Q1 2021 Summit Materials Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the summit materials first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.
For the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need your price star one on your telephone keypad if require any further assistance. Please press star zero. Thank you I'll now turn the conference over to call. The Anderson. Please go ahead.
Welcome to summit materials first quarter 2021 results conference call.
The press release yesterday afternoon detailing our financial and operating results.
All of the company by our Investor presentation, and an updated supplemental workbook, highlighting key financial and operating data all of which are posted on the investors section of our website.
Management's commentary and responses to questions on today's call May include forward looking statements, which by their nature are uncertain and outside of summit materials control. Although these forward looking statements are based on management's current expectations and beliefs actual results may differ in the material way for a discussion of some of the factors that could cause actual.
The results to differ please see the risk factors section of summit Materials' latest annual report on form 10-K, each of which is filed with the SEC.
You can find reconciliations of the historical non-GAAP financial measures discussed on today's call in our press release.
Today's call will begin with the business update from our CEO and Union then our CFO, Brian Harris will provide the financial review any of them provide concluding remarks.
We will then open the line for questions. Please limit your assets to one question and then returns of the queue. So we can accommodate as many analysts as possible in the time, we have available with that I'll turn the call over to Ann.
Good morning, everyone and thank you for joining our first quarter 2021 earnings call. We will begin on slide four of the presentation with an overview of our first quarter performance.
Before a brief you on our operating and financial results consistent with our normal practices at summit I would like to start by providing an update on safety safety is the single most important core value driving the daily actions of all summit employees, our highest priority is debt all of our approximately 6000 employees of pull.
The highest standards for safety and return home safely after every workday.
Our focus continues to be on driving of zero incidents safety culture I am pleased to report that many of our operating companies have achieved zero recordable incidents year to date safety is the core values and of summit. We are committed to the journey of improving our performance every minute of everyday to ensure that we keep RMP.
<unk> and the communities that we serve safe enhanced safety and distancing protocols are still in place throughout the company in response to COVID-19, ours is an essential business and we take that responsibility seriously of few of our offices remain tolls and continues to have remote workers subject to local guidelines.
However, we expect to complete the transition to in person working for the entire employee base over the next few months provided that local health conditions continue to improve.
I'll turn now to our financial and operating results. After a strong finish to 2020 summit has accelerated into 2020, one with record first quarter results migrate.
Migration activity continues to favor our rural and ex urban markets and most of the state departments of transportation that we serve are on solid financial footing.
We are in the full implementation mode on our elevate some of the strategy and we are seeing early signs of success, we remain focused unsustainable growth with investments in Greenfields and the end markets that are underpinned by strong growth fundamentals.
We delivered record Q1 results for net revenue and adjusted EBITDA. Our Q1 adjusted cash gross profit margin expanded to 24% from 14, 6% in the year ago quarter, an expansion of over $31 million in dollar terms and impressive outcome for which.
Typically our lowest volume quarter of the year when annual price increases have not yet taken effect.
Volume growth was robust throughout the quarter with aggregate volumes up 27% cement volumes of 13, 7% ready mix volumes up seven 6% and asphalt of 15, 9%.
The older. We're only two weeks left in the quarter, when we announced our elevate summit strategy, we hit the ground running with several initiatives out of the gate, we completed one strategic divestiture in the quarter and began work on several more of our EBITA margin and ROIC improved on a trailing 12 month basis, and our leverage remained flat versus last.
The quarter.
On slide five we've highlighted our performance at the segment level.
Our West segment is the largest contributor to our financial result, it reported record net revenue of 27% and adjusted EBITDA of 81% in the first quarter on continued strength in the Texas, and Utah residential markets, all of which drove higher aggregates and ready mixed demand.
The market conditions in British Columbia are still improving our east segments reported higher aggregates and asphalt demand. We set records for net revenue, which was up 3% and had record adjusted EBITDA, which was up 23% driven by ready mixed demand, partially offset by fear of wind farm projects when compared to Q1 two.
<unk> 'twenty, we also had a change of product mix in Kansas, where we sold more base materials than a year ago as contractors got an early start to the construction season.
This mix impact negatively affected the average aggregate selling price for both the segment and summit as a whole but contributed to significant bottom line growth in the quarter and adjusted EBITDA dollar terms, the east segments reported $11 7 million of adjusted EBITDA, an increase of 23% over the year ago.
The quarter.
The cement business continues to report increasing demand with volume up 13, 7% in Q1 and revenue up seven 2% submit the trailing 12 months adjusted cash gross profit margin is at 48%.
Our Green America recycling facility is currently ramping back up to full production the project to expand the Green America facility is also well underway.
Turning to slide six.
Seven weeks ago, we presented our elevate summit strategy, we are seeing encouraging signs of early success, but understand that the road ahead will require continuous execution discipline and creativity to deliver better returns of sustained long term organic broke.
We have created the centers of excellence to focus on for critical capabilities across our lines of business operational excellence for aggregates construction in asphalt and ready mix lines of business and commercial excellence across the entire summit the enterprise.
We are standardizing and areas like purchasing technology and asset utilization and developing the tools required to optimize return on invested capital across all of our assets standardization will drive best in class practices across the business and improve consistency of results and the agility of decision, making while optimizing.
Our overall cost structure and productivity results.
As a reminder, we have for key strategic priorities first enhancing our market leadership, we want to continue to be number one or number two in ex urban and rural markets. These are the markets, where we shine by leveraging the strength of our local operating companies and brands and more people are migrating to them each week.
These population shifts will require the construction of new homes schools and roads, we are optimizing the portfolio through selective divestitures to provide the flexibility to expand into key targeted markets, where summit will be best positioned to deliver on our targeted metrics of greater than 30% EBITDA and greater.
The 10% ROIC market leadership fosters value pricing and as the key driver of long term margin growth in Q1, we completed the divestiture of the glass aggregates business, which was not strategically core to our portfolio. This divestiture generated $33 million of cash proceeds and the total gain on disposition of.
$15 7 million summit portfolio optimization team includes a combination of on the ground knowledge and relationships through our regional teams as well as excellent transaction and deal sourcing expertise from our corporate development team the tight integration of corporate development with summit regional leadership will continue.
To drive growth in our strategically targeted markets, we will allocate capital intentionally and strategically and alignment with our elevate summit goals. We are also deploying capital more efficiently with an asset light approach. Shortly after quarter end, we successfully divested and asset intensive business, where we would not the rifle.
On her.
As part of the transaction of the counterparty committed to our long term aggregate supply contract with summit, the strengthening and existing customer relationship, while reducing capital deployed and complexity of our business.
This divestiture met the criteria that we spoke of on March 16th when we rolled out our asset light approach it wasn't isolated downstream assets and the low growth markets, where we were not number of one or two of competed with different competitors in the downstream vs. The upstream the business did not have the capability under.
Our ownership near or medium term to meet our financial goals of greater than 30% EBITDA and greater than 10% ROIC and finally, we had the opportunity to pull through of our aggregates with the long term supply contract we.
We have committed to lead on social responsibility not only because of just the right thing to do but it also has significant importance to all of our stakeholders. We've started the process to establish our C. O two baseline and other measurements to understand the key drivers behind our social and human impact land use and emissions.
Performance, we're standardizing reporting across the company and will use that data to develop a roadmap to become the most socially responsible integrated construction materials service provider. We are expanding our greed of America recycling facility and expect to have the completed this year are valued customers tell us that they faced increase.
Challenges and opportunities with regards to ESG with our commitment to ESG. There is an opportunity to bring value to our customers and the communities. We serve through delivery of innovative solutions to meet increasingly stringent building codes and demands for lower mission products and services, while enhancing the overall quality.
<unk> and financial performance of our business.
Finally, our fourth strategic priority is the commitment to invest in innovation, we are beginning to assign resources to the function and developing an inventory of projects and products that we already sell or have been working towards with the industry and University partnerships. For example, our build the ex lightweight aggregates business is.
Benefiting from the demand for greener more innovative solutions because of our product hey, the IDE reduces energy labor and transportation cost innovation will help summit to be less reliant on one line of business or one geography and drive us towards greater than 30% EBITDA margins in the long term.
On slide seven you'll see of graphic that we introduced during our elevate summit Investor day that summarizes our strategic execution plan and deliverable over three horizons.
We are currently in horizon, one which is detailed at the bottom of slide seven we've completed our portfolio review and are in the process of divesting underperforming and non core businesses, while focusing on key drivers of value creation.
We are looking at ways that we can do more with less capital intensity standardizing processes across the company to improve agility and our underlying cost structure and cultivating a culture of excellence to drive sustainable profitable growth across our portfolio, we are establishing specific goals for the social responsibility.
And starting to recruit talent and invest in resources to develop a compelling innovation strategic roadmap. We expect these horizon one efforts to drive us towards an adjusted EBITA margin of 23% to 26% and roll it up approximately 9% and less the three times leverage.
When we presented the strategy on March 16th we told you that some of its long term financial goals will be pursued for a multi horizon implementation of the strategy and that we would report regularly progress along the way.
Following through on that pledge, we have an update on slide eight as I said at our Investor Day, we are playing the long day I want to take the opportunity to level set on the expectations. We believes these pools are clearly within our sites, but it may not be of linear upward trajectory each quarter due to the nature of our strategic priorities.
A great example is the divestiture of assets that may cause fluctuations in results as we progressed through portfolio optimization, while we can't promise of perfect steady climb towards our goals, we can promise transparency and the relentless focus on execution.
We are off to a good start our leverage ratio is three two times unchanged from what we reported in the December and a major improvement from three eight times a year ago, keeping our leverage ratio unchanged. It's also notable because our leverage ratio typically increases in the first calendar quarter of the year because it usually.
Has the lowest EBITDA contribution.
Based on business conditions today, we believe that achieving our elevate summit goal of less than three times leverage is within striking distance of this year of course, we will balance our leverage ratio with other capital allocation priorities, along the way, but achieving our less than three times goal is close.
Return on invested capital for the trailing 12 months improved by 60 basis points to eight 6% from 8% we.
We've seen a cultural change at summit with our regional leaders taking charge on this metric and challenging their teams to be more capital efficient to be better positioned in a market by divesting or acquiring assets and to pursue an asset light approach, where it makes sense. We expect that rule. It may fluctuate a bit as we go through this period of die.
Besting assets, but we believe our strategy positions us well to drive towards of greater than 10% target.
Adjusted EBITDA margin expanded 50 basis points to 23, 2% in the trailing 12 months ended April 32021 from 22, 6% in calendar 2020.
Our commercial teams drove results that more than offset the impact of loss of production stemming from unfavorable weather conditions in late February.
On slide nine we provided an update of the current end market conditions and our top five states by 'twenty 'twenty revenue.
Its end use markets of roughly 38% public 31% residential and 31% nonresidential demand for U S. Housing is robust with housing permits up two 7% in March relative to February 2021, and up 30% year over year likely reflecting a combination of strength.
Today, and COVID-19 related weakness a year ago.
And Texas Tech start is projecting $9 6 billion in Lettings in the current fiscal year, a substantial increase from last year. In addition, Texas is expected to receive over one 9 billion from the recent stimulus which reflects the combination of legislation passed in December 2020 of March 2021.
Houston is still one of the country's most diverse and highest growth residential markets and single family home permits were up 18% in March year over year nonresidential construction activity has been resilient in many of the suburban ex urban markets and we are seeing signs of a recovery in the Permian Basin area.
By contrast, the Panhandle area may see fewer Lettings later this year as textile embarks upon from large projects in other parts of the state.
Single family permits in Salt Lake City were up seven 8% in March year over year and inventories of new homes remain at historical lows with less than one month of the inventory reported you Dodge is forecasting a modest revenue increase for the current fiscal year. In addition to $263 million unexpected.
Stimulus, Utah is one of some of the highest growth markets and is a great example of where our vertically integrated model is fully leverage to deliver profitable organic growth and high returns on invested capital.
In Kansas K Dot is planning for $1 9 billion of spending in this current fiscal year budget growing to $2 2 billion for fiscal 2022.
The family permits are up 14% across the entire state in March year over year, Kansas is an excellent market for summit, where we are well positioned to continue to leverage past on ongoing investments in our operating companies and greenfields to deliver sustainable organic growth.
While the Missouri Department of Transportation initially estimated of decline in tax revenue of up to 30%. They have recently announced plans to deploy approximately $360 million worth of projects that had previously been deferred Missouri is also expected to receive approximately $437 million of stimulus.
Finally in Virginia. The current budget reflects an increase of 16% over the prior year single family permits are up 12% year over year in March while the state is expected to receive 1.0 of $5 billion of stimulus.
Wrapping up on slide 10, we are pursuing in aggregates Greenfield development strategy focused on markets that are underpinned by strong growth fundamentals investment in these targeted growth markets is key to delivering sustainable organic growth. For example, we are expanding our presence in Georgia with an aggregates greenfield that will start.
In mid 2021, and the Atlanta excerpts that location has favorable migration trends on job growth in the state with the strong deal T funding profile of major mobility program, we have another greenfield development well advanced in the Carolinas, which will expand our presence in one of the fastest growing markets in the country.
The state D. O T funding conditions are also rapidly improving in both north and South Carolina.
It is estimated that the summit will generate $45 million of adjusted EBITDA on an annualized basis by 2020 for from these projects. Once they are in full operation with $18 7 million generated in 2020 expected investment in Greenfields is $25 million to $35 million in 2021 as part.
Of cumulative capital spending of approximately $200 million on Greenfields.
These greenfield projects complement our existing business and provide another avenue for long term sustainable growth with that I'll turn the call over to Brian for a discussion of our financial results.
Thank you Anne.
On slide 12, we've provided on net revenue bridge, comparing Q1 2021 to Q1 2020 from its net revenue increased $56 1 million or 16, 4% in the first quarter of 2021 to $398 5 million compared to 342.
One 4 million in the first quarter of 2020 on the higher aggregates ready mix concrete and cement asphalt and paving revenue relative to a year ago due to strong demand in most markets.
On West segment led the way.
<unk> on incremental $37 6 million organic net revenue on higher aggregate on ready mix volumes, particularly in Utah and Texas.
We also benefited from an incremental $12 7 million in revenue associated with acquisitions of operations in Texas, and British Columbia that closed in the third quarter of last year.
All of these segments net revenue was up $3 1 million as we had higher volumes in Virginia parts of Kansas, and Kentucky relative to a year ago.
Our cement segment net revenue was up $2 7 million in Q1 relative to the prior year quarter on stronger demand, particularly in the southern markets on the.
Earlier opening of the river for northbound barge traffic.
Turning to slide 13.
We provided the Q1 adjusted EBITDA Bridge.
We ended the quarter at $41 million up over 167% from a year ago. The biggest drivers of the increase for a record organic west segment performance relative to a year ago as well as higher returns from cement.
Turning to slide 14, you'll see key GAAP financial metrics.
We reported an operating loss of $25 1 million in the first quarter of 2021 on improvement of 39, 9% compared to an operating loss of $41 7 million in the prior year period.
Net revenue gains in all lines of business exceeded increases in cost of revenue on more than offset of $10 million increase in general and administrative expenses.
Which included $3 4 million in severance and related costs as well as increased professional fees associated with optimizing organizational efficiencies.
Reported first quarter 2021, net loss attributable to Summit, Inc.
The $25 million or <unk> 19 per basic share was an improvement of 50% relative to a year ago. When we reported the net loss of 45 million of <unk> 40 per basic share.
This reflected substantially higher performance in our west segment relative to a year ago together with the $15 7 million gain on sale of the business unit.
Turning to slide 15, we've presented several non-GAAP financial metrics. When we compare Q1 2021 to Q1 2020 as well as the trailing 12 month comparison.
Adjusted cash gross profit margin expanded by an impressive 590 basis points in the first quarter and expanded by 130 basis points on a trailing 12 month basis on a combination of higher volume and price improvements from aggregates ready mix on the asphalt and nearly all of our markets.
The adjusted EBITDA margin expanded 590 basis points for the quarter and on a trailing 12 month basis. We're at 23, 2%, which is an increase of 50 basis points.
Adjusted diluted net loss improved 31% in Q1 2021 to $38 9 million for 33 per share relative to Q1 2020.
Turning to slide 16, we've provided a comparison of our price and volume for the first quarter 2021 versus Q1 2020 on.
Organic average selling prices in the first quarter of 2021 were unchanged aggregates and the increased 0.4% from cement three 7% in ready mix concrete and five 5% in asphalt.
While most of someone's geographies reported higher average selling prices for aggregates in the 2% to 6% range in the first quarter of 2021 higher volumes of base materials and the product mix in our Kansas of North Texas markets resulted in a lower reported companywide average selling price than the prior year period.
By way of reminder, our annual price increases don't go into effect until the start of the season, which is typically April one.
Sales volumes in a traditionally low first quarter increased 27% in aggregate 13, 7% in cement seven 6% in ready mix concrete and 15, 9% in asphalt relative to the same period last year on strong demand in most of our markets as well as the.
Impact of recent acquisitions.
Turning to slide 17, we provided adjusted cash gross margin in the first quarter 2021 versus Q1 2020.
As well as the trailing 12 month comparison in all lines of business.
Aggregates margins expanded 370 basis points in the first quarter to 41, 8%, reflecting stronger aggregates pricing in most of our geographies on.
On a trailing 12 month basis, the margin percentage declined by 140 basis points. However, actual gross margin dollars increased by $14 4 million.
Our products margins expanded by 220 basis points for the first quarter and 130 basis points for the trailing 12 months as we experienced sustained volume and pricing growth for our downstream businesses, particularly in Utah and Texas.
Margins in our services business expanded significantly moving from negative eight three in Q1 2020 to positive nine 5% in Q1 2021, replacing an unseasonably strong level of activity. The trailing 12 month margin improved by 610 basis points.
Placing the underlying strength of our Texas markets.
Cement margins expanded significantly in Q1, and 230 basis points for the trailing 12 months to 48% of higher volumes resulted in lower unit planned costs I.
Our Green America recycling facility continues to ramp up production following an explosion that occurred in April 2020, the river reopened for northbound traffic two weeks earlier than normal, which allowed shifting to northern customers and early of movement of inventory.
Materials and products comprised 91% of our trailing 12 months adjusted cash gross profit a slight increase from 88% for full year 2020, we continue to expect the contribution from materials will be an increasing proportion of our EBITDA as we pursue our greenfield strategy.
G experienced organic growth of our markets engage in M&A and divest underperforming downstream assets.
On slide 18, I'd like to highlight some modifications to our reporting structure.
The production overhead and transaction costs, which resulted in changes to our guidance for G&A expenses.
Beginning in the first quarter 2021, we are reporting fixed overhead expenses related to production and cost of revenue previously we reported fixed production overhead expenses as the general and administrative costs.
<unk> costs, which were previously included in operating income or loss have been moved into G&A.
We believe these reporting changes will foster greater transparency and comparability to our peers as we measure our performance.
For quarterly modeling purposes for 2021, we estimate the G&A will now be in a range of $50 million to $55 million. We estimate the interest expense should be in a range of 22 to 24 million and the DNA should be $54 million to $57 million.
For the purposes of calculating adjusted diluted earnings per share. Please use the share count of $118 million, which includes $115 for class a shares and $2 6 million LP units turning to slide 19, you'll see a summary of summit's capital structure.
Our Q1 2021 leverage ratio of three two times was down by 0.6 times from Q1, 2020, which is the lowest first quarter leverage ratio in summit is history.
Our leverage ratio of typically increases in the first quarter of Q1 has the lowest EBITDA contribution of the year and relatively high capital expenditure. However of proceeds from the sale of the business unit combined with the strong financial performance allowed us to hold the leverage ratio of constant.
The closing cash position was $359 7 million, which was an increase of over $150 million from Q1 2020.
Moody's upgraded summit materials LLC corporate family rating to be a free from B, one, citing continued strengthening of summit materials credit profile. Following the steady improvement in operating performance higher predictability in free cash flow and robust operating fundamentals.
Combined with our Undrawn revolver summit had over $650 million and available liquidity at the end of the first quarter.
Elevate summit goal is less than three times leverage and we believe that is within our sites in 2021.
And with that I'll turn the call back over to Ann for her closing remarks.
Thanks, Brian on Slide 21, we've provided our outlook for this year, which is unchanged from the guidance. We provided on our last earnings call. We expect to revisit this forecast as the year progresses for.
For 2021, we expect to generate adjusted EBITDA of $490 million to $520 million.
Which at its midpoint assumes growth of 5% over 2020, we expect to spend 200 to 220 million on capex of which $25 million to $35 million will be related to greenfield.
We continue to expect low to mid single digit price increases for aggregates and cement and low single digit volume increases in those lines of business, we expect asphalt pricing and volume to be relatively flat, while our first quarter performance was excellent. It's important to acknowledge that our Q1 adjusted EBITDA represents.
Just 9% of the midpoint of our full year outlook. So we believe making adjustments at this stage would be premature.
Concluding on slide 22.
It is early days for the elevate summit strategy, we've listened and learned and we are turning that feedback interaction.
We have a lot on our collective plate at the moment, but we as a management team believes this approach market leadership asset light approach, social responsibility and innovation will deliver better and more consistent results to our stakeholders overtime with that I'd like to turn it over to the operator for questions operator.
Yeah.
At this time I would like to remind everyone. I know what are two of Husky question price star bulk wine on the I T.
Telephone keypad.
Let me ask for one question and then return to the queue. So we can accommodate as many analysts as possible at the time, we have available.
Your first question comes from Stanley Elliott with Stifel.
Hey, good morning, everybody. Thank you all for taking the question quick question could you give us a little more color on the divestitures I believe for the class aggregate some of the downstream business.
Curious what the would have him comment if these were kind of running below corporate average margin.
If they were somewhat isolated I know the market penetration has been a key focus on part of the elevate strategy.
I'll hang up and listen thank you.
Hi, Stanley Good morning, and thanks for your question.
So the first divestiture, we did was the last aggregates business and that's example of a business that was basically in the low growth markets underperforming and just a little bit more color on that it was actually tied to a long term supply agreement that limited our ability to really get the margins and ROIC to the <unk>.
Well, we would meet our targets that we've set in place and we Werent just the rightful owner. So it was much better in this case it wasn't strategically core either to sell the business get 33 million of proceeds of $15 seven on the gain the other business, we really haven't talked about as part of our asset light approach, but what it having common where the things the.
I talked about we.
We divested after the end of the quarter. It was one where we looked at the downstream said, we're number four of five.
It was one where we didn't see a near term to medium term paths to get to the.
30% margins that over double digit ROIC without significant investment and candidly, we the customer where we could develop a win win relationship with half of long term egg supply agreements and it was net better for both parties. So it really fit right in that sweet spot of where we said we would use of an asset light approach.
Great. Thank you.
Thanks Stanley.
Sure.
And your next question comes from Phil <unk> with Jefferies.
Hey, guys congratulations on a really impressive quarter.
Great start to the year.
Your unchanged guidance implies organic volume declines for accurate, which seems pretty conservative just given.
How things are shaping up so far but curious to get any color on bidding activity and any color on the lag on volume for some of the stimulus money called out and perhaps anything on the of deferred letting work that you call out on Missouri as well.
Okay, just a couple of things so on our guidance, we had a very clear for the midpoint low to mid single digit assumption on price for aggregates and cement on the low single digit assumption on volume and we did keep asphalt volume and price flat because of such a strong year in 2020.
Just a little bit of color on bidding activity, Texas is very very strong for us and continues to be that we did talk on our prepared comments about the fact that we're seeing a little we expect some decrease in the panhandle, but we're seeing a bigger backlog of the Permian. So overall, Texas is just very strong for us.
As we look across all of our markets Salt Lake City continues to be strong from the public.
The funding perspective.
$263 million of stimulus, Kansas very strong budget, one 9 billion. This year of 2.2 next year, and then Missouri $360 million has been put it back into projects that was deferred and has now more same day of 437 million so not at the levels that we've seen.
I would say when we look at publix, but spending across the board, we're saying, it's normal course, but we're not seeing that stimulus money really be seeing widespread growth at this point in time and I think that's going to take some time for that to actually work through as we see the volume squirrel, but.
We're cautiously optimistic about where we sit today on our volume.
Okay. Thank you.
The next question comes from Kathryn Thompson with Thompson Research.
Hi, Thank you for taking my question today, that's really surrounds the supply chain on a broader question.
Broadly speaking first could you clarify how the text of the squeeze impacted quarterly earnings and what if any challenges you are facing from the supply chain standpoint.
Along with that but with some of that certain parts of the U S are seeing tight supply.
With much of such as Texas on allocation now how does that look like for you as you're planning over the next couple of months. Thank you.
Thanks Catherine.
The Texas freeze, we had impact for about two weeks and it was indeed impact that's an all year round business for us, but the team did a phenomenal job on catching back up and ended up with the strong quarter delivering really strong earnings. So it's.
This shows the robustness of that business from a supply chain perspective, we have not seen any very significant impacts on our supply chain. At this point in time, I will say that cement supply demand dynamics have definitely tightened, particularly in Q1 than we've seen in a few of our key markets. We are on allocation.
We have very strong relationships with our suppliers. So we the team soon on a regional presence are doing a great job working through that but cement overall nationally is definitely tight.
But so far we're able to manage it but watching it very closely and we are able to in our stronger markets and this is why we play on the downstream in certain markets. We are able to pass that cement price the low and our teams very focused on price execution on working with our customers to drive it through the supply chain.
Thank you.
Thanks Catherine.
The next question comes from Trey Grooms with Stephens.
Good morning, and thanks for taking my question. This is actually know them or Costco on for Trey.
So I wanted to ask you know the the EBITA margin in the quarter was really impressive.
Can you give us any update on timing for when you think you can reach the high end of your horizon, one margin goal I think it's 25%.
We haven't given specific timing to that at this point in time I will say, we're making very good progress and it will really depend on how we get the schedule a lot of these horizons. When you look at our free Horizon, Let me step back for a minute really will overlap a little bit. So we've said on that first horizon, we're trying to get 20.
3% to 26% as of range. The reason we've ranged it because it will depend on how many of the divestitures, we get done in her eyes of more than how quickly we get those proceeds back in and reinvested into the business. So we're moving I would say very fast the team is doing a great job, but we're not sacrificing value.
Generation for our shareholders and do it yourself and continued focus on price will also obviously break us heavily towards improving margins as we've shown this quarter.
Alright, Thanks, I'll leave it there.
Thank you.
Your next question comes from Garik <unk> with loop capital.
Great. Thank you.
Discuss the types of the price situations for Matt just curious if you could provide any thoughts on the potential second price increase later this year and let's say but of aggregates. We've heard from several of your peers regarding targeted midyear price increases of your thoughts on additional price of aggregates as well.
So let me first of all address the meant Garrick. So as you know we announced the price increase in Q4, and that's just coming into play here in April So we'll be able to report on that as the quarter proceeds here along the river and see how our price execution actually goes clearly in Q4 for.
Volumes were not as robust as they are in Q1. So the supply demand tightness is something we're watching but we also as we've talked about many times before.
In segments of our market, it's very important to understand the competitive dynamics.
I would not rule out another price increase in cement our teams very focused on value pricing.
Of course, working with our customers to make sure that they can drag it down of the supply chain. So we will continue to look at that report out as we go from an aggregate perspective, our first quarter numbers as we said in our prepared remarks, we're a little impacted by mix I would say price increases in aggregates are just coming in again most of our price comes in in April.
Our first quarter as we reported had double digit volume growth year over year on most of our aggregate markets and frankly in most of our regions, we had 2% to 6% price increases because it's such a low volume quarter. We did see some based materials that we sold in Kansas and North, Texas, bringing down our overall pricing.
But the thing that we were very encouraged by obviously is the increase in adjusted cash gross profit margins to 24% expanding by 581 basis points. We will continue though to monitor market conditions and closely look of competitive dynamics, and we'll be very intentional and strategic with pricing.
Greece's as we proceed.
Right now we're sticking to our guidance of low to mid single digit price, but we will report on that as the year progresses.
Got it thanks for that.
Your next question comes from David Macgregor with Longbow Research.
Hi, This is Joe Nolan on for David Congrats on a great quarter.
I just wanted to ask about cost inflation, just how you're thinking about some of the different buckets there for the remaining of the year.
And just when you think those might peak and just any detail you can provide there. Thank you.
Thanks, Joe Thanks for your question, obviously, a hot topic these days on inflation.
At this point, we're not seeing anything that would exceed the levels that we had baked into our original guidance numbers.
We're obviously watching it very closely and the strongest of the market.
And we will be reactive if we see an opportunity to pass any inflationary increases on in.
Price.
We're seeing that obviously once we get cement price increases we are able to pass that on the ready mix.
When the when the demand in the market is strong.
The things that we baked into our guidance.
The original assumptions were of health care, which we saw about an 8% increase in.
The labor, where we saw approximately a 3% increase.
We did take price increases in cement into our assumptions and everything else was really running at about 3%.
Broadly.
We've obviously hedged out of diesel.
Right now in Q1, we are showing a little bit of favorability on the actual costs compared to the prior year.
We're not really seeing anything else on the energy input prices that would be above the assumptions that we made in our original guidance. So so far fairly stable unemployment, but obviously something that we're watching very closely.
Okay. Thanks, I'll pass it along.
Your next question comes from Anthony Pettinari with Citi.
Hi, good morning.
And the high last.
The last quarter I think you pointed to the potential non repeat of wind farm work as the swing factor just wondering if you're seeing any trends in that end market and then just maybe circling back the full year guidance more broadly are there any other swing factors that you would kind of call out that might get you.
Ultimately to the higher end of the lower end of the range.
Yeah, Anthony Thanks for the question so of wind farm work, obviously, we did called out of it last quarter as saying that if you look on the 2020 basis, we actually had a number of wind farm projects that are of nice price mix frankly, frankly for the business and Q1. This is where some of the pricing was negatively impacted because we.
Had one wind farm this quarter, but prior year, we had more than that so we're watching that and as we said. This this type of work is a little bumpy and its basically we bid and we win the job on the ear and we construct so we'll continue to look at that longer term. We see this is nice work and the very good use of our aggregates in our.
On this moving forward so.
And it will drive more demand for alternative energy on our full year guidance perspective, we've talked to what our assumptions are within the midpoint of the guidance. If we look at the low end, we would say that would be driven as we typically would look at our low end by decreased pricing of our lower pricing and volume and maybe some.
Mine of weather impacts on the higher end, though to specifically address your question. We would have there an assumption of having prices maybe across all of our lines of business.
And also single to mid digit volume growth across all of the lines of business. So they'd be kind of swing factors as we kind of think about the range of guidance, but as the year proceeds here when we get past our lowest quarter of the year of we will continue to assess our guidance on would be very thoughtful about how we give you guys that number.
Okay. That's very helpful I'll turn it over.
Our next question comes from Mike Dahl with RBC capital markets.
Good morning, Thanks for taking my questions.
And I wanted to follow up on kind of the divestment of their plan.
You went out publicly to the market.
Investors with with some of the high level details.
The two months ago. My question is since that time.
You know how of the discussions.
I guess I'm thinking more from the standpoint of.
Have you started the receive more inbound inquiries into some of your assets and to the extent that you had additional discussions whether it's proactive or for.
For a reverse inquiry.
Any of that changed your view on the number of assets proceeds.
On specifics around which assets might ultimately fall on the bucket of.
Divestitures.
Yeah, Mike Thanks for your question so.
Youre absolutely correct, we did come out with 10 to 12 assets and I think quoted a number over $200 million of proceeds with our best estimate at that time.
As we discussed we completed one this quarter in Q1 of them. We have another one the several debt are actually completed at this point and some that are.
In process on something that we're just starting with respect to.
Your question around Inbounds, we actually have received a lot more inbounds.
We announced that I would say, though that it hasn't really changed our view.
But in saying that I think that was very clear on our March 16th meeting that as we get past. This first horizon of one where we've identified the set of 10 to 12 assets that are really no regret moves for us to divest we will continually look at our portfolio of Optimizes.
And on an asset that may seem perfectly good in the portfolio today may not belong on our long term future portfolio. So I believe strong businesses constantly assess their portfolio to see how they can increase value for the shareholders and the overall stakeholder base.
So we will continue to update you as we look at that and as we change and make the firm decisions around divestitures or acquisitions.
Alright, great. Thanks.
And our next question comes from Jerry Revich with Goldman Sachs.
Yes, hi, good morning, and congratulations.
I'm wondering if you could touch on the.
Volume cadence in the business all of them over the course of the quarter optically you were coming off of pretty tough comps for your aggregates business. It seems like the comps do get easier on a two year stack based on sort of in the second quarter. So I'm wondering if you could just comment on the flow of demand over the course of the quarter and for you.
We'll touch on how April looked.
Just help us understand of the cadence.
Well our volume cadence we were strong at the end of 2020 of that continued right into Q1, obviously, our comps were somewhat different as we got into Q1 of 2021 because we had COVID-19 impact last year, but we also had very robust demand here in 2021.
One in Q1 of them, we did hit record volumes as we went into that so.
We're actually very positive about the level of fundamental growth that we're getting from in migration and from our public spend so I Wouldnt say theres really a cadence beyond that as we go into Q2, clearly a much bigger comp for us on volume.
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The level of public spending residential continuing strong we see that our demand we have nothing to say that demand will not continue as I said in non res wind farms provide a little bit of pumping has to our numbers of times that may be the only thing I would say from a volume cadence perspective that might have the impact.
But overall I would expect us unless something drastic would happen with respect to public funding, which is steady right now and we would call it normal levels not high levels of <unk>.
Funding, we should be in a pretty good shape for Q2, but you are correct Jerry in pointing out that it is a tougher comp for us.
Okay. Thank you.
This concludes our question and answer session I will now turn the call back over to Ed Noonan for closing remarks.
Thank you operator, and thank you all for joining us I'd like to leave you with three messages first summit is in the right place at the right time Megatrends are coalescing in some of its key markets and all require some form of aggregates ready mix concrete cement asphalt and paving and the combination.
Second we are seeing signs of early success towards our elevate summit goals. It may not be of linear upward trajectory every quarter due to the nature of our strategic priorities, but we will be transparent and relentlessly focused on execution and finally, we are creating a culture of excellence across the business for <unk>.
On that to standardize and simplify and also to lead in social responsibility and innovation that will drive long term sustainable growth that is not dependent on any one market or geography.
That concludes our call. Thank you and have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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