Q1 2021 Vulcan Materials Co Earnings Call
Good morning, ladies and gentlemen, and welcome to Vulcan materials Company's first quarter earnings conference call.
My name is Christy and I will be your conference call coordinator today.
During the Q&A portion of this call. We ask that you limit your participation to one question. This will allow everyone who wishes the opportunity to participate.
Now I will turn the call over to your host Mr. Mark Warren Vice President of Investor Relations for Vulcan materials. Mr. Warren you may begin.
Good morning, Thank you for joining the earnings call today with me today are Tom Hill, Chairman, and CEO, and Suzanne Wood, Senior Vice President and Chief Financial Officer.
Today's call is accompanied by a press release and a supplemental presentation posted to our website Vulcan materials Dot com.
A recording of this call will be available for replay later today at our website.
Please be reminded that today's discussion may include forward looking statements, which are subject to risks and uncertainties. These risks along with other disclaimers are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission.
Reconciliations of any non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation and other SEC filings.
As the operator indicated please limit your Q&A participation to one question.
This will help maximize participation during our time together.
With that I'll now turn the call over to Tom.
Thank you Mark and good morning to everyone. We appreciate your interest in Vulcan materials, and hope that you and your families continue to be safe and healthy.
I want to begin by saying that our performance from the first quarter was a very promising start to the year.
Demand in our markets continues to improve and our team executed well as evidenced by our financial results.
Adjusted EBITDA, which excludes the.
The gain on sale from our reclaimed court in California.
Was 244 million up 22% compared to last year.
The strong growth was driven in part by a 3% increase in aggregate shipments.
Despite weather impacts across Texas and parts of the South Eastern February.
We experienced the pick up in shipments.
In March proved to be a strong month.
Residential starts continue to accelerate and highway starts also increase due to improved lettings in the third and fourth quarters of last year.
We've experienced an increase in both the number of jobs and the shipping speed and the heavy non residential space, which is also the most aggregate intensive.
And finally.
Some of the jobs that had been postponed last year have started.
With year over year improvement across our footprint pricing was the second driver of our EBITDA growth freight adjusted aggregates pricing increased by 2% of the quarter.
Adjusted for mix the increase was one 3%.
This was as expected since we were shipping work that had been bid in the middle of the pandemic when there was uncertainty and the lack of demand visibility.
As our 2021 price increases gain traction.
We will see pricing improvement throughout the year.
The third driver of EBA.
Dag growth and the one most within our control was our excess true cost performance in the quarter.
Aggregate total cost of sales per ton was 2% lower than last year's first quarter.
And cash cost of sales per ton declined by 3%.
Cost control like this is an accomplishment and requires considerable discipline from our operators.
The team focus hard on operational execution and as a result, all of our operating parameters and of course improved year over year.
We were pleased with the meaningful impact from our four strategic disciplines, which will continue to mature.
The most compelling metrics continues to be our strong unit margin gains across the footprint.
Cash gross profit per ton increased by 9%.
This demonstrates the attractive operational earnings power of our Irish business when demand is combined with strong execution on our four strategic disciplines.
Overall, our operating results this quarter helped drive a 90 basis point improvement in our return on invested capital.
Suzanne will provide further comments on this and other aspects of our financial performance.
Let's now turn to our view of the end markets and then we'll cover how that influence our outlook for the full year.
Broadly speaking the demand environment improved considerably over the last few months.
Construction starts as measured by Dodge got better along with other leading indicators like the Dodge momentum index Abi.
Construction employment levels continue to improve as well.
Residential construction remains the strongest in market.
There is pent up demand for houses and new subdivisions are being built.
With more to come.
The market fundamentals of low interest rates and reduced supply are still in place, which foreshadows continued growth.
Housing starts are growing faster in Vulcan served markets.
The outlook for our non residential end markets remains limited. However, our quote activity has increased and leading indicators are improving which suggest that of turnaround is happening.
The strongest nonresidential sector relates to e-commerce, and technology and encompasses data centers warehouses and distribution facilities.
According to Dodge, 90% of the growth in this sector will occur in Vulcan served markets.
The majority of non res starts currently fits within this category, but we believe the strong residential market combined with an increasing the open the economy will drive additional demand and other nonresidential sectors.
With respect of highways state budgets, and letting and Lettings are progressing as anticipated we are seeing the improvement in lettings from the second half of 2020 now turn into shipments the.
The COVID-19 relief funds have.
The backstop for any loss of transportation revenues for highways.
Our country's leadership continues to work on an infrastructure package both parties the proposed substantial increases in highway funding.
And this is a parag <unk> from both the Democrats and Republicans.
To summarize our view of end market demand is improving we see evidence of this both on the ground with our customers.
And in the data from leading indicators as a result, we've upgraded our aggregates volume guidance for 2021 to a range of 1% to 4% gross compared to 2020.
Excluding the gain on the sale of the California property, we now expect full year adjusted EBITDA of between 1.38 billion a.
At $1.46 billion.
As we look forward to consider opportunities we have three paths of growth with higher returns.
Those pass or.
Organic growth M&A and Greenfield I'll take each in turn.
First organic growth is a critical part of any strategy because it offers the most attractive and compelling value proposition on a risk adjusted basis.
We have the best geographic footprint of the industry.
And the best operators in the industry, but we are not satisfied.
Our four strategic disciplines are designed to accelerate this organic growth strategy.
And the benefits of clear as we grow our unit profitability.
Second we regularly review and active list of M&A targets.
Last year, the M&A market basically shut down.
But as we opened this year.
We have a long history of making both large and small acquisitions when they are a good strategic fit.
Since 2014, we've completed more than two dozen value enhancing acquisitions and some of the fastest growing markets in the country.
And finally, we had a long and successful history of developing and opening new aggregate locations.
This allows us to pinpoint the location of aggregates reserves and growth quarters, where there is no acquisition opportunity.
The additional benefits include more control over timing of capital investment and not paying a premium for the assets, we like having a balance between organic and.
In inorganic growth.
It provides a high degree of flexibility and is an important part of our capital allocation process.
And our ability to increase our return on invested capital.
I'll now turn the call over to Suzanne for further comments.
Thanks, Tom and good morning to everyone I'd like to start by highlighting four key areas to consider this quarter.
Our aggregates unit profitability expansion return on invested capital balance sheet strength, and the California land sale.
First unit profitability, our aggregates gross profit per ton increased by 12% to $4.82.
We believe this is important because improving the operational profitability of existing locations generally comes with limited capital investment as compared to other growth engines.
When the improvements are both sustainable and widespread across the footprint significant value is created.
Our strategic disciplines are making an impact and we have a good track record of execution over the past three years, our compound annual growth rate for gross profit per ton was 7%.
The second key area is the return on invested capital.
As Tom mentioned, the 90 basis point improvement in the quarter pushed our return to 14, 8% for the trailing 12 months ended March 31.
While our higher returns profile is always good the way in which the improvement is achieved is also important.
As an example, the first quarters are Oh I see gain was comprised of a 1% increase in invested capital and the 7% increase in adjusted EBITDA.
This further highlights the importance of the unit profitability discussed earlier.
Over the past three years, our trailing 12 months, our Oh I see has improved by 280 basis points driven by a 4% compound annual growth rate in invested capital and an 11% compound annual growth rate in adjusted EBITDA.
The third area is the balance sheet.
Our balance sheet strength has created significant optionality and flexibility as we consider our capital allocation priorities, our balanced approach to growth and shareholder returns are.
Our net debt to adjusted EBITDA ratio is 1.4 times and we have nearly $900 million of cash on the balance sheet.
Our debt has a weighted average maturity of 15 years with no significant maturities in the near term.
And as always we will continue to operate the business for the long term, we will not rush decisions to invest just because extra capital is available.
The last of the four key areas I wanted to highlight was the sale of the reclaimed quarry in southern California the.
The sale generated $182 million of net proceeds and a pretax gain of $115 million.
One of the strength of our aggregates focused business.
Are the multiple opportunities to create value and the lifecycle of this corey demonstrates that well.
Now so far on the call with the Hittite.
Early on the aggregates business, so let's shift briefly the non aggregates.
Gross profit in those segments collectively was $5 $6 million in the quarter or $2 million less than last year. The severe weather mentioned earlier affected both asphalt volumes in Alabama, Tennessee, and Texas and concrete volumes in Virginia.
Before I turn the call back over to Tom I'll touch briefly on two more topics diesel fuel costs and a change in our effective tax rate.
With respect to the cost of diesel it really wasn't much of a factor in the quarter because of the unit price of diesel was relatively unchanged from last year's first quarter for.
For the full year, we now anticipate that the cost of diesel fuel will be a headwind of approximately $25 million, reflecting higher prices since the start of the year.
The last time, we spoke with you we expected that our effective tax rate for 2021 would be 21%. We now expect the full year rate to be between 23 and 24% following a 27% rate in the first quarter.
The higher rate in Q1, and the revised expectation for the full year resulted from Alabama's recent change in the law, which modified the methodology by which a company of portions income to the state.
This change had the effect of reducing our ability to fully utilize certain net operating loss carry forwards in Alabama and as a result, we recorded a $14 million charge in the first quarter.
And with that I'll turn the call back over to Tom for closing comments.
Thank you Suzanne before we go to Q&A I want to again, thank our employees for their hard work for.
For keeping each other safe and for their dedication to servicing our customers embracing our strategic disciplines.
And making Vulcan better every day.
We will continue to operate Vulcan for the long term.
This means staying focused on our strong local execution.
Driving unit margin expansion, maintaining a strong finance financial position and.
And improving our returns.
Now, we'll be happy to take your questions.
Yeah.
Thank you at this time, if you'd like to ask a question Press Star then the number one on your telephone keypad.
As a reminder, we ask that you limit yourself to one question and.
And your first question is from Stanley Elliott of Stifel.
Hey, good morning, everyone. Thank you guys for taking the call can you talk a little bit about what's happening on the cost structure. I mean go back to the aggregates day, you guys had a framework volumes and EBITDA.
Where you're tracking kind of the midpoint of the guide would imply that share you know at least the year ahead of what you would talk about on the cost side.
I don't know if that's just the last year of pricing with COVID-19 being the anomaly.
Or something else, that's driving it but it is certainly nice to see thank you yeah. Good morning.
It was an excellent operating quarter the cost of cash cost was down 3% on flat production volumes and what we're seeing is still is our operating disciplines at work. Most importantly, we kept the book safe, but they were just good fundamental.
<unk> in our key operating parameters things like.
Throughput plan available of the yield or labor and energy efficiencies. For example will give you. An example, there.
31 of our top 50 plants showed improvement in plant availability and that's the that's a that's a big lever when it comes of course. So you know my hat goes off the operators congratulations on the on a great start to the year end.
We appreciate all the hard work, but it's a lot of smart work too yeah.
Yeah, and Stanley I'd, just add to that you know we one of the themes of the Investor day. When we had it was that you know as Tom said, we're going to focus on what we can control because you don't always have control over volumes and we certainly saw that in the last year with them you know the pandemic and the uncertainty so we have real.
<unk>, you know pushed and our operators have embraced these operational efficiency initiatives and that discipline that Tom talked about and.
You know that that's really what you see coming through in the quarter. Because you should always have some measure of control over your over your cost.
Yeah.
Thank you. Your next question is from Kathryn Thompson of Thompson Research.
Hi, Good morning, Hi, good morning, and thank you for taking my question today and.
At 12 years ago today are Tom Suzanne startup T. R. G. In you guys for the very first earnings call as the company. So.
Wow.
The ending.
Switching to our DNA, our wishes and the structure and public construction focus just one year. After the COVID-19 began how would you describe the state D. O T helped outlook and tied to that your thoughts on the infrastructure Bill and the extinction of the fast start to put this means for Vulcan going forward.
Yeah, So I would describe the state dot budgets and Lettings is simply back to normal.
If you remember we saw a slowdown in lettings from the third quarter when revenues fell in Q2 of last year. The Lettings ramped back up in October and of stayed up so the 2021 D O T budgets in Lettings basically returned to normal you saw gas tax revenues return you got the 10 billion of.
Aid from the first COVID-19 relief packages. So so.
So basically 2021 back to normal as we look forward to 2022, which in most states starts fiscal year starts July one it appears they haven't finalized the budgets of it appears the budgets again, we'll be back to normal or as planned with overall growth I would point out that four of our five top states.
We will see funding growth, we think in fiscal year 2022, so so back to normal.
On the highway Bill all of the Federal Highway Bill.
The for me the good news is the our nation's infrastructure problem and potential solutions are on the front page of the paper every day.
I think it's too early to say how much funding will be up but regardless of who's playing you like both plans show a considerable increase in funding for roads and bridges and also remember that in any definition of infrastructure. If it's new construction aggregates is going to be in the foundation so little.
Help us you know, whether its roads and bridges or other forms of infrastructure. So the bottom line is that we are I think we're likely to see an infrastructure package get done by the end of the year was substantially increase in funding and again going back to your first question don't forget that the state funding is up and will continue to get better so.
You know it looks like a bright future of from a from a infrastructure perspective.
Thank you.
Thank you. Your next question is from Jerry Revich of Goldman Sachs larger good morning.
Good morning, everyone. This is Jeff and kind of on behalf of J REIT average.
The hearing in other industries that concerns of low drastically higher copper to the gains taxes driving private players to the market. This year are you seeing that dynamic flow and can you also update us on your M&A pipeline overall.
I'm sorry, I think the question was about capital gains tax of those.
The connection wasn't Greg.
Yeah, so they're hearing in other industries that concerns over drastically higher capital gains taxes are driving private sellers to the market the scale.
Are you seeing that dynamic play out.
And I always ask that can you update us on your M&A pipe.
Plan overall.
Sure.
I'll, let Tom comment on the update on the M&A pipeline, but with respect to whether or not capital gains tax in the day, you know potential changes proposed by the Biden administration are driving and sellers to the market I mean, that's that's something that you you often hear come.
Up as tax law potentially changes and as you know there's a pickup in the M&A activity you know in.
And in our view I mean, it's it's possible I certainly wouldn't say that it would have no impact but in in our experience. We typically see the driver I mean of particularly in some of the small bolt on acquisitions as being sort of generational changes.
With our ownership you know as you know certain of the business leaders that had been running you know some of the smaller to mid sized businesses and decide that they want to.
Have a look at succession planning or their children in going to be involved in the business et cetera, we see that as the more typical driver of of potential seller into the M&A market, but I don't think it'll have a big impact on M&A I mean, it makes picked up but I don't think that's the.
That's the catalyst.
Great. Thank you.
Your next question is from Garik <unk> of loop capital.
Good morning.
Hey, good morning, Thanks for taking my question I, just wanted to understand the guidance range of little bit better how much of the guidance is related to the <unk> strength.
Maybe relative to your initial plan and then you did take up of your volume outlook, but you also took up the view of diesel costs. So should we think of those two netting out the rest of the year. So I guess just trying to understand what's incremental in the overall EBITDA guidance of share relative to Milwaukee performance.
I think of the volume of address volume it was approaching 3%. It was driven by the southeast and mid Atlantic I think that the at the end of the day works just returning faster than we had expected you heard us say on our February call. The the big the the big unknown in 2021 would be.
How quickly the job start back up good news the started faster than anticipated.
Really in the resin nonresidential and highway sector and those were the big unknown for us. So as we got a little more clarity of that and how fast jobs of starting them and what our backlogs look like it gave us confidence that we could up or our volume guidance. So that was it was just the the work we do the work was there was how fast was how fast was the good would come back.
And it just came back faster than we'd expected.
If you look at the cost guidance in there right now we would say low single digit built in our projection.
That includes I think what youre seeing there is the.
Inflationary pressures, obviously, we called out fuel well I think we've been you know around $10 million or so we're now at <unk>.
The $25 million and that's simply the the price of diesel went up so the goal.
Of course, as always flat costs and other.
I don't know what our operators have of passion to do that and you know we think we can beat inflation, but right now I think we're that's all of US our best estimate on cost would be low single digit.
Yeah, the Garik I'll, just add something of with respect to the volume guidance you know as Tom said when we last spoke to you in February it really was around the fact that we wanted a bit more of visibility around starts and what was coming in the market. Because we you know we were still a bit early in the in the.
The process and so it really for US was a combination of.
Seeing the gross in the first quarter as as Tom said some of those postponed jobs starting to come back online input from our customers. What we were seeing across the you know the footprint in all of the markets, but also from a macro perspective, yeah. We have a number of it of leading indicators we.
Looked at that that are all of them too.
Turning in the positive direction and just you know as examples we we look at construction unemployment, we look at Abi AR at.
Of the index is kind of a trend indicator, even though it can be.
Volatile month to month, Yeah, we are a big believer in Dodge starts and on a total dollars basis. You know that's growing you know again in our markets and we also look at the Dodge momentum index, which is sort of an indicator for non res. So when you when you put all of that together.
The other including our own internal metrics and you know it gave us the confidence to to look at what happened in the first quarter and take that forward based on some of those indicators that I mentioned.
Yeah.
Thank you. Your next question is from Mike Dahl of RBC capital markets.
Good morning.
Taking my questions.
Suzanne I actually just wanted to follow up on the volume questions and maybe Thomas as well.
I understand that <unk>.
Is seasonally a relatively small quarter for you, but given the strength to start the year.
Some easier comps over the next couple of quarters and your comments about the momentum.
In the business.
You know the the low end of that volume guide actually it still seems fairly conservative.
Can you just walk through kind of what why wont the what why wouldn't volume be even stronger at this point given what you are talking about and maybe some of the puts and takes you could elaborate on.
Sure No. It's a you know it's it's it's a very good question I mean, you've heard of stay this lots of time to me, we always try to be thoughtful in our guidance. We we like to give a range and then talk about what would put you at the lower end of the range of what might happen in and put you at the upper end of the range.
And as you know is always when we look at that lower end of the range. The plus one on volume I mean, it's it's really driven by your comment I mean look it's first quarter and that's typically the smallest quarter it's seasonally.
<unk> and you know when you look out toward third quarter, you do have the severe weather events that could could potentially have some some impact so we want to be of a bit cautious about that.
No on the higher side of the volume the plus 4% and you know again if.
Now if we see the starts and other.
Work opportunities job opportunities out there come to pass I mean, we could definitely be at that at that level. So it's really around it's really around non res and just exactly how quickly that comes back so could we be a bit better you know.
I guess, possibly but I think that for now based on what we know and what we see in all of those internal and external indicators. We are comfortable with the one to four range I think we've thoughtfully considered everything we know and I think it's exactly the right place for us to be you know as we said.
Here on May the force and as we look forward you know in second quarter look we will have a look and see where we are then but I think you know it's important not to get ahead of ourselves and you know whats the quarter by quarter process of looking at it.
Okay I appreciate that thank you.
Thank you.
Thank you. Your next question is from Trey Grooms of Stephens.
<unk>.
Good morning, Thanks for taking my question so.
So I guess on pricing here.
You mentioned that.
Pricing improved sequentially in March and you expect this to continue through the year and you also increased your outlook for diesel costs this year, which.
Typically leads to more pricing so <unk>.
Similar to Mike's question a minute ago on the volume is there opportunity for for pricing.
Maybe moved at a higher end or maybe even above the higher end of the the range that you didn't adjust the pricing range of up two to four.
But as the it could there be opportunity there and how should we be thinking about the the.
The price cadence given the timing of <unk>.
Fixed price excuse me fixed plant pricing.
Is the step functions or would it be fairly linear linear as we look through the year. So try you called it out always if you look at inflationary pressures and diesel coupled with better visibility to rising demand. It's always good for price and it doesn't mean, that's tied to the fundamentals things that are really good for price. So you know I.
Coal pricing in the quarter as expected Q1, we're working off work do we bid in the middle of the pandemic when price increases were not as robust because of uncertainty and there was a lot of uncertainty if you think back a year.
And the as we said in Q2, we would accelerate prices through the year. Our April fixed plant prices are now in effect and when as expected. So you know prices will continue to grow through the year and that's what we expected and that's what we're seeing.
I do think that pricing will as you said, we'll climb due to both you and inflation and demand returning our bid work pricing is moving up faster now.
Because of inflationary pressures, particularly diesel and logistics.
Challenges and then we're now having more conversations about a second price increase of our midyear price increase depending on the market with our customers and they get that based on.
Both fuel and inflationary pressures and.
I would I would say their profitability or now they're bid work as the prices go up because of both.
Both of the same thing both inflationary pressures and visibility of demand the.
At the same time, we all know that.
Pricing is critical for all of us, but at the same type of remember, it's only part of the units.
The unit margin.
Arithmetic.
Margins is still the most important metric and I believe our teams have done a really good job implementing those force disciplines.
Our cash our cash gross profit of ton went up by 9% in the quarter and that's that's that's a good job because it was the combination of volume price and cost.
Yes.
Yes. Thank you for the color Tom appreciate it and best of luck. Thank you. Thank you.
Thank you. Your next question is from Keith Hughes of Truest.
Thank you most of my questions been asked but I just wanted to turn back to the nonresidential comments you'd given some color of in the industry, what kind of projects could be coming.
I guess my question.
Given the the outlook.
Of the type of projects are there variability in terms of when those actually become shipments for you.
Whether it's the data center versus an office building.
And any kind of aggregate intensity that you would find amongst those different projects that could be come in the market.
Yeah, that's insightful, so non resin definitely improving and.
As you pointed out is led by the the ecommerce in warehouses and distribution centers and that heavy part of non residential construction is more aggregate intensive just because it's.
It's flat and there's a lot of flat work.
And so the the agri intensity is higher but what's interesting of what we're seeing in that heavy side is those jobs are going faster. So the time from when they're.
When the alert or we know when their bid to the time. They are working is much faster than what we traditionally see of non res and that was a little bit of the change in our outlook for <unk> for the year. We saw those non res jobs, just starting faster than we expected now we're also seeing jobs that were postponed in the pan.
<unk> start again start up.
And you couple that with we're starting to see green shoots on traditional non res is falling subdivision construction.
So in general non res is one of the men, but to your point the <unk>.
Heavy side is more aggregate intensive and it does tend to stock faster.
Thank you.
Thank you. Thank you. Your next question is from Joshua Wilson of Raymond James.
Good morning, Tom Suzanne Congrats on the quarter and thanks for taking my question good morning.
Most of my questions have been answered as well, but on the inflation side of things could you also address the maybe what youre seeing on the on the labor side and also in an asphalt costs.
Yeah. So.
You know.
While our market outlook is really exciting with the growth from a volume perspective is there's always going be challenges and right now it's inflationary pressures labor and logistics and we are addressing these now in our four strategic just the disciplines will allow us.
To mitigate these challenges faster and I'll take them in turn inflation. The Argus business has the ability to beat inflation.
For a couple of reasons.
It allows us an avenue for price.
And we own our largest cost which is the rock in the ground and we believe the our good operating efficiencies supported by our operating disciplines will will help offset inflation labor again, our operating excellence program improves efficiencies, but also.
We've really accelerated employee training and development and that all of that retained employees out of tracks employees. It gets new we're poised up to speed faster, which is very important and keeps them safe.
And then on the logistics front, if you remember.
<unk> future truck shortages were one of the catalysts behind our.
Logistics innovation efforts.
And that allows us to more efficiently and we.
We can beat those challenges actually with technology driven efficiency. So.
Or are those four strategic disciplines are designed to take advantage of tailwind, but also to dampen the effects of headwinds.
So that we can live up to the potential for shareholders and I think thats, what youll see over the next year, we will take advantage of the of the volume and potentially pricing until till wins, but but we will offset the headwinds of all of the inflation labor and logistics challenges.
Thanks, Good luck with the next quarter. Thank you.
Thank you. Your next question is from Phil <unk> of Jefferies.
Good morning, Hi, this is actually a column there and onto fill of great start to the year and thank you for taking my question.
So you called out of cost control of the driver of gross profit margin and unit margin improvement in the AG business in the quarter, just given the increase in volumes and pricing youre expecting as well as your outlook for higher diesel food costs can you provide color on how youre thinking about the year over year change in aggregates gross margins and unit margins to the remainder of the year.
Yeah. So you know I would probably call out in the range of mid single digit.
You should put that together that it meets our range in price groups out there I would call out probably low single digit.
Flat to low single digit in cost.
And at this point, we think all of that's achievable.
Okay. Thank you.
Thank you.
Thank you. Your next question is from Michael Dudas of vertical research.
Good morning, Tom Mark Suzanne more in the morning.
Tom's of intrigued about your comments about your balance looked at allocation and talking about the greenfield opportunities, maybe you could share a little bit more on.
The timing what what's the like current plan in your in your Capex budget for this are the projects.
Some of that much longer dated the size scale of what could happen and is there anything that's imminent that youre looking at that would require over next several years are quite of bit of capital to the boomers are a lot of opportunities just let me get a sense of how you're thinking about when you balance that relative to your organic and certainly M&A opportunities.
Yeah. So if you if you just step back and look growth you know if you remember in 2020, the M&A rose really dried up where some of it.
Nope.
Pick up in 2021, and as always we're going to be both opportunistic and disciplined about our approach to acquisitions has got to fit us.
So when it comes to growth I'd actually take a broader view as you've talked about and look at vulcan's ability to grow and it's unique because it's balanced.
And we talked about the three avenues, one was acquisitions and look we're the largest most probably lag of producer will get the call when something's for sale, but we have to be disciplined and we have to do the work to pay the right price for the right assets.
Number two would be opening greenfield facilities, and Greenfields opened a new facility Greenfield as it is a.
It's difficult to do and requires a lot of hard and smart work you have to go out and defined the growth quarters, you have to overlay that with geology you have to go procure the land you have to get the permits and then you have to build the right facility at the right time.
And the reason and the.
For the Greenfields are so important as the as you look at the gross quarter. There may not be an acquisition target available to best supplier of that growth quarter, hence the greenfield, but you just you have to have the know how it is hard to do and you have to do the hard work, there's nothing easy about it and you have the time it right and then the last in the third quarter.
Talk about was organic growth and you've heard me talk endlessly about our four strategic disciplines and we're excited about them because they are important and.
This has to be done with its design and planning of discipline.
It's important because it's from a shareholder's perspective, because it's lower risk and higher returns and for US. It's working as you look at our numbers over the last.
Couple of years, you'll see us accelerate our growth and unit margins and so that but that balance.
<unk> for US is so important and don't forget that we also have the balance sheet to execute on this.
Thank you Tom.
Thank you. Your next question is from Timna Tanners of Bank of America.
Good morning, gentlemen morning, guys. Good morning.
I wanted to ask two questions one was on.
Just you did highlight that the infrastructure of proposals as they stand both focus on increased spending on roads, but one thing we struggle with just trying to understand some of the auxiliary spending and especially in the Biden proposal and what that might mean for aggregates of you've done any work on that or have any thoughts.
In may the proposal of what that might mean and the second question is if you have any updated information for us on how the board is looking at the dividend I know you just raised it but just you know any any thoughts there would be great.
Yeah. So.
I'll talk about how we let suzanne talked about the dividend.
I think that what's important in infrastructure and I've said this when we were talking about the highway Bill and the band plan anything that is new construction you have to of aggregates in the foundation and now obviously, we love roads and highways because the most aggregate intensive but you know anything in the.
Anything that is new construction, you're going to a magazine it. So if you look at.
Alternative energy solutions were back sort of big provider for the foundations for alternative energy, which is which has been a good business for us for years. So we welcome that also.
Yeah.
Timna and I'll I'll just address the dividend question look that the the dividend is very important too to us and it's very important to our shareholders and we want to make absolutely certain that we maintain the dividend. It's a it's a very good way of.
The increasing shareholder returns and as you noted I mean, the company has and.
Continue to increase that year over year and you know as we said it is you know we think about it in <unk>.
You know almost a progressive kind of way and by that I mean, we will continue to grow the dividend.
At the board's discretion to a level that we are absolutely certain that we can maintain through the cycle because what we absolutely do not want to do is have shifts and changes in that dividend. So when you're talking about an ordinary dividend the the ability to maintain that.
Level is is absolutely critical and that's what we're focused on when you look at you know our cash generation capabilities. If you look at our operating cash flows over.
Over the trailing 12 months.
Cash flow from operations was $1 2 billion, that's up about 20% year over year. So I think you can tell by the you know.
Strong cash generation capabilities that we have that we should.
So again at the board's discretion, but we should be in a position to continue the view I just described on dividend growth.
Absolutely it's of high quality problem, but your share price is going up so strongly means that the dividend yield being kind of small. So so here you pointed out through the cycle, but the free cash flow has been pretty steady now actually even through this latest correction.
I'm curious on that and I guess, you didn't have Oh I'm. Sorry go ahead no I was I was just going to say youre right. It is a quality problem to have I mean, what we've been very focused on with our disciplines and focus on our unit profitability is the etc is making sure that that free cash flow.
Is yeah.
Stable, it's increasing and because when you when you have a high degree of confidence in your free cash flow generation. Then you know you can do good things with your capital allocation priorities and you know that was really the first step that and I think we've accomplished that and we'll look forward.
For additional opportunities to improve the company's Rois day.
Okay Sir.
The question I had earlier is there anything that you can provide in terms of rule of thumb in terms of Green energy I mean offshore I imagine is less than you know certainly some of the solar and onshore wind, but is there anything about aggregates for project or anything that you can provide the press in terms of guidance. The it's hard to do it.
Rule of thumb I would just say that the wind energy is very aggregate intensive because you're not just putting in the foundations, which are massive for those windmills. You also put in all of the all the logistics network all of the roads and utilities fluids wind mills. So it's the the wind wind energy is very aggregate intensive.
Okay. Thanks, guys.
Thank you. Your next question is from Adam Palomar with Thomson Davidson.
Good morning.
Guys, great start to the year I guess my biggest question Tom would just be on aggregates pricing.
And theres so much inflation throughout the entire.
Construction chain right now and then when do you think we break out of this low single digit range that we've been in for a while for aggregates pricing. Thank you.
I think youll see us March that up as we progress through the year I think we get the question of lot of times can you get the double digit price increases and yeah. That's what I want to know so so so the here.
Ask the question we have of the history would tell you, yes, and we have done it before I think but you got a you guys see a <unk>.
Average of some 60 markets pricing, all put together and each market marches to a different cadence.
And so what we'll do is we'll push price really hard of the market for a while and then you may at the pause let folks catch up in the Youll push it again and to get to that double digit number of all the stars have to line up of once cannot happen, yes, what I advise that no. So.
But I will say this much the.
The pricing environment has improved dramatically and as I said, a little bit earlier, you got both.
The demand visibility and you've got now you've got inflationary pressures both of which are on.
Good for pricing, so we'll plug out it all year I think you know and obviously will we get towards the end of the year, we'll have a better view for 2022 and don't forget as we said we're still working off some.
That we bid in the middle of the pandemic when price increases were not as healthy as they are today. So we will get past that and will flow, but yes, we would love to see double digit pricing I would also tell you that is very hard to do not impossible, but very difficult.
Okay. Thank you very much you bet.
Thank you. Your next question is from Anthony Pettinari of Citi.
Good morning, good morning.
You talked about the guidance raise being partly driven by jobs shipping and starting faster than expected and I'm. Just wondering if that was really pronounced or concentrated in any specific state or end market and just generally how the the 'twenty one volume growth outlook for eggs, maybe maybe breaks out between the end markets I think that if you if you.
Look at that if you look at really what's happening in the end markets it's pretty.
It's pretty normalized across our footprint, you've got residential which is very very good you've got non res, which is returning driven by the you know the herbicide, but we're starting to see green shoots on the light side on highways the the the.
The jobs that were bid.
In the fourth quarter just have returned faster you remember Q3 was was down as the Dot's. We're trying to start the year and see what was going to happen and then infrastructure or non I won't fix of I would call. It.
Flat to improving you had pressures from revenues, but you know they've come back and you've got COVID-19 relief.
That will kick in probably by the end of this year beginning of next year.
I think that if ive had a pick of market I'd say I'd tell you the southeast and mid Atlantic States were the strongest.
You know you had Illinois down in Texas down in Northern California down that was really weather driven I mean coal frigid weather in Texas, and then and the Illinois and wet weather in Northern California. So if I had the picks of pick areas. It would be the southeast in the mid Atlantic, but I would tell you that the quarter was more of the the volumes were down.
The more weather driven not demand driven.
And I would call out improving in all of our markets.
Okay. That's very helpful I'll turn it over.
Thank you.
Thank you. Your next question is from Paul Roger of Exane.
I'm wondering highest highest of that morning.
But yeah.
So I've just got one question that maybe slightly less sales compared to the rest of the Q&A.
Basically looking at the environmental agenda on the.
Not that that sort of sit in the U S. Co can you talk a bit about the risks and opportunities that the wins.
And maybe specifically.
What in part with the increased use of recycled aggregates hop on the Vulcan.
If you if you look at the environmental piece of a Vulcan we've been doing this a long time and doing it well for a long time, but if you step back and just look at for example greenhouse gas.
For us the.
Our our.
Greenhouse gas emissions or actually for construction materials company very low and we're even though of that being said we are improving our footprint.
We are looking at renewable energies. We're also were probably about 25% of our mobile equipment has has the the.
The new engines in it which have less of submissions and we will plug of that every year to improve it. So I think we've got a great story to tell I think but even that being said, we're working hard to improve it.
I know the day recycled aggregates size I mean that was one of the things we saw when the the divina agenda of really took off of it.
And presumably lots of negative.
Aggregate touch the margin is it.
Yeah. So if you if you're if you're referring to recycle we are a big recycler. We obviously are in the concrete recycling business. We're also with our asphalt business were a big recycler of asphalt. So it is it is part of our part of our makeup and it is growing.
And I would just yeah, I would just add to that.
Paul that you know in terms of.
In terms of highways.
You know the the formulas that are used for them you know the the asphalt there yeah. It varies by state, but you're only able to use of certain amount of recycled material. There. So you have to be cautious as to what you're doing and we're very happy a of as Tom indicated to.
And the recyclable our business, but you know it is it is not a replacement for Virgin asphalt and many of the applications.
Okay.
Thank you.
Your next question is from Zane Karimi of D. A davidson.
Okay. Thanks for the color so far.
I was just hoping to go into a little more detail on your outlook and particularly what you're seeing in California, and Texas like what is driving activity in these markets and how is your outlook. How does it really change from last part of this and are you seeing stronger driver of an infrastructure or non resi for a potential upside from here.
For both of them I would tell you we are seeing growth from member of California, California first.
2020 was a really difficult year in California, you had the pandemic Northern California was the the was the most severe shelter in place.
Of that you had you had the rolling power outages from the fires, which caused severe cement shortages.
You know I would call cement tied in California, but nothing like it was last year. So much improve in California, just from ability to do business. It's opened up and you don't have rolling power outages cement shortages, but that being said highways were up non residential is up and strong non res is improving and infrastructure is.
Covering.
Both with revenues coming back and with COVID-19 Relief Hill, Texas.
Obviously, the rough start with the frigid weather in Texas, but that putting that aside highways of very strong in Texas Reza is very strong in Texas non res is improving again driven by the heavy and the non infrastructure.
Is also improving so boast both in California, and Texas, we see.
Much improved markets and ability to do business.
Okay.
Thank you.
Thank you there are no further questions at this time I will now turn the call back over to Tom for any additional or closing remarks, yes. Thank you very much for your time and interest in Vulcan. This morning.
We will continue to make good progress on our long term goals and we look forward to sharing the news with you over the quarter and of course to come and have a nice day and stay healthy and safe.
Hi.
Thank you. This does conclude today's conference call you may now disconnect.
Yeah.