Q4 2023 Vulcan Materials Co Earnings Call

Operator: To all sites on hold, we do appreciate your patience, and we ask that you please continue to stand by. BF-WATCH TV 2021, Good morning and welcome to everyone to the Vulcan Materials Company fourth quarter 2023 earnings call. My name is Carrie, 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 on the company's website. All lines have been placed in a listen-only mode.

To all sites on hold we do appreciate your patience and we ask that you. Please continue to standby.

[music].

Operator: After the company's prepared remarks, there will be a question and answer section. Now, I would like to turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin. www.globalonenessproject.org. Mr. Warren, you may begin your conference now. Please unmute your conference line, Mr. Warren. We are not able to hear you.

Speaker Change: Good morning, and welcome to everyone to develop Vulcan materials company fourth quarter 2023 earnings call.

Mark D. Warren: Thank you, operator. Let me start over, operator, and we'll get started on the earnings call here. Thank you, operator. Good morning, everyone.

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

Mark D. Warren: With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, VulcanMaterials.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 Exchange.

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

Speaker Change: All lines have been placed in a listen only mode.

Speaker Change: After the company's prepared remarks, there will be a question and answer session.

Now I would like to turn the call over to your host Mr. Mark Warren Vice President of Investor Relations for Vulcan materials. Mr. Warren you may begin.

Mark D. Warren: 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 your interest in Vulcan Materials. Our teams delivered an outstanding year in 2023 and achieved two significant milestones. We generated over $2 billion in adjusted EBITDA, and we surpassed $9 of average cash gross profit per. We remain focused on continued growth, consistent execution, and value creation for our show. Our fourth quarter results again demonstrated the benefits of that focus and our Irish-led business.

Speaker Change: Okay.

Speaker Change: Yeah.

Mr. US warn you may begin your conference now.

Please mute your conference Mr. Worn a we are not able to hear you.

Mark D. Warren: Thank you operator, let me start over operator, well.

Speaker Change: Get started on the earnings call here. Thank you operator, good morning, everyone.

Speaker Change: With me today are Tom Hill, Chairman and CEO and me.

Erie Andrew's Carlyle's, senior Vice President and Chief Financial Officer.

Speaker Change: Today's call is accompanied by a press release and a supplemental presentation.

Speaker Change: To our website Vulcan materials dot com.

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

Mark D. Warren: We delivered a 27% year-over-year improvement in adjusted EBITDA, margin expansion in each of our three primary products, and another 90 basis points of sequential improvement in our trillion 12 months return on invested capital. In the agri segment, continued pricing momentum, coupled with moderating inflationary costs, resulted in $9.92 of agri-cash gross property. A 21% improvement over the prior year, Vulcan Way of Selling and Vulcan Way of Operating continue to contribute to our commercial and operational resolve. The fourth quarter performance marked 19 of 20 quarters of sequential improvement over the past five years.

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

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

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

Speaker Change: This will allow us to accommodate as many as possible during our time we have available.

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

Tom Hill: Thank you Mark and thank all of you for your interest in Vulcan materials company.

Tom Hill: Our teams delivered an outstanding year in 2023 and achieved two significant milestones.

Tom Hill: We generated over $2 billion in adjusted EBITDA and.

Tom Hill: 12-Month Aggregate Unit Profitability. A clear example of our consistent execution and the durability of a business. Our shipments in the fourth quarter increased 2% compared to a week prior year quarter that was impacted by abnormally wet and cold weather. Aggard's freight adjusted price improved 14% during the quarter, pushing the year-to-date average selling price to $19 per ton, a $2.60 per ton increase over the prior year. Rate adjusted unit cash cost of sales increased 7% compared to the prior year quarter.

Tom Hill: And we surpassed $9 of aggregates cash gross profit per ton.

We remain focused on continued growth.

Tom Hill: Consistent execution.

Tom Hill: Value creation for our shareholders.

Tom Hill: Our fourth quarter results again demonstrated the benefits of that focus and our aggregates led business.

Tom Hill: We delivered a 27% year over year improvement in adjusted EBITDA.

Tom Hill: Margin expansion in each of our three primary product lines and another 90 basis points of sequential improvement in our trailing 12 months return on invested capital.

Tom Hill: This marks a third consecutive quarter of trading 12-month deceleration in year-over-year costs. As we move into 2024, we are determined to continue controlling what we can. Most notably, the expansion of our average unit profitability. Pricing momentum remains healthy, and we expect freight-adjusted aggregate price to grow from 10 to 12% for the full year. Inflationary cost pressures continue to moderate, and we expect freight-adjusted unit cash costs to increase mid-single digit in 2024, resulting in an attractive mid-teens improvement in cash growth per ton. On the demand side, we continue to expect a moderate decline in 2024, with aggregate shipments forecasted to land within a range of flat to down 4% for the full year. Much like 2023, we see varying dynamics across different end uses, so let me provide some commentary on each end use. I'll start with residential, which has quickly entered recovery mode. Single-family housing permit

Tom Hill: In the Agri segment continued pricing momentum coupled with moderating inflationary cost resulted in $9.90 of every cash gross profit per ton a.

Tom Hill: A 21% improvement.

The prior year.

Tom Hill: Our Vulcan way of selling invoke with operating disciplines continue to contribute to our commercial and operational results.

Tom Hill: The fourth quarter performance March 19 of 20 quarters over the past five years of sequential improvement in trailing 12 month aggregate unit profitability.

Tom Hill: A clear example of our consistent execution and the durability of our business.

Tom Hill: Shipments in the fourth quarter increased 2% compared to a weak prior year quarter that was impacted by abnormally wet and cold weather.

Tom Hill: Average freight adjusted price improved 14% in the quarter pushing the year to date average selling price of $19 per tonne, a $2 six separate ton increase over prior year.

Tom Hill: Great adjusted.

Tom Hill: Unit cash cost of sales increased 7% compared to the prior year quarter.

Tom Hill: This marked the third consecutive quarter of trailing 12 month deceleration in year over year cost.

Tom Hill: The stock started to return to growth in the second half of last year, and momentum is accelerating across our path. We expect the strength in single-family construction activity to be offset by weaker multi-family starts as they pull back from historically high levels. Overall, the underlying fundamentals for residential construction activity remain firmly in place.

Tom Hill: As we move into 2024.

Tom Hill: We are determined to continue controlling what we can control most notably the expansion of our aggregates unit profitability.

Tom Hill: Price momentum remains healthy and we expect freight adjusted average price to grow from 10% to 12% for the full year.

Tom Hill: Vulcan markets have a low housing inventory level. Favreau Demographics Driving the Need for Additional Housing, We continue to see distinct trends across various categories of private non-residential construction, which we anticipate will result in a year-over-year decline in shipments to this end market. Moderating warehouse starts from recent historical high levels is expected to be the biggest headwind to private non-residential construction, while commercial activities are expected to remain weak as uncertainty in the macroeconomy and higher interest rates persist. Manufacturing activity, however, remains a catalyst for non-residential shipments and is concentrated in Vulcan State.

Tom Hill: Inflationary cost pressures continue to moderate and we expect freight adjusted unit cash costs to increase mid single digits in 2024, resulting in an attractive mid teens improvement in cash gross profit per ton.

Tom Hill: Oh, the demand side, we continue to expect a moderate decline in 2024 with aggregate shipments.

Tom Hill: Our forecast land within a range of flat to down 4% for the full year.

Tom Hill: Much like 2023, we see varying dynamics across different end uses so let me provide some commentary on each end use.

Tom Hill: I'll start with residential which has quickly entered recovery single family housing permits.

Tom Hill: We continue to ship on numerous large manufacturing projects, for which we offer customers a differentiated solution with our advanced footprint and logistics capabilities, on the public side. Demand backdrop is developing as expected. We began seeing modest growth in the second half of 23 and project accelerating demand in 2024. Treading 12-month highway starts have now surpassed $100 billion.

Tom Hill: And starts returned to growth in the second half of last year and momentum is accelerating across our footprint.

Tom Hill: We expect the strength in single family construction activity to be offset by weaker multifamily starts as they pull back from historically high levels.

Tom Hill: Overall, the underlying fundamentals for residential construction activity remained firmly in place.

Tom Hill: 2024 state budgets are at record levels, and strong upcoming leadings are anticipated in many Vulcan states. We continue to project growth in both highways and infrastructure activities for the next several years, coupling our anticipated unit profitability growth. With the demand backdrop I just described, at the midpoint of our guidance, we project delivering a fourth consecutive year of double-digit growth in adjusted demand. I'm very proud of our teams, what they have achieved and will achieve. Now, I'll turn the call over to Mary Andrews for some additional commentary on our 2023 performance and some more details on our 2024 outlook. Mary Andrews.

Tom Hill: Vulcan mortgage have low housing inventory levels and favorable demographics driving the need for additional housing.

Tom Hill: We continue to see distinct trends across various categories of private nonresidential construction, which we anticipate will result in a year over year decline in shipments to this end market.

Moderating warehouse starts from recent historical high levels, we expect to be the biggest headwind to private nonresidential construction.

Tom Hill: Light commercial activity is expected to remain weak as uncertainty in the macro economy and higher interest rates persist.

Tom Hill: Manufacturing activity, however remains a catalyst for nonresidential shipments and is concentrated in Vulcan states.

Tom Hill: We continue to ship on numerous large manufacturing projects, which we offer customers a differentiated solution with our advantage footprint.

Mary Andrews Carlisle: Thanks, Tom, and good morning. Our strong operational and strategic execution in 2023 sets us up well to continue our long track record of growth through disciplined capital allocation and consistent execution. Over the last 10 years, we have increased our revenues at an annual growth rate of 11%, grown our adjusted EBITDA at an annual growth rate of 16%, strengthened our free cash flow generation at an annual growth rate of 23%, and improved our return on invested capital by 1,000 basis points. In 2023, we generated $1.5 billion of operating cash flow and received proceeds of over $700 million for the sales of non-core businesses and real estate.

Tom Hill: These capabilities.

Tom Hill: Well the public side.

Tom Hill: The demand backdrop, it's developing as expected we began seeing modest growth in the second half of 'twenty, three and project accelerating demand into 2024.

Tom Hill: Trailing 12 month highway starts have now surpassed $100 billion.

Tom Hill: 2024 state budgets are at record levels and strong upcoming Lettings are anticipated in many Vulcan states.

Tom Hill: We continue to pursue growth in both highways and infrastructure activities for the next several years.

Tom Hill: Coupling our anticipated unit profitability growth with the demand backdrop I just described at midpoint of our guidance, we project delivering a fourth consecutive year of double digit growth in adjusted EBITDA.

Mary Andrews Carlisle: Having followed our long-standing capital allocation priorities of reinvesting in our franchise, investing in attractive growth opportunities, and returning cash to shareholders through both dividends and share repurchases, we ended the year with over $900 million of cash on hand and net debt to adjusted EBITDA leverage of 1.5 times. Our balance sheet is a source of strength and provides us with considerable financial flexibility to continue to grow. We will remain disciplined in optimizing our overall portfolio of assets, as evidenced by the fourth quarter disposition of our Texas concrete business and sale of excess real estate in northern Virginia.

Tom Hill: I'm very proud of our teams what they have and will achieve.

Myriad Rous: Now I'll turn the call over to myriad rous for some additional commentary on our 2023 performance and some more details around our 2024 outlook Barry Andrews.

Barry Andrews: Thanks, Tom and good morning, all.

Barry Andrews: Strong operational and strategic execution in 2023 set us up well to continue our long track record of growth through disciplined affleck capital allocation and consistent <unk>.

Barry Andrews: Execution.

Barry Andrews: Over the last 10 years, we increased our revenues at an annual growth rate of 11% grew our adjusted EBITDA at an annual growth rate of 16%.

Barry Andrews: <unk>, our free cash flow generation at an annual growth rate of 23% and improved our return on invested capital by 1000 basis points.

Mary Andrews Carlisle: Our return on invested capital improved by 280 basis points over the last 12 months, and we are focused on continued improvement. We also remain focused on continuing to drive value for the business through disciplined investments and SAG expenses to both support our organic growth initiatives and innovation through technology. SAG expenses as a percentage of revenue remained at 7% in 2023.

Barry Andrews: During 2023, we generated $1 $5 billion of operating cash flow and received proceeds of over $700 million for the sales of noncore businesses and real estate.

Barry Andrews: Having followed our long standing capital allocation priorities are reinvesting in our franchise investing in attractive growth opportunities and returning cash to shareholders through both dividends and share repurchases. We ended the year with over $900 million of cash on hand, and net debt to adjusted EBITDA leverage.

Mary Andrews Carlisle: Overall, we expanded our adjusted EBITDA margin by 360 basis points and project further expansion in 2024. Let me provide a few additional details around the 2024 guidance to supplement the demand, pricing, and aggregate unit profitability outlook Tom highlighted earlier. We expect our downstream businesses to contribute approximately $275 million in cash gross profit, reflective of asphalt earnings consistent with 2023 contributing approximately 70% of the total, and concrete earnings adjusted for the divestiture of our Texas concrete asset contributing approximately 30% of the total. We expect SAG expenses of between 550 and 560 million dollars, a modest low single-digit increase year over year.

Barry Andrews: <unk> of one five times.

Barry Andrews: Our balance sheet as a source of strength and provides us considerable financial flexibility to continue to grab.

Barry Andrews: We will remain disciplined in optimizing our overall portfolio of assets.

Barry Andrews: Evidenced by the fourth quarter disposition of our Texas concrete business and sale of excess real estate in Northern Virginia.

Barry Andrews: Our return on invested capital improved by 280 basis points over the last 12 months.

And we are focused on continued improvement.

Barry Andrews: We also remain focused on continuing to drive value for the business through disciplined investments in S. E. G expenses to best support our organic growth initiatives and innovation through technology.

Mary Andrews Carlisle: We project depreciation, depletion, amortization, and accretion expenses of approximately $610 million, interest expense of approximately $155 million, and an effective tax rate between 22 and 23%. In 2024, we plan to reinvest in our franchise through operating and maintenance and internal growth capital expenditures of between $625 and $675 million. We expect another year of attractive growth and adjusted EBITDA and strong cash generation in 2024, despite a shifting construction demand environment. We forecast adjusted EBITDA of between $2.15 billion and $2.3 billion for the full year.

Barry Andrews: <unk> expenses as a percentage of revenue remained at 7% in 2023.

Barry Andrews: Overall, we expanded our adjusted EBITDA margin by 360 basis points and predict further expansion in 2024.

Speaker Change: Let me provide a few additional details around the 2024 guidance to supplement the demand pricing and aggregates unit profitability outlook, Tom highlighted earlier.

Speaker Change: We expect our downstream businesses to contribute approximately $275 million in cash gross profit.

Speaker Change: Reflective of asphalt earnings consistent with 2023, contributing approximately 70% of the total and concrete earnings adjusted for the divestiture of our Texas concrete asset contributing approximately 30% the total.

Tom Hill: At the midpoint, this represents an 11% organic improvement over 2023. I'll now turn the call back over to Tom to make a few closing remarks. Thank you, Mary Andrews. Vulcan's culture and people are fundamental to us. Our employees work tirelessly each day to deliver value to our customers, our communities, and the show, and their meaningful contributions were highlighted with three unsolicited recognition letters. Vulcan Materials was named one of the top 200 best companies to work for by U.S. News and World Report.

Speaker Change: We expect <unk> expenses of between 550 and $560 million, a modest low single digit increase year over year.

Speaker Change: We project depreciation depletion amortization and accretion expenses of approximately $610 million.

Speaker Change: Interest expense of approximately $155 million and an effective tax rate between 22 and 23%.

Tom Hill: One of America's Most Responsive Companies, 2024 by News, and was included in the American Opportunity Index, which measures how well large companies invest in human talent to drive business performance and Individual Employee Group. I'm excited about what Vulcan Materials will achieve in 2020. We will remain focused on keeping our people safe.

Speaker Change: In 2024, we plan to reinvest in our franchise through operating and maintenance in internal growth capital expenditures of between 625 and $675 million.

We expect another year of attractive growth in adjusted EBITDA and strong cash generation in 2024, despite a shift in construction demand environment.

Tom Hill: Growing our business, capitalizing on our Vulcan way of selling and Vulcan way of operating, and continuing to deliver value to our shareholders. Now, Mary Andrews and I will be happy to take your questions. Thank you. At this time, if you would like to ask a question, please press star and one on your touchtone keypad. You may remove yourself from the queue at any time by pressing star two.

Speaker Change: We forecast adjusted EBITDA of between 2.15 billion and $2 $3 billion for the full year.

Speaker Change: At the midpoint this represents an 11% organic improvement over 2023.

Speaker Change: I'll now turn the call back over to Tom to provide a few closing remarks. Thank you Barry Andrews.

Operator: Once again, it is star number one to ask a question. We'll pause for a moment to allow questions to queue, and we'll take our first question from the line of Trey Grooms with Stevens. Please go ahead. Good morning, Tom and Mary Andrews.

Tom Hill: Vulcan's culture and people are fundamental to our success.

Tom Hill: Our employees work tirelessly each day to deliver value to our customers our communities and shareholders.

Tom Hill: And there are meaningful contributions were highlighted with three unsolicited recognitions last year.

Trey Grooms: Thanks. Sure. I guess I wanted to touch on aggregates pricing here. Obviously, a very strong performance last year.

Tom Hill: Materials was named one of the top 200 best companies to work for by U S News and we'll report.

Tom Hill: One of America's most responsible companies 2024 by Newsweek.

Tom Hill: And, you know, it looks like you're looking for another year of double-digit growth ahead here for pricing. So, Tom, what's driving the confidence there as we move into 24 on the pricing outlook? Trey, I think we saw a fundamental change in our markets in 2022. We realized in March of 2022 that we had runaway inflation.

Tom Hill: It was included in the American opportunity index, which measures how well large companies invest in the human talent to drive business performance and.

Tom Hill: Employee growth.

I'm excited about what Vulcan materials will achieve in 2024.

Tom Hill: We will remain focused on keeping our people safe.

Tom Hill: Growing our business.

Tom Hill: Capitalizing on our Vulcan way of selling and Vulcan way of operating disciplines, and continuing to deliver value to our shareholders.

Tom Hill: And so we took the lead in 2022 and pulled meteor prices forward to May 1 that year in every March. And then followed that up with we pulled all the 2023 price increases to January 1, where some of it had been April 1. So I think today the fundamentals for pricing are very, very good, and I think embedded in those fundamentals are three clear changes that we're seeing in our markets. One, there's more discipline in announced price increases. Two, our average price increases are now in January, not April 1st.

Mary Andrews: Now Mary Andrew's now, we'll be happy to take your questions.

Mary Andrews: Thank you.

Mary Andrew: If you at this time, if you would like to ask a question. Please press the star and one on your Touchtone Keypad, you may remove yourself from the queue at any time by pressing star Q.

Mary Andrew: Once again it is star one to ask a question.

Mary Andrew: We will pause for a moment to allow questions to queue.

Mary Andrew: And we'll take our first question from the line of Trey Grooms with Stephens. Please go ahead.

Trey Grooms: Good morning, Tom Andrews.

Trey Grooms: Thanks.

Trey Grooms: Yeah.

Trey Grooms: Sure.

Trey Grooms: I guess I wanted to touch on aggregates pricing here, obviously, a very strong performance last year and it looks like you're looking for another year of double digit growth ahead here for pricing so Tom.

Tom Hill: And third, our mid-year price increase conversations are expected in all markets. So, you know, we're in a really good place in pricing. It's probably a good place as good as we've been historically.

Mary Andrews Carlisle: And if you couple that with the tools and disciplines of the Vulcan way of selling, I think our future looks very good. Yeah, Trey, and I'll just add that headline pricing is one thing. But as we always like to remind people, you know, the important thing is taking that price to the bottom line. And our 2023 cash growth profit per ton improved over 20%. And, you know, expecting another year of attractive growth in 2024 in the mid-teens range. I think this shows our execution has us making quick progress towards our $11 to $12 target, you know, at a much lower tonnage. So the compounding nature of this business really showcases its durability. And, you know, I think the continuous opportunity for strong organic growth. Yep, that all makes a lot of sense. Thank you a lot, and I'll pass it on.

Trey Grooms: Driving the confidence there as we move into 24 on the pricing outlook.

Trey Grooms: Troy I think we saw a fundamental change in our markets.

Troy: 2022, we realized in March of 2022 that we had runaway inflation.

Troy: And so we took the lead in 2022 and pull meatier price forward to may 1st that year in every market.

And then followed that up with we pulled all the 2023 price increases to January one where some of them had been April one.

Troy: So I think today the fundamentals for pricing.

Troy: It is very very good and I think embedded in those fundamentals are three clear changes that we're seeing in our markets, one theres more disciplined and announced price increases.

Troy: Two our average price increases are now January.

Troy: April one.

Troy: And third.

Troy: Our midyear price increase conversations or expected in all markets. So we're in a really good place and pricing is probably a good places we've been historically and you couple that with the tools and disciplines with Vulcan with selling I think our future looks very good.

Tom Hill: That's super encouraging. Thank you. Thanks, Trey.

Operator: Our next question comes from the line of Stanley Elliott with Stifle. Please go ahead. Good morning, everyone.

Stanley Stoker Elliott: Congratulations on the quarter and the outlook. My last question was a perfect lead-in. I was curious if you guys could talk a little bit more about kind of what you're seeing on the cost side. Maybe how does this mid single-digit sort of cost inflation that you're expecting in the coming year come together? You know, any puts and takes there would be great. Thanks, Stanley.

Speaker Change: Yes, Trey and I'll, just add that headline pricing is one thing, but as we always like to remind people. The important thing is taking that price to the bottom line and our 2023 cash gross profit per ton improved over 20% and you're now expecting another year of attractive growth in 2024 in the mid teens range.

Speaker Change: <unk>.

Tom Hill: You know, you saw the cost in the fourth quarter was up 7%, and that's down from what we've been seeing as low double-digits in prior quarters, and I think it was like the third quarter in a row where it started to come down. What we're seeing is the impact of inflation starting to dampen. As we said, we saw, we see this year in the mid-single-digit range. That said, I would expect this to go this way. Cost is going to be the highest year-over-year in Q1 and then tail off as we march through the year. That's due to two reasons.

Speaker Change: I think this shows our execution has us making quick progress towards our 11 to 12 dollar target at <unk>.

Speaker Change: Much lower tonnage.

Speaker Change: The compounding nature of this business are really showcases its durability and you know I think the continuous opportunity for strong organic growth.

Speaker Change: Yes that all makes a lot of sense. Thank you a lot in.

Speaker Change: I'll pass it on that's Super encouraging. Thank you. Thanks Craig.

Thanks.

Speaker Change: Our next question comes from the line of Stanley Elliott with Stifel. Please go ahead.

Tom Hill: One, the easing of inflationary pressures. But two, you're starting to see improving operating efficiencies from the bulk wave operations. So you couple that together, I think we're starting to catch up on the kind of runaway costs we've seen for a couple years. And I think we'll see improvement as we go through the year. Perfect. That's great. Thanks so much and best of luck.

Stanley Stoker Elliott: Hey, good morning, everyone. Congratulations on the quarter and the outlook up last question was a perfect lead in I was curious if you guys could talk a little bit more about kind of what youre seeing on the cost side, maybe how does is mid single digit sort of cost inflation that you're expecting in the coming year come together.

Stanley Stoker Elliott: Any puts and takes there would be great.

Thanks Stanley.

Stanley Stoker Elliott: You saw you saw the cost in the fourth quarter was up 7%.

Tom Hill: Thank you. And our next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Stanley Stoker Elliott: It's down from what we've been seeing is low double digit in prior quarters I think it was like this.

Stanley Stoker Elliott: Third quarter ROIC started shortly come down so what we're seeing is the impact of inflation starting to dampen.

Kathryn Ingram Thompson: Hi, thank you for taking my question today. Two parts, just more color on the volume guide bridge and what you're seeing from an in-market perspective. I know you've had it in prepared commentary, but maybe a little bit more color just in terms of growth rates by market. And in previous calls, you were able to give some quantification of what megaprojects are part of your total expected sales. So just a clarification on the earlier question on pricing, is the pricing guidance, does that include the thought for mid-year price increases, or is it just carryover from previous pricing actions, or is it a combination of those? Thank you. Yeah, I'll take the mid-year first.

Stanley Stoker Elliott: As we said we saw we see this year and mid single digit.

Speaker Change: That said I would expect this to go this way.

Speaker Change: Cost is going to be highest year over year in Q1, and then tail off as we March through the year.

Speaker Change: That's due to two reasons, one the easing of inflationary pressures, but two you're starting to see improving operating efficiencies from the bulk with operations. So you couple that together I think we're starting to catch up on the kind of a runaway costs. We've seen for a couple of years and we'll we'll I think we'll see improvement as we as we can.

Go through the year.

Speaker Change: Perfect. That's great. Thanks, so much best of luck. Thank.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Tom Hill: Well, there's not much in there for media price increases. Now, we will or have already announced media price increases and should start those conversations in April. So, I'm not saying there's no, it's not in the plan, but we'll for sure have the conversations, or very little of it is in the plan. On volume, as we talked about in November, we know we're predicting a modest decline in demand for 24. We see strength on the public side and kind of a mixed bag of strengths and weaknesses on the private side.

Kathryn Ingram Thompson: Hi, Thank you for taking my question today.

Kathryn Ingram Thompson: Two part on the just more color on the volume Guide bridge and what Youre seeing from end market perspective, but now you've had it in prepared commentary but.

Kathryn Ingram Thompson: Maybe a little bit more color just in terms of growth rates by end market and in previous calls we are able to give some quantification of what mega projects are of your total expected sales. So just a clarification on the earlier question on pricing.

Does the pricing guidance.

Tom Hill: And I'll go through them, Highways. You know, steady growth wins the race, and we'll continue to see that ramp up, and we feel good about it. Lots of funding there, and it's starting to be put to work. Non-highway infrastructure, we'll see solid growth. In non-res, most sectors, I think, will be challenged. That'd be traditional non-res warehouses and distribution. And as you talked about, that's partially offset in our footprint with the large industrial projects. And I think we have about 10 of those. And we can talk about that later. But they're meaningful,

Does that.

Kathryn Ingram Thompson: Include the thought for midyear price increases or is it just carryover from previous pricing actions where is it a combination of Dennis Thank you.

Speaker Change: The I'll take the mid year first.

Speaker Change: Well.

Speaker Change: There's not much in there for midyear price increases now.

Speaker Change: We will we're have announced mid year price increases and should start those conversations in April so.

There is no there is not in the plan, but we will have will for sure have the conversations are very little ups in the plan.

Speaker Change: On volume.

Tom Hill: Um, while single family, what we saw was challenged in 23, will be a strength for us in 24. It's back into growth mode and recovering rapidly. At the same time, I think multifamily, as everybody knows, will be challenged. So, as we said, we call volumes flat to negative four.

Speaker Change: As we talked about in November.

Speaker Change: We are predicting a modest decline in demand for 24 weeks.

Speaker Change: We see strength on the public side and kind of a mixed bag of strengths and weaknesses on the private side and I'll go through those highways.

Speaker Change: Steady growth wins race, and we will continue to see that ramp up and we feel good about it lots of funding there and it's starting to be put to work non highway infrastructure, we'll see solid growth.

Tom Hill: Now, January, February, as everybody knows, we're both either a freezeout or a washout or both. So, you know, we're seeing a slow start. That being said, it's still only January and February. So, you know, I think we feel very good about the full-year guidance. So, probably a modest decline in volumes for 24. That said, we should still see healthy double-digit earnings. Yeah, Kathryn, I'll give you a couple of other things to think about, you know, regarding Q1 volume, that may be helpful context. Last February was seasonally adjusted, the strongest single month of shipments we had in 2023 and the strongest February in at least the last 10 years. And also, this year, simply given the way the calendar falls, we'll have approximately 10% fewer shipping days in March, which, clearly, we all know is the most important month of the quarter. Now, the good news there is that it's just timing.

Speaker Change: In non res.

Speaker Change: Most sectors I think will be challenged that'd be traditional non res warehouses distribution and.

Speaker Change: As you talked about that's partially offset in our footprint with the large industrial projects and I think we have some 10 of those and we can talk about that later, but they're meaningful.

Speaker Change: While single family, what we saw was challenged in 'twenty three it'll be a strength for us in 'twenty four is back into growth mode and recovering rapidly.

Speaker Change:

Speaker Change: At the same time, I think multifamily as everybody knows will be challenged.

Speaker Change: So as we said we call volumes flat to negative for now January February were.

Speaker Change: Everybody knows where both are either a freeze out or a washout or both so we're seeing a slow start that being said it's still January February. So I think we feel very good about the full year guidance. So <unk>.

Speaker Change: Probably a modest decline in volumes through 'twenty four that said, we should still see healthy double digit earnings growth.

Speaker Change: Catherine I'll give you a couple of other things to think about regarding Q1 volume that may be helpful context.

Mary Andrews Carlisle: We pick those days back up in April, you know, but from a Q1 perspective, it'll be impactful. So you know, overall volumes will be challenged in the first quarter. Pricing will be strong, and it should fall within our guidance range. And I would expect that, paired with, you know, the probable volume impacts on cost, I'd expect maybe mid to high single-digit growth and cash gross profit per ton in the first quarter, still with the very attractive mid-teens improvement for the full year. Thank you so much.

Speaker Change: Last February was seasonally adjusted the strongest single months of shipments we had in 2023 and the strongest February and at least the last 10 years.

Speaker Change: And also this year simply given the way the calendar falls, we will have approximately 10% fewer shipping days in March which clearly we all know is the most important month of the quarter now the good news there is that just timing when we pick those days back up in April but from a Q1 perspective at all.

Anthony Pettenary: And we'll take our next question from the line of Anthony Pettenary with Citi. Good morning. Hey, I'm wondering if you could talk a little bit more about capital allocation. And, you know, we've seen a number of, I guess, very large deals in construction materials over the past few months. Just wondering if you could talk about the potential attractiveness of M&A and, you know, what the pipeline might look like from your perspective in 2024. Yeah, sure.

Speaker Change: It'll be impactful so overall volumes will be challenged in the first quarter.

Speaker Change: Pricing will be strong.

Speaker Change: And it should fall within our guidance range.

Speaker Change: And I would expect that paired with.

The probable volume impacts to cost.

Speaker Change: I would expect maybe mid to high single digit growth in cash gross profit per ton in the first quarter still with the very attractive mid teens improvement for the full year.

Speaker Change: Thank you so much.

Speaker Change: Yeah.

Speaker Change: And we'll take our next question from the line of Anthony Pettinari with Citi.

Mary Andrews Carlisle: Anthony, the balance sheet is, you know, really well positioned to fund all of our capital allocation priorities in 2024, particularly M&A growth. As we mentioned, we ended the year with over $900 million of cash and net leverage of one and a half times. So, you know, we'll think about capital allocation in 2024, very consistently, as we have in the past, but there is a very attractive M&A pipeline. And that's, you know, what we're focused on in terms of being able to deploy the capital capacity that we have. And I'll let Tom. Do you want to make any more comments on the pipeline? Sure.

Good morning.

Speaker Change: <unk>.

Michael Dahl: I'm wondering if you could talk a little bit more about capital allocation and we've seen a number of I guess very large deals and construction materials over the past few months I'm. Just wondering if you could talk about potential attractiveness of M&A.

Michael Dahl: And what the pipeline might look like from your perspective.

Michael Dahl: In 2024.

Speaker Change: Yes sure.

Anthony the balance sheet.

Speaker Change: No really well positioned to fund all of our capital allocation priorities in 2024, particularly M&A growth.

Speaker Change: As we mentioned we ended the year with over $900 million of cash and net leverage of one.

Speaker Change: One five times.

Speaker Change: So we'll think about capital allocation in 2024 very consistently.

Speaker Change: As we have in the past that there is a very attractive M&A pipeline and.

Tom Hill: Well, I think, if I step back and look at it, ours is a three-pronged strategy to grow. And it's very effective and has provided us with double-digit revenues and EBITDA for the last three years and will again in 2024. And those three are number one, organic growth through the Vulcan Wave Selling and Vulcan Wave Operating, which you see us do. And, you know, we've been very consistent; we've been able to grow those unit margins consistently for five years. Second, as you talked about, is M&A. I think M&A, while it was pretty quiet in 23, with a lot of unknowns out there, I think it will be very busy in 2024.

Speaker Change: That's what we're focused on in terms of being able to deploy the cap capacity that we that we have and I'll, let Tom you want to make any more comments on the pipeline sure well I think if I step back and look at it or.

As a three prong strategy to growth and is very effective and has provided us with double digit revenues and EBITDA for the last three years and will again in 2020 for those three are number one organic growth is what we're selling book with operating which you'll see us do and.

Speaker Change: You know we've been very consistent we were able erosion of margins for consistently for five years.

Speaker Change: Second is you talked about is M&A I think M&A, while it was pretty quad in 'twenty three with a lot of unknowns out there I think it will be very busy in 2024, I would expect us to bring some deals to the finish line and then I would supplementing that M&A is greenfield growth, which is great is picking up and we have a handful of those.

Tom Hill: I would expect us to bring some deals to the finish line. And then, supplementing that M&A is Greenfield Growth, which is picking up, and we have a handful of those projects beginning this year, and it'll take a little bit of time to get through that, and we'll get a little closer to it, we'll talk about some of those. But I feel really good about growth strategy, and M&A, I think will be a much bigger part of it in 24 than what we saw in 23. Okay, that's helpful. I'll turn it over to you.

Speaker Change: Projects, beginning this year and it'll take a little bit of time to get through that and will we get a little closer to it we'll talk about some of those but.

Speaker Change: I feel really good about growth strategy and M&A I think would be a much bigger part of it in 'twenty four than what we saw in 'twenty three.

Speaker Change: Okay. That's helpful I'll turn it over thank you.

Anthony Pettenary: Thank you. And our next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead. Hey, Jerry. Good morning. Hi, Tom, Mary Andrews.

Speaker Change: And our next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead, Hey, Gerry good morning.

Jerry Revich: Hi, Tom Merry-andrew, so good morning.

Jerry Revich: Good morning. I wanted to ask, in the fourth quarter, your margin performance was really outstanding sequentially, a full point ahead of normal seasonality. So it looks like costs are already starting to come down for you folks. Can you just talk about what improved in the quarter?

Jerry Revich: I wanted to ask you in the fourth quarter. Your margin performance was really outstanding sequentially for.

Jerry Revich: Full point ahead of normal seasonality. So it looks like costs are already starting to come down for you folks can you just talk about what improved in the quarter.

Tom Hill: And is there an opportunity if some of those improvements continue? It's awesome to be at the lower end of the growth outlook that you outlined in the prepared statement. Well, I think what you're seeing is, as I said earlier, two things. You're moderating inflationary pressures, so the comparisons get a lot easier. And I think we'll continue to see that. But also, if you look at our operating parameters, and you remember that we put the automation and the insights and the technology in the top 100 plants last year, you're starting to see those things go to work, which helps us with, you know, throughput and throughput of critical sizes. So I think that as we march through 2024, I think our costs should improve sequentially as we go through the quarter. Now, whether we can't have a hiccup on that or one that is too big.

Jerry Revich: Is there an opportunity if some of those improvements continue for cost to be at the lower end.

Jerry Revich: The growth outlook that you outlined in the prepared remarks, Tom well I think what Youre seeing is as I said early two things youre moderate inflationary pressures of the comparisons get a lot easier and I think we'll continue to see that but also if you look at our operating parameters and you remember we put.

Jerry Revich: The automation and the insights of the technology and the top 100 plants over last year, you're starting to see those things go to work, which helps us with.

Jerry Revich: Throughput in.

Jerry Revich: Throughput of critical sizes.

Jerry Revich: So.

Jerry Revich: I think that as we March through 2024, I think our cost should improve sequentially as we go through the quarter now whether it can have a hiccup on that are too.

Tom Hill: Outages can have a hit on that, but overall, I would expect our cost to continue to improve over the next four or five quarters. Excellent. Thank you. Thank you. And our next question comes from the line of Phil Ng with Jeffreys. Please go ahead. Morning, Phil.

Jerry Revich: Two big.

Jerry Revich: So outages can have a hit on that but it's overall I would expect our cost to continue to prove over the next four or five quarters.

Speaker Change: Excellent. Thank you. Thank you.

Speaker Change: And our next question comes from the line of Phil <unk> with Jefferies. Please go ahead moorefield guys. Congrats.

Philip Ng: Hey, guys. Morning. Congratulations on a really strong quarter. So, Tim, I'm sorry, Tom.

Phil: Congrats on a really strong quarter.

Phil: It sounds like Tom last year your pricing philosophy, I think was to go big to start the year on average pricing and take a more measured approach on mid years.

Operator: Last year, your pricing philosophy, I think, was to go big to start the year on average pricing and take a more measured approach to mid-years. If I've heard you correctly, you're already having a conversation about mid-years already. So just give a little color to how you're thinking about your approach and philosophy this year. And in a more moderating inflationary environment, do you think double-digit pricing is kind of the new norm going forward? Thanks.

Phil: If ive heard you correctly you at least have any conversation on mid years already so I'll just give a little color on how youre thinking about your approach and philosophy this year.

Phil: More moderating.

Phil: Deeply inflationary environment distinct double digit pricing is kind of the new norm going forward. Thanks.

Tom Hill: Well, as I said, you know, I think we're in a very, very good place from a pricing perspective based on the fundamentals that we're seeing. And, and also VulcanWare selling those tools helps us dramatically in bid work. I think that, you know, we went early as we have, and I think that will continue on January 1, which helps, obviously helps. We think we were appropriate in our January 1 prices. We've announced mid-years in a few markets already. I think over the next, probably the next beginning, and end of the quarter, we'll probably announce them mid-years for the other markets. And obviously, you spend April, May, and June having those conversations so that you're ready for July slash August for a mid-year price increase. So I think that the fact that it's all in January and the fact that everybody expects to have conversations about meteor price increases is, I think, very important for our market. And then double digit pricing, is that like the new norm going forward? I feel good about prices. Okay. All right. I appreciate the color.

Phil: As I've said.

We are.

Phil: In a very very good place.

Phil: From a pricing perspective based on the fundamentals that we're seeing and also the Vulcan with selling those tools help us dramatically and bid work.

Phil: I think that you know we went we went early as we have and I think that will continue January one which helps obviously helps.

Phil: Hum.

Phil: We think were appropriate our genuine when prices we've.

Phil: Announced mid years in a few markets already I think over the next probably the next beginning end of the quarter, we will probably announce it mid years for the other markets and obviously you spin April may and June having those conversations so that youre ready for July Slash August for a midyear price increase so.

Phil: I think that what those those.

Phil: That is all in January and the fact that everybody expects to have.

Phil: Conversations about mid year price increases I think is very important for our markets.

Phil: Okay, and then double digit pricing that like the new norm going forward.

Phil: I feel good about pricing.

Speaker Change: Okay Alright.

Speaker Change: Alright I appreciate the color. Thank you you bet.

Tom Hill: Thank you. You bet. And we'll take our next call or our next question from the line of Michael Feniger with Bank of America. Please go ahead.

Speaker Change: And we'll take our next call. Our next question from the line of Michael Feniger with Bank of America.

Michael J. Feniger: Please go ahead.

Michael J. Feniger: Yeah. Thank you for taking my question. Just, Tom, to follow up on just the pricing, can you just give the cadence of pricing for this year? You gave great color on the cadence of how you think cost plays out. Just on pricing, you know, do you think by the end of the year, are you still kind of in that 10 to 12% range, or are you below it because you start strong? Just kind of how we should think about that. No, I think the pricing will be pretty consistent through the year in that 10 to 12 range. I don't see a big, you know, a big, big change in that.

Michael J. Feniger: Yes. Thank you for taking my questions just Tom to follow up on just the pricing can you just the cadence of pricing for this year you gave great color on the cadence of how you think cost plays out just on pricing do you think by the end of the year are you still kind of in that 10% to 12% range are you blow it because you start restart strong.

Michael J. Feniger: Long.

Speaker Change: Just kind of how we should think about that no I think I think the pricing will be pretty consistent through the year in that 10 to 12 range I don't see a big.

Speaker Change: A big of a change isn't that now you also got to in the third quarter, you got to see what happens with mid years.

Tom Hill: Now you also got to, in the third quarter, you got to see what happens with the mid years. And, you know, we'll have that conversation after we get past July 1 to give you a lot more clarity because we'll just have a clear picture of it. And every market's going to be different. They always are.

Speaker Change: And we'll have that conversation to after we get past July one.

Speaker Change: To give you a lot more clarity because we just have a clearer picture of it and every market is going to be different they always are.

Tom Hill: But I would, I would, I would call it pretty consistent low double-digit pricing throughout. Great. And Tom, just to follow up, you gave great color on kind of the volumes, your shipment growth with the different segments. Just when we think of, let's say, fast forward to 2025, and obviously, you know, we'll see how 2024 plays out. But if you're in a similar range in 2025, with the volume kind of guidance, and it's underpinned by growth in infrastructure, can you just help us understand how that informs pricing, you know, relative to maybe, if it's being driven by residential or private construction markets, how having it underpinned by infrastructure, how that kind of maybe shifts the pricing conversations? I will tell you that my philosophy is that all demand growth is good things I don't care where it comes from.

Speaker Change: But I would I would.

Speaker Change: Call it pretty consistent low double digit pricing throughout the year.

Speaker Change: Great and Tom just to follow up you gave.

Speaker Change: Great color on kind of a volume your.

Speaker Change: Shipment growth with the different segments, just when we think of let's say fast forward to 2025, and obviously <unk>.

Speaker Change: <unk> 'twenty 'twenty four plays out, but if you're in a similar range in 2025 at the volume kind of guidance and it's underpinned by growth in infrastructure can you just help us understand how that informs pricing.

Speaker Change: Tim maybe if it's being driven by residential or private construction markets, how having it underpinned by infrastructure and that kind of maybe shifts to pricing conversations.

I would tell you that my philosophy is all demand growth or good things I don't care, where it comes from a lot like it but the.

Tom Hill: I like it. But, you know, the price between public and private, there's really not a big difference there. I think that the one thing I would call out the good thing about public demand is that it's very visible, and that's for sure. I mean, on the private side, people could hold projects or delay them. But, you know, public growth is going to go to work. It's not a matter of if, it's when.

Speaker Change: The pricing between public and private Theres really not a big difference there.

Speaker Change: I think the one thing I would call out the good thing about <unk>.

Speaker Change: Public demand is very visible and is for sure I mean.

Speaker Change: On the private side people could hold projects or delay them.

Speaker Change: But public growth is going to go to work, it's not a matter of if it's when and so that visibility to growing demand on the public side is really good for for pricing.

Tom Hill: And so that visibility to growing demand on the public side is really good for pricing. But, you know, a ton of concrete rock for public or private use is probably the same number. The difference is that public people know it's there, they know it's coming, and they can take risks on value and price. And we'll take our next question from Mike Dahl with RBC Capital Markets. Please go ahead. I think he'll take my question.

Speaker Change: A ton of concrete rock for public or private is probably the same number. The difference is the public people know, which there they know what's coming and they can take risk on our value and price.

Speaker Change: And we'll take our next question from the line of Mike Dahl with RBC capital markets. Please go ahead.

Mike Dahl: Hi, Thanks for taking my question.

Mike Dahl: Just back on kind of the M&A and capital allocation, you raised some pretty healthy funds from the RMC sale and Texas. It seems like that was the last big chunk aside from maybe California of the legacy U.S. concrete assets. So I just wanted to, you know, have you elaborate a little more on the kind of rationale behind making the move now. And then when you think about reallocation, you mentioned M&A, there are organic investments. I mean, you obviously now have pretty healthy capital positions. So, you know, relative, I think this was asked before, but, you know, the agricultural specific pipeline and relative size of the deals that you think are potentially out there that can cross the finish line this year and anything you can provide there.

Mike Dahl: Just back on kind of the M&A and capital allocation.

Mike Dahl: You raised some some pretty healthy funds from the RMC sale in.

Mike Dahl: Texas It seems like that was the last big chunk aside from maybe California.

Mike Dahl: Legacy U S concrete asset so I just wanted to.

Mike Dahl: Have you elaborate a little more on kind of rationale behind making the move now.

Mike Dahl: And then when you.

Mike Dahl: As you think about reallocation you mentioned M&A.

Mike Dahl: There is organic investments I mean, you obviously know.

Mike Dahl: Pretty pretty healthy capa.

Mike Dahl: Position so.

Mike Dahl: <unk>.

Mike Dahl: Was asked before but.

Mike Dahl: AG specific pipeline and relative size them.

Mike Dahl: Of the deals that you think are potentially out there that can cross the finish line. This year anything you can provide there.

Mike Dahl: I would look at the M&A as more traditional bolt-ons, I think, which are, you know, very much in our footprint, so have the highest returns, deal sizes, everything from small to mid-range, maybe a little better, some a little bigger than mid-range. But I think that as far as timing is concerned, I think 23 was abnormally, I guess, quiet, and it was because there was so much insecurity about, you know, are we going to fall off a cliff? Is there going to be a recession?

Mike Dahl: I would look at the M&A is more traditional bolt on I think which you know which is.

Mike Dahl: Very much in our footprint so highest returns.

Deal sizes everything from small to mid range, maybe maybe may maybe a little better some are little bigger bigger than mid range.

Mike Dahl: But I think that the as far as the timing of concern I think 23 was abnormally.

Mike Dahl: Abnormally.

Mike Dahl: I guess, it's quiet and it was because there was so much.

In security about where are we going to fall off a cliff as youre going to be a recession. So when you have all those unknowns people tend to slow down both buyers and sellers and I think that the fact, you've got that behind you youll see some catch up in 2024.

Tom Hill: So when you have all those unknowns, people tend to slow down both buyers and sellers. And I think that the fact you've got that behind you will see some catch up in 2020, and a rationale for exiting the ReadyMix assets. Well, I think, you know, if you look at our assets, we look at our business collection of assets. And if, you know, if there were some more to someone besides us, and it's not strategic, then you know, there ought to be another owner. We'll take that money and put it back in the aggregates business. And so this is no different than what you've seen us do.

Mike Dahl: And rationale for exiting.

Mike Dahl: The ready mix assets.

Mike Dahl: Well I think if you look at our assets.

Mike Dahl: Look at our business as a collection of assets and if.

Mike Dahl: If they're worth more to someone besides us and it's not strategic then there'll be another owner and we will take that money and put it back in the aggregates business and so this is no different than what you've seen us do and we.

Tom Hill: And we know we, we are, we exit businesses at times, and we exit different product lines at times. And so this one made sense strategically for us to sell the Texas Ramex. Thank you. And we'll take our next question from the line of Keith Hughes with Truist. Please go ahead. Thank you. Hey, how are you doing?

Mike Dahl: We are we exit businesses at times, and we exit different product lines at times and so.

Mike Dahl: This would make sense strategically for us to sell the <unk> business.

Speaker Change: Thank you.

Speaker Change: And we will take our next question from the line of Keith Hughes with Truest. Please go ahead hey.

Keith Brian Hughes: Good morning.

Keith Brian Hughes: Hey, How're you doing thanks for taking the question.

Keith Brian Hughes: Thanks for taking the question. Just shift over to Asphalt and Concrete. You gave guidance. You've done a good bit in cash. Cast Gross Profit vs.

Just shipped aggregate and asphalt concrete.

You gave guidance you got a good book cash cash gross profit versus prior year can you talk a little bit more detail, what's going on or.

Tom Hill: Prior Year. You can talk a little bit more in detail about what's going on and what you're expecting. Yeah, I think the asphalt performance at 13% gross margin was a really good performance. Now, if you look back about three years ago, everybody was asking me why I didn't sell that asphalt business, and now everybody wants me to buy more. So that's just the asphalt business, but 13% is a good number. So it's performing well. We'd see... flat at very high levels for 2024. And I would call that hot mix price increases, offsetting increasing liquid costs and increasing aggregate costs. So asphalt is a very good place.

Keith Brian Hughes: What you expect for 2014.

Speaker Change: Yeah, I think the asphalt performance and at 13% gross margin was really good performance now.

Speaker Change: Look back about three years ago, everybody was to ask me why don't sell that asphalt business and now everybody wants to be bought more so just the asphalt business, but 13 as percent is a good number so it's performing well we'd see.

Speaker Change: Flat.

Speaker Change: At very high levels for 2024.

Speaker Change: And I would call that a hot mixed price increases offsetting increasing liquid coffee costs and increasing our costs, so asphalt and a very good place and we like our we like our story there and I think as that those teams are performing well.

Tom Hill: And we like our story there. And I think it's that those teams are performing well. ReadyMix, I'd call it virtually flat with the private side challenge, some challenge markets, you know, this that affects the ReadyMix business. But it's not a bad performance based on, you know, some of the private challenges we had. But remember, ReadyMix is 2% of EBITDA. So, you know, I think under the circumstances, both businesses are doing fine. Yeah, and just in terms of ReadyMix, Keith, just to maybe a couple things helpful to think about the impact of the divestiture, you know, our expectations in 2024 for a modest decline and same store volumes, which were about 4 million cubic yards in 2023.

Speaker Change: Ready mix I'd call it virtually flat.

With the private side some challenged markets.

Speaker Change: That affects the ready mix business, but it's not a bad performance based on some of the private challenge we had but remember our remix is 2% of our EBITDA. So you know I think under the circumstances.

Speaker Change: Both businesses are doing fine yeah, and just in terms of ready mix, Keith just to maybe a couple of things helpful to.

Speaker Change: Think about the impact of the divestiture.

Speaker Change: Expectations in 2024 for a modest decline in same store volumes, which were about 4 million cubic yards in 2023 and.

Tom Hill: And we expect, you know, kind of consistent gross margin performance. I think in the longer term about that, I think that there are low single digits. I mean, our low double digit expectations are still what we're pushing for. That's going to, you know, take time and better volumes to get there. But, you know, one thing about 2024, where we expect relatively flat gross margins with the weight of the non-cash fixed cost on the volume challenges that Tom mentioned, really driven by private non-res, we do expect to see some expansion and cash growth profit margins and also improved unit profitability, given the markets where we've retained our concrete business. Okay, thank you.

Speaker Change: And we expect you know kind of consistent.

Speaker Change: Gross margin performance I.

Speaker Change: Thinking longer term you know about that I think that there are low single or.

Speaker Change: Low double digit expectations.

Speaker Change: Are still what we're pushing for that's going to take time and better volumes to get to get there but.

Speaker Change: But one thing about 2024, where we expect relatively flat.

Speaker Change: Gross margin with the weight of the noncash fixed cost on the volume challenges that Tom mentioned really driven by private non res we.

Speaker Change: We do expect to see some expansion in cash gross profit margins and also improved unit profitability.

Speaker Change: Given the markets, where we've retained our concrete businesses.

Speaker Change: Okay. Thank you.

Mary Andrews Carlisle: Thank you. And we'll take our next question from the line of Garik Shmois with Loop Capital. Please go ahead. Oh, hi, thanks. Congratulations on the nice results.

Speaker Change: Thank you.

Speaker Change: And we'll take our next question from the line of Garik <unk> with loop capital. Please go ahead.

Garik: Oh, hi, thanks, Congrats on the nice results I wanted to follow up on the cost side.

Garik S. Shmois: I wanted to follow up on the cost side. I know, you know, it's a little bit more favorable than the preliminary outlook you offered on the three-hue call, and you spoke to some broad-based deflation, which is getting better as you move through the year, with operational improvements helping as well. Anything in particular, though, that's changed or has gotten better since the last call that you could point to? On the cost side, they'll be. Yeah, I think what you're seeing there is the Vulcan wave operating and efficiencies in those plants. And that's embedded in that technology. It is training, which is so important from a safety perspective, but also from the plant availability and inspection of that equipment.

Garik: I know, it's a little bit more favorable than the preliminary outlook you offered on the <unk> call you spoke to.

Garik: Broad based deflation getting better as you move through.

Garik: Year operational improvements, helping as well anything in particular, though.

That's changed or has gotten better since the last call that you could point to on the call.

Speaker Change: Cost side that would be helpful. Yes.

Speaker Change: Yes, I think I think what youre, what youre seeing there is the Vulcan with operating inefficiencies in those plants and that's.

Speaker Change: Embedded in that is technology. It is training, which is so important from a safety perspective, but also from a plant availability and inspection of that equipment and then our throughput youre seeing our throughput of crooks classes starting to improve so it's a combination of easing inflationary pressures.

Tom Hill: And then you're seeing our throughputs of critical size starting to improve. So it's a combination of easing inflationary pressures, comps get, you know, kind of level out, but also those operating efficiencies are really, really important to making sure that we, you know, our job is to beat inflation, not just live with it. Got it. Thanks again.

Speaker Change: Comps get.

Speaker Change: Kind of level out, but also those operating efficiencies are really really important to making sure that we you know our job is to beat inflation not just live with it.

Speaker Change: Got it thanks for that thank you.

Angel Castillo: Thank you. And we'll take our next question from the line of Angel Castillo with Morgan Stanley. Please go ahead. Hi, good morning.

Speaker Change: And we will take our next question from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo: Hi, Good morning, Thanks for taking my question and congrats on a solid quarter.

Mary Andrews Carlisle: Thanks for taking my question. And congrats on the third quarter. May Andrus, I thought I heard you say, I guess that, given the kind of capital that you have, you still have the ability to kind of do organic and organic and return capital to shareholders. So just wanted to expand on that a little bit. It sounds like on the M&A front, you're looking at more bull dons. And if I did the math correctly, just moving to the midpoint of your kind of leverage allows you to have at least another $2 billion of capital that you can deploy, which seems, you know, plenty for both M&A as well as other ways of returning cash to shareholders. So maybe just could you talk about buyback intentions for the year and then also the willingness to potentially lever up above your range, your historical range, for the right opportunities and return cash to shareholders? Yeah, sure.

Angel Castillo: Hey, Andrew I thought I heard you say I guess.

Angel Castillo: Given the kind of capital that you have you still have the ability to kind of stew.

Angel Castillo: Ganic inorganic and return capital to shareholders. So just wanted to expand on that a little bit it sounds like on the M&A front youre looking at more bolt ons and if I did the math correctly and just moving to the mid point of your kind of leverage allows you to have at least another 2 billion of capital that you can deploy which seems plenty for both M&A is.

Angel Castillo: Well as are there other ways of returning cash to shareholders. So maybe just could you talk about buyback intentions for the year and then also willingness potentially levering up above your range historical range for for the right opportunities and returning cash shareholders.

Yeah sure I mean.

Mary Andrews Carlisle: I mean, as you referenced, I think we're really well positioned to be able to fund all of our capital allocation priorities in 2024. And as it relates to returning cash to shareholders, doing that via repurchases has long been a part of our capital allocation priorities, I think, appropriately following reinvesting in the business, growing the business through both M&A and greenfields and returning cash, you know, through our sustainable dividends. But with the attractive cash generation and, you know, you saw with the slow remuneration in 2023, we did repurchase $200 million of shares. And we would, you know, enter 2024 thinking about making those capital allocation decisions in the same kind of, you know, disciplined manner.

Angel Castillo: You referenced I think we're really well positioned to be able to fund all of our capital allocation priorities in 2024 and as it relates to returning cash to shareholders.

Angel Castillo: Doing that via repurchases.

Angel Castillo: Has long been a part of our capital.

Angel Castillo: Capital allocation priorities I think appropriately following reinvesting in the business.

Angel Castillo: Growing the business through both M&A and Greenfields and returning cash through our sustainable.

Angel Castillo: Dividend, but with.

Angel Castillo: With the attractive cash generation and and you know you saw with the slower M&A in 2023, we did repurchase $200 million of shares.

Angel Castillo: And we would enter 2024.

Angel Castillo: I'm thinking about making those capital allocation decisions in the same kind of disciplined manner and in terms of.

Mary Andrews Carlisle: And in terms of, you know, leverage, I think, for us, regardless of where we are, you know, in the against kind of our target leverage range, what's important is being disciplined about doing the right deals and the deals that are going to have attractive returns for us. And, you know, we certainly have, over time, levered up even outside the top end of that range with plans to always, you know, quickly get back within that two to two and a half times that we tend to target. Very helpful; thank you.

Angel Castillo: Leverage.

Angel Castillo: Thank for you know for us regardless of where we are.

Angel Castillo: You know.

Angel Castillo: The target against kind of our target leverage range now what's important is being disciplined about doing the right deals and the deals that.

Angel Castillo: We're going to have attractive returns for us and we certainly have overtime.

Angel Castillo: Levered up even outside the top end of that range with with plans to always.

Angel Castillo: Quickly get back within that two to two five times debt that we tend to target.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you.

Michael Dahl: Thank you. And we'll take our next question from the line of Michael Dudas with Vertical Research. Please go ahead. Good morning, Mary Andrews, Mark, and Tom. Good morning.

Speaker Change: And we'll take our next question from the line of Michael Dudas with vertical research. Please go ahead.

Good morning, Mary Andrews, Mark Tom Good morning.

Tom Hill: Tom, I'm curious about your thoughts. You indicated a positive trend for civil public infrastructure and record state transportation budgets. How are they prepared and ready to pull through when you see some of the budget numbers in your important states? I'm also curious how things are in California, because you hear certainly Caltrans is above the budget there, but certainly there could be some other issues there. So just a little bit of a sense on the public side in your important states, how you see the opportunities for bidding and project work going forward. Yeah, I think they're still challenged, but they are because they got so much money. It's a lot for them to digest, but they are growing into it. And as I said, we'll see solid growth in highways in 24. We saw low single-digit growth in 23. We'd expect mid single digits in 24, kind of as expected. But also, we have to remember that IJ passed in November of 21, so we're just past that two year mark, and we'll say it takes two years.

Speaker Change: Okay.

Speaker Change: Tom.

Michael Dahl: Curious about your thoughts you indicated a positive trend for civil public infrastructure.

Michael Dahl: And records the pharma transportation budgets.

Michael Dahl: Or are they prepared and ready to flow through when you see some of the budget numbers in your important states and I'm also curious on how things in California, because you're here certainly caltrans has bumped up the budget there, but certainly there could be some other issues. There. So just a little bit of a sense of on the public side in your important states, how you see the opportunities for bidding.

Michael Dahl: And project work or going forward, Yeah, I think.

Michael Dahl: There is still challenged but there, but they are because they've got so much monies. It's a lot for them to digest, but they are growing into it and as I've said, we will see solid growth in highways in 'twenty four we saw low single digit in 'twenty. Three we would expect mid single digit in 'twenty four kind of as expected, but also we've got them.

Michael Dahl: Remember that <unk> passed in November of 'twenty. One. So we're just past that two year, Mark and we say it takes two years.

Tom Hill: As we've said, it'll be a ramp-up, not a step change, in this, and I think it'll be a ramp-up over time. And I think that the DOTs are growing into their capital aid, added resources, and the lettings continue to be healthy. There's a lot of money out there.

Michael Dahl: As we've said it'll be a ramp up not a step change in this.

Michael Dahl: I think it'll be a ramp up over time.

And I think that the dot's are growing into their capital we've added resources and the loadings continue to be healthy as a lot of money out there, but I would what I would see here I think is kind of slow and steady wins the race and we will see.

Tom Hill: What I would see here, I think, is kind of slow and steady wins the race, and we'll see, you know, improving growth in 24, kind of mid single digit. I think that'll go up in 25 again. I think that demand will go up in 26, and I think it'll go up in 27. So, you know, that slow and steady improvement in the public isn't bad, particularly when you're compounding unit margins like we are. As far as Caltrans, I think they'll be fine. There's always some rumblings numerous times about Caltrans and funding and people trying to grab it. But remember, it is firewalled.

Michael Dahl: Improving growth in 'twenty for kind of mid single digit I think that'll go up in 25 again I think that demand will go up in 2006 and I also think it will go up and 27. So you know that slow and steady improvement in public isn't bad, particularly when you're compounding unit margins like we are.

Michael Dahl: As far as Caltrans I think there'll be found yeah, there's always some rumblings numerous times and caltrans in funding and people trying to grab it but remember it is firewall it has to be used for for infrastructure.

Tom Hill: It has to be used for infrastructure. Excellent point. Thank you, Tom. Thank you. And we'll take our last question from the line of Brent Thielman with D.A. Davidson.

Speaker Change: Excellent. Thank you Thomas Thank you.

Speaker Change: And we'll take our last question from the line of Brent Thielman with D. A Davidson. Please go ahead.

Brent Thielman: Please go ahead. Hey, thanks, Tom, Mary, I guess your clarification question on the ready mixed business, a ton of refinement on that over the last 12 months, can you sort of level set us on what that business is now sized to do? I think you did seven and a half million cubic yards in 23. Where do we go from here? And I guess my other question, since I'm the last, is, I think we've all been sort of worried about the implications of some of these light non-residential activities, sort of higher interest rates, sensitive sectors hitting your business. Could you talk about to what degree that's actually had an impact? Has it been more resilient than you would have expected? I'll take that one first, and then I'll let Mary Andrews take the ready mix.

Brent Thielman: Hey, Thanks, Tom Morey.

Brent Thielman: So a clarification question on the ready mix business with China refinement of that over the last 12 months can you just sort of level set us on what that business is now sized to do I think you did $7 5 million cubic yards in 'twenty three.

Speaker Change: Where do we go from here and I guess my other question since I'm the last is.

Speaker Change: I think we've all been sort of worried about the implications of some of this light nonresidential activity sort of more interest rate sensitive sectors hitting your business could you talk about to what degree that's actually add an impact has it been more resilient.

Speaker Change: You would have expected.

Speaker Change: I'll take that one first and then I'll, let maryann just take the ready mix.

Tom Hill: I think it's been fairly, fairly weak for us, obviously offices have been weak. But, you know, last year, the light side was pretty weak. So kind of more of the same on that still challenged by interest rates. And my advice to you is that the more traditional ex-office building, more traditional light, non-residential construction usually follows the creation of subdivisions.

Speaker Change: It's been fair.

Speaker Change: Fairly fairly weak for us obviously offices has been weak but.

Speaker Change: Last year, the light side was pretty weak so kind of more of the same on that still challenged by interest rates and I would tell you that the my view of that is that.

Speaker Change: The more traditional X X office building more traditional light nonresidential construction usually follows.

Speaker Change: Creation of subdivisions and so we're back in growth mode in those subdivisions. So I would expect us sometime.

Tom Hill: And so we're back in growth modes in those subdivisions. So I would expect us sometime, you know, maybe 25, middle 25, that starts to impact that sector of the light res. So it probably has a brighter future than what we've seen in 23 and 24. But kind of what I described in 24 is more of the same as 23.

Maybe 25 below 25 that starts to impact that sector of the light red. So it probably has a brighter future than what we've seen in 'twenty three 'twenty, four but kind of what I got.

Speaker Change: Slide 24 is more of the same for 'twenty three.

Mary Andrews Carlisle: Yeah, and in terms of ReadyMix, you know, we completed the divestiture of the Texas concrete business in mid November and had disclosed that it was about 4 million cubic yards annually. So that that puts us at about 4 million cubic yards on the same store basis. We would expect, you know, those volumes to decline modestly, and our 2024 outlook for those cash gross profit dollars being 30% of that to 75, kind of, as I said, consistent from a gross margin percentage standpoint with 2023, a bit of an expansion from a cash gross profit percentage standpoint. And, you know, in that business, we're focused on, you know, continuing to improve that margin performance over time for the retained assets that we have, which we believe are in, you know, a very attractive and well-structured ReadyMix market.

Speaker Change: Yeah and in terms of our ready mix, we completed the divestiture of the Texas concrete in mid November.

Speaker Change: And had disclosed that was about 4 million cubic yards annually.

Speaker Change: So that that puts us in 2023 at about 4 million cubic yards on a same store basis, we would expect those volumes to decline modestly and our 2024 outlook of that those cash gross profit dollars being 30% of that $2 75.

Speaker Change: As I said consistent.

Speaker Change: From a gross margin percentage standpoint, with 2023, a bit of expansion from a cash gross profit percentage standpoint, and you know in that business, where we're focused on.

Speaker Change: Continuing to improve that margin performance overtime for the retained assets that we have which we believer in very attractive and well structured ready mix market.

Mary Andrews Carlisle: Thank you. Thank you. And we have no further questions at this time. I'll turn the call back over to Tom for any closing remarks. Thank you for your time this morning. We appreciate your interest in Vulcan Materials Company. We look forward to talking to you throughout the quarter. Please keep yourselves and your families safe. Thank you, www.microsoft.com.au. This concludes today's conference. Thank you for your participation, and you may now disconnect. www.larryweaver.com Go to Beadaholique.com for all of your beading supply needs!

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: And we have no further questions at this time I'll turn the call back over to Tom for any closing remarks.

Tom: Thank you for your time. This morning, we appreciate your interest in Vulcan materials company.

Tom: We look forward to talking to you throughout the quarter. Please keep yourselves and your family safe. Thank you.

Tom: Yeah.

Speaker Change: This concludes today's conference. Thank you for your participation and you may now disconnect.

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Speaker Change: Okay.

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