Q2 2022 Vulcan Materials Co Earnings Call

Portion of this call we ask that you.

Visitation to one question. This follow everyone pushes 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, and thank you for your interest in Vulcan materials with me today are Tom Hill, Chairman and CEO , Suzanne Wood, Senior Vice President and Chief Financial Officer, and Mary Andrew's Carlisle, Vice President of Finance.

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

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

And you need assistance during the conference today.

Yeah.

Thank you Mark and thanks to everyone for joining the call. This morning, we appreciate your interest in Vulcan materials company.

Sure.

Thank you.

Good morning.

Ladies and gentlemen, and welcome to the Vulcan materials company's second quarter earnings call. My name is Katie and I will be your conference coordinator today.

Our teams delivered another solid performance in a challenging macro environment in.

The resilient nature of our aggregates led business.

During the Q&A portion of this call we ask that you your participation to one question.

Actually stands out in times like these.

We've grown our cash gross profit per ton and 15 of the last 16 quarters and it expanded our trailing 12 month unit profitability at a compounded annual growth rate of five 5% over that four year period.

Everyone has 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.

These consistent results come from our unwavering commitment to executing on our strategic disciplines, which allows us to capitalize on pricing opportunities to mitigate cost pressures and to drive improvement in unit profitability.

Good morning, and thank you for your interest in Vulcan materials with me today are Tom Hill, Chairman and CEO , Suzanne Wood, Senior Vice President and Chief Financial Officer, and Mary Andrew's Carlisle, Vice President of Finance.

Sure.

During the second quarter, we grew our aggregates cash gross profit per ton despite significant external headwinds.

Today's call is accompanied by a press release.

A supplemental presentation posted to our website bulk materials dot com.

Importantly, our year over year improvement expanded sequentially each month.

A recording of this call will be available for replay later today at our website.

We are poised to carry this momentum forward and deliver both aggregates cash unit profitability growth and double digit adjusted EBITDA growth this year.

Please be reminded that today's discussion may include forward looking statements, which are subject to risks and uncertainties.

These risks along with other legal disclaimers are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission.

We generated $450 million of adjusted EBITDA in the quarter and 11% increase over the prior year.

These results include an approximate $20 million impact from the unexpected and arbitrary shutdown of our operation in Mexico in May.

Reconciliations of any non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation and other SEC filings.

The results were also hampered by ongoing energy cost headwinds and other inflationary pressures.

As the operator indicated please limit your Q&A participation to one question.

Pricing improvement was robust across all product lines.

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

Year over year growth in aggregates mix adjusted price has increased sequentially for six quarters.

Yeah.

Thank you Mark and thanks to everyone for joining the call. This morning, we appreciate your interest in Vulcan materials company.

Both asphalt and ready mix delivered strong double digit price improvement, which helped to offset rising energy costs.

Our teams delivered another solid performance in a.

Challenging macro environment.

Turning now to each segment.

Resilient nature of our aggregates led business actually stands out in times like these.

Aggregates gross profit improved.

8% to $402 million.

We've grown our cash gross profit per ton in 15 of the last 16 quarters haven't expanded our trailing 12 month unit profitability at a compounded annual growth rate of five 5% over that four year period.

Demand remained healthy across our footprint during the second quarter with the majority of geographies showing shipment growth.

Overall volume improved 9% or 2% on a same store basis.

Ongoing pricing momentum helped margins returned to growth in the second quarter freight.

These consistent results come from our unwavering commitment to executing on our strategic disciplines, which allows us to capitalize on pricing opportunities.

Freight adjusted pricing increased 9% over the prior year's quarter.

Mix adjusted pricing improved 10%.

We expect continued momentum through the balance of the year as second half price increases and new project work backlog that higher prices begin to flow through into the third quarter.

To mitigate cost pressures and to drive improvement in unit profitability.

During the second quarter, we grew our aggregates cash gross profit per ton despite significant external headwinds.

It's worth noting that price momentum building in 2022, we will continue to deliver benefit into 2023.

Importantly, our year over year improvement expanded sequentially. Each month, we are poised security this momentum forward and deliver both aggregates cash you to profitability growth and double digit adjusted EBITDA growth this year.

As expected our costs were elevated in the quarter on a year over year basis due to significantly higher energy cost and other inflationary pressures our operators remain focused on controlling what they can control by driving improved efficiencies in our plants to continue offsetting the impacts of higher input.

We generated $450 million of adjusted EBITDA in the quarter and 11% increase over the prior year.

These results.

<unk>, an approximate $20 million impact from the unexpected and arbitrary shutdown of our operation in Mexico in May.

Cost.

In the second quarter our cash.

Cash gross profit improved 2% $7.99 per ton.

The results were also hampered by ongoing energy cost headwinds and other inflationary pressures.

In the asphalt segment, both volume and pricing improvements were geographically dispersed pricing actions that began last year, usually a 19% improvement in average selling prices in the quarter and helped to mitigate a $33 billion energy headwind.

Pricing improvement was robust across all product lines.

Year over year growth in aggregates mix adjusted price has increased sequentially for six quarters.

Both asphalt and ready mix delivered strong double digit price improvement, which help to offset rising energy costs.

Volumes improved 9% ash.

Asphalt cash gross profit in the quarter held for 2021 levels. Despite the significant year over year increases in liquid asphalt and natural gas cost.

Turning now to each segment.

Aggregates gross profit improved.

8% to $402 million.

Demand remained healthy across our footprint during the second quarter with the majority of geographies showing shipment growth.

Concrete cash gross profit in the second quarter benefited from the addition of U S concrete growing from $14 million in the prior year to $51 million this year.

Overall volume improved 9% or 2% on a same store basis.

Ongoing pricing momentum helped margins returned to growth in the second quarter.

Volume price and material margins, all improved as higher selling prices offset higher material costs.

Freight adjusted pricing increased 9% over the prior year's quarter.

<unk> improvement in private nonresidential construction activity and the onset of infrastructure investment remain catalysts for the concrete segment.

Mix adjusted pricing improved 10%.

We expect continued momentum through the balance of the year as second half price increases and new project work backlog that higher prices begin to flow through into the third quarter.

Now, let's shift, let's shift to the broader demand environment.

We continue to expect private and public demand to grow in 2022.

It's worth noting the pricing momentum building in 2022, we will continue to deliver benefit into 2023.

Residential construction activity in the second half of 2022 remained good and multifamily permits and starts are showing particular strength.

As expected our costs were elevated in the quarter on a year over year basis due to significantly higher energy cost and other inflationary pressures our operators remain focused on controlling what they can control by driving improved efficiencies in our plants to continue offsetting the impacts of higher input.

Headwinds to single family construction have resulted in slowing permits and starts but after multiple years of strong growth single family construction remains at high levels and.

And Vulcan States continued to outperform the U S average.

Cost.

In the second quarter our cash.

Cash gross profit improved 2% $7 99 per ton.

Private non residential demand has returned to growth and has broadened in 2020 beyond aggregate intensive warehouses and distribution projects to now include other nonresidential categories like office manufacturing and institutional.

In the asphalt segment, both volume and pricing improvements were geographically dispersed pricing actions that began last year, usually a 19% improvement in average selling prices in the quarter and helped to mitigate a $33 billion energy headwind.

Worth.

On a trailing 12 month basis square footage for total private nonresidential starts has grown 20% of Vulcan served markets and is now above pre COVID-19 levels.

Volumes improved 9% ash.

Asphalt cash gross profit in the quarter held for 2021 levels. Despite the significant year over year increases in liquid asphalt and natural gas costs.

Other leading indicators like the architectural building buildings index and the Dodge momentum index also point toward growth.

Concrete cash gross profit in the second quarter benefited from the addition of U S concrete growing from $14 million in the prior year to $51 million this year.

The Abi remains in positive growth territory, and the Dodge momentum index hit a 14 year high in June .

On the public side, we've entered growth mode, and while public demand is somewhat muted has been somewhat muted in the first half of the year, we anticipate we anticipate secondhand growth in both highways and infrastructure.

Volume price and material margins, all improved as higher selling prices offset higher material costs.

The improvement in private nonresidential construction activity and the onset of infrastructure the best remain catalysts for the concrete segment.

The bidding and booking activity, we saw in the second quarter reflected record levels of public funding.

Now, let's shift lift shift to the broader demand environment.

In addition, we anticipate that the federal infrastructure investment and jobs Act funding will begin to flow with the shipments in 2023 and for years to come.

We continue to expect private and public demand to grow in 2022.

Residential construction activity in the second half of 2022 remained good and multifamily permits and starts are showing particular strength.

Now remember the ultimate timing of the impact of the Iia JA will depend upon the pace at which states continue to allocate additional funds.

Headwinds to single family construction have resulted in slowing permits and starts but after multiple years of strong growth single family construction remains at high levels and.

And the time horizon needed to move from design to leading to construction.

Overall, our markets are positioned to continue to outperform other parts of the country.

In Vulcan States continued to outperform the U S average.

And our strong execution and tireless commitment to expanding our unit margins will ensure that we continue to drive value for our shareholders.

Private non residential demand has returned to growth and has broadened in 2022 beyond aggregate intensive warehouses and distribution projects to now include other nonresidential categories like office manufacturing and institutional.

I will now turn the call over to Suzanne to marry Andrews.

To comment further on our results and the full year outlook.

Susanna, Thanks, Tom and good morning to everyone.

Sport.

On a trailing 12 month basis square footage for total private nonresidential starts has grown 20% in bulk and serve markets and is now above pre COVID-19 levels.

As I reflect on the first half of this year I am pleased with our 14% adjusted EBITDA growth that was driven by a strong performance in aggregates, which Tom described and GE cost leverage our strategic discipline has helped us confront and overcome macro challenges in the current.

Other leading indicators like the architectural building buildings index and the Dodge momentum index also point toward growth.

MC operating environment.

The Abi remains in positive growth territory, and the Dodge momentum index hit a 14 year high in June .

In regards to <unk>, we reduced this cost as a percentage of revenue by 50 basis points in the first half to seven 3% and we are positioned to further leverage cost by the end of the year.

On the public side, we've entered growth mode, and while public demand has somewhat has been somewhat muted in the first half of the year. We anticipate we anticipate secondhand growth in both highways and infrastructure.

I'm also pleased that our net leverage was reduced to two five times EBITDA. The top end of our stated target range of two to two five times, our balance sheet is strong and our significant cash generation capabilities give us the capacity to continue to invest in both organic and inorganic growth.

The bidding and booking activity, we saw in the second quarter reflected record levels of public funding.

In addition, we anticipate that the federal infrastructure investment and jobs Act funding will begin to flow with the shipments in 2023 and for years to come.

<unk>.

Disciplined capital management remains fundamental to our strategy.

Now remember the ultimate timing of the impact of the Iia JA will depend upon the pace at which states continue to allocate additional funds.

Capital decisions are made with the goal of improving shareholder returns and return on invested capital, while maintaining financial flexibility and our investment grade credit ratings on.

And the time horizon needed to move from design to leading to construction.

Overall, our markets are positioned to continue to outperform other parts of the country.

On a trailing 12 months basis, our ROIC at quarter end was 13, 6%.

And our strong execution and tireless commitment to expanding our unit margins will ensure that we continue to drive value for our shareholders.

Our adjusted EBITDA over the same time horizon increased by 13% and we expect continued improvement I'll now turn the call over to Mary Ann <unk> to provide more details on our outlook for the remainder of 2020 to marry Andrews. Thanks.

I will now turn the call over to Suzanne to Barry Andrews.

To comment further on our results and the full year outlook.

Thanks, Suzanne and good morning, all it is a pleasure to take part in this quarters call in February we communicated expectations for 2022, delivering adjusted EBITDA between $1 72, and $1 eight 2 billion today, we're providing an update to our full year guidance.

Suzanne.

Thanks, Tom and good morning to everyone.

As I reflect on the first half of this year I am pleased with our 14% adjusted EBITDA growth that was driven by a strong performance in aggregates, which Tom described and say Gee cost leverage our strategic discipline has helped us confront and overcome macro challenges in the current.

Our update reflects both the previously disclosed $80 million to $100 million impact from the loss of our Mexico business. In addition to other adjustments related to higher than anticipated inflationary pressures.

<unk> operating environment in.

In regards to <unk>, we reduced this cost as a percentage of revenue by 50 basis points in the first half to seven 3% and we are positioned to further leverage cost by the end of the year.

We now expect adjusted EBITDA for the full year between one six and $1 7 billion.

We expect mid single digit growth in aggregates cash gross profit per ton for the full year.

I'm also pleased that our net leverage was reduced to two five times EBITDA. The top end of our stated target range of two to two five times, our balance sheet is strong and our significant cash generation capabilities give us the capacity to continue to invest in both organic and inorganic growth.

Our strong pricing momentum we have seen in the first half is expected to continue and we now expect aggregate freight adjusted prices to increase between nine and 11% for the year.

We continue to expect aggregates volume improvement of 5% to 7%.

We are also revising our expectations for the asphalt segment due to the continued escalation of liquid asphalt cost.

<unk>.

Disciplined capital management remains fundamental to our strategy.

Capital decisions are made with the goal of improving shareholder returns and return on invested capital, while maintaining financial flexibility and our investment grade credit ratings on.

Earnings for the full year are now expected to approximate full year 2021.

Benefiting from solid shipment growth and aggressive pricing actions that are offsetting the significantly higher energy costs.

On a trailing 12 months basis, our ROIC at quarter end was 13, 6%.

I'll run through a few other components that may be helpful for modeling purposes.

Our adjusted EBITDA over the same time horizon increased by 13% and we expect continued improvement I'll now turn the call over to Mary Andrew to provide more details on our outlook for the remainder of 2020 to marry Andrews. Thanks.

<unk> expenses are expected to be between $495 and $505 million.

Interest expense for the year is expected to be approximately $165 million.

Depreciation depletion amortization and accretion is expected to be approximately $565 million.

Thanks, Suzanne and good morning, all it is a pleasure to take part in this quarters call in February we communicated expectations for 2022, delivering adjusted EBITDA between $1 72, and $1 eight 2 billion today, we're providing an update to our full year guidance.

Effective tax rate is estimated between 21 and 22%.

We plan to spend between 600 $650 million on capital expenditures in 2022. These expenditures include both maintenance and growth projects.

Our update reflects both the previously disclosed 80 to 100 million dollar impact from the loss of our Mexico business. In addition to other adjustments related to higher than anticipated inflationary pressures.

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

Thank you Larry Andrews and a special thank you to Suzanne <unk>.

As we previously announced this will be Suzanne let Suzanne his last earnings call.

We now expect adjusted EBITDA for the full year between one six and $1 7 billion.

Can you hear me say this a lot, but it's the people of Vulcan make display special.

And Suzanne is for sure one of those people.

We expect mid single digit growth in aggregates cash gross profit per ton for the full year.

Suzanne we're grateful for your tenure and we appreciate your leadership and its been and your leadership has been played a critical role in our success over the last four years and our ability to deliver enhanced profitability and higher returns on capital despite pressures like pandemics inflation or inflation.

Our strong pricing momentum we have seen in the first half is expected to continue and we now expect aggregate freight adjusted prices to increase between nine and 11% for the year.

Continue to expect aggregates volume improvement of 5% to 7%.

And while Suzanne business skills are tremendous.

We are also revising our expectations for the asphalt segment due to the continued escalation of liquid asphalt cost asphalt earnings for the full year are now expected to approximate full year 2021, benefiting from solid shipment growth and aggressive pricing actions that are offsetting the significantly higher energy costs.

What I'll Miss most is heard carrying touch.

And I think what the organization will Miss his house shall shoot welcomes all in and made us feel a part of the Vulcan family.

Suzanne we wish you the best in your retirement, we will Miss you greatly we want to thank you. We will make sure you got to take care of those grandbabies.

I'll run through a few other components that may be helpful for modeling purposes.

I will also thank the entire volt team for your hard work and.

<unk> expenses are expected to be between $495 and $505 million.

And your success I'm excited about where we've been but I'm more excited about what we're going to accomplish the rest of 2022 and beyond.

Interest expense for the year is expected to be approximately $165 million.

First and foremost on keeping our people safe as we've shown.

Depreciation depletion amortization and accretion is expected to be approximately $565 million.

In our industry, leading safety performance.

And we are focused on delivering value to our shareholders by executing at the local level driving unit margin expansion through our strategic disciplines and maximizing the synergies from recent acquisitions.

<unk> tax rate is estimated between 21 and 22%.

We plan to spend between 600 $650 million on capital expenditures in 2022. These expenditures include both maintenance and growth projects.

We look forward to seeing all of you in New York in September for our Investor Day.

I will now turn the call back over to Tom for closing remarks.

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

Thank you Mary Andrews and a special thank you to Susanne.

Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star Q. Once again that is star one to ask a question again as a reminder, we ask that you. Please limit yourself to one question.

As we previously announced this will be Suzanne let Suzanne his last earnings call.

Can you hear me say this a lot, but it's the people who Vulcan make display special.

And Suzanne is for sure one of those people.

Suzanne we're grateful for your tenure and we appreciate your leadership and its been and your leadership has been played a critical role in our success over the last four years and our ability to deliver enhanced profitability and high returns on capital despite pressures like pandemics and inflationary inflation.

Pause for a moment to allow questions to queue.

Thank you. Our first question will come from Stanley Elliott with Stifel. Your line is now open.

Hey, Good morning, Tom Suzanne Mary Andrew. Thank you all for taking the question.

And while Suzanne business skills are tremendous.

Tom.

I'll start it off I mean, theres, a tremendous amount of volatility in the market right. Now has it changed your view on where we are in the cycle and maybe could you point to some things that you are seeing in the market that gave you confidence that things really haven't changed all that materially.

What I'll Miss most is heard carrying touch.

And I think what the organization, we will Miss his house shall shoot welcomes all in and made us feel a part of the Vulcan family.

Suzanne we wish you the best in your retirement, we will Miss you greatly we want to thank you will.

Thanks, Dan and good morning.

Stanley I think as an investor.

Make sure you take care of those Grandbabies.

I want to also thank the entire volt team for your hard work and.

Asked three critical questions. The first question would be what's going to happen with price.

And your success I'm excited about where we've been but I'm more excited about what we're going to accomplish the rest of 2022 and beyond.

And I think that's a pretty easy question to answer price is very good.

Getting better and it's going to continue for the foreseeable future we've seen.

First and foremost on keeping our people safe as we've shown.

Times, where we had double digit pricing and usually when that happens, it's a multi year trend.

In our industry, leading safety performance.

Second question would be okay in the face of inflation can you take that price to the bottom line.

And we are focused on delivering value to our shareholders by executing at the local level driving unit margin expansion through our strategic disciplined and maximizing the synergies from recent acquisitions.

And simply yes, we saw an inflection point in the second quarter margins were back in growth in May.

Low single digit then they grew to mid single digit in June so margins are in expansion mode, and then we're going to have.

We look forward to seeing all of you in New York in September for our Investor Day.

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

Did your price increases.

Pricing is now outpacing inflation.

Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star Q. Once again that is star one to ask a question again as a reminder, we ask that you. Please limit yourself to one question.

And I'd like to take you back to a critical fundamental of our business and that is that accurate pricing is in elastic but diesel cost or not.

And then the third question would be whats going to happen with demand as shipments in the foreseeable future and I think the answer to that one is we see demand continuing to grow maybe in a little bit different format.

Pause for a moment to allow questions to queue.

Thank you. Our first question will come from Stanley Elliott with Stifel. Your line is now open.

So less single family more multifamily.

Hey, Good morning, Tom Suzanne Mary Andrew. Thank you all for taking the question.

Really growing non res and a lot more infrastructure.

Tom starting off I mean, theres, a tremendous amount of volatility in the market right now has it changed your view on where we are in the cycle and maybe could you point to some things that youre seeing in the market that gave you confidence that things really haven't changed all that materially.

So you put all those those three questions together I think our business is set up for success for the next few years.

That's great thanks, very much and today and best wishes to you.

Thank you Stanley.

Thanks, Dan and good morning.

Thank you. Our next question will come from Trey Grooms with Stephens. Your line is now open.

Stanley I think as an investor.

Asked three critical questions. The first question would be what's going to happen with price.

Alright, Thank you and good morning, everyone. Good morning.

Cash gross profit I wanted to touch on that cash gross profit per ton increased in the quarter, which is.

And I think that's a pretty easy question to answer price is very good.

Getting better and it's going to continue for the foreseeable future we've seen.

Pretty impressive given the headwinds in and Youre looking for.

The revised guidance mid single digit improvement for the year.

Times, where we had double digit pricing and usually when that happens it's a multiyear trend.

It does imply a pretty strong pickup in the back half so.

Second question would be okay in the face of inflation can you take that price to the bottom line.

Should we be thinking about the progression there and I'm assuming that.

And simply yes, we saw an inflection point in the second quarter margins were back in growth in May.

That will imply a pretty strong exit rate and bode well for profitability going into next year. So any any color you could give there would be helpful. Yes. So as I talked about earlier, if you looked at May we were up.

Low single digit then they grew to mid single digit in June so margins are in expansion mode, and then we're going to have.

<unk>, 2% and unit margins June say, 5% you've got another price jump in July we're also adding our bidding prices in the second half we see the <unk>.

Did your price increases.

Pricing is now outpacing inflation.

And I would like to take you back to a critical fundamental of our business and that is the aggregate pricing is in elastic but diesel cost or not.

Cost inflation.

It's not this is going to go down, but it's not going to continue accelerating like it has and that would point us to what I would say high single digit unit margins in the second half so really.

And then the third question would be whats going to happen with demand as shipments in the foreseeable future and I think the answer to that one is we see demand continuing to grow maybe in a little bit different format.

We recovered.

As we always do we will take the inflationary hit our pricing lags, but we'll jump it and we will go back into.

So less single family more multifamily.

The growth mode and.

I'd say that unit margins will be very good in the second half it will carry that momentum into 'twenty three.

Really growing non res and a lot more infrastructure.

So you put all those three questions together I think our business is set up for success for the next few years.

Yeah, Okay. Thanks, Thanks, Tom and best wishes Suzanne with retirement.

Thanks, so much.

That's great. Thanks, very much and Suzanne best wishes to you.

Thank you. Our next question will come from Garik <unk> with loop capital. Your line is open.

Thank you Stanley.

Thank you. Our next question will come from Trey Grooms with Stephens. Your line is now open.

Oh, hi, Thanks for taking my question I'm, just wondering if you could speak a little bit more on the infrastructure side and coming into the quarter you were still expecting this.

Alright, Thank you and good morning, everyone. Good morning.

Cash gross profit I wanted to touch on that cash gross profit per ton increased in the quarter, which is.

The first half of this year that reflect a bit of an air pocket <unk> bidding activity that was a little slower in the back half of last year I'm just wondering you've got some slides.

Pretty impressive given the headwinds and Youre looking for.

The revised guidance mid single digit improvement for the year.

Yes.

Record an increase.

I'm wondering if what you're seeing on the ground and kind of what the expectations of infrastructures and I'm, sorry, I'm, sorry, I couldn't hear the first part of your question are you talking about the entire mortgage of our specific end use like like ours.

It does imply a pretty strong pickup in the back half so how should we be thinking about the progression there and I'm assuming that.

That will imply a pretty strong exit rate and bode well for profitability going into next year. So any any color you could give there would be helpful. Yes. So as I talked about earlier, if you looked at May we were up.

Sorry, I was speaking specifically to highways sure.

I think it was slow as we had predicted in the first half because states kind of hit the pause button in the second half of last year kind of see what's going to happen with their with their bus.

<unk>, 2% in the year margins June say, 5% you've got another price jump in July we're also adding power bidding prices in the second half we see the.

Budgets.

The fundamentals I think for multiyear growth in infrastructure highways is very good you've got at this point, you've got state County City tax revenues at extremely high levels.

Cost inflation.

It's not this is going to go down, but it's not going to continue accelerating like it has and that would point us to what I would say high single digit unit margins in the second half so really.

That is prior to JA.

We've seen substantial booked work being booked work and infrastructure in the last 90 days and embedded in that and the recent backlog a number of multi year.

We recovered.

As we always do we will take the inflationary hit our pricing lags, but we'll jump it and we will go back into.

Big Big projects. They begin prior to RJ. So the bidding of backlog growth should continue for the balance of this year and then the I think the Dod budgets as we look forward to next year are starting to reflect.

The growth mode.

I'd say that unit margins will be very good in the second half it will carry that momentum into 'twenty three.

Yeah, Okay. Thanks, Thanks, Tom and best wishes Suzanne with retirement.

The 38% funding increase from RJ plus on top of that.

Thanks, so much.

Thank you. Our next question will come from Garik choice with loop capital. Your line is open.

There are substantial funding going into this so you know.

We predicted the growth we saw it in the biddings in the second quarter. We think that continues through this year and well into 'twenty three 'twenty four.

Oh, hi, Thanks for taking my question I'm, just wondering if you could speak a little bit more on the infrastructure side.

Into the quarter you are still expecting this.

Got it thanks again.

Thank you.

The first half of this year to reflect a bit of an air pocket <unk> bidding activity that was global slower in the back half of last year and I'm just wondering you've got some slides.

Thank you. Our next question will come from Anthony Pettinari with Citi. Your line is now open.

Good morning.

Reflected an increase.

Good morning.

On the updated guidance, if we strip out Mexico, I think there is $30 million from higher costs. If I got that right I'm. Just wondering if you can put any finer point on that $30 million.

And then just wondering if youre, what youre seeing on the ground and kind of what the expectations of infrastructures and I'm, sorry, I'm, sorry, I couldn't hear the first part of your question are you talking about the <unk> Tom will give you our specific end use like <unk> was.

Sorry, I was speaking specifically to highways sure.

Diesel energy.

Labor or if there's other things that we should be thinking about there.

I think it was slow as we had predicted in the first half because states kind of hit the pause button in the second half of last year kind of what's going to happen with their with their.

Yes, it's really energy and.

Diesel from from the second half to first half second half is probably about in line, but you still have other inflationary pressures that are in there.

Budgets.

There and labor continues continue to escalate a little bit.

The fundamentals I think for multiyear growth in infrastructure highways is very good you've got at this point, you've got state County City tax revenues at extremely high levels.

But it's primarily just all the flow through of all of the inflationary inputs and services that we have in that business, yes, Anthony I'll just add that the.

That is prior to JA.

We've seen substantial booked work being booked work and infrastructure in the last 90 days and embedded in that and the recent backlog a number of multi year.

Extra 30 million, you'll see the majority of that in the asphalt segment.

Continued higher liquid in the back half and then we also raised guide.

Just a bit but just related to business development expenses and other.

Big Big projects May begin prior to Jay so the bidding and backlog growth should continue for the balance of this year and then the I think the Dod budgets as we look forward to next year are starting to reflect.

Legal costs related to Mexico.

Okay. That's very helpful and then just on Mexico.

Understanding the guidance adjustment can you just remind us of the timeline for potential NAFTA arbitration and sort of the remedies that you are pursuing there.

The 38% funding increase from J plus on top of that.

There are substantial funding going into there so.

Yes, so with the shutdown in May we filed an application and the naphtha arbitration to seek additional claims because of the shutdown.

We predicted the growth we saw it in the biddings in the second quarter. We think that continues through this year and well into 'twenty three 'twenty four.

In July the tribunal granted our application to seek those further claims and we should hope to hear a decision sometime in 2023.

Got it thanks again.

Thank you.

Thank you. Our next question will come from Anthony Pettinari with Citi. Your line is now open.

Okay, that's very helpful and Suzanne thanks, so much for all the help over the years.

Good morning.

Good morning.

On the updated guidance, if we strip out Mexico, I think there is $30 million from higher costs. If I got that right I'm. Just wondering if you can put any finer point on that $30 million.

I enjoyed it thank you.

Sure.

Thank you. Our next question will come from Jerry Revich with Goldman Sachs. Your line is now open.

Diesel energy.

Yes, hi, good morning, everyone.

The labor or if there's other things that we should be thinking about there.

Suzanne Mary Angers.

Congratulations once again to you both.

Yes, it's really energy and.

And we will.

Diesel from from the second half to first half second half is probably about in line, but you still have other inflationary pressures that are in there.

Miss working with you.

I'm wondering if I could just ask.

As you folks.

There and labor continues continue to escalate a little bit.

Look at what the outlook for aggregates percent margin performance.

But it's but it's primarily just all the flow through of all of the inflationary inputs and services that we have in that business, Yes, Anthony I would just add that the.

Over the balance of the year, if we back out the impact.

The unfortunate situation in Mexico, do you expect year over year.

The extra 30 million Youll see the majority of that in the asphalt segment.

Gross margin expansion.

In the fourth quarter, just based on the pricing actions that you folks.

Two continued higher liquid in the back half and then.

Have an ounce.

We also raised guide.

Similarly can you just talk about the.

Just a bit but just related to business development expenses and other.

The cadence of organic volume expectations.

Now that we have to contend with not being able to ship from from Mexico. It looks like over the next couple of quarters. Thanks.

Legal costs related to Mexico.

Okay. That's very helpful and then just on Mexico.

Understanding the guidance adjustment can you just remind us of the timeline for potential NAFTA arbitration and sort of the remedies that you are pursuing there.

Yes, Thanks, I think on the gross margins.

And in the back half like Tom said, we really view the second quarter as having been an inflection point with pricing beginning to accelerate faster than the cost and so we would expect to see gross margins.

Yes, so with the shutdown in May we filed an application and the naphtha arbitration to seek additional claims because of the shutdown.

Again to improve in the back half.

In July the tribunal granted our application to seek those further claims and we should hope to hear a decision sometime in 2023.

Yes.

Yes.

<unk>.

Go ahead I'm sorry.

Oh I apologize I was just going to ask is that a year over year.

Okay, that's very helpful and Suzanne thanks, so much for all the help over the years.

Margin expansion comment or.

Or sequential.

Sure I enjoyed it thank you.

I think we will see sequentially.

Sure.

The challenges that we've had in growth and gross margin in the first half from the inflationary pressures will abate somewhat in the second half.

Thank you. Our next question will come from Jerry Revich with Goldman Sachs. Your line is now open.

Yes, hi, good morning, everyone.

Suzanne Mary anchors.

And I apologize Tom did you want to add.

Congratulations once again to you both.

You asked about you asked about volumes and I would tell you that what's in the guidance is.

And we will.

Miss working with you.

I'm wondering if I could just ask.

<unk> growth was roughly low single digit.

As you folks.

I would tell you to point out that the underlying demand in the market I think is a lot stronger than that particularly with the growth we're seeing in non res and infrastructure.

Look at what.

The outlook for aggregates percent margin performance.

Over the balance of the year.

Back out the impact.

The unfortunate situation in Mexico, you expect year over year percent gross margin expansion.

<unk>.

The second half as I said, we will see growth, but <unk> got some headwinds there in this namely.

In the fourth quarter, just based on the pricing actions that you folks have announced and similarly can you just talk about that.

The biggest one is going to be Mexico second would be lack of rail service, we just can't get enough product to the coastal markets in the third and fourth one would be.

Cadence of organic volume expectations.

Structural ridges that peak time capacity and then some cement shortages in the market.

Now that we have to contend with not being able to ship from from Mexico. It looks like over the next couple of quarters. Thanks.

As we look further out I think the demand drivers are shifting you've got single family, leading indicators not as robust, but we think that while it is still at really high levels, but we think thats offset by three factors one multifamily construction remains extremely strong.

Yes, Thanks, I think on the gross margins.

In the back half like Tom said, we really view the second quarter as having been an inflection point with pricing beginning to accelerate faster than the cost and so we would expect to see gross margins.

To nonresidential construction continues to improve and three as we talked about how we can infrastructure bookings are showing considerable strength in the last 90 days and that's priority JA and that will only get better the second half of this year going into 'twenty, three and remember that you got to remember the bulk market.

Again to improve in the back half.

Yeah.

Yes.

Great I'm sorry.

Oh I apologize I was just going to ask is that a year over year.

Margin expansion comment or.

Enjoy considerable population growth so our demand profile will grow faster than the rest of the country.

Sequential.

I think we will see sequentially.

The challenges that we've had in growth and gross margin in the first half from the inflationary pressures will abate somewhat in the second half.

I appreciate the update thanks, everyone.

Thank you.

Thank you. Our next question will come from Kathryn Thompson with Thompson Research Group. Your line is now open.

And I apologize Tom did you want to add on that point.

You asked about you asked about volumes and I would tell you that what's in the guidance is as you know growth of roughly low single digit.

Hey, Good morning. This is actually Brian Biros on for Catherine. Thank you for taking my question.

We've been hearing increased concern from state.

That inflation impact.

I would tell you would point out that the underlying demand in the market I think is a lot stronger than that particularly with the growth we're seeing in non res and infrastructure.

Their ability to.

Yes that work programs.

In addition to labor and material shortages are you seeing inflation impact the other core programs at all.

<unk>.

You know you hear about.

The second half as I said, we will see growth, but <unk> got some headwinds there and this namely the.

Jobs, not being awarded due to being over the engineer's estimates.

The biggest one is going to be Mexico second would be lack of rail service, we just can't get enough product to the coastal markets in the third and fourth one would be.

Because of inflation and we think thats really the exception not the norm the place that we've seen a little bit of that is in Georgia, but even in Georgia. They postpone eight.

Structural ridges with peak time capacity and then some cement shortages in the market.

8% of work, where they normally do about 1%.

As we look further out I think the demand drivers are shifting you've got single family, leading indicators not as robust, but we think that while it is still at really high levels, but we think thats offset by three factors one multifamily construction remains extremely strong.

And I would underline postpone that underway, where they just said they were going to wait and see what happens with inflation.

So those jobs don't go away, but most states that's more of the access and the rule. Most states are pushing work through despite inflationary costs. For example, I think Texas and Arizona Dot's had been real clear about that Theyre going ahead with their scheduled programs.

To nonresidential construction continues to improve and three as we talked about how we can infrastructure bookings are showing considerable strength in the last 90 days and that's priority JA and that will only get better the second half of this year going into 'twenty, three and remember that you got to remember the Balkan markets.

And you have to remember that the funds are extremely high levels right now and that's prior to the big increase in federal funds, you've got gas tax revenues at extremely high levels, you've got extra COVID-19 funds.

So at this point the Dot's have been aggressively bidding their work.

Enjoy considerable population growth so our demand profile will grow faster than the rest of the country.

February March and we're seeing that in our bookings and backlogs as we talked about so.

I appreciate the update thanks, everyone.

Actually don't think it's a big issue for most of the <unk>.

Thank you.

Thank you. Our next question will come from Kathryn Thompson with Thompson Research Group. Your line is now open.

Thank you.

Thank you.

Yeah.

Thank you. Our next question will come from Mike Dahl with RBC capital markets. Your line is now open.

Hey, Good morning. This is actually Brian Biros on for Catherine. Thank you for taking my question.

We've been hearing increased concern from state dot's that inflation impact their ability to address that work programs.

It's actually Chris on for Mike Thanks for taking my questions.

Just going back to the.

The Mexico Mexican quarry disruptions I was hoping you could help flesh out in more detail how you plan to.

In addition to labor and material shortages or you're seeing inflation impact the other core programs at all.

Backfill those those lush shipments is there an opportunity to potentially backfill that through.

You know you hear about.

Jobs, not being awarded due to being over the engineer's estimates.

Through M&A.

So plan to utilize utilize the ships.

Because of inflation and we think thats really the exception not the norm the place that we've seen a little bit of that is in Georgia, but even in Georgia they postponed.

We have made over the years.

How do you plan to address the Destructions and continue to serve those golf course Gulf.

Gulf markets.

At this point.

8% of work, where they normally do about 1%.

That's not in our guidance in fact, that's why we took the eight.

And I would underline postponed they don't go away. They just said they were going to wait and see what happens with inflation.

$200 million.

We're not back filling those funds.

You'd say well catch this railroad down there. The fact of the matter is we can't get the rail service.

So those jobs don't go away, but most states that's more of the exception. The rule. Most states are pushing work through despite inflationary costs. For example, I think Texas and Arizona have been real clear about that Theyre going ahead with their scheduled programs.

Our normal business increases that we would normally do so at this point, we don't have that in our plan.

And you have to remember that the.

Titanfall is there any sort of contingency plan in place if you were to permanently lose access to that quarter.

Funds are extremely high levels right now and that's prior to the big increase in federal funds.

To be seen I don't see that at this point because of the lack of rail service, but we will as we as time goes on we will keep you updated.

Got gas tax revenues.

Particularly how levels you've got extra COVID-19 funds. So at this point the docs have been aggressively bidding their work.

Understood I appreciate the color. Thank you.

February March and we're seeing that in our bookings and backlogs as we talked about so.

Yeah.

Thank you. Our next question will come from Michael Feniger with Bank of America. Your line is now open.

Actually don't think it's a big issue for most of the Dod.

Hey, everyone. Thanks for taking my question.

Thank you.

Thank you.

We're hosting an investor day in September I mean provide a framework. It was in 2019 and now youre seeing strong cost control higher pricing.

Thank you. Our next question will come from Mike Dahl with RBC capital markets. Your line is now open.

Hi, This is actually Chris on for Mike Thanks for taking our questions.

<expletive>.

<unk> peak, so would that not lead to a higher cash gross profit per ton long term just trying to assess as we go forward now.

Just going back to the.

Mexico Mexican quarry disruptions I was hoping you could help flesh out in more detail how you plan to.

Backfill those those lush shipments is there an opportunity to potentially backfill that through.

Incremental margin operating margins do you kind of see in 2023 and going forward based on how pricing is going to exit this year and the cough likely peak. Thank you Noah.

Through M&A.

So plan to utilize these lines the ships.

Are you going to steal my Thunder from our Investor day, So yes.

We have made over the years.

<unk> you pointed out look we as we said in the prepared remarks, we're at $7.99 per ton. So in our long range had been non book So we're rapidly approaching that obviously.

How do you plan to address the Destructions and continue to serve those golf course Gulf.

Gulf markets.

At this point.

That's not in our guidance in fact, that's why we took the.

This is a continuous improvement journey and so we will hope to give you some you've got some new goals and some and.

$80 million to $100 million.

We're not back filling those funds.

You'd say well catch this railroad down there. The fact of the matter is we can't get the rail service.

A path to those goals as we talked in September and I think we will have a.

Our normal business increases that we bought <unk>. So at this point.

Full morning of that in the September .

We don't have that in our plan.

I can just follow up is there any sort of contingency plan in place. If you were to permanently lose access to that Corey.

Thank you. Our next question will come from David Macgregor with Longbow Research. Your line is now open.

To be seen I don't see that at this point because of the lack of rail service book.

Yes, good morning, everyone.

In responding to an earlier question you talked about a number of factors that real fluency volume in one of those you mentioned was just cement tightness I'm just wondering.

As we as time goes on we will keep you updated.

Understood I appreciate the color.

As a way to talk about the extent to which cements.

Hugh.

I meant availability or lack thereof may be.

Thank you. Our next question will come from Michael Feniger with Bank of America. Your line is now open.

Adversely impacting your aggregates business not just this quarter, but heading out through the next five or six quarters and then.

Hey, good morning, Thanks for taking my question.

If I may just you talked about the book of business.

Hosting an investor day in September .

The inflection you've seen there the last 90 days, what's your expectation in terms of the timing of that becoming visible in the revenues.

We provide a claim market was in 2019 and now youre seeing strong cost control higher pricing.

Thank you, yes, so the Smith issue for <unk>.

Nick.

A diesel cost peak, so would that not lead to a higher cash gross profit per ton long term just trying to assess as we go forward now the <unk>.

<unk> volumes.

It's not as big a deal as the Mexico, where rail it's a little bit here, a little bit there I'm not sure that if you had to submit you'd have the trucks to deliver the address of the trucks to deliver to the concrete itself, but that's why I kind of put it with the cement and the trucking so.

Incremental margin operating margins can you kind of see in 2023 and going forward based on how pricing is going to exit this year and the cost will likely peak. Thank you know you're going to steal my Thunder for my Investor day. So.

It is there I don't see it as a big headwind.

And I think there will be other governors that would take over if all the submit was there.

Yes, but you pointed out look.

We said in the prepared remarks, we're at $7.99 per ton. So long range had been non book So we're rapidly approaching that obviously.

As far as.

What was the second part of your question about margin expansion.

Well just on the cement I guess, if I could dwell on that for a moment. My concern was more with respect to 2023 as volume ramps and CJ snick capacities constrained and the extent to which that might entail and not so much interested in this quarter you were thinking about how you're thinking about the next.

Well this is a continue.

Continuous improvement journey, and so we will hope to give you some <unk> got some new goals and some and.

The path to those goals as we talked in September and I think we will have a.

Full morning of that in the September .

Six quarters in that.

Sorry.

My answer applied through the balance of this year I didn't really get into 'twenty, three but that was a little bit of a governor there this year, but I don't think it's.

Thank you. Our next question will come from David Macgregor with Longbow Research. Your line is now open.

It's one of the major ones.

Okay and then the second part was just the.

Yes, good morning, everyone.

But we see books over the last 90 days that inflection.

In responding to an earlier question you talked about a number of factors that real fluency volume in one of those.

This estimate in terms of the timing of that becoming visible revenue stream.

Well I think it became visible in may it became more visible.

<unk> was just cement tightness I'm just wondering if there's a way to talk about the extent to which.

Margins were up 2% in June they went up 5% were predicting them go up fast.

I meant availability or lack thereof may be.

Adversely impacting your aggregates business not just this quarter, but heading out through the next five or six quarters and then.

High single digit in the second half so I think with here and we're in the middle of it and it's growing rapidly.

If I may just you talked about the book business in the.

Thanks very much thank you.

Inflection you've seen there in the last 90 days.

The expectation in terms of the timing of that becoming visible in the revenues.

Thank you. Our next question will come from Adam Thalheimer with Thompson Davis. Your line is now open.

Yes, so the Smith issue.

Hey, good morning, everybody, Hey, Tom I wanted to ask about.

For aggregates volumes.

It's not as big a deal is the Mexico, where rail it's a little bit here, a little bit there I'm not sure that if you had to submit you'd have the trucks to deliver the aggregates with the trucks to deliver the concrete itself, but that's why we kind of put it with the cement and the trucking so.

You talked about this demand rotation when do you think that the percentage of revenue from infrastructure could increase materially.

I think you see it ramping up in the second half of this year and then it ramps up some more in 'twenty three and a lot more in 'twenty four so you've got I mean, what's really impacting this year is not the federal for the increase in federal funds. It is it is gas tax and Covid fluids.

Is there I don't see it as a big headwind.

And I think there will be other governors that would take over if all the submit was there.

As far as what.

It probably is the majority of the ramp up in the first half of 'twenty three and then you've got the big jump in federal funds I think getting second half in 'twenty, three and 'twenty four.

What was the second part of your question about margin expansion.

Well just on the cement I guess, if I could dwell on that for a moment. My concern was more with respect to 2023 as volume ramps in <unk> capacity is constrained and the extent to which that might entail and not so much interested in this quarter you were thinking about how you're thinking about the next.

Thanks, and good luck thank.

Thank you.

Thank you. Our next question will come from Michael Dudas with vertical research. Your line is now open.

Six quarters in that.

And then my answer applied through the balance of this year I didn't really get into 'twenty, three but that was a little bit of a governor there this year, but I don't think its.

Good morning, gentlemen, Suzanne Mary.

Good morning.

Maybe for Suzanne.

It's one of the major ones.

Three.

Okay and then the second part was just the.

You highlighted the caps capital spending outlook. This year, so thats going to accelerate second half versus first half.

What you see books over the last 90 days that inflection whats your best estimate in terms of the timing of it becoming visible.

<unk>.

Maybe it's a little bit of where that spending the growth and is there growth projects without giving up budgets for next year that could be multi year ahead, given some of the delays from COVID-19.

Well I think it became visible in may it became more visible.

We were up 2% in June they went up 5% were predicting them go up fast.

High single digit in the second half. So I think we're it's here and we're in the middle of it and it's growing rapidly.

And is there a target in the two to two and a half level.

Debt ratio.

We're given the spending.

Thanks very much thank you.

Deposit cash flow, you're generating a bit.

More capital allocation shareholders could be thoughtful or is that something that did you say for the September investor day. Thank.

Thank you. Our next question will come from Adam Thalheimer with Thompson Davis. Your line is now open.

Thank you.

Yes sure.

Hey, good morning, everybody, Hey, Tom I wanted to ask about.

As Mary Andres indicated the Capex outlook for this year remains at $600 million to $650 million. We've talked about this before that's a little higher than what it has been in the last couple of years, just because we had various things impacting that namely the pandemic and most recently the supply.

You talked about this demand rotation when do you think that the percentage of revenue from infrastructure could increase materially.

I think you see it ramping up in the second half of this year and then it ramps up some more in 'twenty three and a lot more in 'twenty four so you've got I mean, what's really impacting this year is not the federal court of increase in federal funds. It is it is gas tax and Cobra influence that.

Chain has made it difficult to tell.

<unk> taken some of that equipment that we had planned to be delivered last year. So this year is a little bit higher and probably.

Two thirds or so of that is directed towards what we referred to as operating Capex. That's the first pillar of our capital allocation strategy, because it's important that we maintain the value of.

Probably the majority of the ramp up in the first half of 'twenty three and then you've got the big jump in federal funds I think getting second half in 'twenty, three and 'twenty four.

Thanks, and good luck, Sir thank you.

The valuable franchise, we have and therefore, it's super important that we keep our equipment and very good working order and certainly as you look forward potentially volatile times from a macro.

Thank you. Our next question will come from Michael Dudas with vertical research. Your line is now open.

Good morning, gentlemen, this is Anne Marie.

Good morning.

Maybe for Susanne ordinary.

Perspective, it's important that your equipment remain in good shape and good utility because that gives you the ability if you needed to to reduce capex and.

You highlighted the caps capital spending outlook. This year, it's going to accelerate second half versus first half.

At least.

Maybe it's a little bit of where that spending the growth and is there growth projects without giving up budgets for next year that could be multi year ahead, given some of the delays from Covid and is there a target on that.

Going forward for a few years.

So so we're comfortable with where we are on capex with respect to to growth certainly we we have invested in a number of sales yards over the years and in certain markets that act as virtual quarries for us and help us distribute aggregates two.

Two to three and a half level.

Debt ratio.

We're given the spending and deposit casually generating.

More capital allocation to shareholders could be thoughtful or is that something maybe you say for the September investor day. Thank.

<unk> customers. We also have a number of greenfield projects, which you know we do a number of those if we have a growth quarter in which there isn't.

Thank you.

Yes sure.

As Mary Andres indicated the Capex outlook for this year remains at $600 million to $650 million, we've talked about this before thats a little high.

<unk>.

A company that we're interested in from an M&A perspective, some of those more recent greenfield sites have been California, Georgia, Texas and South Carolina.

Higher than what it has been in the last couple of years, just because we had various things impacting that namely the pandemic and most recently the supply chain has made it difficult to.

We're comfortable with the level of spending we think it's appropriate for the size of our business now and puts us in good shape going forward.

<unk> taken some of that equipment that we had planned to be delivered last year. So this year is a little bit higher.

With respect to the leverage target it was important for us following the U S concrete acquisition to get ourselves back within the range. So we were we were pleased to get to the top end of that range at two five times and having gotten.

Probably.

Two thirds or so of that is directed towards what we referred to as operating Capex.

The first pillar of our capital allocation strategy, because it's important that we maintain the value of that the valuable franchise, we have and therefore, it's super important that we keep.

Within that range.

I think that we will continue down the path that it's important to stay within the range with what we have in front of US I think we are well able to do that and the capital allocation priorities have been in place for a long time they have.

Our equipment and very good working order.

Certainly as you look forward potentially volatile times from a macro.

Perspective.

It's important that your equipment remain in good shape and good utility because that gives you the ability if you needed to to reduce capex and going forward for a few years and so so we're comfortable with where we are on capex with respect to to growth.

Put us in good shape, our return on investment has increased 40 or 50 basis points over the last two or three years and so we will continue to follow those capital allocation priorities.

Yes.

Thank you Susan.

Certainly.

Sure.

We have invested in a number of sales yards over the years and in certain markets that act as virtual quarries for us and help us distribute aggregates to customers. We also have a number of greenfield projects, which you know we do a number of those if we.

Thank you. Our next question will come from Phil <unk> with Jefferies. Your line is now open.

Hi, Good morning, this is actually calling on for Phil.

I just wanted to touch on aggregates pricing you guys are implementing a midyear price increases you talked about increasing bid work pricing and even one of your large competitors talked about targeted <unk> price increases. So just given these dynamics can you talk about how youre thinking about the magnitude of sequential price improvement in Q3, and Q4 and help us think about the magnitude of carry.

Have a growth quarter in which there isn't and.

Company that we're interested in from an M&A perspective, some of those more recent greenfield sites have been California, Georgia, Texas, and South Carolina. So.

Over pricing that you would expect in 2023.

Yes.

We're comfortable with the level of spending we think it's appropriate for the size of our business now and puts us in good shape going forward with.

<unk> in the quarter as we said it was up nine.

10% of mix adjusted I think it is important to your point to note the cadence of pricing within the quarter.

With respect to the leverage target it was important for us following the U S concrete acquisition to get ourselves back within the range. So we were we were pleased to get to the top end of that range at two five times and having gotten.

April was up 7% May was up 9% June was up 10% and we will continue to see that sequential pricing as we progressed through the second half.

To your point is supported by widespread July price increases you've got bid work continue to go up youre, replacing.

Within that range.

I think that we will continue down the path as it's important to stay within the range with what we have in front of US I think we are well able to do that and the capital allocation priorities have been in place for a long time they have.

We'll work with higher priced bid work.

And so I think if you if you if you if you look at the second half we're probably in the 12 to 13 for the total second half six months, we're probably in the 12% to 13% range.

And as you pointed out we ended the quarter at 10, so that will continue.

Put us in good shape, our return on investment has increased 40 or 50 basis points over the last two or three years and so we will continue to follow those capital allocation priorities.

To step up as we go through the year.

To your point that will also set us up really well for 2023 as most of the work that we bid in the third or fourth quarter will show up next year. So we'll go into it with significantly higher prices as we start the year.

Thank you Susan.

Sure.

Thank you. Our next question will come from Phil <unk> with Jefferies. Your line is now open.

Big advantage to us to kick off 2023 with much higher pricing.

Hi, Good morning, this is actually calling on for Phil.

Great. Thank you for the color and good luck. Thank you.

I just wanted to touch on aggregates pricing you guys are implementing a midyear price increases you talked about increasing bid work pricing and even one of your large competitors talked about targeted for Q price increases. So just given these dynamics can you talk about how youre thinking about the magnitude of sequential price improvement in Q3, and Q4 and help us think about the magnitude of carrier.

Thank you. Our next question will come from Jane Ramirez with D. A Davidson your line is now open.

Good morning, This is John <unk> for Brent Thielman.

Good morning, good good morning.

Okay.

My first question is to what extent estimate outages and allocations impacting the volume in ready mix.

We're pricing that you would expect in 2023.

Yes, so in the quarter as we said it was up nine.

Should that be in the second half.

10% of mix adjusted I think it is important to your point to note.

So I would tell you monitor a little bit here and there some peak times.

Cadence for pricing within the quarter. So April was up 7% May was up 9% June was up 10% and we will continue to see that sequential pricing as we progressed through the second half.

It's it's not just submit it's also trucking for aggregates. It's also rare.

Mix truck operators, so theres, a whole bunch of things that plays into that cement is a piece of it but I'd say it all kind of just blends together so it's.

To your point is supported by widespread July price increases you've got bid work continue to go up youre, replacing old work with higher priced bid work.

It's more peak time.

In the week, but it's so it's a little bit, but there's a lot of other factors. Besides just a minute.

And so I think if you if you if you if you look at the second half we're probably in the 12 to 13 for the total second half six months, we're probably in the 12% to 13% range and as you pointed out.

Yeah.

Great.

Just a quick follow up.

Given the impact to the Mexico operations are there any plans today to try and alternatives, we serve those markets that rely on that product.

We ended the quarter at 10, so that will continue.

To step up as we go through the year.

Not at this point and that's really driven by lack of rail service.

To your point that will also set us up really well for 2023 as most of the work that we bid in the third or fourth quarter. We will ship next year. So we will go into it with significantly higher prices as we start the year. So a big advantage to us to kick off 2023 with much higher pricing.

Great. Thank you so much I appreciate thank you.

Sure.

Thank you at this time I am showing no further questions I'll now turn the program back over to Tom for any additional or closing remarks.

Thank you all for your interest and your time for bulk materials. This morning, we appreciate it very much.

Great. Thank you for the color and good luck. Thank you.

Thank you. Our next question will come from Gene Ramirez with D. A Davidson your line is now open.

Hope that you and your families remain safe.

And healthy and we really look forward to seeing you within the September for our Investor Day in New York. Thank you and have a great day.

Good morning, This is John <unk> for Brent Thielman.

Thanks, everyone.

Good morning, good good morning.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect.

My first question is to what extent estimate outages and allocations impacting the volume in ready mix.

Good afternoon.

[music].

Should that alleviate in the second half.

So I would tell you monitor a little bit here or there so some peak times.

<unk>.

It's not just submit it's also trucking for aggregates. It's also.

Ready mix truck operators, so theres, a whole bunch of things that plays into that submit as a piece of it but I'd say it all kind of just blends together so.

It's more peak time.

In the week.

So it's a little bit but there is a lot of other factors. Besides just a minute.

Great.

Just a quick follow up.

Given the impact of the Mexico operations are there any plans today to try and alternatives, we serve those markets that rely on that product now.

At this point and that's really driven by lack of rail service.

Great. Thank you so much I appreciate thank you.

Yes.

Thank you at this time I am showing no further questions I'll now turn the program back over to Tom for any additional or closing remarks.

Thank you all for your interest and your time for bulk materials. This morning, we appreciate it very much.

Hope that you and your families remain safe.

And healthy and we really look forward to seeing you within the September for our Investor Day in New York. Thank you and have a great day.

Thanks, everyone.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect.

Okay.

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Okay.

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Yeah.

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