Q2 2022 Arcosa Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Arcos. It incorporated second quarter 2022 earnings Conference call. My name is Bobby and I will be your conference call coordinator today. As a reminder, today's call is being recorded now I would like to turn the call.
All over to your host Gil Peck CFO for Arcos <unk>.
MS Peck you may begin.
Good morning, everyone and thank you for joining our second quarter earnings call.
I'm joined today by Antonio Carrillo, President and CEO I'll.
I'll begin with a few remarks, then turn it over.
Bert you Antonio a question and answer session will follow our prepared remarks.
A copy of yesterday's press release and the slide presentation for this morning's call are posted on our Investor Relations website IR.
<unk> got our Coosa dotcom.
A replay of today's call will be available for the next to me.
Instructions for accessing the replay number are included in our press release.
A replay of the webcast will be available for one year on our website under the news and events.
Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP.
Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix.
The slide presentation.
In addition to todays conference call contains forward looking statements as defined by the private Securities Litigation Reform Act of 1995.
Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
Such forward looking statements.
Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release, we filed yesterday and our Form 10-Q.
Due to be filed later today I would now like to turn the call over to Australia.
Thank you Kayla and good morning, everyone and thank you for joining today's call.
Starting on slide four I'll begin with our second quarter highlights.
Of course, our reported excellent second quarter results, reflecting strong infrastructure related fundamentals proactive pricing actions on significant operational efficiencies.
All segments contributed to this quarter's results led by our growth businesses within construction folks that engineered structures.
With each of our segments generating double digit increases in revenue and adjusted EBITDA, We delivered record second quarter adjusted they beat that record adjusted EBITDA margins of 16, 5%.
I am proud of the dedicated team once again.
Executed at a high level successfully navigating the challenging environment, managing inflationary pressures and driving lean manufacturing efficiencies.
We continue to advance our strategic transformation with the acquisition radical a leading provider of recycled aggregates in the southern California market, while optimizing our portfolio with the pending divestiture of our storage tank business.
Robin It's a great addition, and complement to our construction products business and I'll provide more details on this acquisition in a moment.
We also continued to make progress on several large organic projects that should start producing positive or beat that in 'twenty to 'twenty three.
Based on our stronger than expected first half performance and our increasing confidence in the outlook for the second half, we're raising our full year revenue and adjusted it beat that guidance.
Turning to slide eight.
We continue to make progress on our strategic transformation that is focused on reducing the complexity complexity on the cyclicality of our business.
Over the past 18 months, we have completed three key acquisitions and construction products, extending our capabilities and expanding our geographic footprint into high growth markets, including Arizona, Southern California, and Tennessee.
At the same time, we have rationalized our portfolio with the pending divestiture of our storage tank business for 275 million, providing a significant source of capital to reinvest in growth initiatives.
In particular, we continue to execute on several organic growth projects, which include the expansion of our specialty materials plaster plant in Oklahoma and the construction of a concrete bold manufacturing plant in Florida to support our utility structure business.
In addition, we will open two new aggregates Greenfield sites in 2023.
We'll accelerate the growth in that business.
Turning to slide nine in May we have quite a radical a leading independent producer of recycled aggregates, serving the greater Los Angeles Metropolitan area.
Consistent with our disciplined approach to strategic M&A, we acquired this business for 75 million, representing an attractive implied valuation of less than eight times EBITDA.
Ron Ron please how relatively small yet compelling strategic addition to our construction products business complementing our existing footprint and customer base in the California market.
<unk> has a unique business model.
This customer a feat to receive a construction materials for recycling being crushers, those materials and recycled aggregates. These.
This combination of being able to charge most of the receiver and sell recycled aggregates makes ramp call a very profitable business.
We're excited by the opportunities it brings to oracle's.
With a midyear close we estimate approximately 5 million of incremental adjusted EBITDA from Ron calling the second half 'twenty to 'twenty two.
Now I will turn the call over to Gail to review, our second quarter financial performance in more detail.
Thank you Antonio I'll start on slide 11, and touch briefly on our consolidated results second.
Second quarter revenues increased 17% driven by double digit increases in Alt.
Second quarter, adjusted EBITDA improved 26% outpacing the increase in revenue led by our breath.
Overall, adjusted EBITDA margin increased 120 basis points to a record.
Second quarter led by engineered structures and supported by consistent year over year margins in construction and transportation despite inflationary pressures.
Turning to construction products on slide 12 revenues.
Revenues and adjusted segment EBITDA increased approximately 20% primarily due to organic contribution.
With acquisitions contributing roughly five percentage points to revenue.
Demand trends remain favorable across the segment and we maintain stable margins year over year due to proactive pricing.
On a sequential basis.
Margins improved 260 basis.
Recently slower first quarter, we continued to face headwinds from it.
Pressure, particularly particularly higher costs for energy and for some that which is used in our stabilized San products.
Product lines, serving the Houston market.
Although higher energy costs increased cost of sales.
$10 million during the quarter, we believe full year segment margins in 2022 has the potential to meet or exceed last year's level.
And natural aggregates.
The demand feels the elevated price increases across our markets with average organic pricing up low double digits that helped to maintain organic margins year over year total.
Total natural aggregates volumes increased significantly as we benefited from the addition of southwest.
On an organic basis, we generated mid single digit volume growth led by our Texas Gulf Coast region.
While weather was generally better than that in the prior year quarter, we experienced some volume pressures in the market.
Availability, which impacted our stabilized sand operations in Houston, as well as our readiness customer and in Texas.
And Gulf Coast region.
Turning to recycled aggregates volume and pricing increased significantly in the second quarter with a late may clothing ramp has contributed positively to our results.
So recycled aggregates growth during the quarter was largely organic.
Favorable demand and improved weather in the Houston market.
In specialty materials average selling prices were up broadly, but volumes were down leaving revenues about flat year over year in March and slower strong volume and pricing growth in a classroom.
Offset primarily by lower lightweight aggregates.
On market demand for lightweight aggregates remains favorable.
Volumes declined due to scheduled an unplanned maintenance as well as labor availability in certain markets.
Finally, our trench shoring business reported a 29% increase in revenue.
Higher steel prices and increased.
Order activity was healthy during the quarter, providing solid production visibility.
Moving to engineered structures on slide 13 second quarter, adjusted EBITDA increased 30% outpacing revenue growth, resulting in a 270 basis point increase in margin.
Although each business contributed to the better than anticipated quarterly result utility structures with the primary driver.
During the quarter and versus the prior year this business benefited from robust markets.
Strategic pricing measures and increased operating leverage.
Combined revenues in adjusted EBITDA in our traffic and telecom businesses were also up compared to last year.
Results in our traffic central business were helped by a one $6 million gain on the sale of one of our two plants in Florida as we consolidated our footprint serving the region.
In our storage tank business second quarter revenues increased 22%, reflecting strong pricing to counter steel prices like overall volumes were lower year over year due to reduced volumes in our products, serving the Mexico market.
Turning to wind towers, we executed well during the second quarter and significantly lower year over year.
At the end of the quarter, the combined backlog for utility wind related structure with approximately $410 million.
18% year over year led by utility and traffic structures.
Turning to transportation products on slide 14, the segment executed well as year over year volume and profitability improvements in our steel components business.
The declines in our barge system.
Segment, adjusted EBITDA increased 29% with similar margins to last year.
Quarter revenues in our steel business increased 80% driven by significantly higher volumes compared to last years trough level. As a result, adjusted EBITDA margins increased notably unimproved operating leverage our barge business exceeded our expectations, despite challenging market conditions and lower volumes year over year.
<unk> increased 10% due to higher steel prices.
Adjusted EBITDA declined but benefited from better cost absorption at several barges scheduled for the second half into the quarter.
At the end of the second quarter, our backlog stood at a $132 million with approximately 50% scheduled for delivery in 2023.
Moving to slide 15, we ended the quarter with net debt to adjusted EBITDA of one nine times down slightly from the first quarter driven by higher free cash flow.
Reflected in our crude leverage position isn't an additional $30 million of debt revolver borrowings to fund the acquisition of right now.
During the quarter, we generated $60 million of free cash flow compared to a breakeven level in the first quarter.
Second quarter, working capital management contributed $8 million cash flow, representing a significant improvement from the first quarter driven by increased payables and supported by flat inventory level inflationary pressures continue to increase overall working capital investment. So we continue to expect working capital be a source of cash for the full year.
'twenty two.
Capital expenditures were $27 million for 2022, we continue to see full year capex of $120 million to $140 million with the potential to reach the high end of the range based on the growth projects, we have underway and construction and engineering sector.
During the quarter, we repurchased shares totaling $15 million, leaving $26 million available under our current $50 million authorization.
One final note before turning the call back to Antonio as we anticipate the storage tanks that that's your church of close in the second half of their business is now presented as held for sale on our balance sheet. There were no changes made to the P&L cash flow presentation.
In addition, similar with our prior guidance.
And your ability our newly revised guidance include the full year of storage tanks resolve.
As we indicated in yesterday's release.
Midpoint of our revised guidance.
Full year revenues of $250 million and adjusted EBITDA of 53, and a half million dollars related to storage.
Antonio.
Thank you Gail.
These calls we continued to benefit from solid underlying fundamentals within our infrastructure related businesses.
We're successfully managing cyclicality no win barge and rail components.
We remain vigilant in monitoring inflationary pressures proactively implementing price increases where appropriate.
On the strength of our supplier relationships to secure more advantageous pricing on key raw materials, including steel.
Many of our businesses benefit from long term.
Trends driven by both public and private investment in large scale infrastructure projects and we expect the infrastructure Bill will have an uplift in 'twenty to 'twenty three.
We continue to monitor the macroeconomic environment in light of the increasing interest rates and the potential impact on housing demand and consumer confidence.
Please turn to slide 17.
At the midpoint of our revised guidance range, we now forecast to beat the improvement of 27% for our girls business is in 'twenty to 'twenty two.
We expect second half a beta.
Both businesses to exceed our strong first half performance with the addition of Russell.
The outlook for construction projects remains positive benefiting from our expanded portfolio of products favorable aggregates pricing I'm a healthy construction activity in our major markets at the same time, we continue to manage supply chain constraints currently affecting certain customers.
As we look at 2020 three we anticipate that the initial spending athletes from the one trillion infrastructure Bill will provide a tailwind for our construction products business.
Strategically we have achieved significant progress in broadening our geographic presence umbrella for the portfolio through our focused approach to them. When they do they are construction boat segment is fundamentally stronger more resilient more diversified providing a solid foundation for long term growth and margin expansion.
While we continue to evaluate smaller bolt on opportunities that would enhance our operations. We're bolstering our larger in my knees efforts for now as we focus on completing the organic growth projects, we have underway.
We continue to see strong outlook for growth businesses within our engineered structures segment.
The key drivers of our continued robust demand for utility and profit structures on improving demand within the telecom market electric.
Electric utilities continues to direct traffic stores rates hardening resiliency and renewable energy projects.
You're providing good visibility for our utility structures through the remainder of 'twenty. Two in addition, we're seeing favorable volume in our structures business.
Moving to slide 18, although we continue to face challenging environment in our cyclical businesses, we have seen early but promising signs of market recovery.
Most notably our barge business secured a $35 million in new orders in the second quarter, I think $205 million in new orders received in the first quarter.
Our ability to secure more favorable steel pricing was a key factor in getting disorders, which completed our production plans for for this year and provide production visibility into 2020 three.
In addition, we have seen barge order inquiries trend upwards, indicating pent up demand for customers seeking to upgrade their aging fleets.
In wind towers.
The absence of a renewable tax credits continues to weigh on short term demand. However, the long term outlook for wind power generation remains very positive.
We are encouraged are encouraged by the recent gate a mountain Senate legislation that includes tax spreads for renewable energy.
That's it into law. This crazy should provide a significant boost to our wind tower business.
We anticipate our rail components business will continue to perform well over the remainder of 2022 benefiting from improvement in the North American rail market, where deliveries are forecast to raise sharply compared to 'twenty to 'twenty one.
Turning now.
Our updated financial guidance on slide 19.
Four of course overall, including storage tanks are revised 'twenty to 'twenty two our adjusted EBITDA guidance range is now 325 to 345 million up from our prior guidance of 292, 301 5 million.
Using the midpoint from both ranges our revised guidance represents an increase of $37 5 million for my prior guidance.
The increase in our full year EBITDA guidance range reflects our stronger than expected performance in the first half of the year as well as our increased confidence in the second half outlook.
For a cyclical business specifically, we estimate 2022, adjusted EBITDA of $32 five to 35 million up from 'twenty to 'twenty five previously.
Driven by our expectation for a slightly higher production volumes and greater operating efficiencies in both our barge and wind tower businesses.
Second half expected to beat that for the cyclical business has trailed our first half performance, primarily because certain higher margin barges scheduled for delivery later in the year shifted into the first half.
In summary, our guidance for the second half shows the same pattern significant year over year expansion in our growth businesses compensating for weakness in our cyclical business.
In closing our strong financial performance.
Solid outlook for the second half lead us to increase our full year revenue and they beat that guidance.
I am pleased with the strategic progress, we have made expanding and strengthening our rolls business is through acquisitions and organic initiatives, while selectively optimizing our portfolio to enhance our resiliency and reduce cyclicality.
I'd like to open the call for questions.
Yeah.
And at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you.
Once again that is star one to ask a question, we'll pause for a moment to allow questions to queue.
We'll take our first question from Stefanos Crist with CGS Securities.
Good morning, and congrats on the quarter.
Thank you Stefano.
You discussed pausing M&A for organic projects can you talk about you know some of those organic projects and how much capital you can employ in those.
Sure.
Trying to get a little bit in my script, but I'll give you a little more color. So we have a really for large projects going on we have a new plant to expand their plastic capacity.
And if we can play in Oklahoma.
We expect to expand our capacity to start that plant sometime early in 2023.
We have a a we announced in the first quarter conference call, we announced a new a.
Concrete bowl facility in Florida.
That should start late in 2023.
Hum.
We just started and then we have two greenfield facilities.
For our aggregates, a natural aggregates business that should start somewhere also in 'twenty to 'twenty three so those are and that's why the capex. This year is so high because we are investing in those projects.
Yeah.
And the reason for the closing of the larger M&A has to do not only with that we will do probably some bolt ons like ramp go on some others.
But you know if you think about the the environment, we're in where there's expectation for a slower economy et cetera.
Think about it as dry powder to find better opportunities as we see them. So it doesn't mean, we won't do anything I just think the environment will lend itself. So that we can find those opportunities, let's say, a better prices or better opportunity in the near future.
Perfect. Thank you for the color if I just follow up on the acquisition of Aramco can you just talk about it.
And your expectations for recycled aggregates going forward and you know what you see driving growth there.
Absolutely so the phone them into sort of the same natural aggregates the pricing for recycled aggregates is set by by night for library smoke. That's the maximum price you can sell up.
And the demand factors are the same the pricing. The mine. This is exactly the same it has a couple of differences I think one is of course, you'll have reserves. So the return on invested capital is much higher.
Because you don't have a lot of reserves.
Margins I would say are in similar ranges as a natural aggregates.
So the fundamentals in the market.
Very similar.
The difference is how you acquire those how would you acquired your raw material when it seems this casey's rumbled, though and I described a little bit in my script that in the case of California, we charge a fee to receive that material because you cannot bump it isn't in our in our landfills over there and that's one of the beauties of this business.
California is that the regulations are support recycling a lot, but the business is less developed than here in Texas. So I think we're taking our experiences from Texas and applying it to California, where we already had a presence in our lightweight aggregates. So.
I think the future for recycled aggregates, it's it's a growing business and something that I think it's is here to stay I think it's a trend that we cannot stop this they're all all the recycling and it's not a business that it's a business. That's a compliment to natural language is not something that.
You know, it's it's much more a business that metro, but its a its a very healthy business.
Perfect. Thanks, so much and congrats again.
Thanks.
Uh huh.
We'll take our next question from the line of Gary small with root capital.
Oh, hi, Thanks for taking my question and congratulations on the quarter I just wanted to start with engineered structures to margin improvement.
In the quarter or just you know if you can.
And maybe parse out the drivers are.
Around the margin expansion I'm, not asking you to hold kind of 18% to 19% margin moving forward given how much stronger in the quarter was relative to normal, but just kind of wondering maybe how sustainable. This type of margin is in the near to midterm.
Good morning Derik.
Yeah, we were very very pleased with.
Of the engineered structures segment.
Oh.
You know first half margin above 16% for the segment very very strong first half performance as we said in our comments and materials led by utility structures.
Very robust demand and solid execution really across all fronts.
From materials handling and you know, even including safety as we look at our safety records year over year. So 15 is really firing on all fronts.
And you know we benefited from a favorable mix during the quarter. So as we think about the back half you know like I said, a 16% or so margin for the first half and maybe it may be a challenge to meet that level for the second half.
We do have some slots to fill later in the year and often those come with big market orders. So that there could be a potential the third slot fill them with lower lower margins, but but all in all our expectations for this segment is to continue to have a very strong second half. It just it just may be hard to meet that.
Really.
Perfection level that we achieved in the first half.
Derek let me add something which I think is important to remember this segment includes our wind towers and.
If you remember from three years ago, our highest margin business in that segment was wind towers and.
We are achieving these margins, even though our wind tower business had a better performance than we expected.
It seemed to me that they were more efficient, but there's still bouncing bound in the bottom. So so I think you know we're very optimistic about the future of wind, especially these legislative package goes through but that's you know right now wind towers are being carried by the rest of the businesses.
Got it that's that's encouraging.
Wanted to follow up just on the so called coal.
Business, because you mentioned first off.
Some barge shipments that were pulled forward into the first half of the year I was wondering if you could quantify that and just more broadly you know you're starting to see some life here.
At the bottom, but you know what the market is worried about a recession just kind of curious of your high level thoughts on how the cyclical businesses could perform in a recession.
Sure I'll give you.
Talk a little bit about that so that the barge pull forward. It's it's I think it's let's gave you the numbers, but it's it's maybe a couple of million dollars up moved forward.
And I mentioned in my script that the second half that's why we expect the second half to be a little lower in the cyclical businesses, which will be overcompensated by the by the girls business, including the new acquisition. So.
I'll give you a little color on the three cyclical business starting with barge as we've discussed before this is a business driven specifically.
Several drivers.
Of course energy markets are or are one of the biggest ones second all the grain exports believe it or not now the coal market is showing signs of life.
But those are the three big drivers on petrochemicals.
We are seeing a very healthy inquiries for barges, especially for dry cargo hopper barges, which are <unk>.
Mainly grain coal and those kinds of commodities and some petrochemicals.
And so the reason I think the demand continues to be slow is still is a very large component of the cost of a barge.
The barges are made with plate generally in place, even though steel it has come down quite a bit and Colin.
The plate market has not behaved exactly the same way. So there's a wide difference right now in pricing between plate and Colin but every forecast shows that plate is coming down we've seen where we have been able to get some at least some plate that are relatively good prices. That's why we've been able to sell these barges in the first quarter and second quarter.
Everything indicates when the conversations with our customers to the inquiries, we're getting that the demand is there and also that the price of steel should be coming down.
And we don't expect it to come down to levels of 2019, but but it should be very good news for our barge business at least the show they play.
Of still coming down on wind towers.
Normally we have our negotiations with our customers at this time of the year. So even though we didn't have orders in the second quarter. It didn't surprise us is timing issue.
But we the market is very slow and unless we get this production tax credit up real weak, we expect slow slow wind tower market in the near future and even if we get these legislation approved there was already a gap created between the time you start a project I think at the time when towers or the liver. So we will have a period of slow.
In wind towers, we.
Our goal right now is to stay keep our manufacturing flexibility as healthy as possible. So that we can take advantage of the demand when it goes back because we believe it's going to be extremely robust when it comes back and then finally rail components. We're seeing we saw significant growth in the beat them and revenue in the quarter.
We see a very a good ending of the year the rail market to it.
As a forecast of significant growth in 'twenty two for 'twenty to 'twenty three there's a range of growth.
And let's see where that falls, but 2023 seems to be also a good year for rail components. So.
All in all I think if you add them all.
I think positive news, let's wait on the legislative package to see if it gets approved that would be really good news for us.
Right, that's very thorough I appreciate the help and best of luck.
Yeah.
And we'll take our next question from the line of Hulu, You're Romero with Sidoti and company.
Hey, good morning, everyone wanted to stay on the engineered structure side, specifically on the utility structures business.
You talked about robust demand materials handling mix, what surprised you the most in the quarter relative to your expectations three months ago.
Who knew this Antonio you know.
Thank you.
You know things aligned very well in terms of the size of bowls, we were making the D. A I think the the allocation we did through our plants as you know in 2020, one we started our.
<unk> ramped up our plant in Mexico.
Our our our production in Mexico has been going very very well on the efficiencies ramping up probably faster than we expected.
We are we are seeing a more of availability of labor, we have been seeing it for probably a year.
It was very difficult in the U S to get labor for our plants over the last three months at least we've seen positive trends. It doesn't mean, we have a line of people waiting, but we are getting the right. The people that we that we are meeting.
But I think in that business specifically.
Our team is doing just an incredible job know we've brought a tremendous amount of talent to the team and they're just performing like clock work. They are doing a very very good work. So I think it's a combination of all things that not scaled mentioned he chose in everything from safety to quality due to the efficiencies. It's just the implementation of.
Lean lean process over there and it's going very well. So I think the team is just doing a fantastic job.
Okay. That's very helpful and then.
I believe you guys touched on it earlier the inflation reduction act the Senate legislation any way to think about the impact to your wind tower business and our folks in the value chain youre getting cautiously optimistic about that potential.
Potentially being enacted.
Enacted.
Yes, so so if you look at the.
I would say the tone in the market or the I would say almost the environment or the the conversations the.
The mood in the market from a month ago to today is completely different change dramatic.
And.
Okay.
If you look at the legislation or the proposals.
It's different from the previous ones in terms of people, who have a significant impact on our business because it has provisional sort for things to be amazing in the country. We are we are basically making them all in the country. We use everything sourced in the U S. Basically we we think we comply with a lot of the things that are in the package.
So I think it would be a perfect package for us, but there's also the provision was not providing incentives for manufacturing and other things which are in addition to the previous package. So all in all I think it would be a fantastic bookstore business and it would provide a longer term view.
Perspective to the tool to pull their business, which is something that's needed. If you see the history of the wind tower business every time, there's clarity of them there's certainty for investors.
The business behaved very very well of course, the risks of passage.
I don't want to comment on what percentage or what what are the risks or the challenges.
I would say it's Mike.
My hope that it happens.
And knock on wood it sounds very encouraging thanks very much for taking the questions.
Yeah.
Yeah.
We will take our next question is from the line of John Ramirez with D. A Davidson.
Good morning. This is Darren mirrors for Brent Thielman, how are you.
Thank you.
Is there a way for us to understand what the impact of higher diesel and other costs is doing to aggregate margin on the surface. It looks like they are stable, but you have some acquisitions of the score year to year comparison.
Just wondering what kind of pressure you're seeing.
Since the industry peers ive seen pressures.
Yeah.
That's a great question and we did try to provide some color on that and in an aggregate bucket of costs. So if I look at fuel inclusive of diesel natural gas, our specialty materials business as a consumer of natural gas and coal along with some men, which.
Which is used in our and then put in our stabilized San product in Houston, we saw about a $10 million increase year over year and I would say when you look at those costs and that in the pizza.
Drove that the largest driver with diesel by far was the biggest component of that that $10 million.
Sure.
One thing to clarify which is I think it's important.
We have a very very very small downstream business. So we are mainly aggregates on recycled aggregates week, we don't ship our problems. So we that's an important difference with some of our peers, where they have your ready mix and all the things they use a lot more diesel whatever we do we basically use our diesel inside our facilities.
Although there are some things like that so we are a little.
Less exposed because we don't have that delivery system that some of our peers do.
Right.
That was for the categories of energy and the price impact.
Taking volume weighted price due for those inputs.
Two our cost of sales year over year.
Got it and if I could do a fall another question.
What do the inquirers and quotations looked like for wind and.
The shoring business.
And the second half of this year based on the barge sorry, and barge for the second half of this year based on the commentary you provided today.
Sure for wind we are.
We're basically sold out for the well so sold out at the current capacity for 'twenty 'twenty. Two so we have good visibility of where our production for 2022.
As I mentioned in my comments before we do expect slowdown the wind like a slow market.
Simply because the even though even if the package gets approved the time between the time between approval and then projects being Neil.
Neil ready to be rolled out and also delivering power takes time. So we expect 2023 will be a slow wind power a year.
And I think that's a that's a general modal the industry.
In terms of our barge as I mentioned before.
Healthy inquiries for our coal grain on petrochemicals and.
You know even at this steamed current steel prices.
They fall down I think we're going to be able to sell some let's hope lets hope of prices for fossil that the expectations of the customers are aligned with the current market.
And then maybe just on barge.
I think we mentioned it in our prepared remarks, you'll see that raw materials or backlog, that's about $130 million right now.
That is for the back half and then we have the other half is scheduled for 2023. So that gives you a sense of the cadence.
With what we had at that time.
Thank you I appreciate the extra commentary.
I'll hop back in the queue.
And we'll take our next question from the line of Trey Grooms with Stephens.
Good morning, this is normal.
And congrats on the strong results.
Thank you so.
So first I think you'd mentioned in your prepared remarks that aggregates pricing was up low double digits in the quarter pretty.
Pretty impressive.
How should we be thinking about that for the back half.
What would that accelerate.
The expectation for more price increases in the back half maybe seed.
Mid double digit mid teens growth.
Hi, Good morning, this is gil.
Yeah, we did have nice pricing in the quarter low double digit if you look at the first quarter was mid single digit now we have annual guidance out there for prices mid single I think a strong performance in the second quarter gives us confidence we're going to be at the high end of that range for the year.
Yeah.
Yeah, the pace of pricing.
Continues to be an everyday discussion for us, we're obviously seeing a lot of value for our product.
Raising price to combat inflation, where we can oh I'm not sure I'm in a position to say, we can match the low double digits for the back half, but we're certainly.
Yeah.
Watching pricing very very very very carefully.
Gail mentioned in her remarks, our goal for the for the year is too.
To at least meet or exceed our margins from last year. So our.
Our goal is to try to match pricing increases to be able to focus on our on the margins for the business.
Okay.
That's helpful and then.
The volume side I think you said mid single digit volume is that a good run rate for the rest of the year.
We've been obviously theirs.
Headwinds coming from new residential also been hearing of a lot more supply constraint. So maybe if you could just contextualize, how you're thinking about.
As for aggregates.
I stick to kind of our full year guidance. There on volumes were much lower in the first quarter on a year over year basis. So we're seeing organic one to three I think just like pricing, we had the opportunity to see volume for the full year coming closer to that higher end of our organic range.
To your point, we're watching residential very closely.
Alright, perfect. Thanks for taking my questions and good luck on the next quarter. Thank.
Thank you.
And we'll take our next question from Ian Zaffino with Oppenheimer.
Okay.
Hi, Good morning. This is Isaac Sars in onshore in thanks for taking the question.
Regarding the infrastructure Bill I know, we've been talking about it for some time.
But just wondering if is there any indication into the magnitude of the uplift for two.
2023 across the businesses, maybe as applies to construction products or the utility structures business.
With this Antonio so it's hard to give you a number.
Number but.
But I will tell you is if you read the infrastructure Bill I think you can put on are also named almost do everything that's included probably accept water. We don't have a lot of exposure to water infrastructure.
And we are seeing already in some of our businesses.
Projects being deployed especially for example in the barge business.
The maintenance of the docks and some large projects for improving the infrastructure around the Mississippi River.
There's a lot of talks of many many projects out there.
It's hard to it's hard to to see which projects comes from infrastructure build versus versus just a normal project, so but what I. What we said in her comments is we expect in 2023, we will see some tailwind from that it's hard to tell you how much but I think the way I think about it is.
You know many of our businesses are behaving very well and have drivers that are not necessarily tied to GDP growth. They have specific things like barge.
Replacement of wind towers things like that that have specific drivers and the infrastructure Bill just provide some additional boost to that.
On the other hand for some of the businesses that are more tied to the construction housing things like that I think the infrastructure Bill provides some sort of a safety net for them because when you hit some headwinds for housing you will get some tailwind on the infrastructure side, which is a much bigger exposure, we're much more exposed to infrastructure in house.
So I think overall it should help us compensate some of the negatives of a slowdown.
Okay, Great. That's helpful and then briefly on M&A.
Given the acquisition of Gram co. It seems like there's still plenty of strategic or bolt on acquisitions out. There I know you mentioned larger M&A would be off the table for now, but generally what does the M&A landscape look like.
I guess, what kind of synergies if any can be realized on small acquisition like Graham co.
Sure. The U S. I said, you're a larger mandates of the table, it's really we're going to be taking a boston and being very disciplined around it.
We think we can we are going to find good opportunities.
Probably.
Later.
On the bolt ons, we do we do have a pipeline that we have we always have a full pipeline, we analyze and we choose the best ones, we want and synergies are relatively easy to do to generate them in smaller acquisitions would you where you have a presence. So once you have a presence for example, now in Arizona bolt on acquisitions are in.
Integrated relatively fast and Ah theres, many many synergies.
The case of radical for example.
I think recycled aggregates.
Really more developed here in Texas that in California in terms of the disciplined pricing the operations, So I think bringing our.
Capabilities from our Houston, and Dallas market to California is going to be you'll you'll help us on the idea is to increase the margin. So I think the synergies are more operational and our let's say our systems.
Anything else.
But they are very very profitable, but when you do a bolt on and try to generate the synergies really fast.
Okay, that's very helpful. Thanks.
Thanks for taking the questions and congrats on the first half of year.
Thank you.
Yeah.
And that is all the time, we have for questions I'll now turn the call back over to CFO Gail Peck.
Thank you Bonnie.
Thank you everyone for joining us today, we look forward to speaking with you again next quarter.
Okay.
And thank you for joining the Arcos incorporated second quarter 2022 earnings Conference call.
This does conclude the program you may now disconnect have a great day.
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