Q3 2023 Vulcan Materials Co Earnings Call

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Good morning, welcome everyone to the Vulcan materials company third quarter 2023 earnings call.

My name is Angela and I will be your conference call coordinator today.

Please be reminded that today's call is being recorded and will be available for replay later today at the company's website.

All lines have been placed in a listen only mode.

After the Companys prepared remarks, there will be a question and answer session now.

Now I will turn the call over to your host Mr. Mark Warren Vice President of Investor Relations for Vulcan materials.

Mr. Warren you may begin.

Thank you operator, and good morning, everyone with me today are Tom Hill, Chairman and CEO, Mary Andrew's Carlyle's, Senior Vice President and Chief Financial Officer.

Today's call is accompanied by a press release and a supplemental presentation posted to our website Vulcan materials Dot com.

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

During the Q&A, we ask that you limit your participation to one question.

This will allow us to accommodate as many as possible during the time we have available.

And with that I'll turn the call over to Tom.

Thank you Mark and thank all of you for joining our call. This morning.

In September we officially surpassed our prior go.

$9 per ton cash gross profit on a trailing 12 month basis.

And that was before reaching the 230 million tons on a same store basis and despite macro challenges over the past four years that none of us likely anticipated back in the fall of 2019, when we initially set that target.

This accomplishment perfectly demonstrates the durability of our Irish led business.

And I'm really proud of how our teams continue to execute at a high level.

Compounding profitability through the solid execution of our Bolton with selling bulk with operating strategic disciplines is at the core of who we are across our coast to coast footprint today.

Today, our teams are intensely focused on our new target of $11 to $12 of cash gross profit per ton.

Cash gross profit per ton growth is key to increasing our free cash flow and.

And continuing to create value for our shareholders.

In the quarter, we generated $602 million of adjusted EBITDA, which is a 19% improvement over the prior year.

Our aggregates asphalt and concrete product lines, all posted another quarter of year over year gross margin improvement.

In the aggregates segment gross margin expanded by 200 basis points in cash gross profit per ton improved by 18%, 18% despite lower volumes.

Shipments declined 2% in the quarter.

With variations across end uses and geographies.

Residential weakness impacted the majority of our markets while at the same time many of our markets are seeing improving momentum in highway shipments.

Private nonresidential construction activity related to large industrial and manufacturing projects continued to drive healthy volume growth, particularly in Georgia and the Carolinas.

Remember.

Foot print matters and the Arris business ours is unmatched in the south east, where private demand dynamics, but currently strongest and across the country in states, where I J a investments will be the most significant.

Pricing momentum continued across our footprint with all geographies achieving healthy year over year increases.

Average selling prices improved 15% in the quarter and 3% sequentially more than offsetting continued inflationary cost pressures.

In asphalt.

Gross margin improved 660 basis points.

Shipments increased 11% and across most geographies with particular strength in California.

Average selling prices improved 2% and cash unit profitability improved over 50% benefiting from lower liquid asphalt costs and solid manufacturing cost control.

Concrete gross margin improved 120 basis points cash.

Cash unit profitability improved by over 30%, despite lower volume that continued to be impacted by the slowdown in residential construction activity rig.

Remember prior.

Prior year concrete segment Ernie.

Earnings benefited.

From the contribution of the now divested in New York, New Jersey, and Pennsylvania concrete operations.

Through the first nine months of the year, we have executed well and successfully navigated evolving macro dynamics.

Let me comment briefly on what we're currently seeing in each end use.

Residential we're encouraged by the recent growth in single family permits and starts in many geographies.

Over the last three months.

On the other hand, I, providing some support for overall residents demand multifamily starts from now begin to pull back from historically high levels.

Affordability and higher margins more mortgage rates are likely to continue to have some impact on residential activity.

But the underlying fundamentals remain firmly in place Vulcan markets.

In private nonresidential construction.

Trends differ across categories as expected warehouse activity the largest non risk category is soft in <unk>.

But manufacturing activity remains at high levels and is concentrated in Vulcan States, we have booked and are shipping on numerous large manufacturing projects, where we offer customers a differentiated solution with our advantage footprint and logistics capabilities.

On the public side.

Leading indicators remain supportive of continued growth in both highway and infrastructure trailer.

Trailing 12 month highway starts are up 18%.

And 'twenty 'twenty four state budgets are at record levels.

We continue to expect accelerated growth in public construction activity into next year and continued growth for the next several years.

For our customers in any demand environment and to continue to improve profitability and drive value for our shareholders.

Now I'll turn the call over to Mary Andrews for some additional commentary on our third quarter performance.

It upgraded 2023 outlook Andrews.

Thanks, Tom and good morning.

Over the last 12 months, we have improved our adjusted EBITDA margin by 220 basis point posted a 97% free cash flow conversion ratio before our strategic reserves purchases.

<unk> $275 million to shareholders via dividends and repurchases.

Improved our return on invested capital the capital by 180 basis points and reduced our net debt to adjusted EBITDA leverage to one eight times.

Our robust operational performance that Tom highlighted coupled with our sound capital allocation and strong balance sheet position us well for continued success on our strategic objectives are further enhancing our core and expanding our reach.

As part of our ongoing portfolio optimization. We are currently working to finalize an agreement for the disposition of our Texas concrete answer.

As a result during the quarter, we classified these assets as held for sale and recorded a $28 million pre tax charge to adjust the carrying value to fair value.

During the first nine months, we have invested $411 million in maintenance and growth capital.

We continue to expect to spend between 600 and $650 million on maintenance and growth capital and $200 million on strategic reserve purchases for the full year.

Year to date, our S. A G expenses have increased a modest 3% and improved by 30 basis points as a percentage of revenue.

Year over year increases are due mostly to higher incentive accrual, it's congruent with improved earnings our investments in talent and technology to support our business objectives are paying off and operational results.

After another quarter of strong operational execution and financial results. We now expect to achieve between 195 and $2 billion of adjusted EBITDA for the full year 2023.

A greater than 20% improvement versus the prior year at the midpoint we.

We plan on carrying the strong momentum into next year. So I'll now turn the call back over to Tom to provide some initial commentary on 'twenty 'twenty four and a few closing remarks.

Maryann, Bruce while we're still finalizing our operating plans for 2024, let me offer some early commentary on our expectations and I'll start with the two things I'm most confident in regarding 'twenty 'twenty four.

First I.

Aggregates pricing momentum.

For the last seven quarters aggregate prices have exceeded historical norms.

And the pricing environment remains quite positive.

Vulcan with selling is driving our commercial execution.

We expect prices to improve at least high single digits in 'twenty 'twenty four.

Second.

Public demand.

We are confident in growing public demand supported by the recent growth in contract award activity and healthy State D O T budgets for 2024.

We expect public construction activity to accelerate next year.

Now there's more uncertainty regarding the impact of the macro economic environment, when private demand that makes it frankly, a little bit or too early to call.

While current trends in single family residential activity are positive.

Uncertainty remains as to how higher rates and affordability challenges may impact that sector overall and influence whether or not it returns to growth next year.

In private nonresidential demand similar uncertainties exist as to how a higher rate environment could impact the sector overall. Additionally.

Additionally, if warehouse activity continues to pull back from the recent historical high levels. It may further masked the current strength in manufacturing activity and will be a key driver of the decline the degree of decline in nonresidential demand.

We will give you an update in February as to how we see these dynamics unfolding and what that means for aggregate shipments in 2024.

I am confident that our teams are well equipped to deliver unit profitability growth in any macro environment.

And they have a proven track record of doing so over the last 12 months, even in the face of a volatile macro backdrop.

And lower aggregate shipments our Irish cash gross profit per ton has expanded by 18%.

And our adjusted EBITDA has improved 17%.

As we work to finish this year strong and finalize our plans for 'twenty 'twenty four over the next couple of months, we remained focus on keeping our people safe.

Stay committed to a Vulcan way of selling the volt with operating disciplines and continue to deliver value for our shareholders.

And now I'm here, Andrew is and I'll be happy to take your questions.

Yes.

At this time, if you would like to ask a question. Please press star one on your telephone keypad.

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The first question comes from Trey Grooms with Stephens. Please go ahead.

Okay.

Hey, good morning, everyone.

So.

Tom I wanted to kind of follow up on that on the last bit of your commentary here and I. Appreciate some of your high level comments around demand in the end markets, but.

Could you maybe give us enough color, where we could try to triangulate maybe the.

Possibilities if it is possible to call at this point.

If volume could be in positive territory next year as you kind of look at those three or four end markets and understanding.

Understanding theres a lot of uncertainty here, but any additional color you can give us around that would be helpful. Yes, right. Good morning, I'm, probably a little early to call specifics I'd say that footprint is going to matter and I like ours because of the positioning the southeast it wouldn't surprise me if we saw a mod.

This decline next year similar to what we've seen this year, but we get there different way some challenges on the private side single family. We think has hit bottom and there has been proven.

I think we can get to growth when looking at the full year for 2024.

Multifamily as you know will be a headwind.

So and non risk I think we got some it's a mixed bag. We got some challenges on the light side and on warehouses warehouses stocks have gotten a little weaker.

The the headwinds in light warehouses will be partially offset I think by the big industrial projects, which really fit us.

Now we will see you definitely see growth on the private side, both in highways and non highway infrastructure driven by you know state local and the big <unk> J funding.

All that said to your point I think I could make a scenario to get flat volume next year, but at this point.

I'd, probably lead us to a modest decline.

But that all of that.

That being said remember the summer this year, we should still realize really strong earnings growth next year, even if we do have a modest decline in ROIC.

Got it okay. Thanks, Thanks for those thoughts Tom I appreciate it I'll pass it on you bet.

The next question comes from Tyler Brown with Raymond James. Please go ahead, Martin Tyler Hey, Good morning, Hey, Good morning, Hey, I know, there's obviously going to be a lot of chatter about volumes, but I kind of want to come back to this idea.

About unit revenues versus unit cost because it feels like costs are just remaining stubbornly sticky volumes are stubbornly opaque. So despite both of those now you guys have expanded unit margins. So can you just talk about your confidence in the durability of expanding those margins into next year regardless.

Of what the market throws at you and Mary injuries, just any thoughts on what unit cost inflation ex fuel could be.

Yeah, Let me take I think I'll take price first and you're right. We will expand margins I think we will see another year of really strong unit margin growth even in the face of inflation.

It's really it's really because we carry really good pricing momentum into <unk> 'twenty 'twenty four.

That visibility into healthy public demand growth and you couple that with rising energy prices really sets up a good environment for price our conversations with our customers for a January price increases I think you've gone very well if you look at our backlog prices I think they are very healthy and as we look at 'twenty 'twenty four price.

As I would expect at least high single digit, but I can also see a path to low double digit pricing.

So you know at this point, we can't really good.

Excellent pricing momentum into 2044.

And will more than offset inflation and see strong unit margin growth yeah tolerance in terms of cost and evaluating next year I think it's probably helpful to think about our recent trends I'm you know on a trailing 12 month basis, you'll remember them on a year over year basis trailing 12 month total cost cash cost of sale.

<unk> began rising in the first quarter last year and you know we saw it ramp considerably that delta for five quarters before peaking in the first quarter of this year you know it since moderated for the last two quarters modestly and we expect that trend to continue we just think of it.

Gonna be gradual so as we think into next year I think what that means is you know higher than historical average our cost increases in 'twenty 'twenty four you know, possibly even high single digits, but as you started with them you know with the pricing momentum that Tom described we can still deliver.

Attractive gross margin improvement and definitely unit profitability improved and that next year.

Okay excellent. Thank you.

Thank you.

The next question comes from Garik <unk> with loop capital. Please go ahead.

Hey, good morning, Thanks for having me I'm wondering if you can expand on just that last comment Tom with respect to seeing a path to a low double digit pricing.

Next year, you know recognizing you don't have a formal guidance just yet and you do expect pricing to be at least high single digits was that based on the conversations that you guys are having now with your customers and perhaps better than expected discussions does it require a carryover from any major increases you've got this year or does it require any additional.

Midyear pricing next year, just any any any.

Color on that how we get to low double digits in 2024.

Yeah on price first of all I would say that you know it's high single digit low double digit.

The January price increases conversation has gone very well and as you pointed out I think as we've seen for the last few years, we will have mid year price increase discussions where our customers. It's just part of the norm now will well I guess, we'll check back in February we were a little more color on that.

We have a lot clearer view of it but again I think as we look forward it looks pretty good from a from a price perspective.

Oh cost there's Merry-andrew said, it's places just stubborn for us and you know well, we we've looked past had low single digit each year. You know this year up until 2022. This year were low double digit, but it's merry-andrew says starting to fall off but it's I think it's slower than maybe I would.

We expected six months ago.

Got it okay. Thanks for that.

The next question comes from Anthony Pettinari from Citigroup. Please go ahead, Hey, Anthony.

Hey, good morning.

Tom on private nonresidential you talked about some of these these large manufacturing projects in the south east, helping to offset weakness in some of the wider categories and I'm. Just wondering as you look over the past few months and then as we think about 'twenty four have.

Have you seen any kind of incremental slowdown or delays in some of these mega projects or are they coming kind of on time or maybe faster than expected I guess, we've seen some new stories about maybe availability of skilled labor and contractors in some cases impacting individual projects, but I don't know if that was something that was widespread or something.

Thing that Youre seeing.

With your customer set actually I think just the opposite we've seen them come on strong but at this point I think we booked 11 of those very large projects and you know.

Talking to ship those it'll be more of a 'twenty 'twenty four play those 11.

I'm thinking that would make up about 12 million tons as we look out I think we're.

Probably over the next year will be another 678 of these big projects that would constitute another 14 million tonnes. So the.

The large industrials are are going to move the needle for us in 2024.

Geography, really really helps here Theres, Georgia, Tennessee, Alabama.

Mississippi, where a lot of those are right in our footprint, so or geography has really helped us here, but for Oklahoma perspective, they've gone probably a little faster than maybe we had anticipated so but remember we were first coming out of the ground so supply chain, probably impacts us less than less than maybe others does.

Okay. That's very helpful. I'll turn it over thank you.

The next question comes from Stanley Elliott with Stifel. Please go ahead, thanks, Dan Hey, Good morning, everybody. Thank you for the question Hey, Tom could you all talk a little bit more about kind of what youre seeing at the state budget level.

It seems to be a kind of a different part of the story, maybe you know from prior years and just how that can help to the public markets. You know accelerate into next year. Yeah. Good question and actually it's going well as you know we always say it takes two years for the money to go to work and.

If you remember I J a was pass November of 'twenty, one towards the two year, Mark and we're starting to see it come on.

It'll be a gradual growth rate over time.

We will see growth in 'twenty 'twenty four we see it in the awards trailing trailing 12 months is up 70% on awards, but if you look at the to your point. If you look at the state D O T capital budgets for 2024, they're actually really big.

You probably won't see all of that in 'twenty, four but it'll sure sets us up well for example, I think Alabama is up.

29% capital budget, California's up five but 50% over three years in California. So we're starting to see that money flow through Florida will be up 20% Tennessee's budget doubles in Texas is up 21%. So this will be a multiyear play they can't put all that money to.

Walk in 'twenty 'twenty four but it sure sets. So you have some of them will go to work in 'twenty four but sets us up also over 'twenty four 'twenty five.

I think that again all of this is really setting us up well for 'twenty four 'twenty five 'twenty six.

Perfect. Thanks, so much thank you.

The next question comes from Kathryn Thompson with Thompson Research Group. Please go ahead good morning Catherine.

Good morning, Thanks for taking my question today.

No. There's a lot of questions just about the rest of the 23 and the outlook for 2024.

Stepping back and looking at the Big picture there's been.

A bit of activity in the industry from an M&A standpoint, and yes.

Some rumblings out there.

Or slowdown in the economy in two.

'twenty 'twenty, four which can be opportunities for some growth for companies false position that yourself.

As you think about these type of opportunities and just areas of growth for Vulcan.

Do you position yourself.

And what geographies and products.

Top of the list in terms of both initiatives for Vulcan. Thank you yeah, well accuracy is always going to be the top of the list and bolt ons in our in our footprint will give us the best the best returns.

As I look at the M&A market right now from say six or eight months ago, its actually picked up.

I think over the next several months over the next several quarters, we should see some strategic bolt on acquisitions.

And I think there we've got some really good opportunities. There I think will also over the next two years see a marked pickup in greenfield starts as we got some really good opportunities in adjacent markets to add some new facilities that we've been working on for the last five to 10 years. So I think both will pick up.

As always our biggest growth engine is going to be improving cash gross profit per ton in aggregates and I think as we've heard early in this conversation while we've had a great year in 'twenty. Three I think we will also have a really strong year because of pricing momentum in our operating disciplines as we look out to 2024, so I'm.

Very encouraged with growth on all fronts at this point.

Okay, great. Thank you. Thank you.

Yeah.

The next question comes from Jerry Revich with Goldman Sachs. Please go ahead good morning.

Hey, Tom Mary interest good morning.

I'm wondering if you could just talk about.

The opportunity that you folks have from the logistics services and other initiatives outside of price cost.

You've had over the past 10 years, 10% compounded CAGR in.

Profitability, you've had some contribution outside of price cost from those initiatives and can we just.

Ask you for an update on how that's tracking and the opportunity set.

Over the next couple of years, yes, it's quietly gone very well for us and that's been a singular strategic advantage to servicing our customers, particularly on these very large projects they're complex, they're all day.

Quality and delivery makes a big difference because those projects have a timeframe and some of them have you know a damages if youre not on time and if you can't get it there and get the right product there the whole project up.

It it it's worth more than the price of aggregates. So I think that both from a price perspective.

Aspect of any volume perspective quietly has been a strategic advantage for us.

Yes.

The outlook from here Tom.

Any particular acceleration because it seems like it's contributed to the unit profitability CAGR about one to two points generally yeah, I think that I think that it will continue to grow I think we continue to add new features to that including back office features that make it easier for our customers to do business with.

So I think again, we're not done with it and we continue to learn and improve upon it.

Thanks.

<unk>.

Yeah.

The next question comes from Mike Dahl with RBC capital markets. Please go ahead more than my good morning.

Good morning, Thanks for taking my question.

So let's talk about the downstream businesses, maybe give us an update on how youre thinking about them for this year within the guide and then if you do have any initial thoughts.

On kind of.

The volume and price or price cost outlook similar to how you outlined for aggregates for your downstream businesses next year that'd be great. Yeah. So asphalt you know it's been a great years was a really strong quarter volumes were up 11% margins up 50%.

And we're really helped well first of all we're in really good asphalt markets, but we're also obviously helped by a liquid.

Fall in liquid and on top of that really good pricing momentum for hot mix as we look to 2024 I'd say, we're still doing the work I think theres potentially some challenges from liquid pricing going up I think demand will be okay, but I think we'll give you a lot more color in February.

As I look for ready mix as we called out kind of early in the year, where we struggle with unit margins because of inflation and an energy last year, we got past that was prices we predicted.

Volumes in the quarter were a little challenged on a same store basis.

And that's really driven by single family construction, but prices were up 10% unit margins were up over 30%.

Next year I think it's a little early to call because of the.

Volatility in the private side, we just got to see more of that said I think we do have a pretty good pricing momentum going into 'twenty four on concrete.

I think just longer term.

We think about that ready mix businesses, you know kind of low double digit gross margin and I think as Lee neither had well we'll continue improving back towards that on asphalt yeah same thing probably ever of through the cycle high single digits, maybe low double digits.

We were ahead of that right now because of the timing on an on an energy.

But you know the margin recovery in both businesses is exciting and we'd expect that to lab to continue.

Great. Thank you. Thank you.

The next question comes from Timna Tanners with Wolfe Research. Please go ahead, good morning, gentlemen.

Morning, guys. Thanks.

Thanks for all the great detail I guess I know ask yet I figured I'd touch on the Mexican quarry updates because there was some news recently that the government offer you something north of 300 million and that was not accepted so just wondering what the latest there is what you're holding out for I know you've quoted some press reports says closer to over $1 billion.

But just trying to get a sense of maybe any timing there are the latest in that process. Thanks, yeah as far as you got to remember as far as a number is concerned we have a confidentiality agreement and with the with NAFTA Tribunal. So we can't quote numbers theres been some quoted in the Mexican press as far as the business value.

Are you of that business is concerned the simple story is that we're waiting for the results of the NAFTA claim.

The NAFTA Tribunal heard the case in August.

We like our position, we like how that how that hearing went we should get those results sometime next year and then as far as the property rights and our property down there will protect our ownership with it.

We protect our ownership of our land in Mexico.

So damn offering you something before the results of the NAFTA panel was just want to try to get around that and ultimate result, maybe at that seems strange Ah I can't I don't want to predict the dealings of the Mexican government, a kid I can't explain that to you.

Okay understood alright, thanks again, thank you.

The next question comes from Phil <unk> with Jefferies. Please go ahead, I feel like Hey, guys.

Yeah.

Guys called out some cross currents in your non res business, notably between manufacturing and warehouse can you help size up. These two end markets for you from a percentage of your business or tons and any nuances between the average intensity at least two different end markets.

Yeah, well I would tell you that first of all both of them or are really aggregate intensive because they're big and they're flat, but let me just kind of feedback to size up the non risk sector for you I think first of all nonresidential demand has been much better in 'twenty three than we originally anticipated back in February really supported about warehouses.

As in the large manufacturing projects.

As we look to 'twenty four.

I think nonresidential construction to me it'll have some some segments ups in some segments down.

The larger manufacturing projects would you pointed out a really good for aggregates and particularly good for Vulcan as I pointed out. So many of those are right in our footprint and where we've already backlogged almost a dozen of them.

So we will service a little bit of that this year, but most of it will go into 24 warehousing demand.

Really good in 'twenty three is at record levels, but we see some risk stocks are now slowing.

As we had anticipated we thought we could get hit with some of that in 'twenty three but so.

So far so good but I think we you know we probably anticipate some of that for 24.

We will continue to see some challenges to light.

<unk>.

Because of macroeconomics, but you know even with some challenges to non res I think our markets outperform.

Because of the big large industrials and how many are we backlog yes.

And so in terms of composition of shipments, we don't necessarily track shipments to that level, but I think you could think about it in terms of contract award and so in private non res warehouses now make up probably close to 50% of the contract awards in the industrial manufacturing probably 10 to 15.

Percent.

Okay.

And then you guys gave us some good color for 2024 in terms of the day.

Drivers of low single digit volume declines potentially in AG double digit price.

And then part potentially high single digit cost inflation.

My answers I guess, if I had to unpack that I get to low teen cash flow.

Gross profit per ton growth next year and my generally in the strike zone.

Well I think you know.

It's just too early for us to give you two to go there really will come back in February with with more specifics, but.

As we've talked about we definitely see good opportunities for continued unit profitability.

Ability growth next year, Yeah, I think you know I think overall, you're you're assumptions are you know again, we got a.

Some of that could fluctuate by the time, we get February but at this point I don't think your assumptions or way off.

Okay. Thanks, Tom.

Are you.

The next question comes from Keith Hughes with Truest. Please go ahead.

Yes, a question on diesel what what role is that playing into the guidance for the fourth quarter.

Current prices what would that look like just starting next year.

Yes, so in the quarter and the third quarter diesel was really up and down, but but that was a net benefit.

And you know as we move.

Florida its diesel stays at the levels. We saw in September 4th quarter would probably be essentially a push them looking into next year. We think on average you know diesel will be higher year over year, but it's probably too early to call exactly what that will look like as you know for us diesel can be.

Be a temporary challenge, but it's also an opportunity.

And while we're on costs one other question I know a lot of inputs.

So just kind of the world.

Its been continue to stay high we will or are you hearing from your suppliers more potential increases to begin in calendar 'twenty four.

Yes, I think.

Everything is sequentially staying up where in those negotiations I think a little early to call that right now from for the big the big push the big movers. The one we think will be up will be energy, both diesel and electricity will probably be up but as far as the other inputs.

I think that you know, it's it's stable a lot more stubborn than we would've anticipated.

I don't think we're a.

At this point, we call up you know probably high single for next year, but it's really too early to call as we're doing the operating plans and the negotiations with our suppliers at this point.

Okay. Thank you. Thank you.

The next question comes from Michael Dudas with vertical research. Please go ahead.

Good morning, Good morning, Harry Andrews, Mark and Tom.

This is for Tom and Lori Andrews.

When you talked about.

Capital towards the land acquisitions that here this quarter at up to 200 million you talked about 2023.

Maybe you can share like how that progress is and what's the medium longer term timing on some of the greenfield opportunities.

Are there some that are closer rather than others and.

I'm, a big picture basis, how much is that kind of think about relative to investing the capital into those types of projects.

Yeah. So this this year those strategic or their purchases as you would've seen we completed the majority of that and in the third quarter and where we're at and working on our capital planning for next year.

Right now and Tom mentioned earlier, you know, we do have a healthy pipeline of greenfield opportunities that are varying stage.

Stages. So we're working now to define what that spending will look like for 2024, I think if you think of Capex.

Overall as we go into next year, we think that the current level for operating and maintenance capex are appropriate.

For our current business needs and kind of where we are in the cycle of the growth is the part that will move around a little bit more but we wouldn't expect the same level of land.

Purchases next year as this.

This year.

Okay.

So theres capacity growth potential in those states or others as you look out medium to longer term.

As those markets continue to be attractive for you guys.

Yes, I think I think the answer is yes. It's also what you're looking at is where are the growth quarters and how do you get that.

Most effective logistic position to those future go quarters, and what's the timing of of putting the capital in and that's the beauty of a Greenfield is you can time the capital and you can you can you don't have to go into all at once.

So you know if you've got a fast growing market where were you were greenfield as you put a big plan and if you've got if it's out there and you just want to it is slow growth you'd put maybe a portable where smaller plant in but.

Oh in.

The number of these it is getting the most strategic position in those markets at the right time.

Thank you Mary interest Huh.

Okay.

The next question comes from David Macgregor with Longbow Research. Please go ahead.

Good morning.

I guess my question is just on the timing.

And project starts and.

I guess are you seeing much in terms of change in the lag between awards announcements and aggregates shipments is that lag greater than you would have otherwise expect at this point, we've had quite a bit of inflation, obviously in materials and labor and services I'm guessing a number of these projects are running above engineers estimates.

Any projects being held back or delayed as a consequence of inflationary concerns and expectations.

Labor to defer they might get better economics further down the road as far as far as delay as far as people, probably just getting pushed back we saw a little bit of that in a couple of states.

Oh, I'd say nine months ago, we're not seeing that today at all in fact sites are working hard to get projects out.

Inflation has definitely had an impact on project costs, but we're still seeing growth in demand and we will this year and we will see growth in demand next year, despite inflation and as you heard me talk about earlier budgets or up in a number of what I'd say dramatically. So I think they understand that I don't.

I think I worry about projects being pushed back from a from a cost perspective if.

If it is delays to projects, it's really delays to getting into lettings because of capacity of dot's growing into the funding.

But again I think all of that taken and we continue to see gradual growth in highway demand next year in the next year and the next year and the next year.

Have you seen much in the way of revisions to engineers estimates.

Sorry, I misunderstood you.

Are you seeing much in the way of provisions to engineers estimates.

Yes, theyre going up and I think they are adjusting to it appropriately.

But theres a lag there and they're playing a little bit of catch up because of inflation.

Thanks, Tom.

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The next question comes from Michael Feniger with Bank of America. Please go ahead morning. Good morning. Good morning. Thanks for taking my questions. Just you gave some great color on 2024, just to kind of put a finer point on it when we think of the price versus cost spread you guys.

Achieved in Q3, just is that price versus cost spread expanding in 2024 or staying the same given kind of the moving pieces.

You were indicating earlier.

Simple answer is and you have a lag of its a little early to call. We're still figuring that out we're trying to give you color.

Very early on price and cost.

On price, we said you know high single digit may be in the low double digit on cost.

Really around cost because you know, where we're where we're estimating high single digit, but we're doing the work right now, including negotiating with our vendors and doing the operating plans I think what I am encouraged about on the.

Cost perspective is I think we will see improve operating efficiencies because of the automation and the and the.

What we've done in the plants, but also the complete program of the Vulcan way of operating.

But to call that margin growth at this point I think we're all just a little bit early but we'll be back to you in February.

Appreciate that and when we think of next year, how do you kind of outlined potential movement in shipments when we think of the cadence it residential public light versus heavy I'm. Just curious if you could kind of help us understand heightened Acadian kind of plays out for next year is it you start strong or.

Actually kind of get better through the year, you have kind of easier comps potentially in the second half just how we kind of think of these moving pieces how that rolls through next year.

I.

I don't know that I don't know that I have got that down yet I think the puts and takes for next year go like this.

And this is I'm not answer your question as far as sequel.

Sequencing to quarterly but more.

What would be on the high side, and what would drive us lower and I think number one speed of AV and really important speed of highway dollars going to work and go into shipments will be at the forefront.

<unk> would be.

Does the single family come Roaring back or is it maybe a little slower I hope. Please I think we will see growth in single family, It's how fast and how far in the macroeconomics the macro.

The demand the fundamentals for demand the single families. There, but you are fighting obviously cost and inflationary pressures in the price of a house.

Non <unk> it will be.

The speed of the big projects versus what happens with warehouses.

So I think that those are kind of the puts and takes so I'm not sure that they're as far as the sequencing quarter to quarter.

I think we got to do some work on that but those would be the puts and takes of what if we had the high end or low end when we get the guidance in February.

Perfect. Thank you.

Sure.

The next question comes from Rohit, Seth with Seaport Research partners. Please go ahead.

Hey, good morning, Thanks for taking my question.

Good morning.

My question is on the Vulcan way of operating.

You had mentioned on past calls that you had made some investments in the past couple of years and I know you touched on the logistics side, but I think theres some plant level stuff that.

You had in the works and we're looking forward to.

The needle moves in 2024.

Still think those.

We're going to be needle movers next year and if you can help us think about what to expect and if you can quantify any impact that would be great.

It's really hard to quantify particularly at this point as those operating plans are being developed and will be presented to us in December.

From a high level, we've the investment we did and you know the top probably 70% of our operating facilities.

Funds from a volume perspective that investments in place now once you get it in place you've got to get the the.

The.

The tech the technical piece for each plant has to come out we're working on that as we speak I think we'll be through that by the time, we get to the first second quarter of next year or at least mid year next year or so.

We will see some marked improvements I believe in operating efficiencies, putting that to dollars and cents.

[laughter] at works going on right now and we won't be done with it through December So we'll have to get back with you in February.

Alright. Thank you. Thank you.

It appears we have no further questions at this time I will now turn the program back over to our presenters for any additional remarks.

Thank you very much for your interest in Vulcan materials.

We look forward to talking to you throughout the quarter. Please keep yourselves and your families safe and healthy. Thank you.

This does conclude today's program. Thank you for your participation you may disconnect at any time.

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Yes.

Okay.

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Hmm mm.

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