Q2 2023 Vulcan Materials Co Earnings Call
We ask that you limit your participation to one question. This will allow everyone who wishes the opportunity to participate.
Now I will turn the call over to your host Mr. Mark Warren Vice President of Investor Relations for Vulcan materials. Mr. Warren you may begin.
Good morning, and thank you for your interest in Vulcan materials.
With me today are Tom Hill, Chairman, and CEO , and Mary Andrew's, Carlisle, Senior Vice President and Chief Financial Officer.
Today's call is accompanied by a press release and a supplemental presentation posted 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 said in the interest of time, please limit your Q&A participation to one question and.
And with that I'll turn the call over to Tom. Thank you Mark and thank all of you for your interest in Vulcan materials today.
Our results through the first half of 2023 highlight both the attractive fundamentals of our aggregates led business and Balkans commitment to compounding profitability through our solid execution of our booking with filling evoke with operating strategic disciplines.
I am proud of our teams for delivering yet another quarter of improvement in our trailing 12 months aggregates cash gross profit per ton.
<unk> 20.
Over the last 22 quarters.
This exceptional execution, coupled with better than expected demand environment gives us confidence in our ability to deliver between one nine and $2 billion in adjusted EBITDA. This year.
In the quarter, we generated $595 million of adjusted EBITDA, which is a 32% improvement over the prior year.
Gross margin expanded by 480 basis points and importantly, each product line delivered year over year improvement.
In the aggregate segment gross margin improved by 290 basis points.
Cash gross profit per ton improved by 22% with healthy year over year price improvement and moderating year over year cost increases.
Shipments declined a modest 1% in the quarter, but were varied across markets on the one hand, we saw solid growth in our key southeastern markets, where we have the most attractive eggers footprint.
We were pleased with the rebound of sales in California, after a very wet first quarter.
On the other hand weather continued to be a challenge in Texas and remember softer residential activity weighed on most markets.
All geographies benefited from the continued strong underlying price environment.
Our mix adjusted sales price improved 15% in the quarter.
Attractive price growth should continue to drive improvement in our unit profitability as we progress through the back half of this year and into next year.
In asphalt cash gross profit nearly tripled from the prior year to $66 million and cash unit profitability improved over $10 a ton.
Volume growth of 16%.
Price improvement of 9% and lower liquid asphalt costs all contributed to the stable results.
Gross margin improved almost 200 basis points.
Concrete cash unit profitability improved by 24% in the quarter and this is despite lower volumes.
That were impacted by the slowdown in residential construction activity.
Prior year concrete segment benefited from the contribution of the now divested New York, New Jersey, and Pennsylvania concrete operations.
Now starting with residential let me provide a few thoughts about each end market.
To date the impact of the slowdown in residential activity has not been as significant as most of US initially feared.
Recent permits and starts were showing that some areas have reached the bottom.
And the sentiment among homebuilders is much improved.
These trends.
Along with the solid underlying fundamentals for residential demand growth such as low inventories favorable demographic trends and employment growth in our markets suggest that single family demand will bottom in the second half of this year and then start recovering thereafter.
In the private nonresidential construction.
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Starts remain at healthy levels with particular strength in large manufacturing and industrial projects.
Our strong southeastern footprint and logistics innovation efforts are making us a supplier of choice of many of these projects.
As an example, we booked and are currently shipping to projects such as battery plants electric vehicle manufacturing facilities, LNG facilities and large warehouse parks.
While the public trend on the public side.
Demand is unfolding largely as we expected funding from the infrastructure investment and jobs Act is beginning to flow through and the pipeline is building with trailing 12 months, how we source up over 20%.
2024 state budgets are at very healthy levels and internally, our bookings and backlog reflect this increased activity.
The level of this year shipments will depend upon how quickly this increased activity conversed shipments.
We expect accelerating growth into next year and continued growth for the next several years.
Trailing 12 months other infrastructure starts are also over 20% up over 20%. In addition to significant JA funding for water energy ports and shipments strong state and local revenue support growth and not highway.
Investments.
Based on the improved private demand backdrop, our first half shipment and a first half shipments. We now expect aggregates volumes to decline between 1% and 4% in 2023 as compared to our initial expectations of a decline between 2% and 6%.
Of course, regardless of the demand environment.
Our focus is to consistently improve unit profitability and grow earnings that would create value for our shareholders.
We are well positioned to do exactly that this year and deliver approximately 20% year over year improvement in both our cash gross profit per ton and adjusted EBITDA.
And now I will turn the call over to Mary Andrews for some additional commentary on our second quarter and an update for 2023 outlook.
Thanks, Tom and good morning, our strong operational performance through the first six months in this year exhibits the benefits of our strategic focus on enhancing our core we have improved our adjusted EBITDA margin by 350 basis points year to date through a combination of gross margin expansion and disciplined.
Cost management.
This operational execution, and resulting cash generation has allowed us to deploy capital towards each of our long standing priority to improve our return on invested capital and to maintain the strength of our investment grade balance sheet.
Over the last 12 months, we have invested $677 million in maintenance and growth capital, including strategic Greenfield Adair.
Additionally, we have deployed $340 million for acquisition and we've returned $271 million to shareholders via a combination of dividends and share repurchases.
We have improved our return on invested capital by 110 basis point on a trailing 12 month baked that.
And we have reduced our leverage on a net debt to adjusted EBITDA basis to two times at June 32023 from two five times at June 32020.
We are well positioned to execute on our strategic objective of further enhancing our core and also expanding our reach.
Talent and technology are critical to achieve our business objectives, and we continue to invest in that while remaining focused on further leveraging our FHA cost.
Trailing 12 month <unk> expenses as a percentage of revenue has improved by 50 basis points.
Now, let me shift to the updates to our full year guidance as Tom mentioned, we now expect to generate between one nine and $2 billion of adjusted EBITDA in 2023 of 17% to 23% improvement over the prior year.
Our revised outlook results from the update to our aggregates volume expectations that Tom described in addition to the momentum in our asphalt business.
With our non aggregates businesses now in margin recovery mode, we expect to generate approximately $295 million of cash gross profit from our downstream businesses.
With 50% to 55% of the total expected from asphalt and 45% to 50% of the total expected from concrete.
We continue to expect to spend between 600 and $650 million on maintenance and growth capital.
Additionally, we expect to spend approximately $200 million on opportunistic purchases of strategic reserves in California, North Carolina, and Texas three important markets for Vulcan materials.
Because these areas are critical to our long term success, our land portfolio is extensive and a strategic focus for at.
We take a disciplined approach to securing high quality reserves the timing of it often depends on a combination of availability alternative uses of cash and tax efficiency.
We manage the entire lifecycle of our land to create maximum value for the business for our shareholders and for our community putting land to work both before and after mining.
Our excess properties like completely mind, and often reclaimed to their highest and best year can generate significant value such as the 2021 sale of previously mined property in southern California that was reclaimed for commercial and retail development and sold for over $180 million.
Of course, the timing of buying and selling lands can be uneven, but our focus is on the strategic management of our land portfolio.
All other aspects of the full year guidance is reaffirmed or updated and may remain unchanged.
Now I'll turn the call back over to Tom for some closing remarks.
Thank you Mary roofs in closing I want to thank and congratulate our teams on an outstanding performance in the first half of this year and I want to challenge them to remain focused on our Vulcan with selling the volcker operating disciplines. So that we can continue to compound improvements and drive value for our shareholders.
Most importantly, we will remain committed to each other to each other and to keeping each other safe.
And now <unk> and I'll be glad to take your questions.
At this time I would like to ask a question. Please press star one on your Touchtone phone.
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As a reminder, please limit yourself to one question.
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The first question today comes from Trey Grooms with Stephens. Please go ahead.
Hey, Good morning, Mary Andrews, and Martin that's work in the quarter. Thanks try good to talk to you.
Likewise, so I.
Okay.
Wanted to touch on the guide specifically the increase in your in your volume outlook for the year and comment.
Tom I know you've done some things maybe from a high level, but could you maybe go into a little bit more detail on the primary drivers there.
Especially as you kind of look on the on the private side on rather than private non red and is that adjustment that you've made here for the full year.
Based more on what you've seen in the results year to date or.
An improvement in the outlook for the balance of the year. Thank you.
So the last part of that is I'd say both.
We had a strong start and I think things are looking better than what we thought at the beginning of the year volume in the quarter was only down 1%. It was a great recovery in California, where we had we had a big wash out in the first quarter.
Texas was the first quarter was what the second quarter, causing shipments to be down year over year.
Interesting in the second quarter the southeast was also with.
But after those what days, we're seeing a faster recovery in these markets I mean volumes go up soon is it drives volumes pop in so.
That's good news for all of Us.
The private demand has been stronger than we anticipated both single family and multifamily shipments have held up better than I think our original projections. Non res has also been better as we said driven by the heavy side.
So that's why we raised our guidance to negative one to negative four.
<unk> always I think finishes the year about where we thought low single digit.
We got really good backlogs and bookings are growing so we're really build into 2024, but at the end of it the private side with just stronger has been stronger will be stronger than we originally anticipated.
Got it thank you so much.
The next question comes from Garik <unk> with loop capital. Please go ahead.
Oh, hi, Thanks, just.
Wanted to piggyback on <unk> question with respect to the volume.
Outlook.
If you could speak a little bit more just.
One side of the equation recognizing.
Okay.
<unk> strong are you seeing any any change in trend there and then also.
Hi wins are.
As expected this.
Just curious if there's any visibility, but what kind of growth we might anticipate into 2024.
I think non res first as I've said, it's been a lot better we thought.
It's really driven by.
As you would expect warehouses distribution center and now we've got the heavy industrial projects coming on which have been very helpful.
I would say a little bit of risk in some geos.
Geographies in some sectors next year.
As we've seen maybe some slow in stores in Texas and warehouses that said if you look at that segment. The warehouse segment in some of our stronger mortgage a strong mortgage like Georgia, Florida, California, Arizona, We're still you're still seeing growth in source and warehouses and those mortgage so a little bit mixed bag of warehouses.
I would say other really good news in non res as we continue to see the big growth in the heavy industrial projects in our footprint in these projects carry substantial volume needs. We have I think 11 of these big projects that we've already booked most of them were already shipping on and they will carry out through 2020.
On top of that we are currently bidding on a number of projects.
As you know will ship till 'twenty 'twenty four 'twenty five so in this sector geography really does matter.
So better growth in non res and I think we originally expected.
Oh, sorry.
Second question was on highway demand.
It's really a matter of timing we are seeing we're seeing a lot of growth in.
Growth of bidding the funding as you know the federal side of the state side of the loan side is very good.
Highway Lettings continue to build our bookings and our backlogs and highways continues to build and as you know what we're bidding today. What we are looking today will ship in 2004 so.
Again low single digit in this sector in 'twenty three Blitz is setting up very well for 24, and 25% and 46.
The next question comes from Stanley Elliott with Stifel. Please go ahead twice daily.
Good morning. Thank you for the question could you guys talk about the pricing environment, you mentioned pretty broad based momentum through the first half of the year you did leave the pricing guidance unchanged.
Regional mix is it maybe some timing and to what level are you guys thinking about second price increases and maybe even how that carries us into 2024.
Yeah, I would tell you that the pricing in 'twenty three is unfolding as we thought it would prices were up 15% in the quarter, we expect to be up 50% that carried through the full year.
I think I'll step back and remember the secrets and pricing was very differ between 'twenty, two and 'twenty three and 'twenty three as we told you we went out much higher much earlier than we did in 2022.
We've gotten more price in 'twenty three we got more price 23, and we got it earlier. So if you kind of look at a good reference would be slide five in that deck.
And if you looked at 'twenty two.
Full year year over year.
From January one to December 31, we would up above 53.
So from the beginning of this year till the end of June for 'twenty, three we're already up $2 28.
<unk>.
It is compounding is much faster much higher second half price increases while they were mixed will only help that I'd tell you they're more they really are a really good set up for 2024.
And we will continue this momentum.
And the reason why.
Momentum is very good as you know, but demand is looking better than the private side better the public side is growing so all of us in this sector have very good visibility too.
A more positive demand picture and our customers I would tell you continue to be quite confident so I feel good about the momentum. We are right now planning our January January one price increases, which will go out in a few months and I would expect US again to go out hire earlier than we did would point to.
This though and I think it's really important as well.
Our ultimate goal is to take that price to the bottomline.
That's really important that we continue that margin expansion.
We're up low twenties, where in the first quarter low <unk> in the second quarter, we expect that to continue for the next few quarters.
And that.
That is a really important number and we get there in the second half of the year, a little different probably a little as a percentage wise, we got tougher comps on price, but easier comps on costs. So we continue that low <unk> margin expansion.
Great. Thanks, so much best of luck. Thank you.
The next question comes from Mike Dahl with RBC capital markets. Please go ahead.
Mike.
Good morning, Thanks for taking my questions.
So I had a question on the downstream businesses. So it's nice to see in a second.
Operator.
And Youre referencing.
Garrett margin recovery, you took up the guide for this year when I take a step back look at kind of your legacy business.
Bind with the previous U S concrete.
<unk> business.
Seemed like there will be still like quite a bit more work or runway left on.
What quote unquote normal.
Today in downstream so just wanted to get your thoughts on that.
So we need that.
Yes sure.
And buying businesses could.
Could be like $400 million.
The 95, I'm not saying, yes, this year and next.
Is that the right normal to be thinking about or how should we frame that yes. I think we were very encouraged this quarter. We had unit margin growth in all three product lines, we battle that a little bit in asphalt.
For a year or two and then we had.
The catch up we said, we'd catch up this year in concrete and we've got it in the second quarter I will take the protocol I was kind of one at a time really strong quarter for asphalt.
Gross margins were up.
$66 million. They were <unk> 26 last year volumes were up 16% in spite of wet weather in Texas, California, and Arizona asphalt volumes were really strong after a tough tough first quarter because of rain.
Prices were up 9%.
And our liquid costs were down so.
Great great quarter and asphalt. We told you guys. We would continue to grow this margin and we are so really encouraged by that and that will only get better as you see the funding from JA and local and state.
And go to work in the and the public sector.
Ready mix, we had a really tough first quarter slow start to the year.
Really blown up with weather.
Recovered I thought the team there did a really nice job recovering rapidly in the second quarter and it was really driven by unit margin expansion. So a same store basis, our volumes were down actually 11% combination of rain in Texas and the impact of single family demand prices were up 10% and unit.
Margins were up 24%. So we said we'd get back to growth mode. In ready mix. I think we are in I think it will continue that recovery, but I'm really proud of the ready mix teens recovery and the asphalt teams continued performance in those product lines, yes, and Mike just on a sort of.
Longer term horizon, I think you know in the ready mix business, we still think that low double digit gross margins.
We need to be incentives.
We saw great recovery in the second quarter. If you look at where we are in a trailing 12.
We still have runway ahead of us.
The margin expansion that we're looking forward to going forward.
And similarly in the asphalt business sort of onset high single digit.
Low double digit long term gross margins in asphalt.
10% on a trailing 12 month basis, and I think with where we are right now with the pricing environment and the demand environment ahead of US we can still see some expansion there as well that would still.
Single digit lead up double digit over the long term.
Great Alright.
The next question comes from Anthony Pettinari with Citi. Please go ahead.
Hi, good morning.
Good morning.
Hey, just following up on margins.
I think you previously pointed to cash costs high single digits year over year. This year I was just wondering is that still a fair expectation and I think costs were up a little bit more than that in <unk>, you talked about comps getting easier in the second half.
Any kind of further detail in terms of the cadence from <unk> to <unk> and if there is any sort of good guys are bad guys from a cost perspective that we should.
Especially keep in mind for the second half.
Yes.
Yeah.
We're getting better carry costs, but there is still high they were up nine 9% in the quarter and you really feel the impact of the inflationary pressures on parts and services.
As we said comps get easier throughout the year.
Our guidance is the highest single, which would put us in kind of mid <unk> for the balance of the year.
Parts and service cost.
Continue to plague us we also have Israel challenges with parts delivery, which hurts our efficiencies that also is getting better.
We do have a good guy in the quarter of diesel, which was probably an impact of around $25 million and our operating efficiencies continue to improve and will help us offset some of this so.
We would guide you to for.
For the full year to high single digit, which would put us kind of mid <unk> in the back half of the year, but talking over a lot easier numbers again, Anthony I think.
Important as it has been a challenging couple of years with inflationary pressure certainly but.
I guess is the price cost winter and our gross margin on a trailing 12 month basis, returning to expansion in the second quarter.
It was great to finally Scott.
Good runway ahead of us on that and as Tom highlighted earlier.
Still expect low 20% growth this year and our cash gross profit per ton.
Okay. That's very helpful and maybe just on labor are you seeing any change there maybe not in terms of wage rate or dollar but.
The availability of labor.
Maybe helping you or hurting you this year.
It's still tight I think it is.
The labor market has gotten better.
Our perspective, I think we've also gotten better retention.
And how we handle that so so still a challenge, but much improved from where it was over the last couple of years.
Okay. That's very helpful. I'll turn it over thank you.
The next question.
<unk> comes from Jerry Revich with Goldman Sachs. Please go ahead.
Yes, hi, good morning, everyone.
Thank you Tom.
Andrew It's mark.
Can you just talk about how you're thinking about pricing for 2004, it feels like one of the big lessons learned from the industry from 'twenty two is to price for a higher level of inflation.
Inflation is lower just get the benefits of that.
Or are you thinking about the magnitude of those January one price increase that you spoke about versus the historical.
4% to 5% CAGR.
And the industry have delivered.
The backdrop that we've seen over the past 18 months. So as I've said I think we've got a lot of momentum going into this and this.
The.
Private side demand on this being better is helping that everybody has got good visibility too.
The public side.
If you go out there talk to.
The segment through the construction materials and construction segment people are feeling a lot better about the future than maybe we were six months ago.
And you can see more of the demand.
The positive sentiment the momentum on pricing and better visibility to demand all a good setup for price as far as magnitude. We're working on that right now, but I would our strategy last year was to go out.
Higher on January one that worked very well and I think I wouldn't see a stream from that strategy as we look to 2024.
Thanks.
The next question comes from Tyler Brown with Raymond James. Please go ahead.
Hey, good morning.
Good morning.
$8 million.
So I'm a little unclear on the Capex I think capex is expected to be 600 to 150, but does that include the $200 million in land purchases or will that be on top of it maybe I'm missing it but those maybe flow on the acquisition line and the cash flow statement I'm just not sure.
Tom any color on the M&A pipeline.
Yes, so Tyler just to clarify the 200 million.
We are planning to spend on strategic reserve and.
In addition to the $600 million to $650 million.
It will show up as PP&E evident in Atlanta, but I think youre thinking about it right in terms of that being more of an opportunistic strategic acquisition type of opportunity.
I'll, let Tom had M&A, yes, I would simply describe.
The acquisition with an improving picture.
And clarity to the private demand and it probably looks a little better than maybe we thought I would expect that to improve the M&A pipeline.
We've got we always have a couple we're working on.
For strategic bolt ons, but I would think this this this will help the pipeline.
The next question comes from Timna Tanners with Wolfe Research. Please go ahead.
Yeah, Hey, good morning.
Wanted to follow up on that strategic strategic catchy says so talking about property purchases is this because of opportunistic.
Availability or is this you know I need to we saw reserves was that just some color. There and then similarly, just wondering if you could comment on that for share buyback since the pandemic and what that might illustrate for your future plans.
We'll split that question I'll take the land piece Youre exactly right. It is opportunistic.
A lot of times. These are when they come up much like a bolt on acquisition and that's both for <unk>.
Buying reserves, but also.
Both buying reserves and and selling land is going to be lumpy by nature.
So I think it was in 'twenty, one, where we sold $180 million worth of land. So.
It is it is it comes when it comes it's hard to plan. Sometimes you can most of the time you cant I would tell you are very very pleased with Reuters, we got they were primarily in California, Texas and North Carolina.
So glad to get them good use of capital and.
And we're pleased with the team's effort event, yes and in terms of.
Share repurchases, returning excess cash to shareholders through repurchases has been part of our long standing capital allocation priorities.
I believe appropriately following reinvesting in the business.
Through operating and maintenance Capex after growing the business and returning cash to the dividend so with attractive cash generation.
Finally, our M&A in the first half of the year, we repurchased $50 million of shares in the second quarter and really our capital allocation decisions in the back half of the year I will just follow our same disciplined approach.
Okay, great. Thanks, very much thank you.
The next question is from Phil <unk> with Jefferies. Please go ahead.
Hey, good morning, Hey, guys congrats on the strong quarter.
Yes.
My question is your guidance for average volumes, you're calling for it to be down call it 1% to 4% and you're only down modestly and <unk> and with housing bottoming and you're calling out pretty good momentum on the infrastructure in heavy commercial side with frankly easier comps in the back half.
Feels kind of conservative.
One offs that we should be mindful of and when we look out to 2020 for Tom you were talking about how youre seeing momentum building on infrastructure and heavy on the industrial side any color how to think about the growth profile of those two end markets. When we kind of look at 2024. Thank you.
Yes, I think if you look at the kind of the upside downside to our guidance the low side. The minus four would tell you that single family shipments without falloff worse than we've seen.
I think we bottom.
We're seeing kind of the bottom and single family.
And I think that it gets better for 2020, hopefully we get there for $2000 for the high side.
The modest one we'd have to see a little more volume how we how we what we have for some of our projects will have to start below a little faster it could happen and Thats why we got the range, where we do I do think that.
The heavy piece.
It's going to help us in the second half I think it's going to be more help in 2024.
On the heavy industrial.
Is there a way to think about how that growth profile is going to look next year I mean, low single digits for air France is that like a mid to high single digit growth story next year.
If all other infrastructure.
Just infrastructure and generate I mean, Tom you talked about low single digit growth. This year right. So when we look out to 2024 with all the Lettings and then bidding actively going through is that a good mid single digit grower high single digit growth.
It's too early to call.
We just got a C Moore.
Do it addressed that we haven't talked about the non highway infrastructure is also looking very good alike like highways the local state and federal funding is extremely healthy and that's J in it.
Starts in the other non highway infrastructure were up like.
Six months was up 18% and trailing frees up 'twenty. So.
Good for 'twenty, three probably getting low single digit, but much better for 'twenty four.
Okay. Thank you.
Thank you.
The next question comes from Kathryn Thompson with Thompson Research Group. Please go ahead.
Hey, Good morning. This is actually Brian Biros on for Catherine. Thank you for taking my question I guess just on the.
All business can you just touch a little bit more on that performance there the volume risk specifically with kind of what projects are you seeing come to market in that business.
It's more of a prior work, where maybe it's more new work coming down the pipeline. Thank you.
As far as the paving is both youre seeing both new and and recovery.
And overlays.
I was pleased with the volume growth because we had a lot of rain in Texas, which is the big asphalt flip side of that is California, and Arizona, probably had some catch up from the first quarter, which we just didn't do much at all.
I am very pleased with the pricing performance in the.
Unit margin performance so.
I think.
Really good start to the year in asphalt where back in unit margin growth mode.
And the.
The growth in funding for highways is only going to help this product line.
Thank you.
Thank you.
Yes.
The next question comes from Adam Thalheimer with Thompson Davis. Please go ahead.
Hey, good morning, guys great quarter.
Thank you Thomas would you characterize the.
Midyear price increases as mix why was that I think there was just a month or two ago it might be better.
And does that bode well for January increases next year.
Yes, remember as I've said.
Sequencing from 'twenty, two 'twenty three was very different.
We intentionally went out much higher much earlier.
2023, so kind of as expected the mid year was successful in some markets. It was successful in some market segments.
It will have it'll have a little bit of an impact on 'twenty three but it's going to have a much larger impact on 'twenty four.
Simply a matter of timing from timing from project pricing the shipment and also maybe some backlogs.
It does impact 2024, I don't think it slows any momentum for January one price increases.
Again that strategy of higher early works really good in 'twenty, three and we will carry that strategy towards 24.
But so I would tell you is as expected.
Yes. Thank you. Thank you.
The next question is from Keith Hughes with Truest. Please go ahead.
Thank you Becky.
How're you doing.
As an update on the situation in Mexico core there.
Through our process and sort of any sort of movement at all.
So.
Short answer is the same no news.
We've got the naphtha claim we will be able to have the final hearing all of that on that on the NAFTA Tribunal this year.
We should.
As a result of that in 2024, we feel very good about our position we feel very good about our case, we feel very good about the evidence, but we won't have.
We finished the legal proceedings this year and have a final ruling in 'twenty four.
And what would be the best case scenario.
Successful.
I think that we get.
A large check.
And because of the shutdown of our business.
The magnitude of that but we can't disclose because we have a confidentiality agreement with the <unk>.
Okay. Thank you. Thank you.
The next question comes from David Macgregor with Longbow Research. Please go ahead.
Yes, good morning, everyone nice quarter.
I wanted to.
Maybe just ask a little bit on the guidance and you talked about this.
This quarter being in California, Texas in the second quarter Whats your sort of best estimate of the carryforward tons into the second half due to the disruptive first half weather.
I think I think the I think you saw that in California, Arizona during the quarter, you probably will have some of that.
The third quarter in Texas as I said earlier.
What I'm impressed with as well.
A lot speedy recovery after wet days in our markets, which tells me that.
The firepower of our contractors is getting much better and I am sure. It is because of the work that they've got coming out from all the public funding.
So I think maybe a little bit in Texas, everybody else I think steel CLO carryforward, because <unk> been able to catch up pretty quick.
Okay. Thanks very much thank.
Thank you.
The next question.
Question comes from Michael Dudas with vertical research. Please go ahead.
Good morning, Andrew It's Mark.
Good morning morning.
Tom.
<unk> provided some very helpful observations on expectations for second half of the end of 'twenty, four, but if youre going to isolate either better than expected pricing better than expected cost of better than expected volume as we exit 'twenty three 'twenty four what would you what would you point towards or maybe all the above.
You're saying as we go from 'twenty three 'twenty four.
Yes, as we as we can.
Through the second half of the year as results come through your expectations would have been getting some year end, let's say the high end of your EBITDA range or would it be better pricing better cost utilization.
Execution or better volumes.
I would tell you we probably have the best shot at it how we were coming on a little faster than maybe we expected.
As.
The flip side of that is obviously that if you see a bigger slowdown.
Some are more slowdown on roofs, which at this point, we don't think it's going to happen.
We'll take them one at a time on pricing.
I think I think we've got it about right and we got it because we've got a little bit in the mid year, but it's going to flow through in 'twenty for the cost piece.
Think again.
We've got to be mid single digits at end of the year and I think that between efficiencies and comps we get there I guess at the end of the day, if I had to pick one I would probably pick the volume piece of that.
Excellent. Thank you Tom Thank you.
The next question comes from Brent Thielman with D. A Davidson. Please go ahead.
Hey, great. Thanks.
Tom Nice to see the continued improvement in aggregates gross margin. This quarter I guess my question was more to the quarter and thinking about this going forward with.
With the east under some pressure due to weather and some of those variables would that actually a net negative to your reported profitability in that segment.
So.
You said you still couldn't understand which is what you pointed out as a possible negative.
The east.
We do have very attractive margins in our <unk>.
I think while there was.
Some some wet weather.
Sort of.
Strength in the private non res in these large industrial projects in those areas.
Our volumes were quite healthy in that market I'll also tell you that think that through.
Impressed we had wet weather these.
Covering time, when those thunderstorms will blow through the next couple of days was impressive.
It appears we have no further questions at this time I will now turn the program back over to Tom for any additional closing remarks.
Thank you all for your interest and your time and your.
Support of Vulcan materials company, we look forward to talking to you throughout the quarter, we hope that you and your families stay healthy and safe. Thank you.
Okay.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Yes.
It's very much thank.
Thank you.
The next question comes from Michael Dudas with vertical research. Please go ahead.
Good morning, Hey, Andrew It's Mark Tom Good morning morning.
Tom.
You provided some very helpful observations on the expectations for second half of the end of 'twenty, four, but if youre going to isolate either better than expected pricing better than expected cost of better than expected volume as we maybe exit 'twenty three 'twenty four what would you what would you point towards or maybe all the above.
You're saying as we go from 'twenty three 'twenty four.
Yes, as we as we get through the second half of the year as results come through your expectation would have been getting to year end, let's say the high end of your EBITDA range or would it be better pricing better cost utilization and.
Execution or better volumes.
I would tell you we probably have the best shot at it how we were coming on a little faster than maybe we expected.
<unk>.
As.
The flip side of that is obviously that if you see a bigger slowdown.
Some are more slow down on <unk>, which at this point, we don't think it's going to happen.
We'll take them one at a time.
Pricing.
I think I think we've got it about right and we got it because we've got a little bit.
Mid year, but it's going to flow through in 'twenty for the cost piece I think again.
We've got to be mid single digits at end of the year and I think that between efficiencies and comps we get there I guess at the end of the day, if I had to pick one I would probably pick the volume piece of that.
Excellent. Thank you Tom Thank you.
The next question.
Question comes from Brent Thielman with D. A Davidson. Please go ahead.
Hey, great. Thanks.
Hey, Tom Nice to see the continued improvement in aggregates gross margin. This quarter I guess my question is more into the quarter and thinking about this going forward.
With the east under some pressure due to weather and some of those variables would that actually a net negative to your reported profitability in that segment.
So.
So it couldn't understand what you are what you pointed out as a possible negative.
The east.
It appears we have no further questions at this time I will now turn the program back over to Tom for any additional closing remarks.
Well. Thank you all for your interest and your time and your support of Vulcan materials Company. We look forward to talking to you throughout the quarter, we hope that you and your families stay healthy and safe. Thank you.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Yes.
Okay.
With.
Google.
Google.