little we've Non-res, a two as half far changed. going more As coming challenges solid to to really in are got loaded. really highways on, -- and takes The

key think fast I for of lettings me I think backdrop. is all be shipments to is of go to But going shipments. a the highway those in timing from how this,

years. You which us demand of quarter seen out the Vulcan do few over Vulcan got of will confidence to of you've last quarter -- that challenges, the gives our and the in we've performance which continue regardless operating, me selling, way way improve

Yes. I progress year-over-year expect. as should think XXX as what we typical is in points basis, of margins, yes, you sequential improvement from terms that And first Jerry, said basis on quarter. we'll the I acceleration that off significant see the And a quarter-to-quarter

from Capital. next RBC Mike comes question Our Dahl,

guide, taking for Andrews, Mary guidance, parts sure with quarter, talked last to about not other up and this and that but of the with being inflation my morning. if think Good high-single-digits I'm formal I was you the expectations. ags respect the said was release consistent Thanks tracking questions. cost cost

of profit is, it something if gross percentage top price the low-XXs it like new about kind is still might of of gross then from suggest for and profit kind in ton? expectation ton So per wondering on I'm the that's a right if per that increase to a wise standpoint, year-on-year think

assumption step stubborn Quickly, If services. inflation back on per at impact of we're Yes. cost, and improvements. I you're correct on profit in the look your and still parts gross ton facing

you looked the the If had West quarter, on cost. weather impacted first quarter in first the negatively

remember a costs comps get we as year, lot our on As -- but easier. through progress whole the

guiding by to in cost. offset still inflation. would as and better delivery us it we're just probably that expected delays some So high-single-digit than services down costing that's expected And is describe keeps the diesel higher because cost I than equipment and parts probably also

the point, way comfortable to being all but this with that continue we'll I guide. that very still But efficiencies -- think high-single-digit to We'll on operating operating. of at work we're said, Vulcan our

profit And per consistent cash be improvement that'd beginning, this and ton the profit year. ton gross Yes. from Mike, we on much gross the per thought just more

XX% that a and good so saw assumption. rest in And the the low-XXs you is for first the quarter

question Thompson, comes Group. from next Thompson Our Research Kathryn

Good morning, Kathryn.

quarter. Good morning. Great

materials channel mid-year? to strong commentary on for to mid view, we throughout more with Act quarter, population the for In in does also so described this the this markets clarification view and when in funding as And shift in pricing? and look open additional long-term the checks, and year along even much. or that, robust had you mid up markets multiple your Act, the IIJA pricing long-term in a a based possibly some have you reassuring actions our of supported government CHIPS on at demand seeing Inflation possibility pricing Thanks season. Reduction enter then the play how already you key as into U.S., Just some construction light of the does pretty we're tightness the

Yes.

year, second so price that think first. markets. increases mid-year did That increase that you -- vast we pricing most like assume XX% earn our the as not I got far as a of to of announced price guide. rest feel are we in We the majority in said, half the our in have

as Vulcan our just on far work, report bid out mid-year day price of progress So our and selling. on that's we'll part and August as of work, in we're those day efforts in our way on pushing bid

the to on a the see large as far As the spot highways large projects side, -- and you're more a going non-highway, on lot projects lot we're both public flowing. and more money

as starting big projects, continue also, to are think we you well future. industrial said, the the which manufacturing into We see

pricing. backdrop also public All of the tend that to ones those customers' more and once and gives pricing projects to is so visibility both surety those gives that they that to bodes very for demand. announce our extremely demand, then And be us well a because which and industrial to large going good coming they're projects there's big them for surety happen

question from Keith next comes Securities. Our Hughes, Truist

Keith. Hi,

morning. Good

non-residential, positives words, business? How you you on a I to lot visibility right really now. of strong work guess could seeing out there's other of there much. several on heavy Hey, In heavy the years do switching discussion of to specifically we done? on be have thank that very be far

a is a coast. projects in Yes. That to they're they're in engineering. energy manufacturing, budgeting, that both along the see number they're of or big healthy There you going and either both the in of industrial, are bidding, years pipeline

both And of believe and price. will bode -- and see think for this volumes like really you so I I we'll I said, it well years

not that give visibility you're shorter Is your on And correct? light. that long nearly that that business on that your is light cycle,

That's correct.

D.A. from comes question Brent Thielman, Our Davidson. next

Hey, Brent.

Good morning.

from quarter morning. the surface, look good including curious I'm the Tom, residential sector the weather, balance, X%, just what down with on hit was Hey, the only Hey, it this because that much. like volume doesn't on just

half it if were look positive. took at and about So in of you half a about markets res our hit

of year. probably the in you tell as permits -- starts feel So impact of in we We'll fall and second single-family. that I'd and really half starts the the the the mid-single-digit. we'll feel said, But

as and that. in now, think some So much plus California masks -- right pretty of it's and weather Texas, Arizona, a expected I

is pipeline. it's as -- as a through it that we So think starts But go second harder I those more play have to to -- see. half of the

Jefferies. Phil Our comes Ng, from next question

Hi, Phil.

Good Phil. morning,

Hi, mix, Thank forward? should you talk good but pricing morning. might that for about This that how mix by Phil. wanted mix. favorable is on how actually that about touch [ph] to the Colin on aided margins mix geographic I know benefit and just we going you. have think was helped gross could I

it's it big gross going margin. think think price. X% don't a -- on on don't It to I play was I only has

it So impact really it didn't on on price have really -- did on margins. much or an not impact

Timna question from Tanners, Wolfe comes next Research. Our

Good morning, Timna.

Hey, good morning.

Hey. Tim. Hey,

I haven't address, just appreciate there. the year I there's And broadly. is heard Thanks. I Mexican updated been know hear thoughts will noise down be the then and but operations as your would it's bigger there, to things One well. Two and a labor and love a on customers, you take some issue like I that shut your been would were since for May been it's think I so markets anniversary from, please. would

would easing. the as labor describe I market Yes.

I think that. and on of year I of it's we've done with retention labor the easing, the think work combination lot a a gotten market's and over last better

we a sometime it On of that or on So not customers, would hope illegally remain XX issue for it the shutdown lot get a ago. issue, in really ago XX like continue, but the and a XXXX. our proceedings still ruling not We was NCRA bigger Mexico, change. an is months probably still tribunal to with months

Thalhimer, comes Adam question from Davis. Thompson next Our

Adam. Hey,

morning. Good

Hey, good guys. morning Great quarter.

Nice.

If an there's questions get don't the debt from you to support? on ceiling. infrastructure starting am to federal increase, get clients we risk a I Hi, think

Well, that, ringing infrastructure I our while we'll I first doubt mean, their everybody's so time solve and -- I happened, hands we'll that's that spending. with I that it, continue would since a think be would this would problem over

government prior mean, deal, I they? Yes. have big haven't a been shutdowns

I our going Well, impact see one, don't to it's I want but infrastructure projects. to don't think

Our Vertical Michael Research. comes question from next Dudas,

Michael. Hey

morning. Good

Tom, just Mary then year. discuss on cash the will thoughts the can Hey, in looks how it visible by free gentlemen, do Andrews, for of through good your with happening Andrews. guess see any went we how maybe the rest what's activity could the you. flow Thank morning, share we the pipeline M&A QX best and you and year-end operating And marketplace?

Yes.

priorities. were flow And we our It's free with capital pleased to our we'll XX over free we business flow. with obviously that cash are conversion over that trailing XX%, approach result. months, cash -- our take So the has about waterfall stayed cash disciplined think consistent as pleased we very be so along allocate generative our how

On we're you far remains; markets synergies a M&A, projects game as number those I with tend always, to the normal what along, M&A, And and and of disciplined it. of us be be of as are the lumpy. large this as When Greenfields to about take unique be along for in in we're what advantage. in, we they all large guess Greenfield pay it we what we'll are from we'll and working bolt-on a kind of the pipeline I smaller on. and would perspective, tell number smaller have bolt-ons that we'll come

and forward that as -- come to about. we So they look reporting

Capital. Shmois, Garik from Loop comes question next Our

Garik. Hi,

Garik. Good morning,

Hey, size Nice at you're has when and outlook, to Just changed Wanted the lag between good pipeline? just occur, ask this volumes project later the up the projects starts the of has that on given showing on Curious year. demand all? the quarter. morning. highway in counting

highway of thumb, for we But think because that X think it is that project change except a projects it's would it thumb. engineering, you'll can the not snag, months pushed more that XX multimillion of limit. But and complex I around to can those. call now months pushes And just once into permitting run while X XX across stops longer to would XX rule take always good complex a work months. or back. bit; larger X a ton I in past more a of get planning they a the still complex more big when out and chunk every a I come rule months months months of little

from comes question next MacGregor, Our David Research. Longbow

David. Hey,

Good morning.

a strong quarter. Hey, Tom Phenomenal. and Andrews, congratulations on

Thank you.

I some I on you've transportation. be got long in tonnage haul update I'd Yes. know any just guess interested there. got you've

Is view it talking about how able coast. and you you down better? to How if been potential far lock changing have risk capacity for up the changing? You're for the as so along the strength a is that Do and forward? that

it's I rock think about driven all as short on we coast by on bottlenecks primarily railroads. still talk and is

hard as we'll be us making those gaps the And challenges think the challenges there. I railroads and XXXX. it are I with know see I through don't improve still has I work but they're It for to that fine its risk in think in XXXX. work but working and progress, partners railroad there's our

question comes Bank America. from next Feniger, Our of Michael

Michael. Hey,

Good morning.

for Thanks guys. morning, Good questions. my taking

Just two.

to typically So pricing range you. XX.X% first with to range the your below very a over. just does cadence. the Could flow-through think trying think kind actually think still so operating that guess do we the see pricing out is year of potentially territory. and there that are the pricing I'm XX% level? price sticking target you above certain that diesel above periods trying be leverage Thank I question, for double-digit the one, periods? flow-through I second can strong rolling that are where full-year like target just of you just increases, -- mid-year -- finish Aggregates, range of we I'm that And the year think in XX%, and obviously then that

can. You

we the big see you on it all, can of inflationary as and your piece can put inflation, see below jumps, First this, of fuel. flow-through you that, above on that as said, pressure does

really you're and have this on some parts year, be still inflationary at little bit going I if sticky I cautious services. look because think would pressures you to a

price is you're through won't that as price. what the to over the comping progress increase marks because high at in the as XX% think percentage we year, -- sequentially up a we've XXXX the range stay said I such

The we as flip that They that really this That ease the go inflationary point. comps go. at of put range unit all all we as in said, year-over-year through you're we is side ease that pretty should improvement year think XX% high the cost, consistent we've that in seeing cost as in together we're margins because

final Cumming, Stanley. question Dillon Our comes Morgan from

Hey, question. good Thanks the morning. for

wanted ask a Just non-res finer commentary. put if could to you point in some of the

I regards the non-res think are a the heavy concerns side some how environment, there impact just to and could financing there tighter out with that light equation. both comments of

if latest customers of and you're the that there thinking is. curious and what since then around the kind Just from update hearing

I it this way. would put

So towards non-res solid we've not our and markets seen heavy far shifting yet really we're manufacturing. some any is what seeing non-residential. impact on in industrial But on

haven't I XXXX. so Now in impact your watching any everybody's non-res and at for but point. But watching but that far, we point, being said, to it, so we're we're good seen think that, watchful this

closing like I call any turn now would remarks. for back the Tom Hill to over to

and interest We time remain throughout in look your update we'll safe and forward our Thanks. quarter. that morning. talk your families to this the your quarter to you you your Materials. throughout you and you progress. the appreciate to Vulcan healthy We hope and interest We seeing We on appreciate

does you today's This your conclude program. for participation. Thank

at You may any disconnect time.