Q2 2021 Vulcan Materials Co Earnings Call
Good morning, ladies and gentlemen, and welcome to Vulcan materials Company's second 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 1 question.
It 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.
Thank you operator, and good morning, everyone. Thank you for joining our earnings call today with.
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 the supplemental presentation posted to our website bulk of 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 legal disclaimers are described in detail on 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. The 1 question.
This will help maximize our time together.
With that I'll now turn the call over to Tom.
Thank you Mark and thanks to everyone for joining the call. This morning. We appreciate your interest in Vulcan materials, and hope that you and your families continue to be safe and healthy.
I want to begin today's call by taking a moment to congratulate our team for the solid execution during the first half of the year.
Our performance through the first 2 quarters further demonstrates the strength of our aggregates led business.
We expect the momentum we generated in the first half of the year to carry through the second half and we reiterate our full year 2021 adjusted EBITDA guidance range of $1.3 billion to 1.46 billion.
For the first half of the year, our adjusted EBITDA increased by 7%.
And our aggregates cash gross profit per ton expanded by 5%.
From a combination of volume growth higher pricing and improved operating efficiencies.
Adjusted EBITDA for the second quarter was $406 million essentially unchanged versus the same quarter last year.
We achieved this result, despite a $25 million headwind from much higher diesel and liquid asphalt costs.
Diesel costs rose by $15 million in the quarter.
Liquid asphalt costs were $10 million higher than the same period last year.
And together with wet weather negatively impacted the profitability of our non aggregates segments.
Even after considering the energy headwind our aggregates cash gross profit per ton grew by 2% in the quarter due to our teams consistent execution of our 4 strategic disciplines.
With a 4% increase in aggregates volume in the second quarter and the market's current visibility to the man the pricing environment continues to improve.
Freight adjusted aggregates pricing increased 3% in the quarter and the rate of growth improved sequentially throughout the quarter.
Adjusted for mix freight adjusted price improved 2.6%.
Twice the growth rate realized in the first quarter.
Along with improved volume and pricing operating efficiencies and cost control helped to offset offset inflationary pressures.
Our total cash cost of sales increased by 4% in the quarter versus the prior year.
Excluding the diesel headwinds cash cost of sales grew by less than 1%.
During the second half of the year, we will remain diligent and focused on controlling what we can control and on driving further improvements on our profitability.
The solid ARAS performance helped to offset reduced profitability in the non aggregates segment.
Our second quarter non aggregates gross profit declined year over year, due primarily to the higher liquid asphalt costs, which I mentioned earlier and lower volumes in both asphalt and concrete.
Wet weather impacted asphalt shipments, while the shift in timing of projects, particularly in Virginia resulted in lower than anticipated concrete shipments.
Turning now to the demand picture.
It has improved across our major end markets as well as geographies the.
The residential end use has shown continued strength with solid starts and single family housing. We've also seen an uptick in multifamily housing starts.
Now with respect to the non residential outlook improvement continues and the number of leading indicators and we've begun to see month over month improvement in stocks.
The strongest nonresidential sector continues to be the work related to E Commerce and technology infrastructure.
But lighter traditional nonresidential demand is also recovering.
The level of highway starts remained healthy in the first half of 2021 as states got back to normal funding and budget levels.
On the broader subject of federal highway and infrastructure spending.
We're encouraged by the progress made toward a highway bill with substantially higher funding over the fast Act levels.
We've also seen an acceleration of starts and public infrastructure, such as water and sewer treatment systems airports and storm flood control.
Before turning the call over to Suzanne I want to briefly touch on our growth strategy and the recently announced agreement to acquire U S concrete.
We have 3 paths to growth and it's important to strike the right balance between these 3 in order to drive higher returns.
Those pads or organic growth Greenfields and M&A.
We always start with organic growth because it offers the most attractive and compelling value proposition on a risk adjusted basis.
We have a unique and irreplaceable irreplaceable asset base spread across the most attractive geographies of the U S.
Our 4 strategic disciplines are designed to accelerate our organic growth in.
And the benefits of clear as we expand our unit profitability.
We also have a long and successful history of developing and opening new locations, particularly in growth quarters were accurate where acquisition opportunities may be limited.
We like the flexibility of the Greenfields provide in regards to timing and pace of capital spending.
Our third growth engine is M&A.
U S concrete is a great strategic fit for Vulcan as it naturally complements our existing aggregates business.
It also brings new geographic exposure to the company expanding.
Expanding and diversifying our already strong footprint into the northeast.
Along with my colleagues at both Vulcan and U S country.
I'm very excited about the potential for this combination.
It will allow us to further drive sustainable long term shareholder value.
And I'll look forward to welcoming the U S concrete team to the Vulcan family now.
Now I'll turn the call over to Suzanne for further comments.
Thanks, Tom and good morning to everyone I'd like to begin by highlighting a few key areas to consider this quarter, our aggregates price realization unit profitability return on invested capital and balance sheet strength.
First our ability to consistently deliver compounding price improvements is an important driver of our unit margins. The current pricing environment is positive due to improving demand visibility and inflationary pressures.
We've seen attractive sequential improvement in pricing through the first half of the year and we expect of the momentum to carry over to the second half.
Clearly these compounding price improvements along with good operational execution are having a positive impact on our unit profitability. This quarter marked the 12th straight quarter of the improvement in our trailing 12 month cash gross profit per ton.
For the trailing 12 months cash gross profit per ton was $7.26 and for the quarter. It was $7.83 per ton moving ever closer to our current goal of $9 per ton.
The next area of focus is our return on invested capital. We are pleased with our improving returns and on the trailing 12 month basis return on invested capital was 14, 8% an increase of 60 basis points compared to the prior year period. This improvement was comprised of an essentially.
Unchanged invested capital base and of 4% increase in trailing 12 month adjusted EBITDA.
And finally, we will continue to prioritize our balance sheet strength to create the flexibility and optionality necessary to support our capital allocation strategy at June 30, our net debt to EBITDA was 1.3 times, reflecting 968.
Dollars of cash on hand on.
Our debt has a weighted average maturity of 15 years with no significant maturities in the near term.
It's important to note that even after the anticipated close of the U S concrete acquisition, our balance sheet will be in good standing and we remain committed to maintaining our investment grade rating.
Before turning the call back over to Tom I do want to touch briefly on 2 housekeeping matters.
First you will have noted an increase in our interest expense this quarter concurrent with the announced pending acquisition of U S. Concrete in June we obtained a bridge facility commitment to support the deal.
Subsequently, we executed a $1.6 billion dollar delayed draw term loan, which will be used to fund the acquisition along with cash on hand bar.
Borrowings under that facility or do 3 years from the funding date.
And so this facility will be used as an interim measure prior to accessing the bond market at the appropriate time.
As a result of financing costs of $9 million for the bridge commitment was recognized as expense in the second quarter.
The final matter to mention is our effective tax rate and as a reminder, at the end of first quarter, we increased our expectation of the full year rate to between 23 and 24% that guidance is still applicable.
And with that I'll turn the call back over to Tom for closing remarks.
Thanks, Suzanne before we go to Q&A I want to again, thank the entire Vulcan team for their hard work and their dedication to serving our customers.
Our people are what makes Vulcan better every day.
I would be remiss, if I didn't comment on the current COVID-19 environment and the recent announcements by the CDC in response to the surge in the Delta variant.
We will continue to closely monitor the spread of the virus, ensuring the health and safety of our employees and their families.
We will continue to operate Vulcan for the long term this means keeping our people safe and healthy.
Staying focused on strong local execution.
Driving unit margin expansion and improving our financial returns.
And now we'd be happy to take your questions.
Thank you the floor is now open for questions. As a reminder, we ask that you. Please limit yourself to 1 question.
And your first question comes from Trey Grooms of Stephens.
Hey, good morning, everyone, good morning or drug.
So.
Tom Your aggregates business, clearly performed well given given some of the headwinds.
Obviously asphalt.
Some of them.
Some challenges right now is on the cost of Brian but.
As we look into the back half of the year can you can you help us unpack some of the puts and takes around the guidance specifically around these different segments. Thank you sure sure as you heard US say you know we're confident in the full year guidance of $1.38 billion to $1.46 billion.
Which we remember we raised that 90 days ago, as you said, probably with a little bit different puts and takes.
We probably won't make up of won't be able to make up the shortfall in the other aggregates, which is really asphalt as you know we're playing catch up on liquid Hum cost now I would I would say to that asphalt prices are going up and we will see increased prices.
And probably improve margins in the second half, but probably not enough to offset all of the liquid the headwinds.
That being said aggregate volumes appear to be improving with the main improving in all market and uses so I'd call it asphalt being offset by shipping on the higher side of our volume midpoint.
So you know ARAS were on the optimistic side of volume price is in aggregates.
You know reiterate the 2 to 4 range, although we're seeing.
Rice's improving sequentially from a cost perspective, but we would still say that over the 12 months will be low single digits. So good operating disciplines unit margin in the mid single digit range.
Non aggregates of little lower, but improving which brings me to say confidence in the $1.381.
The billion dollar guidance.
Great perfect.
That's great color. Thanks for the thoughts Tom and take care. Thank you. Thanks Craig.
Thank you. Your next question is from Stanley Elliott of Stifel.
Hey, good morning, everyone. Thank you all for taking the question.
And nice work on a very tough environment.
Tom can you talk a little bit more about what you're seeing on the price side of the the equation. The you mentioned sequentially improving of you've got the demand commentary of which looks encouraging and at the back half of the year on into next year, just curious to see what's happening on the ground in terms of the pricing dynamics. Thank you and good morning Stanley Yeah. When you have well we have visibility to growing the.
The man like we have right now and you couple that with.
Pressures from fuel and it's and other inflationary pressures.
We know that prices will accelerate.
The probably accelerating a little faster than maybe we anticipated 90 days ago, and it's probably a little brighter at this point I think we'd be premature to adjust our 2021 pricing outlook, but I think it bodes very well for pricing in 2022.
As we said.
In the first quarter call as we called out of the rate of price increases continues to escalate sequentially over time, we saw that in the quarter. When we talked about I mean, the if your mix of just price in the second quarter of doubled.
The first quarter and then if you look within the second quarter prices increased sequentially month to month I think that we'll see continue to see that sequential rate growth pattern throughout 2021, and I would expect it to that sequential improvement to continue in 'twenty 2 'twenty 'twenty 2.
Although maybe a little higher amplitude and here's what we started talking about to our customers about second half price increases in may on.
On bid work, which is about 6% of our work we have definitely increased price increases over the last 60 days on new jobs now remember, there's a lag between the bid work of it.
Don't ship for you know roughly 6 to 9 months.
When it comes to fixed plants. We've had discussions you are having discussions about second half price increases that we have.
Realize those in a few markets, but in our conversations with customers they've been very positive again, all supported by the clear visibility to growing demand and inflationary pressures. So.
While we see some benefit to 2021 this is definitely going to be a 'twenty 'twenty 2 impact.
Cause those jobs that were the Rebidding now we're a bit over the last couple of months are definitely going to benefit 2022, and we will see a bigger impact on fixed plant prices in 2022 again.
I would expect to see that rate of price increases continue to climb sequentially. This year and that pattern to continue too.
Into 2022. So this is just a really good environment for pricing.
Great guys. Thank you very much the best of luck.
Thanks.
Thank you. Your next question is from Anthony Pettinari of Citigroup.
Hi, good morning.
Morning.
Tom is the decision to acquire U S concrete a function of a more optimistic view on volumes over the next 3 to 5 years, maybe consistent with what we're hearing from D. C. On infrastructure I mean, you've talked about the attractiveness of the assets I'm. Just wondering why now is sort of the right time to pursue the acquisition.
As market structure gotten better or are you more optimistic on end market demand just wondering if you could give any more any.
Any more color there.
Well as you know you usually 1 of the 1 of those happens it's a long term view and it takes a long term to make 1 of those happens. So as you can as you know we've been talking for a while and thinking about it for a while and working with U S. Concrete I think if you step back with it.
Obviously market demand.
Is looks good for the short term, but again when you do 1 of these it's both short term and long term and for both companies.
Shareholders I think it was a good deal if you step back and look at the geography works, both in California, and Texas, and Virginia, and the introduces us to some really good positions in attractive new markets, and New York and New Jersey.
On the aggregates their aggregates and ready mix assets are very attractive.
I think it's a well run company their cultures work.
Sure.
Much like ours, and I think the deal is progressing nicely and we look forward to getting their team and the the Vulcan family, we know them they are talented.
And.
We think this thing is very complementary and you know the fact that the short term markets looks very good as another benefit.
Okay. That's helpful I'll turn it over.
Yes.
Thank you. Your next question is from Jerry Revich of Goldman Sachs.
Everyone. This is the jumping off on behalf of all charity of Delhi.
The balance sheet is projected to be in great shape for the.
The us concrete acquisition, how would you characterize the M&A pipeline on the opportunity set from here.
Yes, as you know.
I think that.
The M&A pipeline continues to be good.
And as active I'd say, a lot more smaller targets more bolt ons.
We have the balance sheet to be able to do what we want to do or need to do there, but as always I think you know you have to be disciplined about those and what markets do you want to be in and what synergies are unique to us don't overpay and when you get on make sure you integrate them fast and accurately so is a lot out there, but we'll be disciplined.
Now we have the firepower, but we'll be disciplined how we look at them.
Okay.
Thank you. Your next question is from Keith Hughes of Truest.
Thank you you referred earlier on the costs of $15 million of diesel inflation I think that was the second quarter number. If you could talk about what that I think I'll look like in the third I assume thats, probably going to go up some given where diesel has moved and then and then maybe even in the fourth hour, how it's kind of affect the rest of the year.
Yeah, I think you know we saw $15 million impact on diesel 16.
<unk> for the for the quarter <unk> 16 in the half. So it was really of QP Q2 impact I think the second quarter will be the hardest hit for the year by diesel and if you remember.
Last years.
Diesel in the second quarter, maybe I think it was under a dollar. So just if you look comparable as this will be the toughest hit.
Who knows what's going to happen with diesel prices, but our.
Our best outlook would tell you the impact of the 20 to $25 range in the second half of that being said I think we're comfortable with our operating efficiencies to be able to.
The only have low single digit cost claim for the full year, which you know right now were under 1%. Yeah. I think that was 20 to 25 million dollar growth.
In the second half.
Thank you and the fact, if I could.
1 more on U S concrete any kind of.
The narrow a timeframe of when you think of the deal close.
The second half at this point I mean, it's going along well, but those are hard to predict so I'll just tell you the second half.
Okay. Thank you.
Thank you. Your next question is from Kathryn Thompson of Thompson Research group.
Hi, Thank you for taking my question today.
Could you clarify how much of price controls the purchase of pricing play into your out expectations and are you seeing are there certain geographic areas, where you're seeing greater relative strength or where there are greater opportunities in light of both price and on cost controls. Thank you I'm I'm, sorry, I couldn't hear the first part of that.
Sure.
Yeah.
Could you clarify how much of price controls versus pricing have played into your expectations not just for 'twenty, 1 but into 'twenty 2.
And what geographic markets are you seeing greater relative upside and are there of greater opportunities for pricing there, but also other operational efficiencies that maybe you didn't present themselves to the same degree early in a share yeah. I think that you know if you step back and look at all of this the price.
The environment is as good as we've seen it in a while now you've got temporary inflationary pressures.
With diesel but that is good for pricing because of.
It allows you to have.
The ability to raise prices, particularly with the demanded by being what it is and I think with good cost control I think we're confident with that mid single digit unit margin improvement from a pricing from a geographic.
Perspective, it's really widespread.
We raised bid prices across our footprint over the last 2 months I think that the the second half fixed plant price increases you know a few a few places in the southeast of.
But it's that will really be of more of a 2022 play with hopefully higher amplitude on pricing and maybe earlier in the year. So you know you've got temporary pressures from inflation inflation, but really a good set up from a 4.
For 4 of prices moving forward and I think that we've got a pretty good proof of record on cost control to offset inflationary pressures.
And we'll catch up with depot diesel even on cost control.
Yeah, Catherine I would just add to that that you know look when you. When you when you look at their performance and the the second quarter and also in the first half certainly very good from a pricing perspective is as Tom said, which was expected, but despite the diesel headwinds. We also had a very good no cash.
Cash cost performance as well cash cost of sales was up 4% in the quarter, but if you back diesel out of that which which rose significantly and rapidly.
On our expenses, where we're less than 1% rise year over year. So yeah, we certainly experienced some.
From inflation and in other parts of the business and other input.
Our products besides the diesel, but again, we had sufficient operating efficiencies and cost control to hold those cash costs to within less than 1% and so you know if you have the combination of good pricing discipline in those rises we've talked about and we have.
Yeah, good control over costs, which is 1 thing that we should be able to fully control. Then you get the good results in cash gross profit per ton that that we talked about in Tom's comments, he called out that cash gross profit per ton was up 2% and if you.
Exclude diesel from that it's up 5%. So you know again of a very good performance and it just shows you know when you focus on the things that you can control what can be accomplished.
In fact, if you look at the progression of cash gross profit per ton and you look at it on a trailing 12 month basis ended with the second quarter in 2019, and you compare that to the trailing 12 months ended the second quarter in 2021, so that kind of a 24 month period.
There it's up 5%. So you know that's something that we will we're always focused on we we always like to talk about that because that's clearly the driver of our profitability and we will continue to talk about that.
Okay, great. Thank you.
Thank you. Your next question is from Mike Dahl of RBC capital markets.
Good morning, Thanks for taking my questions.
So my first question clearly, there's still some moving pieces around kind of the legislative agenda as it relates to the Standalone infrastructure Bill and potential of reconciliation, but it does seem like things are kind of taking.
Taking shape in a more tangible form so just wanted to ask for your thoughts on as you have read through the.
The text of and the amendments.
How youre thinking about the potential support.
From the infrastructure Bill and you know how.
How might we see these.
<unk> manifest in terms of both timing and magnitude of near view.
Yeah, I would tell you. The we're excited about it I mean this is a this is a multi generational opportunity for highway funding and 1 that our you know our country sorely needs. So this is exciting for us not just for the company, but also for the country and we're confident the Congress passes on the infrastructure package to include a <unk>.
Long term reauthorization of the fast Act.
It would be a roughly 60% increase from the fast Act at this point all signs point to those significant increases in core highway funding.
We think the Senate should pass their bill in the next week, which is incredibly exciting and then I think we're confident of that.
The Congress passes the build this year.
Now you know it always I would caveat that it always takes 1 to 2 years to see funding passed into shipments.
Usually we normally say 2 years, but I think state.
<unk> have.
Really matured into their increase there theyre substantially increased funding in a much more have much greater ability to step up work faster than what we saw over the last 3 years when the states dramatically increased state funding.
Yes.
Okay.
Yeah, I would just add to that you know 1 more you know of course, the the prospect of the passage of the Bill is as Tom said, It's you know, it's it's very exciting I mean from our perspective and it also provides an opportunity we think to kind of extend the cycle.
On giving us a longer period of time to continue to compound price, which then flows into compounding unit margins back to my earlier point.
Right Okay.
Good to hear.
And my second question.
I mean, maybe the comment about just the expected second half close on things going well.
Concrete when you say that he is going well I just wanted to ask.
First if you could elaborate a bit more is that going well in terms of.
Your conversations management management Hill team to field team or our integration wise or is that of comments specific to your conversations with the Doj and any update you can give on the review process. I mean short answer is all of the above.
We've had conversations management team the management team.
We looked at what we have to do integration, obviously Thats limited until we close they've got to run their business independently of ours and vice versa.
We are getting to know each other better and getting the no capabilities better how do you how do you overlay that and how do you move quickly, but accurately and then the the Doj process I think is going at this point.
Quite well and we feel confident that we will close of this year.
Sounds good. Thank you. Thank you.
Thank you. Your next question is from Garik <unk> of loop capital.
Great. Thanks for having me on I was wondering if you could provide some more color just on the timing of headwinds you saw.
That impacted the concrete segment do you think of specific to QQ and I'm wondering if there's any potential delays in other parts of your business, perhaps due to inflation of labor constraints that might be coming down the pike here in the second half of the year.
Yeah, Good morning, Gary.
The short term impact was timing of jobs. It had us impacts of about $4 million in the second quarter that was really some big jobs in northern Virginia.
They will ship, we think second half of this year and the volume should return.
It's candidly of good time to be in the ready mix business was again, while you have the short term challenges of diesel.
Seeing ready mix prices moving with great momentum in many markets around the country and we will see 2 to 3 price increases this year alone as well ours. So while you got this quarter, maybe next from short term headwinds from fuel pricing is moving.
Rapidly and I think that's the that's a really good sign for the ready mix business along with you know those the demand in the end uses or is improving as the same as aggregates.
Okay, and just to be just to be clear, you're not really seeing any delays in <unk>.
In other areas, just because of the labor inflation or the material inflation or supply chain constraints. The backing up no. The jobs that we saw on the second quarter were just timing on the jobs. It wasn't it wasn't inflation.
Supply or labor constraints.
Great. Thanks for that thank you.
Thank you. Your next question is from Adam <unk> of Thompson Davis.
Hey, good morning, guys. Good Tom I'm, just curious on the U S and another 1 on the another 1 on the U S. Concrete deal just curious how how you are framing this to investors who are worried that you're increasing downstream exposure.
Well I think that if you look at our history.
Number 1 we've gone from 95% to 85% of our EBITDA coming from aggregates. When this closes 85% of of our EBITDA will come from aggregates.
I think more importantly, you got to look at.
The how the 2 companies match up the geographies work extremely well.
The California, Texas, Virginia, we match up very well the if you look at their technical capabilities, they're a very good operator in ready mix concrete.
We think they can help us we think we can help them with our ability to expand unit margins a click of the ability to expand unit margins in aggregates.
We help each other we think the culture fits ours very well and you also got to remember, there's 12 million tons of 12 on a half million tons of aggregate and U S concrete and so it is also which is very complementary and places we art of product was that we arent. So it's very complementary to us so.
And as I said, the management team fits very well, we know them well they know US well. We started talk of we've always talked to each other because we know each other very well but.
In our conversations and pre closing and the store.
Hard to figure out how we put the companies together, it's going extremely well. So I think of you talk to anybody on the collective teams were all excited about this and see lots of opportunities.
Thanks, Tom.
Sure.
Thank you. Your next question is from Phil <unk> of Jefferies.
Hi, This is actually calling on for Phil. Thank you for taking my question.
Can you parse out how your different end markets performed to contribute to that 4% year over year increase in aggregate shipments and then maybe dive a little bit more into trends in the non res end market and how that business is tracking versus 2019 levels.
Sure I think if you look across our footprint, it's pretty consistent non rose.
Is improving.
Non res starts on a trailing 6 months of trailing 3 month basis have now turned positive we continue to see strength as you would imagine the heavy non res warehouses and distribution centers, but now we're seeing growth in things like government buildings institutional buildings healthcare private schools and churches.
And we're just starting to see green shoots on stores that followed the subdivision so I'd call non res out across our footprint pretty much as is improving.
Residential it's going great our single family starts on.
Trailing 12 month basis were up 31% in our markets inventories extremely low. This is almost all new subdivision work, which is more and more aggregate intensive so demand growth in this sector.
We will continue to grow and still not overbuilt now youre seeing multifamily improvement.
Permits for both multifamily and single family would support continued growth.
So it's just strong on the roadside highways.
Good we're confident you know we've we've returned back to normal walk from talk about that more later I think what's exciting which is a little bit of of shifts that we're seeing now we're seeing growth in non highway infrastructure and this is.
Are we starting to see this and kind of the end of 19 beginning of 'twenty then it got shut down with the pandemic, but on a trailing 12 months or 6 months and 3 months.
It's very good and you know.
It's more in the in the sector of the water sewage and you'll remember that the housing growth is also driving the non highway infrastructure. So all in all you've got non res returning.
And has made the turn of the other 3 are now growing.
Great. Thank you for the color sure.
Thank you. Your next question is from Joshua Wilson of Raymond James.
Good morning, and thanks for taking my good morning.
Just to make sure we tie out all the moving parts on the second half can you update.
The gross profit guidance I think before you had said.
The non aggregates gross profit collectively would be up mid to high singles, where are you thinking that shakes out.
Yes.
Yeah.
Yeah, and I'll I'll speak to that in terms of our cash gross profit per ton. That's usually the measure of that that we call out. We had you know for the for the full year, we had talked about that being sort of you know mid yeah, roughly mid single digits and you know.
We we don't see a reason to change that guidance at this point.
Yes, I think if you look at.
And this is more of a longer term view of this is always because cost can be so.
So variable within a quarter, but year to date, we're at 5% I think we'd tell you that as we March through the year probably.
We will absorb the inflationary pressures and we will end the year at mid single digit from a.
The cash gross profit per ton.
Got it and with the heavy non res that's been the been the driver for so long or any geographies seen any moderation there at all or even if it's in like quoting activity.
No, it's still going well and what's interesting about that is because the biggest flat, it's very aggregate intensive but their ability to go from bid to turning dirt and shipping rock is probably as fast faster than any segment, we're seeing I mean, they're really quick at it so.
I don't see any slowdown in the the good news is as we said the life side is starting to see.
Some growth in even stores, which would kind of the last 1 to fall in here is starting to fall of the subdivision with green shoot.
Great. Good luck with the the next quarter. Thank you.
Thank you your next.
Next question is from Brent Thielman of D. A davidson.
Hey, Thank you good.
Tom can you talk about the California public and private bid environment. Just given you. That's when you have higher price markets getting a good chunk of revenue from USTR there.
Yeah, I would tell you very good news.
The residential market continues to improve a little bit better in southern California, The Northern California, which was the hardest hit with the shutdown non res again.
Excuse me the rest is healthy the nonresident, improving again, probably a little faster and southern the northern California, but both on the mend Caltrans of Great story.
Caltrans came out this week and up there outlook for Lettings in 2022 by over 50% of.
So great news from Cal trends, they have really mature into their funding fast they've got a lot of needs and they're going to put that money to work. So the boat for our aggregates business, our asphalt business, our concrete business in future aggregates and concrete business from U S concrete.
The good sounds good omens of good news.
Tom That's our fiscal 2022 is that right. Yes. So that's that starts July of <unk>.
Correct of Caltrans that fiscal year 2022, so that starts I believe July 1 started July 1.
Very helpful. Thank you best of luck. Thank you.
Thank you. Your next question is from Michael Dudas of vertical research.
Good morning comps in the morning.
Yeah.
So.
Just back of the U S concrete.
Your expectations on you.
The return profile on the investment over the next several years.
What were your expectations of how they framed relative to other investment opportunities and maybe you can tie that back to once the deal closes and the balance she gets the restructured.
Your your go forward targets on whether certain type of debt levels, you know priorities on cap allocation.
And they will there'll be any.
You know me.
More allocation of 1 way of the other given how well you think the concrete to the bring the cash into the business.
I wouldn't.
Wouldn't see a big shift and the and the.
Capital.
When you put the 2 together.
Either up or down obviously, I don't think again I wouldn't see a shift in priorities and putting the 2 together I think it gives us a lot of more flexibility.
On moving capital around and how we allocate it and mixing and matching.
Again, I think we got to get it closed and we can give you a lot better view of returns and how that's gonna look and give us let us put the teams together and really of close but I would tell you at this point.
I'm more optimistic than I was when before we started talking to them and feel very good about it and that's.
How what happens when we put the 2 together and how we help each other but also the short term the markets look to be improved.
Okay.
The pink just from your early indications that just concrete was fairly well capitalize on its current asset base.
I think the fine I think there is a well run business I think that team has done a good job.
I think you know like all of US they've got places where they are they.
They feel better than others, but we would tell you the same thing about ours, but I don't think I don't see again I don't see any big shift with this and I think that team has done a good job with allocating capital as well as is running the business servicing the customers and manage their operating efficiencies.
Thank you Tom.
Thank you.
Thank you we have no further questions at this time I'll turn the call back over to Tom for any additional or closing remarks.
Thank you for your interest in Vulcan materials.
We look forward to talking to you next quarter or throughout the next few days and weeks and months.
As always you know the the world is changing and we hope that all of you stay safe stay healthy and safe and keep your families healthy look forward talking to you bye bye. Thanks.
Yes.
Thank you. This does conclude today's conference call you may now disconnect.
Yeah.