Q3 2024 Summit Materials Inc Earnings Call

i

Thanks for standing by. My name is Maandeep and I'll be your operator today. At this time I'd like to welcome everyone to the Summit Materials Inc. 3rd quarter, 2024 Ernie's call. All lines being placed on mute to prevent any background noise.

After the speaker of tomorrow, so be a question and answer session. We'd like to ask a question during this time, simply press star, follow by the number one on their telephone keypad. We'd like to withdraw your question, press star 1 again. Thank you.

Speaker Change: I would now like to turn the call over to Andy Larkin, Vice President of Investor Relations. You may begin.

i

Hello and welcome to the Summer Materials, third quarter 2024 results at the conference call.

Yesterday we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation and a supplemental workbook highlighting key financial and operating data. All these materials we found on our Vestor Relations website.

and the next question is, may I include forward looking statements, which, by the nature are uncertain and outside of some of the materials control.

Although these four-looking statements are based on management's current expectations and beliefs, as sure results may differ in a material way.

Speaker Change: For discussions on the factors that could cause after-result endeavor, please see the risk factor section of some Ontario's latest annual report on Form 10K, and Quarterly Report on Form 10Q, as updated from time to time, in our subsequent filings with the SEC.

You can find our conciliations of the historical non-gap financial measures discussed in today's call in our press release and investor presentation and topical mental workbook.

With me today are Summit Materiel CEO Announ and Summit CFO Scott Anderson, and we'll discuss five level highlights from the quarter and then provide our view on the business moving forward. Scott will follow with a detailed review over financial performance.

Speaker Change: After words we open the line for questions. At respect for the analyst and the time he have a lot of, please let me yourself to one question and then we're turned to the cue so we can accommodate as many analysts as possible in the time we have available. On now turn the call over to Anne Noonan.

Anne Noonan: Thank you Andy and welcome to everyone joining today's call.

Anne Noonan: As you saw on our press release, our third quarter demonstrated tremendous resiliency in the face of very difficult operating conditions. I'm incredibly proud of our collective efforts to act with agility, manage what we could and deliver strategic progress and strong financial results.

In Q3, we said an elevated era record for both quarterly adjusted EBITDA margin at 28.3% and training 12 months EBITDA margin at 24.3%.

A strong endorsement of our high quality execution and unwavering strategic focus.

and true to our values we executed the quarter with the safety at all costs mindset. When faced with imminent and dangerous storms, we prioritize the safety of our people, closing operations, securing equipment, and providing the resources necessary to ensure the health and well-being of our employees.

Anne Noonan: I'll detail the impact from severe weather events in a moment, but what's most important is that through all of the hurricanes and tropical storms, we had zero safety instincts at any of our affected facilities.

Herving now to slide four. Let me provide the highlights from the quarter, both strategically and financially.

First, our strategic progress is on track. We continue to move through integration activities with the sharp focus of strengthening our cement platform. For example, planning for our Green America recycling expansion is on the way at the Legacy Argos USA plants.

Anne Noonan: We are establishing critical supplier relationships and advancing our capital planning efforts so that we can begin our installation during the 2025 winter shutdown at our Roberta Alabama SMAD Plan. A disciplined portfolio optimization approach also remains an important component.

Guided by Market Leadership and Asset Life Principles, we are taking action to strengthen leading market positions in target geography, while unlocking value through divesting non-strategic assets.

Anne Noonan: Through Q3, we have completed four such dispositions, while adding two bolt-ons to amplify our market position in Phoenix as well as add to our overall export portfolio.

with substantial liquidity and robust balance sheet. Some of this well-positioned pursue a creative eggs-oriented acquisitions to feel greater growth and returns.

I naturally we are taking decisive actions across the enterprise to drive sustainable margin growth.

Our value pricing strategy continues to deliver results with double digit pricing gains and aggregates.

and Mid-Single Digital Organic Price and Games in cement expected for 2024.

We are also identifying and attacking the most meaningful operational excellence opportunities across our footprint with an intense focus on AG's productivity initiatives. And finally, our team is adjusting our discretionary spend to alignment the current volume environment, something every good business should do.

As for factors outside our control, this quarter again, we contended with unprecedented and severe weather that translated into lower volumes and higher costs.

Anne Noonan: Despite this, an inclusive of delude of impacts from the Argos USA Transaction, we were able to grow adjusted EVID-Dob margins in Q3 on a year-to-date basis and on a training 12 month basis.

This speaks to our relentless focus on commercial and operational execution and underscores a more durable portfolio that we believe is being undervalued in equity markets.

We will hold closely to our elevate some extravagant strategy, and firmly believe our sound execution will be recognized and eventually rewarded by the investor community.

On slide five we present our Elevate Summit Scorecard, which highlights our financial progress. As I mentioned, LTM adjusted the biddam margin of 24.3% is a summit record for any trevly 12-month time frame since the launch of Elevate in 2021.

Anne Noonan: This is our thesis playing out. Focus the portfolio on margin-acredive acts and cement platforms, concentrate on geographies with market-leading positions, and consistently improve the commercial and operational capabilities of the enterprise.

Anne Noonan: This is our formula which in turn, jump starts our cash flywheel and on lock three sources to reinvest in further growth and value creation.

Net leverage at 2.2 times if down from 2.5 times last quarter, and well below target providing sufficient optionality to pursue our highest return capital allocation priorities.

Rhoek at 8.9% will move concurrently with the improvements implemented at our Legacy Argos USA cement plan. As there is considerable daylight between Legacy Summit and Legacy Argos cement Rhoek levels.

Anne Noonan: This represents a tiered light path to closing on our heroic minimum target. Across all financial measures, our actions and strategic priorities are driving the targeted and desired financial outcomes for our business. Now from the back road to the micro.

Slide 6 estimates the impact of specific weather events in Q3. Between hurricanes, barrel, Debbie and Elaine, we incurred volumes and elevated costs most prominently in Houston, Western and Northern Florida, the Carolinas and to a lesser extent Georgia and Virginia.

Anne Noonan: As you can see, the most consequential event was Debbie. Where the quarry that feeds are hardly those cement plant near Charleston flooded, as Debbie jumps significant rainfall over the area.

Anne Noonan: Our team is quickly stood up mitigation measures, blunting the worst of it. But West Feetstock, inaccessible primary equipment, and customer-related ramifications resulted in approximately 120,000 tons of lost volume, and 12 million dollars of lost EBITDA.

[inaudible] I, too, have a great time.

In our footprint, precipitation days increased into 85% of our MSAs.

and precipitation days were up 20% year on year. Percipitation total score up 65% versus Q3-23 underlying the severity of third quarter storms.

All in, we estimate the three-discrete weather events cited, amounted to approximately $15 million in 4-gonna need bittoff at 3rd quarter. Noesley, this does not include the impact from Hurricane Milton, which we estimate will affect our fourth quarter by roughly $5 million.

We'll work to make up as much as we can, but as always that will depend on getting a good stretch of weather to close the year.

Speaker Change: Q-mail is to believe for 2024, our business is more than $20 million of weather-related EBITDA head with the sheer. And yet we are still positioned to grow EBITDA dollars and margins for 2024. A testament to our strong report folio, and a collective focus to drive positive growth from areas within our control.

Having fully incorporated these weather events are updated 2024 outlook is on slide 7.

The adjusted EBITDA range is being adjusted to 970 million at the low end and 1 billion at the top end. If achieved, the 985 million midpoint represents roughly 7% annually EBITDA growth on a pro-format basis.

which compares favorably to the peer group and underlines both the momentum we have in the business and the growth opportunity unique to summit.

This outlook recast volume expectations for 2024. We now project organic volumes for aggregates to be done mid-single digits this year, implying fourth quarter-agg volumes to be relatively flat to prior year.

Speaker Change: The Man Volume Expectations have been reduced to approximately 8.6 million tons this year, which translates to down roughly 250,000 tons in our river market and down 200,000 tons in legacy of our markets.

Of course, our fourth quarter outlook assumes normal weather conditions, knowing that the longevity of the construction season is the biggest swing factor for Q4 performance.

Speaker Change: Importantly, when given dry days in markets like Houston, we've been able to partially recoup storm-related impacts. At trends we are hopeful we'll continue as we close the year.

Speaker Change: All setting this more restrained volume environment is visibility to asset sale opportunities and potential adjustments to incentive compensation.

Speaker Change: I'm pricing, we are reaffirming our outlook calling for double digit acts pricing in 2024 and mid-single digit organics and math pricing with average selling price accident in the year in the mid-150s.

and we are reiterating our previous cost outlook with mid-Single-Didget Cost inflation this year and G&M may expenses out of below 330 million. On CapEx, we have recalibrated, our CapEx spent maintain, our 10% of net revenue commitment.

As such, we expect our tap-ex for this year will approximate 400 million at the admit point.

In summary, volumes are softer than anticipated. Price is tasting with expectation. Self-help is stronger than originally contemplated. And as a result, we are well positioned for top tier 2024 growth and margins of at least 24%.

When achieved, this would mean we will fully recover our host delusion in the first year of integration, a fantastic achievement for our team.

Speaker Change: Well, we keep our sites firmly focused on 2024 execution. We are well into our planning cycle for 2025.

On slide date, we provide our high-level framework for next year, but as customary, we will refine and adjust as we move into 2025 with more detailed guidance presented in February. In summary, we think that 2025 is setting up to be another year of growth and margin gains for some of the materials.

Speaker Change: First, we see enduring pricing growth across our upstream businesses. As I'm pricing normalizes, I think we can and will do better than the three to five percent long run historical average next year.

Speaker Change: First-imment while regional demand conditions will be considered, we have carbonized cement's go-to-market approach with January 1st pricing plans for all markets. This initial pricing alongside opportunistic midgears means the pricing will remain a reliable level for profitable growth in 2025.

On demand, the picture is much more fluid. On one hand, the public end market appears poised to sustain elevated activity in 2025.

Speaker Change: For our top states, our DOT budgets are at historic levels and growing. Our leddings are outpacing the national average, and importantly, nearly half of IIA Formula funding has yet to be obligated.

pairing that with our advanced physicians in geographies like North Texas, Utah and Salt Lake counties, as well as Kansas and Missouri, we view public infrastructure as a source of steady reliable activity, heading into 2025.

Speaker Change: We view private ed markets on the other hand, is more choppy, locally dispersed, and subject to reevaluate the information as we move into and through 2025. Markets such as British Columbia, North Florida, and Kansas City are showing promising signs for next year.

While activity in other geographies with significant commercial exposure, like saw, like sitting and Phoenix, is starting to pick back up. They remain somewhat subdued.

I'm Balance and Consistence with our typical budgeting approach, we won't lean into volume growth prematurely.

We need better visibility into our project pipeline and the key construction season before making definitive forecasts. That said, our current perspective suggests a more back half-way to volume profile for 2025, largely influenced by the hesitancy we're witnessing in the private end markets.

Speaker Change: From a South Health perspective, our full funnel of opportunities includes, our goes USA synergies, operational excellence initiatives already taking flight across the footprint, and an evergreen process for portfolio optimization.

These three areas provide unique and powerful margin enhancement opportunities for our business.

And finally, with nearly $740 million in cash on hand and a capable balance sheet, we view growth and able to cap eggs and eggs lead bolt-ons as they have predacatized way to drive organic and inorganic growth next year. These four elements are the 20-25 building blocks.

We believe these elements alongside high-quality execution will push us into the horizon to adjust the VBDM margin range of 25 to 27%.

In closing, our playbook is working, our team is executing. And we are poised to make further introverts into our Elevate Summit Financial Commitments as we close 2024 and enter 2025. With that, let me invite Scott to walk you through our Financial Results and more detail.

Thanks, Anne. I'll pick up on Slide 10, where at a high level, Trune's remain relatively consistent from prior quarters. Pricing remains robust and healthy, up roughly mid-single digits across our portfolio. Volumes on the other hand, and two different degrees remain relatively subdued.

Scott: On slide 11, profitability performance underscores several factors including the durability of the portfolio, the attractiveness of our markets, the power of price and the magnitude of our self-help initiatives.

Scott: A just-in-tash growth profit margin increased approximately 50 basis points you're on here. And a just-in EBITDA increased 20 basis points are a reported basis, and more than two are in basis points on a pro-formal like for like basis.

Similarly, here today we've adjusted even on margins having crey 60 basis points versus the comparable prior year period. Having crey's pro-former by more than 200 basis points.

Scott: Bottom line is that our quality of earnings is improving and we are well positioned to land the year with reported to just beba dot margins above 24% adjusted to the earnings per share of 75 cents with six pennies lower than prior year primarily reflecting higher non-taste DNA as well as higher interest expense.

Speaker Change: Hiroids performance is detailed on slide 12. In Q3, we sold 15.4 million tons of aggregates, but the 0.7% organic for a year-old period, which considering the environment is respectable, but below our previous expectations.

Volume Grove was most prominent in Missouri and T. West's segment, markets like Salt Lake and British Columbia, as easy comparisons along with project time, even more than offset weather impacted volumes in East segment and Houston.

Howard Celling pricing Q3 was $15.34. Up 7.4% versus last year, and of a sense, we're skewed to 2024.

year on year pricing was led by double digit growth in the Carolines, Arizona and certain markets in Kansas and Texas. So, eventually, if you recall, second quarter benefited from mixed-favorability that increased Q2SP and somewhat muted the impact of major pricing actions.

Speaker Change: Nevertheless, commercial execution in 2024 has been strong as we bring our value pricing principles to each individual market.

Speaker Change: A justed cash goes profit margin decreased 50 basis points to 58.5 percent, due in part to one on storm related costs, but per unit aggregates profitability accelerated 46 cents sequentially, and is up over 30 percent in 2024.

On a year-to-date basis, adjusted casculos profit margins have expanded 170 basis points.

Scott: Thanks in part to a shark focus on operational excellence.

Today, we've achieved nearly 15 million aggrids productivity savings. Beclipsing our full 2023 amount and setting us on a course for greater value creation going forward.

Operational Excellence is a key value in answer, especially for our agelined business and feeds our confidence that we will achieve substantial margin expansion this year and in 2025.

Scott: Turning to slide 13 in our seminar performance.

Organic volumes were down to 11.3% reflecting moderating demand and a pullback in important volumes. In poor volumes in our river market, it's decreased more than 55% year over year in Q3. Consistent with prioritizing margin advantage domestic volumes over imports when conditions call for.

Lawings in the South East and Mid-Atlantic were impacted by excessive rainfall, particularly in the Carolinas that Anne mentioned earlier.

Scott: For the full year, Proform of Williams are expected to decline in the mid-single-digit range. With the mid-Atlantic and the south-east, collectively exhibiting and compared in better-volume trains than our river markets.

which we now expect to be down double digits in 2020-24.

Fricing and synergies have combined for a very positive margin story.

For cement pricing, growth has remained healthy, with inland geographies feeling year-over-year organic pricing growth.

Speaker Change: So, quite simply, Saman, Everett selling price increased $2.33.

Scott: to $155.76 per ton. Primarily reflecting Argos USA Commercial Centuries and favorable geographic mix with higher priced markets commanding a greater proportion of our third core volumes.

Some as third quarter adjusted EBITDA on margin increased 180 basis points year over year, and two are 80 basis points on a year to day basis.

Here, synergies combine with a greater mix of domestic volumes and the lower cost of teal and fuels is not only offsetting volume due leverage and the impacts from argos delusion. It's actually power and margin expansion.

Scott: For Q4, we anticipate that trend to continue with further margin enhancement as our less seasonal cement footprint will benefit from more all-season exposures in the southeast and Texas.

Scott: Lastly.

Downstream performances on slide 13. Organic ready-mix volumes remain soft as whether impacts and the sluggish private-in market environment weighed on third-quarter activity. Asphalt's organic volume growth of 0.4% encompasses double-digit volume gains in more Texas, mostly offset by unfavorable timing of activity in the Inter-Mountain West and lower volumes in British Columbia.

Products suggested Caschos profit margin in the period was aided by positive pricing for ready-manks in ASPO, as well as synergy generation. But more than offset by the inclusion of lower margin, Argos ready-mix businesses, in Houston, Atlanta, the Carolina's in Florida.

Services margins grew year on year, mostly reflecting a healthy construction environment in our asphalt markets.

Stepping back, it's important to reinforce our elevator approach to the downstream. We are material sled and highly selective about where we compete in downstream.

We must be market leaders and the downstream must help us achieve our elevate some goals. Otherwise we have continually demonstrated a proficiency of optimize around our materials with portfolio.

Let me now turn it back over to Anne to conclude of the third march. Thanks, Scott. I'd like to briefly address the press release we issued last week, disclosing the non-binding acquisition proposal that we received.

Anne Noonan: As we said in the release, Thomas has held initial discussions with the Interested Party and in consultation with the advisors, our board will carefully evaluate the proposal and act in the best interest of the company and our shareholders.

As we said, there can be no assurance that any definitive agreement will be reached, and we won't be making any further comments on this matter until the board has reached a conclusion.

That's really all we can say at this time. So I would appreciate it if you could keep your questions today, focused on our strong performance.

I want to reassure you that concurrence with that evaluation.

We remain laser-focused on executing our elevates strategy and our steadfast in our conviction about our long-term vision and opportunities.

Scott: As you can see on slide 15, our priorities are unchanged. Integration efforts aim to transform some of us into one high performance organization.

Accelerating growth and aggregates remains crucial to achieving a fair market valuation.

Executing and realizing the pleatset of Argus synergies in scope, and we are dedicated to strengthening and optimizing both our portfolio and balance sheet to support superior growth and value creation. With that, I'll now turn it over to the operator to provide the instructions and open the line for questions.

Thank you. We will now begin the question and answer session.

We've dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

If you'd like to withdraw your question, simply press star 1 again. You are called upon to ask your question, and there are listening via loudspeaker on your device. Please pick up your handset and the short that your phone is not on me when asking your question.

Scott: For today's session, we do request that you limit yourself to one question and re-cute for any additional questions.

Again, press star 1 to join the queue.

Our first question comes from the line of Philippine with Jeffries. Please go ahead.

Hey guys, congrats on really strong results in an uneven environment, so I'll kill you through the team.

So appreciate you guys laying out the groundwork of Framework for 2025.

Can you help us think through some of the moving pieces, some of your peers have provided a framework in terms of demand and price, you know, appreciating and your expected demand to be more back-affuated next year, but is your expectation for volumes to be up?

and any more call on price again. I know you have announced price increases on cement. How big, how that's coming through and in some of the opportunities kind of unlock better commercial efforts on the RGOSet, things would be helpful.

Yeah, so there's a lot packed in there, Phil, thanks for the congrats on the quarter. Let me kind of step back and talk about what we're thinking with respect to pricing, first of all, and I'll do it by line of businesses best.

Scott: So from an axe perspective obviously we have some nice momentum and we've done out across the board on January 1st price increases. Consistent what we did in 2024 that will vary.

According to geography, so for example Phil.

Scott: Last year, this year, actually, we went out and Kansas, with a really strong January price and Chris Midia was more moderate. Virginia, on the other hand, it was balanced between the two. So we will do it a very much value pricing dynamic pricing mentality into 2025, but expected to be very strong and I would be extremely disappointed if we weren't in the range of 6 to 9 percent in 2025 on Ags pricing.

Samantha, as I said in my prepared comments, we expect another strong year of pricing and cement.

and there I would look at the fact that...

Scott: Demand does actually drive.

Scott: Strong pricing and cement, we see that particularly in the second half.

and Opportunity Team may even get a second price increase in the addition towards January price increases.

So think about it as we go in cement a more harmonized approach across the board January 1st price increases. And on top of that, we still have some contracts rolling off that are below markets, where we're working with our customers to get them back up to market pricing.

That will be, you know, hand to hand combat as we go through, but we intend to be a price leader in this market consistent with our position in the marketplace. And then finally, all the commercial excellence efforts that we're putting in place to upgrade our people processes and tools.

Speaker Change: and Samantha Wood's Rye for Value Pricing. So overall, Samantha, constructor pricing environment, acts, continues strength in that mid to high single digit overall.

From a demand perspective in 2025, we go in with very cautious volumes. That's just our planning stats. That is played out this year, Phil. That keeps our team focused on their controllables.

Speaker Change: So if I think about it from an end market perspective, public strong, private, a little choppy, and then from a line of business perspective, eggs, we'd go in with flat-ish volumes on a year to your basis, but that will drive much more performance, and that's kind of a mixed bag on eggs.

It's very divergent, so for example, in Florida, we have more additional capacity coming on so we'll grow there. On the other hand, if I look at Phoenix, our tilt-ups are down 75% in 2024 and residential is recovering. So as we get into February, we'll give you a much better view on volume, but we don't lean into that in our planning stance right now.

First of all, if you look at PCA, it's about 1.4% we're looking at a flat to low single digit right now and with a second half recovery that should be supportive of additional price in the midgears. So hopefully that gave you the color that you need to fill at this point. That's really helpful and quick.

Our next question comes from the line of trade groups with Steven's, please go ahead.

Speaker Change: Hey, good morning and yeah, I'll have to echo the congrats on the quarter. Nice done. Nice, we've done. So solid work on the margins.

and you mentioned in the prepare-to-mark, she expected to hit.

Speaker Change: Horizon 2.

by the end of next year. Is there any additional color, maybe you could give us on how you see cost inflation, maybe progressing in the next year and maybe how you're thinking about any more specifics around the margin improvement.

I know Scott kind of touched on expectations for solid margin expansion to continue, but any additional color you can give us on how to think about that next year. Maybe where the low hanging fruit may be and what would take us to see get into that range.

So I'll cover the margin improvement, what the key drivers are, the high level in the Scott Maybe you'll address the cost of inflation, are the question.

So really try it's continuation of what we've been doing and the team as you can see is obviously executing at a very high level.

So if I think about Axe, the margin improvement is going to continue to come from strong pricing.

We really accelerated operational excellence, which teams were doing a phenomenal job in nearly a six-ing inflation at this point with the cost work that we're doing. And then continued portfolio optimization, investing in those eggs, both organically and inorganic. And then on cement, it's all about delivering the synergies, which were well on track on. And it's also about continued commercial excellence there as we move forward from a pricing perspective. So they will continue to drive that margin. And overall, we'll continue to optimize this portfolio, which has been very large and agreed to our business.

Stop maybe if they address the cost of inflation per the question. So, Tray, when you look at the cost, you know, this year we're mid-singled, we've been kind of normalizing, moderating the cost, inflation all year. And just as Anne pointed out, we're making progress on our optics improvements.

Speaker Change: Really starting to cut into that inflation so you barely had any cost inflation this year because of the offsets we had an operational improvement.

and that's going to carry on. We've got a lot of momentum around that on the ag side, especially when you look at the mind planning that's going on, the yellow iron, you know, and then as well as inventory optimization. So around our critical products, but the efficiencies we're getting more for more as our chief operations officer and he's really built now to team actually even having front line training.

to really drive this culture.

Speaker Change: The folks in our cost, we believe, mixture, you're going to see more of that carry on in the ax on the cost side. And just for inflationary, what we're seeing for next year on some of the key buckets, like diesel fuels a big one, we're already hedged at 40 percent and actually we're less than we were hedged this year.

So I think we're has at 40% at $2.53 a gallon.

If you looked at this year's it was 277 so we got some favorability on the diesel side. We're looking at increasing that edge on up to 50% right now.

Speaker Change: So...

Speaker Change: When you look at R&M and sub-contracting some of those categories, we do believe you're going to see the moderation of inflation continue from that mid to more of a low single digit next year as we go through the year, which will continue to help the momentum that we're building in the business.

Speaker Change: and then you know a separate bucket on the cement side would be the standard G's and the cost improvements that we're doing there.

Got it. Okay, it just just to make sure I'm not trying to pin you down or anything. I'm just more making sure I'm thinking about the right way. Is there are there any bad guys on the cost front that we need to be sure to kind of take into account or anything because it just seems like with the momentum you have.

and kind of looking at the 24-3LTM EBITDAGRO's EBITDAG margin that you guys were able to put up with the pricing that we've had in place to kind of desoloration on the cost for it.

Speaker Change: You know, you ought to be able to get into that range, maybe even for the full year, a month, is there any bad guys that we need to be aware of or thinking about that wrong?

Grey, the only one that stands out to me, it's a little bit higher that coming into this next year's natural gas.

Speaker Change: You know that we used if you were to know and offset some of the coal. It's still cheaper than the coal alternative.

Speaker Change: But we've locked in 37% of our usage next year on natural gas at about $350, $350, $350, for M&BTO. And just to compare this year it was more like $3 for M&BTO.

B.T.U. So we do have a little bit of headwind there with the natural gas usage, but we'll also be in an introducing moral alternative fuels into the process next year as well. You know Anne talked about the Roberta project and just across work we're bringing in more feedstock to the plants on the alternative fuels.

Speaker Change: It's just a confirmed. We are confident we'll be in that 25-27% range full year and next year.

Okay, thank you for that, Andy, because it's in the slide deck it says, but here end, I don't know if that was a run rate or about for the full year, but so thank you for confirming that. That's super helpful.

Our next question comes from a line of Garrett Schmaw with Luke Capable. Please go ahead.

Speaker Change: Hi, thanks. I'm Grapple on the quarter. One has some mental, so if you could speak to what you're seeing on the supply demand side across your footprint.

Maybe talk a little bit if two, your expectations around January, price increases in a little bit more detail. And what condition would you need to see occur in order to get the midiors that you cited here, prepared remarks?

Thanks for the question, Gary. You know, we see overall supply demand really being driven by, you know, strong public, which continues to be very robust for us. And then, you know, the private market's being a little more choppy. And if we look at just our markets...

You look at residential and non-residential other ones that more interest rate depend. So they will come back probably in second half, it's the matter of when and which geography they'll come in. We're already seeing summer recovery.

and some of those geographies. But, you know, if you look at the PCA forecast, it's 1.4% with a back-end loaded 20, 25 in a very strong 20, 26.

Speaker Change: I do believe that as we get to midgears you're going to see it's very plausible that that recovery comes back both in residential and the light non-residential. I'm going to see in green shoots of that.

I give you an example of where you might see some uptick. We're looking at British Columbia currently recovering right now.

and that's one where if you look at the Canadian Central Bank, they took the first rate decrease in June and they took a bigger one this month. And now we're seeing that work start to come out across the board that would impact cement.

is the Fed follows the same timeline. It's very possible that you'd see that same kind of recovery. And that's how we kind of look at that recovery coming in in the second half, and it should be a very positive environment for midgears. That's not built into our thinking right now and our budgeting. But we would look for that upside as we always do in midgears.

January price increase, we're all across the board. It's dependent on markets. It's dependent on geography, but the teams pushing hard. We are leaders in value price against momentum. We will continue to be so.

Speaker Change: i

Speaker Change: Our next question comes from a line of Anthony Pettenari with City Group. Please go ahead.

Hi, this is Asherson and I'm Anthony. Thanks for taking my question. Just first of all, point of clarification, your ex-price guy, you know, above the historical growth rate, does that include mid-years, especially in the markets where there are more balance between?

Jan. Ryan Midier, and then for my question, just sort of, I think you talked about trimming discretionary spend to align with demand, and then I also thank you trim deer cat-backs, guys. I'm just wondering if you could talk a little bit more about that, and then maybe where you're pulling back on that investment.

Okay, so let me address the midgears and then Scott can talk about the cost and the cap X that we're sitting on that.

So from what we look at Ags, it is very much dependent by geography how we approach our pricing.

I will tell you across the board we're out with January 1st price increases. In some markets we make a really strong double digit in January and other markets we make a moderate and then go with a moderate midyear price increase but I will tell you all our markets will have both.

and that's consistent and that's why I'm confident we will get in at 69% range next year.

Scott maybe you want to talk a little bit about trimming discretionary spend and the type of capX pull back we had. Yeah so when you look at the SGA and A you'll see it is coming off we left the guy the same at 330 for the year but we're going to probably come in below that and part of it's the synergies.

We're going after the scale synergies and really excel for you Matt and you'll see that on the synergy report out that we give it the end of the year So those of Brent really well and we're just controlling our spend on the cap-X side though

Speaker Change: You saw the previous guy for 30-470. We've now lowered that to 390-410 and really we're staying disciplined our 10%. So we went through the list and found projects that we could defer without impacting the operations.

and a few, actually, some land purchases on some reserves.

Speaker Change: We were able to defer into next year and bring that down. So we're in a good place. We're going to come in and stay within our 10% threshold of revenue on the cap back and we're going to continue to watch our cost. And you'll see us beat that 330, even though we feel like that's a good good guide at this point.

Great, thank you, that's very helpful, I'll turn it over.

Our next question comes from a line of Katherine Thompson with Thompson Research Group. Please go ahead.

Speaker Change: This is Captain Curtis, calling in for Captain Thompson. Thank you for taking my question today.

Speaker Change: Thanks, Katherine.

with the weather impact to cement margins and last year quarters. How should we be thinking about comps for next year going forward?

Weather Impact, so we got to be... So when we look at weather we did detail out what impact that had and you know just use rough numbers of about 20 million here. One of the things that you got to think about moving forward is two factors.

Speaker Change: One is there is some in-year recovery on volume and I'll give you the example of Houston. So Houston, we give you number last quarter about six and a half million adverse effect.

and since then, that team has been firing on all cylinders and it's starting to eat into that six and a half.

So the one thing I would caution Katherine is don't take that 20 million impencently little in for 2025 because we got quite a scrappy group.

Speaker Change: here at Summit and they've proven to be very agile and I would hope that we continue with all our contingencies aboard the teams doing to recover some of that from Milton and these other hurricanes as we go through the rest of the year. We'll be in a position to really update you with February on that but don't go penncelling that 20 million in because the teams execute at a very high level but they're contingencies.

Speaker Change: Thank you, and welcome to the quarter.

Speaker Change: Thank you, Katherine.

Our next question comes from a line of Angel Castillo with Morgan Stanley. Please go ahead.

Speaker Change: Hi, good morning. Thanks for taking my question and again second the congrats on the quarter as long as old

Just wanted to go back to, and some of the coming-day you gave her on the project activity, and maybe some of the green shoots you mentioned. Could you just maybe unpack that a little bit more as it relates to maybe elections or interest rate? Like, what are you hearing from contractors in terms of what may be holding up projects and to the extent that you are seeing green shoots in some markets?

Speaker Change: on the commercial front, what seems to be unlocking that activity? Is it greater certainty, or kind of potential greater certainty from elections, or what's kind of coming down from the messages?

Speaker Change: Yeah, and just so let me kind of unpack that in the two markets that are most impacted here. So, from non-residential perspective, this is where we're seeing it's largely the holding pattern for us.

But we are seeing, for example, recovery in Virginia and British Columbia, we're seeing continuous strength in the energy verticals. But contrasting against that, we're seeing, for example, our heavy commercial markets in Phoenix and Salt Lake City, still are quite slow, because sitting on the sidelines, waiting to come in as interest rates come down.

Now I did quote earlier in my comments that, you know, we would expect a second half recovery if the Fed were to follow the same kind of timeline as the Canadian Bank and we would hope that there'd be a second half recovery.

in that now where we are seeing the Green Truth isn't British Columbia.

Speaker Change: We're also seeing and very encouraged by the fact that we participate in states where the heaviest funding is and heaviest investment.

So for example, the IRA investment, the top three states are Georgia South Carolina and North Carolina. There's 45 billion investment there. We are participating in that on the heavy site.

Founding were big-dization Arizona where there's over a hundred billion. So from a political perspective, we would hope by partisans.

Continued support of supply chain resiliency on strong manufacturing that that would continue to give that kind of funding moving forward. And then on the private side, the interest rates starting to come down hopefully similar to what happened to British Columbia where we're seeing some green shoots.

Speaker Change: and on the residential side you've got a different impact there, it is a ground interest rate.

being still hovering around 6%. We really feel you've got to get the little that 5.5% to see any kind of movement.

in some of our markets. You got the lock-in effect and you've got the whole uncertainty, it has to do to your point-angelo around the political and macroeconomic impact. That being said, leading indicators are improving in residential and the pent-up demand.

Specific to single family permits, they were very low in 2024, we're starting to see some pressure easing off those And then if you double-sake into our three-end markets, they are operating a little differently So Houston is the number one single family permit market at 52,000 in 2024 There you got high

Speaker Change: Good economy, got good in migration trends, solid permitting.

and there we're seeing really it has recovered. And so the days we get to post the weather, our South Regions running really strong and we are actually operating in the area where a lot of these permits are. So in that Southwest portion and for Ben County. Phoenix is our second best recovered market at this point. They've 24,000 permits.

Still High Employment from the ChipSact and there we'll see continued recovery as we're actually located in the best part of the recovery there in the West Part of Phoenix and then finally Salt Lake City is the one that's the most sluggish, though it's a great market for us.

Speaker Change: They are the permits to rune at 3000 versus a typical 4-5,000 race, but we'll be very happy when that recovers and hopefully that second half of 2025 is that's by far-apples profitable and high-roach market. So we are positive about this coming back. We're just not leaning into that volume right now as part of our planning stands.

Speaker Change: Good afternoon, thank you.

Speaker Change: Our next question comes from a line of Timna Tanner's was Wolf Research. Please go ahead.

Yeah, hey good morning. In three, preliminary comments, this is how you think that one of the offsets or several offsets too.

A few of the challenges you cited were the opportunities to divest some assets that perhaps were underperforming and some possible adjustments to incentive comp. Can you elaborate a bit more on each of those and in particular of course on the divestatures what those could look like any further detail there please. Thanks.

Yeah, thanks Tim and I have a question. So the office, that's one of the things I will say is our team has, it's in the DNA of the team to constantly improve the return of on a best capital of our business and so ever since we launched L.A.

Speaker Change: Every year our team has a set of contingencies of asset sales and they can vary from being a business to your question which we do report on. We did for those this year but really where the offsets are as we come into the end of the year a much more in the form of land and equipment.

and each one of our regions has their list of contingencies trying to sell those off and improve the heroic and improve margin as we move forward. And we've got some of those built into our midpoint, we know we can do some of those and then what would drive us up into the rise for 2024 would be increased number of those assets sales.

Speaker Change: Also, we're always adjusting and saying to come depending on where we land and so there is some opportunity that offset some of the volume deadlines.

So that's how we were able to keep that 1985 midpoint, just a refinement of it versus a big reduction.

Speaker Change: and we do believe if you look at our guidance, what would drive us up into the rise of that guidance would be extra days in our colder climate. So Utah cancels in the river markets.

Speaker Change: and so that's how you should really think about the offset. The team's been executed at a very high level under contingencies.

Speaker Change: Okay, I'll leave it there, that's helpful, thank you.

Speaker Change: Extended.

Our next question comes from the line of Roheet Staff with C.Port Research Partners. Please go ahead.

Hey, thanks for taking my question and great quarter guys. I'm actually a great year so far. This question mentioned on the M&A front, you did executed a couple of deals and you just kind of elaborate on what moves you made it in. And what markets.

Speaker Change: and just sort of the dynamics in those markets. Thanks.

Speaker Change: Yes, so our two acquisitions that we did were both Ag Steals, which is consistent with our strategy, moving forward to continue to redeploy cash into the Ag's inorganic growth, and there were our two growth platforms. One was in Florida and the other was in Phoenix. So that's just consistent what we've said how we will redeploy cash from our divestitures and we did four divestures of two acquisitions here today, but all Ag's oriented.

You should think of them more as bolt-on as part of as we go into these areas. If you recall when we went into Phoenix, we went in with a strong ready mix position under pin by an exposition and the very foresight position we did there was an exposition that just grows out our aggregate.

and we probably five more targets were going after it. Phoenix, similarly named Florida. This was one of the targets that we had to further consolidate the market and increase that. So we don't disclose the exact volumes on these for competitive reasons, but think about the more as both on.

that will continue to expand that position in our growing, two growing platforms.

Thanks for having me. If I can squeeze another one in on the cement synergies, I'm going to just try to satisfy that update. How much you realize this year and what's on her? I've been for Q and 2025.

Speaker Change: Yes, so the team's ex-cutting radio well on this meant synergies. I think Scott referred to some of these, but...

So for 2024, we're very confident at being at that 40 millioner above.

and they're driven largely by the scale synergies which are procurement and SGNA and then by cement synergies both operational but also very much commercial and by our AGs pullthroat.

As we go into 25, we've committed to 80 million over 2024 and 2025 in our planning or well on target to deliver that to our shareholders.

and we're very confident of delivering the 130 million over time. Expect the synergies as we go into 2025 to become much more cement oriented and operational with continued commercial synergies in that regard.

Thank you for some. Thank you, all right.

Our next question comes from a line of keypies with tourist securities. Please go ahead. Thank you. The cement pricing range you gave us earlier for 2025. Can you talk about how much of that is market and how much of that is this harmonization with the Argus products?

Yeah, so what we've said is when you think about the Argos synergies, we had overall commercial at 20 to 25 million when we started out on this journey. About half of that was contracts that were below market.

and so we have been on that journey as you know Keats.

Since we closed in mid-January of trying to convert these low market contracts up. And we're making some progress there. And frankly, you know, most has been good progress. Some we've walked away from volume, the surprising is just too low. And we will not drive pricing down in the marketplace. We are value pricing leaders.

I would say we've done really good work around our existing, you know, the bunch that didn't go up high enough in January but went up and made an April that pricing scone and now as you go into 25 think about it being more about harmonized approach to January pricing and continuing to work with about half of that.

You know, commercial part. I would say, Ed, I can't give you exact numbers, but you know, a lot of synergies, probably on commercial on cement, we're around that 7 million mark here today. So, definitely making the progress we probably would keep on that. Okay, thank you.

Our next question comes from a line of Adam, Volomer, with Thompson Davis and Co. Please go ahead.

Hey, good morning guys. I know it's your smallest business, but services is having a great year and I'm just curious what's driving that and what the outlook is.

Speaker Change: i

You and did that Scott? Sure. Adam, you called it out, you know, services is really our construction activities.

and it's really, it aligns with the public demand we're seeing out there. And when you look at our North Texas business, our construction is really booming well.

Speaker Change: So, really good pipeline, good backlogs. You're going to see that continue too. Now, the Inter Mountain West, the projects have been a little lumpy, so it hasn't flown through or shown through quite as strong, but that North Texas is really driving that construction services.

Speaker Change: Perfect, thanks Scott.

Our next question comes from a line of Derry Rebek with Goldman Sachs. Please go ahead.

I'm going to say a good morning everyone and nice quarter

I want to ask you, you know what really is that to me on the sequential performance.

and Agarget's cash growth profit. You had similar growth sequentially through you versus 2Q this year, last year, yet, you know, operationally is more challenging. And then you didn't get the uplift in pricing sequentially this year that you got last year. Can you talk about if there was a business?

Speaker Change: makes it towards maybe some similar margin, but lower price markets and any other moving pieces, it just help us understand that sequential performance and pricing cadence as well, please.

Yes, so I just address this and then Scott, please feel free to come in and color on this So Q2 we had a particularly positive mix, Jerry, Anne Ags

And so when you look at that we had a very strong just mix and cute too. So we knew we were sequential was going to be a little more muted. Also, you're laughing a year where we very high midyear price increases.

Speaker Change: Last year, so that's putting the comps a little funky on that one as well.

Speaker Change: So I would say volume wise, you know, we did quite well, in two-q-3 on eggs with coming up.7%. So that was driven largely by our central region. It's been very strong. We've been a big-eye 70 project. We've some recovery British Columbia and Virginia, and then the south coming really back strong after the weather they had in the first half.

So Scott maybe you want to add a little more color on that? Yeah, not much more to add and you kind of call it's really related to geographic mix. You know, you know, the margins in certain areas are just higher. And so we've had a more favorable geographic mix.

Cooperant, and can I ask you, was you folks thinking about pricing in the aggregates for 2025 and you mentioned that the above the historical

Speaker Change: Are you thinking about in terms of the cushion that you need to build into your pricing commitments considering inflation over the past couple of years has been pretty volatile. Are you thinking of an extra cushion beyond your targeted price cost gap that you're trying to achieve in the business?

Yeah, well, Scott has, there's been a couple of factors here, so we're always driving our team and they're incented on price net of cost and they've done a really nice job in continuing to expand that we've always said as cost moderate off.

That price is, you know, that this location between price and cost has become even more favorable.

Now we kind of think about it in two buckets. So the first bucket is value pricing, Jerry, and as I said in my comments here, you know, we will go with we'll have some carry over, we'll have January increases and we'll have midiors, they'll vary a little bit by GRV, but NASS, I would be very disappointed if we're not at 6 to 9%.

Now, counteracting, that is what Scott referred to earlier. We're also very disciplined in going after our calls, both having to moderate off, but the op-axle inside. So think about it as a tacking from two fronts here.

to get this continued growth, which is why we're very confident, frankly, we'll go into our 25-27% margins overall as a business in 2025.

So really the execution rate momentum that we have right now is really the push that I would talk to.

That's really, but they're not controlled. Yeah, the only thing I would add, Jerry, is, you know, we came into the year saying we're going to try to hold the line on our cost this year in the ax.

and you know, despite the weather impacts, if you look at our ax cost profile, you know, inflation with inflation and the offset, it's only one up about 2%. So we've done a good job, we're making a lot of progress towards holding those costs.

Speaker Change: Well done, thank you.

Speaker Change: Thanks, Jerry.

Speaker Change: Our next question comes from a line of Mike Dal with RBC Capital Markets. Please go ahead.

Mike Dal: I think I've said that in my question. It's just a level set on kind of understanding the fourth quarter when you talk about assuming normal, whether the speed and theality or normal weather.

from here on out. What specifically does that assume or not assume in terms of recapture of some of the 20 million?

Speaker Change: and Lost Storm, Eva Ta and can you talk about as you look at the impact in parts of your footprint which markets you have and have not been able to actually resume kind of normal shipping and operations.

So, overall, I'll try and address this question for you Mike, you know, what's normal weather? Well, essentially we've said, eggs, for example are flat, you're on year, and that just assumes our normalized Q4. Sement, you'll see a slight uptick, you know, Q3 to Q4, which is just consistent with our more season out, you know, all season markets. So, that's kind of a normalized pattern.

Speaker Change: What I would say is we have not, when we think about, we are not.

Slow down, any of our markets right now. We've resumed production and nearly our team has been very resilient.

and we are delivering to our customers we're out there when we have good weather days, that's where we're recouping and I'd use our South region, Houston as an example. They are eaten into that six and a half million in October. I will tell you we just strong October across all of our business.

Speaker Change: and so we're quite positive about what we've seen up to over and if we can get good weather and extend it, we can get more days in the river markets, Utah and Kansas.

Speaker Change: We will go to the upside of our midpoint.

Speaker Change: On the other side, I would say the herkid season is an over till November, so that's why we kind of stayed flat. So I would be disappointed based on the execution rate that Team said, if we couldn't recover some amylsin.

but we're confident in our midpoint range in the way the team is executing. So it's really, we are resumed, we're performing at a high level, in all of our markets right now, and we're going to do everything we can to recapture some of that 20 million that we've had this year on the impact.

Speaker Change: and great thank you.

That concludes our survey session. I will now turn to call back over to Anne Noonan for closing the ranks.

Thank you for joining today's call and I'd like to leave you with the message that I've been sharing with my team.

Anne Noonan: Having successfully navigated a very difficult operating environment, we have the opportunity to close this year from a position of strength with momentum building for 2025.

Our challenge is to laser-focused on our controllables, deliver on our commitments, and in doing that we will achieve our strategic priorities and position some as for superior value creation. We appreciate your continued support of Summit Materials. We thank you for your time, and we hope you all have a great day.

Speaker Change: This concludes today's call, you may now disconnect.