Q1 2024 Arcosa Inc Earnings Call
Speaker Change: [music].
Please standby we're about to begin.
Jamie: Please stand by; we're about to begin. Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. first quarter 2024 earnings conference call. My name is Jamie, and I will be your conference call coordinator today. As a reminder, today's call is being recorded. I'd now like to turn the call over to your host, Erin Drabek, Director of Investor Relations for Arcosa. Ms.
Jamie: Good morning, ladies and gentlemen, and welcome to the Arcos <unk>, Inc. First quarter 2024 earnings Conference call. My name is Jamie and I will be your conference call coordinator today as.
As a reminder, today's call is being recorded I'd now like to turn the call over to your host Aaron Draper director of Investor Relations for our Costar straight back you may begin.
Erin Drabek: Good morning, everyone, and thank you for joining Arcosa's first quarter 2024 earnings call. With me today are Antonio Carrillo, President and CEO, and Gail Peck, CFO. A question and answer session will follow their prepared remarks.
Aaron Draper: Good morning, everyone and thank you for joining our closest first quarter 'twenty 'twenty four earnings call with me today are Antonio Carrillo, President and CEO and Gail Peck CFO.
A question and answer session will follow their prepared remark a.
Erin Drabek: A copy of yesterday's press release and the slide presentation for this morning's call are posted on our investor relations website, ir.arcosa.com. A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website, under the News and Events tab.
Speaker Change: A copy of yesterday's press release and the slide presentation for this morning's call are posted on our Investor Relations website IR dot our cook the dot com a replay of today's call will be available for the next two weeks instructions for accessing the replay number are included in the press release.
Speaker Change: A replay of the webcast will be available for one year on our website under the news and events tab.
Erin Drabek: Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-
Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP.
Speaker Change: Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation.
Speaker Change: In addition, today's conference call contains forward looking statements as defined by the private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward looking statements. Please.
Erin Drabek: Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-Q, expected to be filed later today. I would now like to turn the call over to Antonio.
Speaker Change: Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release, we filed yesterday and our Form 10-Q expected to be filed later today.
I'd now like to turn the call over to Antonio.
Antonio Carrillo: Thank you, Erin, and good morning, everyone. I will begin with some overall comments on our solid start to the year, and Gail will provide additional details about our segment financial results. I will then discuss our outlook before we open the call request. Turning to slide four.
Antonio Carrillo: Thank you Erin and good morning, everyone.
Antonio Carrillo: We'll begin with some overall comments on our solid start to the year and gala will provide additional details about our segment financial results.
Antonio Carrillo: I will then discuss our outlook before we open the call for questions.
Antonio Carrillo: Turning to slide four.
Antonio Carrillo: Our first quarter operating and financial results exceeded our expectations. We executed well on several fronts and are pleased with the progress we're making, ramping up our cyclical businesses, improving our operating performance, and integrating recent acquisitions. Although we were broadly impacted by unfavorable weather in January, results improved significantly through the quarter, highlighting the earnings power of our portfolio.
Our first quarter operating and financial results exceeded our expectations, we executed well on several fronts and are pleased with the progress, we're making ramping up our cyclical businesses, improving our operating performance and integrating recent acquisitions well.
Antonio Carrillo: Although we were broadly impacted by unfavorable weather in January results improved significantly significantly through the quarter highlight.
Antonio Carrillo: Highlighting the earnings power of our portfolio of businesses and the balance of the quarter, we achieved double digit adjusted EBITDA growth at a higher overall margin on an organic basis.
Antonio Carrillo: In the balance of the quarter, we achieved double-digit adjusted EBITDA growth and higher overall margin on an organic basis. Overall, total first quarter revenues increased 9% year over year, reflecting solid organic performance across all business segments, as well as contributions from acquisitions completed over the past year. Consolidated Adjusted EBITDA increased 7%, normalizing for the $22 million land sale gained in the same period last year. Finally, we reported significantly higher operating cash flow that helped fund key growth initiatives. Let me discuss a few key takeaways from the first quarter.
Antonio Carrillo: Overall total first quarter revenues increased 9% year over year, reflecting solid organic performance across all business segments as well as contributions from acquisitions completed over the past year.
Antonio Carrillo: Consolidated adjusted EBITDA increased 7% normalizing for the 22 million land sale gain in the same period last year. Finally, we reported significantly higher operating cash flow to help fund key growth initiatives.
Antonio Carrillo: Construction products benefited from strong pricing momentum, which offset a modest decline in organic aggregate volume. The acquisitions that we completed in 2023 in Florida, Arizona, and Texas also contributed to segment growth within specialty materials. The new plaster plant is doing well, and we're pleased to report another quarter of higher year-over-year performance. Engineered structures executed according to plan in the first quarter. Order activity in utility structures remains healthy, and we continue to discuss new wind tower orders with our customers, adding a small order to the backlog in the first quarter.
Speaker Change: Let me discuss a few key takeaways from the first quarter.
Speaker Change: Construction products benefited from strong pricing momentum, which offset a modest decline in organic aggregates volumes that.
Speaker Change: The acquisition that acquisition was that we completed in 2023, you're throwing that Arizona also.
Speaker Change: Also contributed to segment growth.
Speaker Change: Within specialty materials, the new plaster plant is doing well and we're pleased to report another quarter of higher year over year performance.
Speaker Change: Engineered structures executed according to plan in the first quarter order activity and utility structures remains healthy and we continue to disclose new wind tower orders without customers, having a small over there to the backlog in the first quarter.
Antonio Carrillo: While currently diluted to margin, the ramp-up of our New Mexico wind tower facility and our Florida concrete pool plant are progressing well. Transportation products growth was driven by higher barge revenues and improved segment margins. The barge business continues to exhibit healthy demand with orders for both hopper and tank barges during the first quarter, representing a 1.5 book to bills.
Speaker Change: While currently dilutive to margins the ramp up of our new Mexico wind power facility and are familiar with both plants are progressing well.
Speaker Change: Transportation products growth was driven by higher box revenues and improved segment margin.
The barge business continued to exhibit healthy demand with orders for both Hopper and tank barges during the first quarter, representing a one five book to bills.
Antonio Carrillo: As previously announced, we closed the $180 million acquisition of Ameron Paul Products on April 9. In our press release yesterday, we provided increased revenue and adjusted the guidance for 2024 slightly, reflecting the addition of Ameron and better-than-expected first quarter results. Of note, the midpoint of our revised adjusted EBITDA guidance reflects a 23% increase over comparable results in 2023. I will provide more details in my comments about the outcome. Turning to slide 8.
Speaker Change: As previously announced we closed a $180 million acquisition of Admiral both products on April 9th.
Speaker Change: Our press release yesterday, we provided increased revenue and adjusted to beat that guidance for 'twenty 'twenty four reflecting the addition of AMR and better than expected first quarter results.
Speaker Change: The midpoint of our revised adjusted EBITDA guidance reflects a 23% increase.
Speaker Change: Comparable results in 2023.
Speaker Change: I will provide to provide more details in my comments about the outlook.
Antonio Carrillo: Investments, both organic and inorganic, across our portfolio have transformed the company and are contributing to our long-term growth. Today, we are less cyclical than in the past, with construction products accounting for about 60% of our adjusted EBITDA, nearly double the 33% it contributed in 2018. Moving to slide nine.
Speaker Change: Turning to slide eight investments, both organic and inorganic across our portfolio have transformed the company and are contributing to our long term growth.
Speaker Change: Today, we are less cyclical than in the past with construction products accounting for about 60% of our adjusted EBITDA nearly doubled to 33% contributed in 2018.
Moving to slide nine.
Antonio Carrillo: The acquisition of Ameron is an excellent strategic fit for Arcosa, expanding our portfolio offerings in traffic and telecom structures and establishing our foothold in the attractive concrete and steel lighting pole market. Additionally, we expect it to be an important margin accretive contributor to engineer structures as well as Arcosa overall. We have a proven track record of prudently deploying our capital at attractive valuations to drive sustainable long-term growth. Amer is another example of this.
Speaker Change: Acquisition of Amarin has had an excellent strategic fit for of course, expanding our portfolio offerings in traffic in telecom structures and establishing our foothold in the attractive concrete and steel lighting bull market.
Speaker Change: We expect it to be an important margin accretive because the previous two engineered structures as well as of course overall.
Speaker Change: We have a proven track record of prudently deploying our capital at attractive valuations to drive sustainable long term growth Amarin is another example of this discipline.
Antonio Carrillo: In summary, we're pleased with our first quarter results and the progress on our strategic priorities as we continue to successfully grow our business. I will now turn over the call to Gail to discuss our financial results.
Speaker Change: In summary, we're pleased with our first quarter results and the progress on our strategic priorities as we continue to successfully grow our businesses I will now turn over the call to Gail to discuss our financial results scale.
Gail M. Peck: Thank you, Antonio. I'll begin on slide 12 to discuss our first quarter segment results. Turning to construction products, it's important to highlight the slow start we had to the quarter with a significant number of rain days, particularly in Texas, and frigid temperatures in the Midwest during the month of January. However, in the balance of the quarter, we performed well and achieved strong, organic, adjusted EBITDA growth and higher margins. For this segment, first quarter revenues increased 6% year-over-year. On a freight-adjusted basis, revenues increased 9%, with growth split evenly between organic and acquisition contributions.
Gail M. Peck: Thank you Antonio I'll begin on slide 12 to discuss our first quarter segment result.
Gail M. Peck: Turning to construction products, it's important to highlight the slow start we had to the quarter with a significant number of rain days, particularly in Texas and frigid temperatures in the Midwest during the month of January and the balance of the quarter, we performed well and achieved strong organic adjusted EBITDA growth and higher margin.
Gail M. Peck: For the segment first quarter revenues increased 6% year over year on a freight adjusted basis revenues increased 9% with growth split evenly between organic and acquisition contribution.
Gail M. Peck: Excluding the $22 million gain on the sale of depleted land in the prior period, first quarter adjusted segment EBITDA increased 10% year over year, primarily due to the accretive impact of recent acquisitions and the operating improvements in our specialty materials business. Normalizing for the large land sale gain, freight-adjusted segment EBITDA margin was up slightly year-over-year, building on the significant margin expansion achieved in the first quarter Turning to our aggregates business, which includes both natural and recycled aggregates, average organic pricing was up high single digits in the first quarter with strong pricing gains across our footprint.
Excluding the $22 million gain on the sale of depleted land in a prior period first quarter adjusted segment EBITDA increased 10% year over year, primarily due to the accretive impact of recent acquisitions and the operating improvements in our specialty materials business.
Rising for the large land sale gain great adjusted segment EBITA margin was up slightly year over year building on significant margin expansion achieved in the first quarter of last year.
Gail M. Peck: Turning to our aggregates business, which includes both natural and recycled aggregates average organic pricing was up high single digits in the first quarter with strong pricing gains across our footprint.
Gail M. Peck: In addition, the contribution from acquisitions was accretive to overall average selling price. First quarter volumes were down low single digits on an organic basis and up slightly in total. Volumes were impacted by January weather and lower volumes in the Houston recycling market, which experienced elevated demand in the first half of 2023 due to a temporary shortage of natural lime.
Gail M. Peck: In addition, the contribution from acquisition was accretive to overall average selling prices.
Gail M. Peck: First quarter volumes were down low single digits on an organic basis and up slightly in total.
Gail M. Peck: Volumes were impacted by January weather and lower volumes in the Houston recycling market, which experienced elevated demand in the first half of 2023 due to a temporary shortage of natural limestone.
Gail M. Peck: First quarter adjusted EBITDA increased low double digits year over year, normalizing for the land sale gain in the prior period, driven by recent acquisitions as well as modest organic growth. Acquisitions were accretive to margin during the quarter, and organic margin was roughly flat, as higher pricing was partially offset by weather and mix-related impacts. Within specialty materials, freight-adjusted revenues increased significantly, driven by double-digit overall price increases and higher volumes in plaster. Operational improvements in this business resulted in higher adjusted EBITDA and roughly 40 basis points of margin improvement for the segment. Our single asphalt operation weighed on first quarter results, generating a loss and reducing segment margins. Weather impacts magnified a seasonal low for this business.
Gail M. Peck: First quarter, adjusted EBITDA increased low double digits year over year normalizing for the land sale gain in the prior period driven by recent acquisitions as well as modest organic growth acquisitions were accretive to margin during the quarter and I and organic margin was roughly flat as higher pricing was partially offset by weather and mix related impact.
Gail M. Peck: Within specialty materials freight adjusted revenues increased significantly driven by double digit overall price increases and higher volumes in plaster operational improvements in this business resulted in higher adjusted EBITDA and roughly 40 basis points of margin improvement for the segment.
Gail M. Peck: Our single asphalt operation weighed on first quarter results generating a loss and reducing segment margins weather impacts magnified a seasonal low for this business.
Gail M. Peck: Finally, revenues in our trench shoring business increased on higher organic volumes and contribution from the Houston acquisition that closed at the end of the first quarter of 2023. Adjusted EBITDA increased modestly year-over-year, but margin was diluted to the segment. Moving to Engineered Structures, Slide 13.
Gail M. Peck: Finally revenues in our trench shoring business increased on higher organic volumes and contribution from the Houston acquisition that closed at the end of the first quarter of 2023, adjusted EBITDA increased modestly year over year, but margin was dilutive to the segment.
Gail M. Peck: Moving to engineered structures slide 13 during the first quarter revenues increased 12% due to higher utility structure in wind tower volumes, partially offset by lower pricing for utility structures driven by product mix.
Gail M. Peck: During the first quarter, revenues increased 12% due to higher utility structure volumes in wind tower volumes, partially offset by lower pricing for utility structures driven by product mix. In line with our expectations, adjusted segment EBITDA decreased 10% primarily driven by lower utility structure margin from the shift in product mix, which we expect to improve in the second half of the year. First quarter 2024 margin for our utility structures business was flat with the fourth quarter 2023 margin.
Gail M. Peck: In line with our expectations adjusted segment EBITDA decreased 10%, primarily driven by lower utility structures margin from the shift in product mix, which we expect to improve in the second half of the year.
Gail M. Peck: First quarter 2024 margin for our utility structures business was flat with the fourth quarter of 2023 margin.
Gail M. Peck: We also incurred startup costs for our new concrete utility pole plant that was completed in December, as well as for the New Mexico wind tower plant that is on track to deliver its first towers in the second quarter. These costs were partially offset by higher advanced manufacturing production tax credits for our wind tower business, driven by the increase in volume. Order activity in utility structures was healthy with a book-to-bill ratio above 1, and we received a small wind-tower order for 2024 delivery.
Gail M. Peck: We also incurred startup costs for our new concrete utility pole plant that was completed in December as well as for the New Mexico Wind tower plant that is on track to deliver its first towers in the second quarter. These costs were partially offset by higher advanced manufacturing production tax credits for wind towers business driven.
Gail M. Peck: By the increase in volumes.
Gail M. Peck: Order activity and utility structures with Hep was healthy with a book to bill above one and we received a small wind tower order for 'twenty 'twenty four deliberate.
Gail M. Peck: We ended the quarter with a backlog for utility, wind, and related structures of $1.4 billion, substantially unchanged from the start of the year. This quarter, we recognized an additional $7 million gain on the storage tank divestiture that was completed in 2022 related to the settlement of certain contingencies. This game has been excluded from adjusted segment EBITDA. Turning to transportation products, on slide 14, segment revenues were up 10% driven by higher volume and improved pricing in our barge business. Revenues in our steel components business declined due to a modest decrease in volumes supporting new railcars, partially offset by increased volumes supporting the railcar maintenance market.
Gail M. Peck: We ended the quarter with a backlog for utility wind and related structures of $1 $4 billion substantially unchanged from the start of the year.
Gail M. Peck: This quarter, we recognized an additional $7 million gain on the storage tanks divestiture that was completed in 2022 related to the settlement of certain contingencies. This gain has been excluded from adjusted segment EBITDA.
Turning to transportation products on Slide 14 segment revenues were up 10% driven by higher volume and improved pricing in our barge business.
Gail M. Peck: Revenues in our steel components business declined due to a modest decrease in volumes supporting new railcars, partially offset by increased volumes supporting the railcar maintenance market.
Gail M. Peck: Adjusted segment EBITDA increased 32% and margin expanded by 270 basis points to 16.1% on higher barge volumes and improved margins in both businesses. We ended the quarter with a total barge backlog of $294 million, and we expect to deliver approximately 73% during 2024. I'll conclude on slide 15 with some comments on our cash flow and balance sheet position. We generated $81 million of operating cash flow for the quarter, up $53 million year-over-year, primarily due to lower working capital requirements.
Gail M. Peck: Adjusted adjusted segment, EBITDA increased 32% and margin expanded by 270 basis points to 16, 1% on higher barge volumes and improved margin in both businesses.
Gail M. Peck: We ended the quarter with a total barge backlog of $294 million and we expect to deliver approximately 73% during 2024.
Gail M. Peck: I'll conclude I'll conclude on slide 15, with some comments on our cash flow and balance sheet position.
Gail M. Peck: We generated $81 million of operating cash flow for the quarter up $53 million year over year, primarily due to lower working capital requirements.
Gail M. Peck: First quarter capital expenditures were $54 million, up $10 million from the prior year, reflecting progress on organic projects in construction products and engineered structures. This translated into first quarter free cash flow of $30 million, up from $7 million in the prior period. We are revising our full-year CAPEX guidance to $190 million to $205 million, an increase of $15 million at both ends of the range to include Ameron as well as the pace of first quarter CapEx.
First quarter capital expenditures were $54 million up $10 million from the prior year, reflecting progress on the organic projects in construction products and engineered structures.
Gail M. Peck: This translated into first quarter free cash flow of $30 million up from 7 million in the prior period.
Gail M. Peck: We are revising our full year capex guidance to $190 million to $205 million, an increase of $15 million to both ends of the range to include Ameron as well as the pace of first quarter Capex right.
Gail M. Peck: Our range now anticipates $65 million to $70 million of growth CapEx in 2023. We ended the quarter with net debt to adjusted EBITDA of 1.2 times and available liquidity of $555 million. Pro forma net debt to adjusted EBITDA following the completion of the Ameron acquisition in April is 1.7 times below our long-term target range of 2 to 2.5 times. With pro forma available liquidity of $375 million and no material near-term debt maturities, our healthy balance sheet and ample liquidity continue to provide flexibility for our capital allocation strategy. I will now turn the call back over to Antonio for an update on our 2024 outlook. Thank you, Gail.
Our range now anticipate $65 million to $70 million of growth Capex in 2023.
Gail M. Peck: We ended the quarter with net debt to adjusted EBITDA of 1.2 times and available liquidity of $555 million.
Gail M. Peck: Pro forma net debt to adjusted EBITDA. Following the completion of the Ameron acquisition in April is one seven times below our long term target range of two to two and a half times.
Gail M. Peck: With pro forma available liquidity of $375 million and no material near term debt maturities, our healthy balance sheet and ample liquidity continue to provide flexibility for our capital allocation strategy.
Gail M. Peck: I will now turn the call back over to Antonio for an update on our 2020 for outlook.
Antonio Carrillo: Thank you, Gail. I'm excited to build upon the success of the past year and the momentum from the first quarter. In addition to the organic capital projects underway, M&A is an important growth driver for Arcosa, and we have a healthy pipeline of potential acquisitions. Turning to slide 17.
Antonio Carrillo: Thank you Gail.
Antonio Carrillo: I'm excited to build upon the success of the past year and the momentum from the first quarter.
Antonio Carrillo: In addition to the organic capital breaks on their way and my name is an important growth driver for our culture, and we have a healthy pipeline of potential acquisitions.
Antonio Carrillo: Turning to slide 17.
Antonio Carrillo: We are increasing our guidance for 2024 as a result of the contribution from Ameron along with the better than expected first quarter results. We are increasing our 2024 revenue guidance to a range of $2.58 billion to $2.78 billion. We're increasing our 2024 adjusted EBITDA guidance to a range of $410 million to $440 million, which at the midpoint is up 6% from our prior guidance. We continue to expect our cadence of EBITDA growth to be more second-half weighted.
Antonio Carrillo: We are increasing our guidance for 'twenty to 'twenty four as a result of the contribution from Mammer, along with the better than expected first quarter results.
Antonio Carrillo: We are increasing our 2020 for revenue guidance to a range of $2 58 billion to $2 78 billion.
Antonio Carrillo: We're increasing our 2024 adjusted EBITDA guidance to a range of $410 million to $440 million, which at the midpoint is up 6% from our prior guidance.
Antonio Carrillo: We continue to expect our cadence of EBITDA growth to be more second half weighted.
Antonio Carrillo: Turning next to slide 18 to review our growth. We expect the momentum we experienced in the first quarter to continue, reflective of healthy industry demand and better overall prices. For construction products, ongoing increased infrastructure spending, heavy manufacturing, data centers, and multifamily housing construction in some markets are driving demand. In contrast, near-term demand for new single-family housing is still weak, but the medium-term outlook is supported by expected population migration into our key markets.
Antonio Carrillo: Turning next to slide 18 to review our growth businesses, we expect the momentum we experienced in the first quarter to continue reflective of healthy industry demand and better overall pricing for construction products ongoing increased infrastructure spending heavy manufacturing data centers in multifamily housing.
Antonio Carrillo: In construction and some markets are driving demand.
Antonio Carrillo: In contrast, near term demand for the new single family housing is still weak, but medium term outlook is supported by expected population migration into our key markets.
Antonio Carrillo: For engineer structures, demand for utility and related structures remains strong, driven by increased CAPEX programs for grid improvement initiatives and alternative energy sources coupled with healthy DOT spending in the Southeast. We continue to have strong backlog visibility in this business. Moving next to our cyclical businesses, starting with wind towers on slide 19. The overall demand outlook is favorable as 2024 represents what we expect to be the start of a multi-year upcycle for wind towers.
Antonio Carrillo: For engineered structures demand for utility and related structures remains strong driven by increased Capex program for grid improvement initiatives and alternative energy sources, coupled with healthy <unk> spending in the South east.
Antonio Carrillo: We continue to have strong backlog visibility in this business.
Antonio Carrillo: Moving next to our cyclical businesses, starting with wind towers on slide 19.
Antonio Carrillo: The overall demand outlook is favorable as 2024 represents what we expect to be the start of a multiyear up cycle for wind towers.
Antonio Carrillo: As I mentioned last quarter, we expect to ramp up wind tower capacity over the next couple of years to support growing demand. At the New Belen, New Mexico plant, we recently completed the first tower section and will begin delivering towers in the second quarter of this year.
Antonio Carrillo: Mentioned last quarter, we expect the ramp up wind power capacity over the next couple of years to support growing demand.
Antonio Carrillo: The new <unk>, New Mexico plant, we recently completed the first tower section and we'll begin delivering towers in the second quarter of this year.
Antonio Carrillo: Additionally, during the first quarter, we booked a $10 million order for delivery this year. Interest in onshore wind projects remains high, and we have ongoing discussions with our customers. We have a healthy wind tower backlog of nearly $1 billion and are focused on selling our capacity for 2025 and beyond. Turning to slide 20.
Antonio Carrillo: Additionally, during the first quarter, we booked a 10 million order for delivery this year.
Antonio Carrillo: Interest in onshore wind projects remains high and we have ongoing discussions with our customers.
Antonio Carrillo: We have a healthy wind tower backlog of nearly $1 billion and are focused on selling our selling our capacity for 2025 and beyond.
Turning to slide 20.
Antonio Carrillo: The demand outlook for Indian barges is healthy and with improving prospects. During the first quarter, we received additional orders for both hopper and tank barges, totaling $120 million. Our backlog at the end of the first quarter was up 16% from the beginning of the year and now extends into 2025. Importantly, we see significant growth potential for new hopper barge demand due to several years of underinvestment, resulting in an aging fleet. Furthermore, following two consecutive quarters of new tank barge orders, we're cautiously optimistic about the future of liquid fleet demand.
Antonio Carrillo: The demand outlook for inland barge is healthy and with improving prospects. During the first quarter. We received additional orders for both hopper and tank barges totaling $120 million.
Antonio Carrillo: Our backlog at the end of the first quarter was up 16% from the beginning of the year and now extends into 2025.
Antonio Carrillo: Importantly, we see significant growth potential for new corporate barge demand due to several years of under investment, resulting in an aging fleet.
Antonio Carrillo: Furthermore, following two consecutive quarters of new tank barge orders, we're cautiously optimistic about the future of liquid flip the month.
Antonio Carrillo: For the last couple of years, given the low tank barge demand, we have been producing mostly hopper barges at both of our active operating plants. This is not the ideal production mix since one of the plants is better suited for tank barge production.
Antonio Carrillo: For the last couple of years, given the low tank barge demand, we have been producing mostly hopper barges in both of our active operating plants.
Antonio Carrillo: This is not the ideal production mix is one of the plants is better suited for tank barge production with the increase in tank barge orders on a better outlook, we will be realigning the production mix in our plants. So they can focus on producing barges that maximize efficiency and margins.
Antonio Carrillo: With the increase in tank barge orders and a better outlook, we will be realigning the production mix in our plants so they can focus on producing barges that maximize efficiency and margin. We expect some impact on margin in the second quarter while we align production, but this change should help us improve our margins once the realignment is done. Before opening the call for questions, the last topic I want to cover today is sustainability on page 21.
We expect some margin some impact on margin in the second quarter, while we align production, but this change should help us improve our margins once the realignment is dog.
Antonio Carrillo: Before opening the call for questions. The last topic I wanted to cover today is sustainability on page 21 as.
Antonio Carrillo: As always, our goal is to grow and operate in an even more efficient, sustainable, and impactful manner. Last week, we published our 2023 sustainability report. This is our fourth annual report and builds on our Emissions Tracking, Environmental Metrics, Disclosures, and Conservation Initiatives. To that end, some of our most recent advances include a 17% reduction in greenhouse gas emission intensity compared to our 2020 baseline and tracking ahead of our 2026 goal, improved water efficiency with a 22% reduction year-over-year, and on the employee safety side, lost workdays due to injuries declined more than 60% compared to our prior year.
As always our goal is to grow and operate it in an even more efficient sustainable and impactful manner.
Antonio Carrillo: Last week, we published our 2023 sustainability report this.
Antonio Carrillo: <unk> is our fourth annual report and builds.
On our emission striking environmental metrics disclosures and conservation initiatives does that in some of our most recent advances include a 17% reduction in greenhouse gas emission intensity compared to our 2020 baseline I'm tracking ahead of our 2026 goal.
Improved water intensity efficiency with a 22% reduction year over year and on the employee safety side lost work days due to injuries declined more than 60% compared to our prior year.
Antonio Carrillo: The 2023 report also highlights many of our community-focused initiatives as well as some of our products that contribute to a more sustainable future. We encourage you to read the report, which can be found on our website.
Antonio Carrillo: 2023 report also highlights many of our community focused initiatives as well as some of our problems that contribute to a more sustainable future. We encourage you to read the report which can be found on our website.
Antonio Carrillo: In closing... We had a solid start to the new year, and after a slow January, we have built positive momentum. Across our businesses, we remain focused on operational execution, portfolio optimization, and allocating capital to our growth businesses both organically and through acquisitions. We expect healthy market fundamentals to continue to drive solid results in our growth businesses, while our cyclical businesses are poised to benefit from increased production and greater operating leverage. With strong demand for our products and a fantastic team, I'm more optimistic than ever about the future of Arcosa. Operator, let's open the line for questions.
Antonio Carrillo: In closing.
Antonio Carrillo: We had a solid start to the new year and after a slow January we have built positive momentum.
Antonio Carrillo: Across our businesses, we remain focused on operational execution portfolio optimization, and allocating capital to our growth businesses, both organically and through acquisitions.
We expect healthy market fundamentals to continue to drive solid results in our growth businesses, while our cyclical businesses are poised to benefit from increased production and greater operating leverage with strong demand for our products and our fantastic team I'm more optimistic than ever in the future of our closer operator, let's open the line for questions.
Operator: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you find that your question has been answered, you may remove yourself by pressing star 2. Once again, that is star 1 if you would like to ask a question and star 2 to remove yourself. We'll go first to Ian Zaffino with Oppenheimer.
Speaker Change: Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad. If you find that your question has been answered you may remove yourself by pressing star Q. Once again that is star one if you would like to ask a question and start to to remove yourself.
Speaker Change: We'll go first to Ian Zaffino with Oppenheimer.
Ian Alton Zaffino: Hi, great, thank you very much. Great quarter, and thanks for the out... Can you guys maybe talk about a little bit more about what's going on in New Mexico right now as far as, you know, what's basically baked into guidance there as far as deliveries or shipments and then also at what point do you start to eat through all the cost absorption and become profitable in that factory, in that facility? And then any other discussions about any orders that you might see in addition to that? I know you had a smaller one, but I think we're all expecting kind of a bigger one as well. Maybe kind of thoughts on that as well, or some color. Thanks. Yes.
Ian Alton Zaffino: Hi, great. Thanks, Thank you very much great quarter and thanks for the outlook.
Ian Alton Zaffino:
Ian Alton Zaffino: Can you talk about a little bit more about what's going on in new Mexico right now as far as.
Ian Alton Zaffino: But basically baked into guidance there.
Ian Alton Zaffino: As far as deliveries of shipments and then also at what point do you start to eat through other cost absorption and become profitable.
Ian Alton Zaffino: In that factory in that facility.
Ian Alton Zaffino: And then any other discussions about any orders that you might see in addition to that I know you had a smaller one but I think we're all expecting kind of a bigger one as well maybe kind of thoughts on that as well or some color. Thanks.
Antonio Carrillo: Yes, Ian, this is Antonio, and I have a very fresh, I was there last week. We had a ceremony with the Secretary of Energy, cutting the ribbon for our first section coming out of the plant. So the plant is looking great.
Speaker Change: Yes, yes, there's some formula.
Speaker Change: Have a very fresh I was there last week, we had the ceremony with the secretary of energy cutting the ribbon for a first sexual coming out of the plant. So the plant is looking great.
Antonio Carrillo: We are very excited about not only the facility, the new technology we're installing there, but also the people we're hiring. Our team there is very, very happy with the quality of the employees and the number of employees we're hiring there. So everything seems to be going well. Of course, as we discussed before, we have close to 150 people now at the plant. So that's a significant cost that we are incurring every month.
Speaker Change: We are very excited about not only the facility with the new technology, we're installing there on the the people we're hiring our team there is very very happy with the quality of the employees and the amount of employees. We're hiring there so everything seems to be going well of course as we discussed before we have over a close to a 100.
Speaker Change: 50 people now with the plant. So that's a significant cost that we are in current every month.
Antonio Carrillo: But it's going very well. We mentioned, as we have mentioned before, we always said mid-year we would deliver the first tower. This is my remarks. I said in the second quarter that we're going to do it. So we're moving along as planned, on schedule, and on budget in the plant, which is important. Throughout the year, you will see the plant starting to improve from first a loss, then to a slight profit, and eventually, we should get somewhere late this year, early next year. Our expectation today is that in the fourth quarter, it should be profitable and accretive to margins for the season.
Speaker Change: But it is growing very well we mentioned we have mentioned before we always said mid year, we will deliver the first tower.
Speaker Change: This is my remarks, I said it in the second quarter, we're going to do it. So we're moving along as planned on schedule and on budget and the plant which is important.
Speaker Change: Throughout the year, you will see the plants starting to improve from first the loss then to a slight profit and eventually we should get some time late year early next year.
Speaker Change: Our expectation today is that in the fourth quarter, it should be profitable and accretive to margins for this segment.
Antonio Carrillo: Okay. In terms of orders, it was a small order. As we mentioned a couple of conference calls ago, we're also building some test wind towers for another customer. Discussions are open with both our large customers to continue to expand the business. I would say that, like everything I always mention in this business, this business is not that you get a few orders here and there. We got one this time, and you might see a few others.
Okay.
Speaker Change: In terms of orders, let me just.
Speaker Change: Was this more of a weather as we mentioned in a couple of conference calls ago. We were building also some test that's the wind towers for another customer.
Speaker Change: Discussions are open with both our large customers to continue to expand the business.
Speaker Change: I would say that.
Speaker Change: Like everything I always mention on this business. This business is not that you'll get a few orders here and there. We got one this time on it you might see a few others, but our goal is really to get a larger order to fill the capacity we have four plants, including new Mexico, one is idle.
Antonio Carrillo: But our goal is really to get a larger order to fill the capacity. We have four plants, including New Mexico. One is idle, and the other two plants are still operating at relatively low capacity.
Including new Mexico on the other two plants are still operating at a relatively low capacity because we have a lot of capacity to sale and the industry is poised to grow tremendously so.
Antonio Carrillo: So we have a lot of capacity to sell, and the industry is poised to grow tremendously. So we've met with developers, we've met with all the interested parties, and we're still very, very optimistic that throughout 2025, and maybe for 2026, we'll be able to sell that capacity. And remember, the tax credit is very long, until 2032. So we have a very long line of sight for this business.
Speaker Change: We've met with developers with met with it with a with all the interested parties and we're still very very optimistic that throughout 'twenty five and maybe 426, we'll be we'll be able to sell that capacity.
Speaker Change: And remember the tax credit has.
Speaker Change: It's very low until 2032, so we have a very long lineup.
Speaker Change: A line of sight for this for this business.
Antonio Carrillo: Okay, thanks. And then, just on the rail component side, I know that you got a favorable anti-dumping ruling over there. I think there were some pretty large tariffs on the Chinese and then also some of the Mexicans to a lesser degree. What are you seeing there? Has that helped your demand in that business? Is there any kind of funky inventory in the channel going on where some of the dumpers have, you know, then dumped their inventory into the channel? You've got to work through that. How are we thinking about that business? And then also the long-term kind of viability inside your portfolio of that business doesn't make sense.
Speaker Change: Okay. Thanks, and then just on the rail components side I know that you got a favorable.
Speaker Change: Antidumping ruling over there.
Speaker Change: I think there was some pretty large towers and the Chinese and then also some.
Speaker Change: The Mexicans to a lesser degree.
Speaker Change: What are you seeing there has that helped your demand in that business is there any kind of like funky inventory in the channel going on there.
Speaker Change: Some of the Dumpers.
Speaker Change: And then dump their inventory into the channel you got to work through that.
Speaker Change: How are we thinking about that business and then just also the long term kind of viability inside your portfolio of that business doesn't make sense et cetera. Thanks.
Antonio Carrillo: Sure. So, let me talk about what we're seeing. As always with these cases, when you announce you're running a case, you know, a lot of imports happen, and inventory gets built up in the pipeline, etc. But to be honest, we're seeing very positive things out of that. The market we have lost while we did the anti-dumping is we have lost completely the maintenance market, for Rail Components, for four couplers in particular. And what we're seeing today is even though the industry for new railcar production has not been, let's say, doing very well, especially some of our customers' volumes have not been very high. The maintenance piece is doing very, very well. In the first quarter, we had a significant portion of our revenues coming from the maintenance market.
Speaker Change: Sure. So let me talk about the what we're seeing as always with these cases, when you announced you're running a case you know a lot of imports shopping in the inventory gets built in the pipeline et cetera, but to be honest, we were seeing very positive things in that business.
Speaker Change: You know the market we have lost why we did the antidumping is we had lost completely the maintenance market for.
Speaker Change: Our rail components before coupler specifically.
Speaker Change: And what we're seeing today is even though the industry for new railcar production has not been let's say doing very well, especially some of our customers' volumes has not been very high.
Speaker Change: The maintenance piece is doing very very well in the first quarter, we had a significant portion of our of our revenues coming from the maintenance market. We've signed several agreements with railroads for maintenance and not only the railroads a lot of less source. So it still is just starting but we're seeing really positive thing.
Antonio Carrillo: We've signed several agreements with railroads for maintenance, and not only railroads, but a lot of smaller sources. So, it's still just starting, but we're seeing really positive things coming out of the anti-dumping. Again, what we've always said, we don't want any benefits, any preference. We just want a level playing field, and I think the anti-dumping created that.
Speaker Change: <unk> coming out of the antidumping.
Again, what we've always said, we don't want any benefits we were any any preference. We just want the level playing field and I think the antidumping created that in.
Antonio Carrillo: In terms of the long-term, I think as the inventory, the industry through the inventory, that trend should continue, and that maintenance piece should continue to improve. And once this happens, we'll think about the long-term perspective of the business. As we've always said, we're always looking at opportunities. M&A has its own life, so we're always evaluating the fit and the, let's say, the long-term fit for the company and how we can reallocate capital. So we will continue to explore those opportunities.
Speaker Change: In terms of the long term.
Speaker Change: Pink as the inventory.
Speaker Change: The industry through the inventory that trend should continue in that maintenance piece should continue to improve.
Speaker Change: And once this happens it will we'll think about the long term perspective of the business. That's we've always said, we're always looking at opportunities.
Speaker Change: I may have to live.
Speaker Change: <unk> by its own so we're always evaluating defeat them the the the the let's.
Speaker Change: Let's say the long term fit for the for the company and how we can reallocate capital so if.
Speaker Change: We continue to explore those opportunities.
Ian Alton Zaffino: All right, thank you very much. Another great quarter.
Speaker Change: Alright, Thank you very much great quarter again.
Speaker Change: Thank you.
Operator: We'll go now to Brent Thielman with D.A. Davidson.
Speaker Change: We'll go now to Brent Thielman with D. A davidson.
Brent Edward Thielman: Hey, thanks. Good morning. Good quarter as well.
Brent Edward Thielman: Hi, Thanks, good morning, good quarter as well.
Brent Edward Thielman: Antonio could you just talk about maybe the plans for the Amazon all products business.
Antonio Carrillo: Antonio, could you just talk about maybe the plans for the Amaron Pole Products business? Do you intend to put some capital into it? And does this give you sort of the scale you want or need outside of utility and wind structures? Is there more you'd like to do around this segment in general?
And to put some capital into it.
Brent Edward Thielman: Does this give you sort of the scale you want or need.
Brent Edward Thielman: Outside of the utility and wind structures or is there more you'd like to do around this segment in general.
Antonio Carrillo: Yes, Brent, it's a great question. And I'll be honest, if you look at the list of, let's say, targets that we put together in 2018 and 2019, of how to grow the businesses, Ameron was there for us to, we were, we were really wanting to get Ameron in 2018. We reached out to the buyer, and they were not interested, and eventually, I think we participated in the process and were able to get this fantastic asset for our company.
Antonio Carrillo: Yes, Brent it's a it's a great question.
I'll be honest if you look at the if you look at the list of let's say targets that we put together in 2018 in 2019.
How to grow the business as I remember it was there.
Speaker Change: For us too.
Speaker Change: We were really wanting to get Amazon since 2018 and 19.
Speaker Change: We have reached out to the buyer and they were not interested in eventually.
Speaker Change: We participated in that process.
Speaker Change: We're able to get this fantastic asset for four for our company.
Antonio Carrillo: It really complements our products. We have very little to none overlap in product lines, which is what we were looking for. They have a lot of technology capabilities and experience on concrete poles, much more than we do. We are opening our second concrete pole plant in Florida. We have one in Alabama.
Speaker Change: It really complements our approach we have very little to none.
Speaker Change: Lapin product lines, which is what we were looking for and they have a lot of technology capabilities and an experience on concrete poles much more than we do as you know we are opening our second concrete ball plant in Florida, we have one in Alabama, and these guys bring a lot of them.
Antonio Carrillo: These guys bring a lot of competencies to that market, so that's something we're looking for. On the other hand, we bring a lot of steel capabilities that they were just getting into the steel pole market, and we can complement that. We expect a lot of synergies on the technical side, on the technology side. They have a great team.
Speaker Change: Competencies in that market. So that's something we're looking for on the other hand, we bring a lot of steel capabilities that they were just getting into the steel market and we can complement that Troy, we expect a lot of synergies on the technical side on the technology side.
Speaker Change: They have a great team, we're very happy to have the team come to tour goes up I think when you talk to the team. They are excited to be part of a company where they are now.
Antonio Carrillo: We're very happy to have the team come to Arcosa. I think when you talk to the team, they are excited to be part of a company where they are now in a business that's very important. We're going to pay attention. We're going to allocate capital. We're going to help them grow. It was a little bit like when we were part of Trinity, where we were not the growth engine for the company. They were a little bit like that in their previous owner.
Speaker Change: In a business that is very important we're going to pay attention, we're going to allocate capital we're going to help them grow.
Speaker Change: And they were a little bit like we were when we were part of Trinity, where we were you know.
Speaker Change: Not being the the growth.
Speaker Change: The growth engine for the company they were a little bit like that within their previous owner. So we're excited to see that and we're excited to learn all the ideas that they have for growth.
Antonio Carrillo: We're excited to see that. We're excited to learn all the ideas that they have for growth and the cross-selling and cross-opportunities for the business. We're very excited.
Speaker Change: The cross selling and cross opportunities for the business. So we're very excited.
Antonio Carrillo: Gail mentioned a little bit of CapEx. Don't believe that the majority of the CapEx increases are for Ameren. We have about $5 million of the CapEx increase going to them, but it's not a big amount.
Speaker Change: Gail mentioned, a little bit of Capex that don't don't believe that the majority of the Capex increase East you said.
Speaker Change: For for Amazon, we have about $5 million of the Capex increase going to them.
Speaker Change: But it's not a big amount they they their plants were in really good shape.
Antonio Carrillo: Okay, appreciate that Antonio. I guess just sticking with that segment, I mean, it sounds like you'll have a nice acceleration in wind revenue and wind deliveries this year. What's the view for, I guess, the traditional kind of utility? Structures Business. In terms of the growth outlook for this year, are there any... Air Pockets, and then, you know, how do you think about it in the coming years in terms of the overall growth rate for the segment? Sure. So, the answer is the...
Speaker Change: Okay.
Speaker Change: Appreciate that and Johnny and I guess, just sticking on that segment I mean, it sounds like Youll have a 96 celebration.
Speaker Change: Wind revenue when deliveries this year.
Speaker Change: What's the view for I.
Speaker Change: I guess, the traditional kind of utility.
Speaker Change: Structures business in terms of the growth outlook for this year are there any.
Speaker Change: Air pockets and then how do you think about it did they coming years in terms of a growth rate overall for this business segment sure.
Antonio Carrillo: Sure. So, the utility structures, you know, as we mentioned for the last couple of quarters, we had a product mix and customer mix that was hurting our margins. We're working through that, and that's why we've said that the second half of the year should go back to more normalized and growth margins. If you look at the long-term perspective of the business, it's very, very good. I would say every time you look at a forecast for the utility segment, it's higher than the previous forecast. The book-to-bill ratio is over one.
Speaker Change: Sure.
Speaker Change: So the utility structures.
Speaker Change: As we mentioned for the last couple of quarters, we had a product mix and customer mix. That's hurting our margins, we're working through that and that's why we've said that the second half of the year should go back to more normalized gross margins.
Speaker Change: If you look at the long term perspective of the business. It's very very good I would say every time you look at our forecast for the utility segment.
Speaker Change: It's higher than the previous forecast.
Speaker Change: The book to Bill is over one.
There's always noise in their delivery times and things like that but overall, we are extremely high.
Speaker Change: Optimistic about the future of the business.
Antonio Carrillo: There's always noise in delivery times and things like that. But overall, we're extremely optimistic about the future of the business. And what you see in the industry in general, I mean, the whole electric industry, the power industry, is incredible what's happened over the last year, the changing trends in the expected low demand for the country. From everything coming from industry, factories, near-soaring data centers, you will need a lot of power, and you will need a lot of transmission lines to supply those new plants and that new load connected to the power sources.
Speaker Change: And what you see in the industry in general I mean, the whole electric industry the power industry is.
Speaker Change: Incredible whats happening over the last year the change in trends in the expected low demand for the country.
Speaker Change: From everything coming from industry factories near shoring.
Speaker Change: Data centers, you will need a lot of power and you'll need a lot of transmission lines to supply those new plants and new load.
Speaker Change: With connected with the with the power sources, so I'm very optimistic about it there will be noise ups and downs.
Antonio Carrillo: So I'm very optimistic about it. There will be ups and downs, so it's not going to be a straight line.
Speaker Change: It. So so it's it is not going to be a straight line. The only thing that you have to notice this business is very.
Antonio Carrillo: The other thing that you have to notice is that this business is very sensitive to steel prices. So sometimes there is noise in our revenue line that reduces our margin because steel prices went up. And as you know, we passed through those steel prices to our customers. There's going to be some noise.
Speaker Change: Sensitive to steel prices. So there are sometimes there is noise in our revenue line.
Speaker Change: And that reduces our margin because steel prices went up and as you know we have put pass through those those steel prices to our customers. So.
Speaker Change: There is going to be some noise. We are very optimistic about the second half of the year.
Antonio Carrillo: We are very optimistic about the second half of the year and especially about the long-term growth of the business, and we're investing in the business. Now, going back to the question about more acquisitions, this is mostly an organic growth business. We don't see a lot of M&A in this business. It's mostly organic what we're investing in.
Speaker Change: Especially in the long term.
Speaker Change: Growth of the business and we are.
Speaker Change: We're investing in the business so going back to your question on more acquisitions. This is mostly an organic growth businesses. We don't see a lot of M&A in this business is mostly organic what we're investing in it.
Speaker Change: Okay very good thank you.
Operator: We'll go now to Garik Shmois with Loop Capital Markets.
Speaker Change: Well go now to Gary Weiss with loop capital markets.
Garik Simha Shmois: Oh, hi. Thanks. Congratulations on the quarter. I wanted to ask just about the guidance, you know. Part of the raise was a stronger first quarter, part of it was the Amaron acquisition, but I'm wondering if, you know, just in general, has your outlook for the remainder of the year changed at all?
Gary Weiss: Oh, hi, thanks, congratulations on the quarter I wanted to ask just on the guidance.
Gary Weiss: Part of the raise was.
Gary Weiss: The stronger first quarter part of it was the Ameron acquisition, but I'm wondering if just in general as your outlook for the remainder of the year changed.
Gary Weiss: Changed at all.
Antonio Carrillo: No, I think everything seems to be going in line with what we expected at the beginning of the year. As you know, we're just getting started in the first quarter.
Speaker Change: No I think everything seems to be going going in line with what we expected at the beginning of the year as you know, we're just getting started as the first quarter.
Antonio Carrillo: What I mentioned in my remarks is we're very excited about the momentum we saw through the quarter. So January was really bad for us, not only in construction materials, but we shut down several of our plants. We had curtailment in gas in several plants. So some employees couldn't get to work.
Speaker Change: What I mentioned in my remarks is we're very excited about the momentum we saw through the quarter. So January was really bad for us not only in the construction materials, but it would freeze shutdown several of our plants.
Speaker Change: We have curtailment in gas in several plants. So it was it was some employees couldnt get to work. So we have a really tough January but we saw February and March really pick up and have a very good results. So we're excited on the momentum we're picking.
Antonio Carrillo: So we had a really tough January, but we saw February and March really pick up and have very good results, so we're excited about the momentum we're picking up. For the rest, everything seems to be going in line with what we expected at the beginning of the year.
Speaker Change: The rest everything seems to be going in line with what we expected at the beginning of the year.
Antonio Carrillo: Okay, just wanted to follow up on the production shift on the barge side that's going to happen in the second quarter. You indicated that there could be some modest headwinds in the second quarter. I was wondering if maybe you could provide a little bit more context around that, and you know, would you anticipate the mixed headwinds to be recovered by the end of the year, or would you anticipate that to be a little bit longer?
Speaker Change: Okay.
Speaker Change: Just wanted to follow up just on the.
Speaker Change: Production.
Speaker Change: Just on the barge side, that's going to happen in the second quarter. I think you indicated that there could be some some modest headwinds to the second quarter. It was wondering if maybe you could provide a little bit more context around.
Speaker Change: That and would you anticipate the mix headwinds to be recovered by the end of the year.
Speaker Change: We anticipate that to be a little bit longer.
Antonio Carrillo: It's isolated to the second quarter, maybe the beginning of the third quarter. But what I want to say is, this is good news. So we have not received tank barge orders in a long time, and over the last couple of quarters, we have received really sizable, not huge, but sizable orders for tank barges. And not only have we received orders, but the tone we're seeing from our customers, which a year ago were saying, well, I don't need anything.
Speaker Change: Yeah. It's it's it's it's a second quarter, it's isolated to the second quarter or maybe the beginning of the third quarter, but it's it's what what I wanted to say is this is good news. So we have not received it.
Speaker Change: Think barge orders in a long time on over the last couple of years.
Speaker Change: Or sorry, a couple of quarters, we have received.
Speaker Change: Really sizable not huge but sizeable orders for tank barges.
Speaker Change: Not only did we receive orders, but the tone that we're seeing from our customers, which a year ago were saying well they don't need anything.
Antonio Carrillo: All of them are coming and saying, look, we see all these replacements coming in the near future, and there's not going to be enough capacity to supply the replacement tank barges. So I want to get ahead of the curve and start getting my fleet in order.
Speaker Change: All of them are coming and saying look we feel this replacement coming in the near future and there is not going to be enough capacity to supply the replacement of tank barges. So I want to get ahead of the curve on starts.
Speaker Change: Getting my fleet in order their social a significant headwind.
Antonio Carrillo: There's also significant headwinds for the barge operators right now, tank barge operators, because of the maintenance situation. There are a significant number of barges that have to be maintained and recertified over the next year. So that's creating a significant, let's say, shortage of barges in the short term. So I think if you take all of those things into account, the outlook for the tank barge business has improved for us, and that's allowing us to shift production.
Speaker Change: Headwind for the barge.
Speaker Change: Operators right now tank barge operators.
Speaker Change: Because of the maintenance situation.
Speaker Change: A significant number of barges that have to be maintained.
Speaker Change: And recertified over the next year, so that's creating significant.
Speaker Change: Shortage of barges in the short term. So I think if you put all of those things.
Speaker Change: The outlook for the tank barge business has improved for us and that's allowing us to shift production. Some of these new tank barges were going to put them in a plant that makes it was really good and very efficiently and making them barges.
Antonio Carrillo: Some of these new tank barges, we're going to put them in a plant that is really good and very efficient at making tank barges and leave the hopper barges in the other plant. And once we do that, I think we're going to see a much better production rhythm in the plants, and the efficiency should go up, and then we will be able to maximize our margins. So it's really good news what we're seeing, and it's really good news that we're able to now have the orders to realign our plants.
Speaker Change: And leave the hopper barges in the other plant.
Speaker Change: And once we do that I think we're going to see a much.
Speaker Change: Much better production, let's say rhythm in the plants and the efficiencies should go up and then we will be able to maximize our margins. So it's really good news, what we're seeing and it's really good news that we're able to have the orders to realign our plants, we will get some little bit of a headwind in the short term, but that's that's.
Garik Simha Shmois: Understood. No, thanks for all that, and I'll pass it on.
Speaker Change: Hey.
Speaker Change: Understood. Thanks for all that and I'll pass it on.
Operator: We'll turn now to Trey Grooms with Stevens.
Trey Grooms: We'll turn now to Trey grooms with Stephens.
Trey Grooms: Hey, good morning. And congrats on the quarter as well. Nice work.
Trey Grooms: Hey, good morning.
Trey Grooms: And congrats on the quarter as well nice work.
Antonio Carrillo: Could you guys maybe talk about your, you know, as you kind of look out there at the construction products business? Could you talk about the demand expectations there? I mean, have you seen, I know you touched on this a little bit, Antonio, but as far as the end markets are concerned, have you seen any shifts at all, you know, in the private markets, especially, from, you know, kind of this hire for longer narrative that we've been hearing? Any changes there that you've seen at all, or is it still kind of steady as she goes?
Trey Grooms: Could you guys.
Trey Grooms: Maybe talk about your as you kind of look out there to the construction products business.
Trey Grooms: Could you could you talk about the demand expectations. There I mean have you seen I know you touched a little bit on it Antonio but as far as the end markets are concerned have you seen any any shifts at all.
Trey Grooms: The private markets, especially.
Trey Grooms: From kind of this higher for longer narrative that we've been hearing.
Trey Grooms: Any changes there that you've seen at all or is it still kind of steady as she goes.
Antonio Carrillo: You know, I mentioned in my comments that I think there's a... Remember, we are a little detached from all the projects, meaning we sell a lot of FOB to our plants. What we're seeing from our customers is that the concept of larger projects finally hitting the ground seems to be happening. So anecdotally, we see a lot of more larger projects tied to the infrastructure spending being finally awarded. We are continuing to see a lot of heavy manufacturing in certain regions.
Antonio Carrillo: You know I mentioned in my comments I think there is a.
Antonio Carrillo: Jim.
Speaker Change: And remember we are a little detached from the from the from all the projects, meaning we sell a lot if it will be through our plants. What we're seeing from our customers is they the concept of larger projects finally, hitting the ground.
Speaker Change: It seems to be happening so anecdotally, we see a lot of more larger projects tied to the infrastructure spend.
Speaker Change: Spending is being finally awarded.
We are continuing to see a lot of heavy manufacturing in certain regions. It was hearing a lot more of the data center situation. That's that's coming.
Antonio Carrillo: We're hearing a lot more about the data center situation that's coming, and multi-unit housing is also continuing to grow in certain regions. But what we continue to see is kind of different regions have a different situation in the housing market, and it's still not where it needs to be. I think the potential is there, but we're still seeing mortgage rates still very, very high, et cetera.
Speaker Change: And and multi mode multi.
Speaker Change: Unit housing is also continuing to grow in certain regions. We continue to see kind of a different regions have a different situation when the housing market.
Speaker Change: And it's still not it's still not where it needs to be I think the potential is there, but we are still seeing youll see more mortgage rates still very very high et cetera. So I think the housing piece continues to weigh on the total total business for us.
Trey Grooms: So I think the housing piece continues to weigh on the total business for us. Gail also mentioned during the quarter we have the only asphalt business that we are losing money on. It's a very regional business, subscale, doesn't fit our footprint. We really like the asphalt market, but this one really doesn't fit, so we're working to fix that. But overall, we're happy with where we see demand. Pricing continues to be a positive force for us.
Speaker Change: Also mentioned during the quarter, we have you know the only asphalt business that we have.
Speaker Change: Losing money, it's a very regional business subscales doesn't fit our footprint, we really liked the asphalt market, but this one really doesn't repeat so we're working to fix that.
Speaker Change: But overall, where we.
Speaker Change: We're happy with where we see the demand pricing continues to be the positive force for US as you scaled mentioned volumes were a little down in the total business organically, but when you add the acquisitions. They were a little up I think we we don't expect.
Trey Grooms: As Gail mentioned, volumes were a little down in the total business organically, but when you add the acquisitions, they were a little up. I think we don't expect volumes to be the driver of the business this year.
Speaker Change: Volume to be the driver of the business. This year, it's more a pricing situation and hopefully the second half gets better volumes.
Antonio Carrillo: Okay, that's helpful. Thanks for that color.
Speaker Change: Okay.
Speaker Change: That's helpful. Thanks for that color and that's a good segue into my next question.
Trey Grooms: And that's a good segue into my next question. You know, with the demand picture you have. And I'd say pricing has been tracking, you know, better than what we've seen historically for aggregates specifically. And, you know, you've seen a lot of folks in the industry and some of your public competitors as well on the aggregate side widely indicating mid-year pricing increases again this year. What are your thoughts around that? Are you guys starting to, you know, think about additional price actions in the year or kind of how are you seeing that play out, Antonio?
Speaker Change: With the demand picture you have in.
Speaker Change: I'd say pricing has been tracking better than what we've seen historically for aggregates, specifically and you've seen a lot of folks in the industry and some of your.
Speaker Change: Public competitors as well on the aggregate side.
Widely indicating.
Mid year pricing increases again this year.
Speaker Change: What are your thoughts around that.
Speaker Change: Starting to.
Speaker Change: Thinking about additional price actions in the year or kind of how are you seeing that play out tonio.
Antonio Carrillo: Yes, we are. I think what I always mention is we're no different from our competitors, I think, throughout the year.
Tonio: Yes, we are I think we you know what I always mention is we're no different than our competitors I think throughout the year, what we try to do as you know inflation continues to be an issue. So we have to continue to adjust our pricing to compensate them and again the focus if you remember one of my comments I think in the last call with.
Antonio Carrillo: What we try to do, as you know, inflation continues to be an issue, so we have to continue to adjust our pricing to compensate. And again, the focus, if you remember one of my comments from the last call, we changed our compensation system for all our businesses, but specifically for construction. They're tied to margins. Part of their compensation is tied to margins, so our goal over the next year is to continue to raise margins and focus on pricing. And ideally, once you get your pricing up, when volume comes back, we'll have, let's say, the double impact of that combination. So yes, we expect to continue raising prices throughout the year.
Tonio: Changed our compensation system for all our businesses, but specifically for construction, they're tied to margins there.
Tonio: Part of their compensation is tied to margin. So our goal over the next year is to continue to raise margins I am focused on pricing.
Tonio: Ideally once you get your pricing up when volume comes back we will have a let's say the double impact of that combination. So yes, we expect to continue raising prices throughout the year.
Trey Grooms: Great. Thank you. I've got one last kind of follow-up here just for clarification.
Tonio: Great.
Speaker Change: Thank you I've got one last kind of follow up here just just for clarity.
Antonio Carrillo: You know, on specialty materials, you mentioned in the press release that, excuse me, you expect better plant efficiency and workforce stability. Can you kind of talk about the timing and you know what kind of benefit you might be looking at for CP margins as far as the balance of the year? Thank you. Let me give you the plant. If you remember, in the second quarter, second or third quarter last year, we had a pretty significant we ramped up, we started the plant. The plant went through significant issues. We also had, you know, labor issues there. We had a plant manager problem, so it went through a complicated portion mid-year last year.
On specialty materials, you mentioned in the press release that you had.
Speaker Change: Excuse me that you expect.
Speaker Change: Better plant efficiency and workforce stability can you kind of talk about.
Speaker Change: The timing and what kind of benefit you might be looking at for <unk>.
Speaker Change: <unk> margins as far as the balance of the year.
Speaker Change: So let me give you the the plant if you remember in the second quarter second or third quarter last year, we had a break.
Significantly we ramped we started the plant the plant went through significant issues. We also had.
Speaker Change: Labor issues, there we had a plant manager problem. So it went through a complicated eh.
Antonio Carrillo: Since then the plant has finally we finished the plant we interconnected the whole system and we the plant is ramping up and the production is going up I think it's a third quarter that we have improved improved production and this is second quarter where we have improved a margins so the trend is very very good we we have a nice stable workforce we have a the plant is running very well I was there a month ago and it looks the plant is beautiful demand is there we have a very strong demand for the products and as this ramps up we expect a better better results for this business and eventually to be you know as we've always said this business has lower margins than the the aggregates business but eventually we expect it to get to the 20% margins that we should be getting for this business.
Speaker Change: Or is it mid year last year. Since then the plant has finally.
Speaker Change: Finish the plant, we interconnect the whole system.
Speaker Change: The plant is ramping up and the production is going up I think it is.
Speaker Change: Third quarter that we have improved it improved production.
Speaker Change: This is second quarter, where we have improved.
Margins. So the trend is very very good.
A nice stable workforce, we have the plant is running very well.
Speaker Change: Was there a month ago and it looks the Bluntest beautiful demand is there we have a very strong demand for the products.
Speaker Change: And as this ramps up we expect a better better results for this business and eventually to be.
Speaker Change: As we've always said this business has lower margins than the big the aggregates business, but eventually we expect it to get to the 20% margins that we should be getting for this business.
Gail M. Peck: And good morning, this is Gail. Trey, I might add, I had mentioned in my comments that you asked about the margin potential. I did indicate in my comments that it was 40 basis points accretive to the segment margin year-over-year change in the first quarter. That's up a little bit from what we experienced in the fourth quarter. So, as Antonio said, very pleased with the progress that we're seeing there. Great, thank you
Speaker Change: Great.
Speaker Change: Trey I might add I had it in my comments you asked about the margin potential I did I did indicate in my comments that.
It was 40 basis points accretive to the segment margin year over year change in in the first quarter.
Speaker Change: That's up a little bit from what we experienced in the fourth quarter. So very as Antonio said very pleased with the progress that we're that we're seeing there.
Trey Grooms: Great. Thank you, Gail. I did miss that comment. Well, that's all great colors. Thank you so much and look forward to seeing you guys next month at Investor Day.
Speaker Change: Great. Thank you I did miss that comment.
Speaker Change: Well, that's all great color. Thank you so much and look forward to seeing you guys next month at the Investor Day.
Speaker Change: Thank you. Thank you.
Operator: We'll go now to Julio Romero with the Sidotium Company.
Speaker Change: We'll go now to Julio Romero with Sidoti <unk> company.
Julio Alberto Romero: Hi, good morning. This is Alex on behalf of Julio.
Speaker Change: Hi, Good morning. This is Alex on for Julio Thanks for taking questions and congrats on the quarter.
Julio Alberto Romero: Thank you.
Alex: Thanks for taking questions and congratulations on the quarter. Thank you. First question, you mentioned that you've managed to smooth out some of the cyclical aspects of the business. Are you any closer to simplification initiatives? I think you've talked about that previously.
First question you mentioned, you've managed that smooths out some of that.
Alex: Cyclical aspects of the business.
Are you any closer to simplification initiatives I think you've talked about that previously.
Alex: Previously.
Antonio Carrillo: Yes, as I mentioned, we're always evaluating the timing and where the businesses are at a certain point for being able to simplify the business, and... It's also the ability to redeploy the capital, so it's a combination of both things.
Speaker Change: Yes, as I mentioned, we're always evaluating the timing and the where the businesses are at a certain point for for being able to simplify the business.
Speaker Change:
Speaker Change: It's also a.
Speaker Change: The ability to redeploy the capital so it's a combination of both things and those things.
Antonio Carrillo: And those things, you know, you have to match them out very well. I don't want to give timing on that. It's just something we're working on, we're always evaluating, and we're always discussing with our board. So it's on the table, it's a discussion that we have frequently, and these processes take time. So it's something that continues to be a priority for us.
You have to match them out or very well.
Speaker Change: I don't want to give timing on that is just something we're working on will always evaluating and were always discussing with our board. So it's it's on the table. It's a discussion that we have frequently and these processes take time so.
Speaker Change: It's something that continues to be a priority for us. It just it's never perfect. When you want. It then it happens sometimes when you when you don't expect it.
Speaker Change: Thank you for the context, I know you've discussed barge and fair amount, but one one follow up as you turn your focus to barge orders for 2025 can.
Alex: Thank you for the context. I know we've discussed barges a fair amount, but one follow-up as you turn your focus to barge orders for 2025. Can you speak to how you're balancing disciplined selection of barge bids versus, you know, kind of first ensuring a solid baseline for backlog, and then, you know, selecting after the fact?
Speaker Change: Can you speak to how you're balancing discipline selection of barge business.
Speaker Change: This is kind of first ensuring a solid baseline for backlog and then selecting after the fact.
Antonio Carrillo: Sure. No, no, no, that's, that's, that's, I think if you look at what we've done over the last couple of years, even without tank barge orders, I think we've stayed very disciplined, and you see the margins picking up because we've stayed disciplined around the margins we want to sell. And the reason why we, we want to do that is that when you look at the fundamental aspect of the industry, there's been an underinvestment for many, many years now, especially on the hopper side.
Speaker Change: Sure No no no. That's that's that's that's I think if you if you look at what we've done over the last couple of years couple of years, even without tank barge orders I think we've stayed very disciplined and you'll see the margins picking up because we've stayed disciplined around the margins we want to sell and the reason the reason we want to do.
Speaker Change: That.
Speaker Change: Is when you look at the fundamental aspect of the industry. There has been an underinvestment for many many years now, especially on the hopper side.
Antonio Carrillo: And we know what our customers need. We know the capacity we have is valuable, and we're going to continue to focus on margins and building profitable barges over the next several years. The industry demand is coming. Hopper Barge, let's say, the deficit is larger than Tank Barge, but Tank Barge, as I mentioned, is also changing. The beauty of the backlog we have right now, I mentioned it now extends into 2025. Hopper Barge, believe it or not, Hopper Barge's backlog is now shorter than Tank Barge's backlog, so it allows us time to work with the customers on orders and to work with the customers on their needs.
Speaker Change: And we know our customers need.
Speaker Change: So and we know the capacity we have is valuable and we're going to continue to focus on margins.
Speaker Change: And in building profitable largest over the next several years.
Speaker Change: Industry demand is coming Hopper barge, let's say deficit is larger than tank barge, but tank barge I mentioned is also changing so.
Speaker Change: The beauty of the backlog we have right now.
Speaker Change: Mentioned that now extends into 2025 upper body believe it or not hopper barge backlog, a smell shorter that tank barge backlog so.
Speaker Change: It allows us time to work with the customers on the orders to work on with our customers on their needs and the other thing is I think customers have started getting you know two years ago. They were with Ukraine started on steel prices changed dramatically and I think we've all gotten used to this high steel prices now.
Antonio Carrillo: And the other thing is I think customers have started getting, you know, two years ago the war with Ukraine started, and steel prices changed dramatically, and I think we've all gotten used to these high steel prices now, so we're getting less pushback from customers, I think, as time goes by. You can push your orders a little bit and a little more, but at some point in time, you have to, if you're in the business of moving stuff on the river, you need to change your barges, so I think we're getting to that point, and we're very, very positive about the barge business right now.
Speaker Change: So we're getting less push back from.
Speaker Change: From from customers I think as time goes by you can push your orders a little bit in a little more but at some point in time you have if you're in the business of moving stuff on the river you need to change your bargain. So I think we're getting to that point and we're very very positive on the barge business right now.
Alex: Very helpful context. Thank you. And last one for me, could you just talk a little bit about some of the potential impacts that you think a change in administration might have on Arcosa's portfolio?
Speaker Change: Very helpful context, Thank you.
Speaker Change: Last one for me.
Speaker Change: Could you just talk a little bit about some of the potential impacts that you're seeing a change in administration might have on our closest portfolio.
Antonio Carrillo: Well, you know, I think infrastructure spending is needed no matter what, no matter who's in the administration. When you look at the age of the infrastructure and the state of the infrastructure, and we're basically an infrastructure company. [inaudible] A.I. When you read any report of what A.I.
Speaker Change: Well.
Speaker Change: I think infrastructure spending is needed no matter, what no matter who's in the administration. When you look at the age of the infrastructure on the state of the infrastructure and we're basically an infrastructure company.
Speaker Change: When you look at the I don't think this these near shoring and re shoring is changing in any way in the in the in the in the country. So.
Speaker Change: That's going to need significant investments just to support it and we are tied to those long term trends.
Antonio Carrillo: is doing to the load in the U.S., and very specifically in Texas and some of our markets. The investments that are going to be needed just to support data centers, etc., are incredible. So I'm very optimistic that no matter which administration comes in, we are in a really strong position and have really good industries that are needed in the country. I think that's the main message I want to give you. I think infrastructure should be something that is needed no matter who is running the government.
Speaker Change: Hi.
When you read any report of what AI is doing to the load in the in the U S and very specific and takes us from some of our markets.
Speaker Change: The investments that are going to be needed just to support data centers et cetera is incredible.
Speaker Change: So I'm very optimistic that no matter, which administration comes in we are in a really strong position in a really really good industries that are needed in the country. No. I think that's that's the main message I want to give you I think infrastructure should be something that is something that is needed no matter who.
Speaker Change: It was running the government.
Speaker Change: Yeah.
Alex: Thank you, Antonio. Very helpful.
Speaker Change: Yeah.
Speaker Change: Thank you Antonio and very helpful.
Speaker Change: Okay.
Erin Drabek: And ladies and gentlemen, that will conclude today's question and answer session. I'd like to turn the call back over to Erin Drabek for any additional or closing comments.
Speaker Change: And ladies and gentlemen that will conclude today's question and answer session I would like to turn the call back over to Aaron <unk> for any additional or closing comments.
Erin Drabek: Thank you for joining us today, and we look forward to talking to you again next quarter.
Thank you for joining us today, and we look forward to talking to you again next quarter.
Speaker Change: Yeah.
Operator: Thank you. Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time.
Speaker Change: Thank you once again, ladies and gentlemen that will conclude today's call. Thank you for your participation you may disconnect at this time.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.