Q4 2024 Vulcan Materials Co Earnings Call
Shaina: Good morning. Welcome everyone to the Vulcan Materials Company fourth quarter 2024 earnings call. My name is Shaina and I will be your conference call coordinator today.
Shaina: Please be reminded that today's call is being recorded and will be available for replay later today at the company's website
Shaina: All lines have been placed in a listen-only mode. After the company's prepared remarks, there will be a question and answer session. Now I will turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.
Shaina: Thank you, Operator, and good morning everyone. With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer.
Shaina: Today's call is accompanied by a press release and a supplemental presentation posted to our website, VulcanMaterials.com.
Shaina: Please be reminded that today's discussion may include forward-looking statements which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Security Exchange Commission.
Shaina: Reconciliations of non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation, and other SEC filings.
Shaina: During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available.
And with that, I'll turn the call over to Tom.
Tom Hill: Thank you, Mark, and thank all of you for your interest in Vulcan materials today. 2024 was another year of successful execution.
Shaina: Our two-pronged growth strategy of enhancing our core and expanding our reach is working.
Shaina: We improved our industry-leading aggregates cash gross profit per ton by 12% and deployed over $2 billion towards value-creating aggregates-led acquisitions.
Shaina: These acquisitions expanded our presence into new, attractive growth areas and strengthened our existing franchise in three of our top ten revenue states.
Shaina: We finished the year strong. We plan to capitalize on our solid momentum and deliver attractive earnings growth again in 2025.
Shaina: Before discussing our outlook in more detail, I want to provide you some key highlights from our fourth quarter performance.
Shaina: Our teams delivered $550 million of Justed EBITDA in the fourth quarter.
Shaina: A 16% improvement over the prior year. Importantly, adjusted EBITDA margin improved on a year-over-year basis for an eighth consecutive quarter.
Shaina: In the aggregate segment, cash gross profit per ton expanded 16% to $11.50 in the quarter through a combination of continued pricing momentum and moderating year-over-year unit cash cost of sales.
Shaina: AgriSpray's adjusted price improved 11% in the quarter, consistent with full year results.
Price improvement remained geographically widespread.
Shaina: Growing public shipments and strong demand in storm-impacted areas of western North Carolina and East Tennessee helped to particularly offset headwinds and private construction activity.
Shaina: with less disruption from weather and our consistent focus on maximizing efficiencies through our Vulcan Wave operating efforts.
Shaina: freight adjusted unit cash cost of sales increased 5% compared to the prior year. This was a meaningful improvement compared to previous quarters and a testament to the execution of our operating teams.
Shaina: This continued execution will be a focus for us in 2025.
Shaina: The pricing environment remains healthy, and we expect freight-adjusted aggregate price to grow between 5 and 7 percent in 2025. Now this includes an over 100 basis point negative mixed impact from recent acquisitions.
Inflationary cost pressures continue to moderate, and we're making progress on our vocal way of operating process intelligence adoption.
Shaina: We expect freight-adjusted aggregate unit cash costs to increase low to mid-single digits in 2025, leading to another year of double-digit year-over-year expansion in our aggregate unit profitability.
Shaina: We expect 2025 average shipments to increase between 3 and 5 percent compared to last year.
Shaina: This growth outlook is driven by recent acquisitions, coupled with expectation of stable demand for our legacy business. I expect that continued growth in public construction activity will offset ongoing, more modest contraction in private activity.
Shaina: Over the last year, trailing 12 months, highway starts have increased by another $7 billion to $122 billion.
Shaina: Blowing Highway Input Cost Inflation and Continued IIJA Related Spending Support Ongoing Growth in Highway Shipments in 2025 and Beyond.
Shaina: Additionally, $45 billion of funding initiatives were passed at the state and local level in the recent election cycle to spur additional transportation investment in Vulcan states.
Shaina: Affordability and elevated interest rates remain headwinds for residential construction activity.
Shaina: Increasing single-family starts over the past 12 months support modest growth in single-family housing in 2025.
Shaina: The multi-family starts data and elevated vacancy rates point to another year of declining demand in multi-family housing.
Shaina: Because the demographics in Vulcan market support a consistent need for additional housing, the timing of additional interest rates, reductions, and overall impoverishability will dictate when residential construction activity returns to growth.
Shaina: Likewise, a return to growth in private non-residential construction will also be a matter of timing.
Shaina: While we expect lower private non-residential demand in 2025, we currently anticipate that starts will bottom by mid-2025 and may begin to recover by the second half of the year, voting well for 2026 activity.
Shaina: Recent trends in both warehouse starts and data centers have been encouraging.
Shaina: Trailing 12-month warehouse starts, the largest category in private non-residential construction, have continued to flatten out at pre-pandemic levels after a precipitous drop from historic highs throughout 2023.
Shaina: As I said earlier, the focus of our teams is execution. Controlling what we control.
Shaina: Against the demand backdrop I just described, we expect to deliver between $2.35 and $2.55 billion of adjusted EBITDA in 2025.
Shaina: Now I'll turn the call over to Mary Andrews to provide some additional commentary on our 2024 performance and more details around our 2025 outlook. Mary Andrews. Thanks Tom and good morning.
Mary Andrews: I commented a year ago that our balance sheet was a source of strength and provided us considerable financial flexibility to continue to grow.
Speaker Change: We also reinvested in our existing franchise and furthered our greenfield efforts with $638 million of operating and maintenance and internal growth capital. And we returned $313 million to shareholders through dividends and share repurchases.
Speaker Change: At year end, our net debt to adjusted EBITDA leverage was 2.3 times.
Speaker Change: In March, we redeemed our 2026 notes at PAR for $550 million, and in the fourth quarter, we issued $2 billion of notes across 5-, 10-, and 30-year tenors to fund our 2024 acquisition activity.
Speaker Change: Recently, we provided notice of our intent to redeem the $400 million of 2025 notes with cash on hand, effective March 28, 2025.
Speaker Change: Given another year of solid cash generation in 2024, we remain well positioned to continue our long track record of growth through discipline to capital allocation and consistent execution.
Speaker Change: In 2024, our teams executed well in a challenging volume environment to expand adjusted EBITDA margins by 190 basis points and deliver $2.1 billion of adjusted EBITDA for the full year.
Speaker Change: Gross profit per ton grew by 12% to $10.61, demonstrating the durable, compounding nature of the aggregates business and our continued progress toward our $11 to $12 per ton goal.
Speaker Change: SAG expenses for the full year were 2% lower than the prior year. We remain focused on continuing to drive value for the business through disciplined investments in SAG expenses to support our organic growth initiatives and innovation through technology.
Speaker Change: SAG expenses as a percentage of revenue were 7.2% in 2024.
Speaker Change: Our return on invested capital at year-end was 16.2%, largely consistent with the prior year. The increase in invested capital was driven by fourth-quarter acquisitions, which provided very little earnings contribution given the closing date.
Speaker Change: Absent that timing impact, return on invested capital improved 40 basis points.
Speaker Change: Carrying strong momentum into 2025, we anticipate another year of attractive margin expansion and earnings growth.
Speaker Change: Tom highlighted our views around demand, pricing, and aggregates unit profitability. So let me provide a few additional details around the 2025 guidance.
Speaker Change: We estimate that recent acquisitions will contribute approximately $150 million of adjusted EBITDA in 2025.
Speaker Change: We expect our downstream businesses to contribute approximately $360 million in cash growth profit, with an estimated two-thirds of the contribution from the asphalt segment and one-third from the concrete segment.
Speaker Change: These expectations reflect expansion in cash unit profitability in both segments and the contribution of recent acquisitions.
Speaker Change: We forecast SAG expenses of between $550 million and $560 million.
Speaker Change: We project depreciation, depletion, amortization, and accretion expenses of approximately $800 million, interest expense of approximately $245 million, and an effective tax rate between 22 and 23 percent.
Speaker Change: In 2025, we plan to reinvest in our franchise through operating and maintenance and internal growth capital expenditures between $750 and $800 million.
Speaker Change: Included in this plan is approximately 125 million dollars of spending on three sizable plant rebuild projects that are underway, in addition to capital for recently acquired businesses.
Speaker Change: Overall, we expect 2025 to mark another year of expansion and adjusted EBITDA margins, attractive growth and adjusted EBITDA, and strong cash generation.
Speaker Change: I'll now turn the call back over to Tom to provide a few closing remarks. Thank you, Mary Andrews. I want to take a moment to thank the men and women of Vulcan Materials for your consistent and enduring commitment to excellence.
Tom Hill: Most importantly, you kept one another safe and looked out for your brothers and sisters across the company and the communities in which we live and work.
Tom Hill: particularly in the face of persistent, inclement, and sometimes severe weather. And I am so proud of your consistent execution of the Volcker way of operating and the Volcker way of selling strategic disciplines.
Tom Hill: You proved your mettle and increased cash gross profit per ton every quarter for the second year in a row.
Tom Hill: I'm excited about what we will achieve in 2025. Together, we remain focused on controlling what we can control and delivering value for our customers, our communities, and our shareholders.
Speaker Change: And now, Mayor Andrews and I will be happy to take your questions.
Speaker Change: Certainly, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. If your question has been answered, you may remove yourself from the queue by pressing star 2.
Speaker Change: Once again, that is star one to ask the question. We will take our first question from Trey Grooms with Stevens.
Speaker Change: Mr. Grooms, you might be on mute. Your line is open.
Speaker Change: Hey, I'm sorry. Sorry about that. Good morning Tom. Good morning Tom, Mary Andrews, and Mark.
Yeah, well done on the strong finish to the year.
I wanted to ask on
Speaker Change: aggregates pricing you know it seems like some markets have seen a shift from
January to April as far as just the timing.
Can you talk about...
Speaker Change: a little bit about that, and maybe it's the success of January increases that you've seen, and how we should be thinking about maybe the cadence of pricing this year.
Speaker Change: Sure, Trey, so Q4 in the total year last year, winter was pricing up 11%, so that allows us to carry really good pricing momentum into this year.
Speaker Change: As you saw, our guide is 5 to 7, but that's also negatively impacted over 100 basis points by the acquisitions. You know, I'm not worried about those. We'll get those back up to our averages quickly.
Speaker Change: The timing of price increases, I think, will be very similar to last year. Whether it was in bid work or asphalt or ready mix price increases, the vast majority of our price increases took effect January 1.
Speaker Change: I think we would guide you to, I think we'll be in the range quarter to quarter throughout the year. Now remember, mix can impact a single quarter. It can impact it up or down. But mix adjusted, I think we should be consistently in that five to seven range.
Speaker Change: Yeah, and Trey, you know, I would add that most importantly, we expect that the consistent pricing improvement coupled with, you know, moderating costs that we talked about in the prepared remarks.
Speaker Change: will yield low double-digit improvement and cash gross profit per ton consistently each quarter as well, you know, extending what we've now strung together a nine-quarter run on double-digit improvement.
Speaker Change: And really, the underlying performance of the aggregates business is going to be the biggest driver of our 2025 EBITDA growth.
Speaker Change: which we expect is going to improve, you know, by about 12% on an organic basis. So, really expecting a strong performance from the ag segment.
Speaker Change: yeah well thank you for all the color and that's that's impressive and encouraging so keep up the good work and I'll pass it on thank you
Thanks, Trish.
Speaker Change: We will take our next question from Stephen Fisher with UBS.
Stephen Fisher: Thanks, good morning. I think you mentioned on the aggregates volume side sort of an organic steady pace. So I'm assuming that means about sort of flat organic volumes expectation, if that's correct.
Stephen Fisher: and feel free to correct me on that, but I'm just curious about the the cadence of how that plays out during the year and we've been observing this
Stephen Fisher: slow down in overall non-res construction. You mentioned the private side kind of being a little weak to start off. So just curious what you've assumed.
Stephen Fisher: for the cadence of that organic trend in the first half of the year.
Stephen Fisher: versus the second half. Do you have actual declines maybe in the first half before you know, maybe easier comps and growth in the second half? Thank you.
Stephen Fisher: Yeah, I think you completely understand it. It is growing public, offsetting some challenge private. If you look back at 24, we really never got out of the weather problem. The easiest comp, to your point, is Q3.
Stephen Fisher: If you look at January and February, we got a slow start. Some of that is cold and wet weather. But remember, it's just January and February, so not too worried about that. I think regardless of the challenges, our Vulcan teams will perform.
Stephen Fisher: I think I have complete confidence in our four-year guide, but as you said, back half loaded, probably with some easier comps coupled with probably some help from single family and non-res construction in the second half.
Terrific. Thank you.
Thank you.
Speaker Change: We will take our next question from Katherine Thompson with Thompson Research Group.
Katherine Thompson: Hi, thank you for taking my question. Good morning. Thank you for taking my question today. So your volume guidance in the quarter was very close to ours, pricing exactly in line, but what jumps out at me is
Speaker Change: and correct me if I'm wrong with this, but your gross margins and Keeman at a record Q4 level. Could you, you've articulated in the past
Speaker Change: the bulk of way of operations, but if you could parse out a little bit more for this quarter and project how we should think about next year in terms of that margin of kind of the why behind that record for Q4, the components, and how that plays into the longer-term strategy including for this year. Thank you.
Speaker Change: Sure. You know, our cost increase in the fourth quarter was much improved over the prior three quarters. Three reasons why. One was weather was not as negative. Two, volumes were not as negative. And three, our vocal way of operating technology and tools and disciplines are improving our efficiencies.
Speaker Change: And as we look to 2025, we believe we'll continue to mature the Vulcan wave operating, which will continue to enhance our operating efficiencies.
Speaker Change: We would guide you to the kind of low to mid-single digit increases in 2025.
Speaker Change: That is a substantial improvement over the past couple of years, but really kind of back closer to what we've seen in history. So I think what you're seeing is the Vulcan way of operating at work and offsetting some of the headwinds we would see.
Speaker Change: And Catherine, on growth margin, you know, we saw improvement on a year-over-year basis each quarter in 2024. That's what I would expect for you to see in 2025. I think in terms of kind of the cadence of growth margin, I would think about it, you know, it's typically lowest, obviously, in Q1, highest in Q2 or Q3. We did have an outstanding fourth quarter and plan to carry that momentum into 2025.
Great, thank you very much.
Thank you
Speaker Change: Thank you. Our next question is coming from Anthony Pettinari with Citi.
Hi, this is Asher.
Speaker Change: Hey, hi, this is Asher Soninoff, Anthony, and thanks for taking my question. I just wanted to ask around, you know, administrative policy, have you seen any kind of pressure on, you know, the pace of IIJ rollout or project starts from
Speaker Change: from, you know, any of the policy decisions or executive orders we've seen, and then on tariffs, what kind of impact your business we could expect, potentially.
Speaker Change: So, I don't think we see any impact from policy on the public demand. It's IJ, what you're seeing is the growth in public going to work.
Speaker Change: and remember that money is protected through dedicated long-term funding so nothing's going to happen to it. Looking forward we would think this government will support traditional aggregate intensive public work legislature so probably a positive from that perspective on tariffs.
Speaker Change: On agriterrorists directly, we see very little impact on everything else, and we've looked at steel and rubber. I'm not sure anyone can tell you what's going to happen.
I don't think it's a big impact to us.
Speaker Change: And the flip side of that is I'm confident that Vulcan Materials teams will navigate whatever comes at us.
Speaker Change: You know, look, we've seen a pandemic, we've seen volumes down, we've seen record inflation, and our teams consistently grow unit margins and earnings, and that's exactly why we've developed VulcanWebSelling and VulcanWebOperating.
Speaker Change: So that we can consistently grow our unit profitability regardless of any outside challenges, so The government I think supports infrastructure, and I don't think we'll handle whatever comes out of some of the tariffs
Great, thanks, I'll turn it over.
Thank you.
Speaker Change: We will take our next question from Jerry Revich with Goldman Sachs.
Speaker Change: Hi Jerry. Yes, hi, good morning everyone. Hi Tom, Mary Andrews, Mark. Hi, Mary Andrews, I just wanted to pull the thread on the cost performance, you know, if we back out the period cost absorption, your variable costs per ton were essentially flat in the quarter, so I'm wondering if you could just expand
Speaker Change: on what part of your cost structure is actually deflationary now.
Speaker Change: And, you know, if we just straight line the performance into the first quarter with normal seasonality...
Speaker Change: That would imply costs per ton are about flat year over year in the first quarter, which I just want to make sure that's right, considering the pricing outlook relative to that is pretty attractive.
Speaker Change: I think I'll take that one. I think I would not call costs flat. I would call them up mid to single digit and I think pretty consistently through the year. Now remember quarter to quarter cost is going to be choppy. It's just the nature of the beast. So really kind of need to look at it on a 12-month basis.
Speaker Change: Fourth quarter was encouraging, but we've got to string that together. If you look at inflation, I don't think there's any deflation on anything out there that I can think of. You know, as we guide to 25, I would tell you diesel up slightly.
Speaker Change: wages mid-single-digit, electricity up high-single-digit, and all of that partially offset by improved operating efficiency.
But, but, you know
Speaker Change: I would not guide you to flat, I think you would stay in that longer term, that low to mid single digit cost performance.
Well, nice performance. Thank you.
Thank you.
Speaker Change: We will take our next question from Angel Castillo with Morgan Stanley.
Hi, good morning and thanks for taking my question.
Speaker Change: I just wanted to go back to the comments on private non-resi. You talked about potential for a kind of start to maybe bottom in the middle of the year and maybe even rebound in the second half.
Speaker Change: Yeah, so I think, let me be clear, I think we do see non-residential construction shipments are still down in 2025. I think the good news is
Speaker Change: We're starting to see some turn in that performance. Data centers will be a bright spot, and most of the planned data centers are in our footprint.
And while warehouses has been a big drag
Speaker Change: and we'll be still a drag in the near future. I think that's changing. And if you looked at a number of our markets,
Speaker Change: on a trailing three-month basis, we've seen that turn positive. Not everywhere, but it's starting to turn. So I think you're starting to see some green shoots. I think you're starting to see some things turn. There's a lot of money sitting on the sidelines.
Speaker Change: Like traditional non-res, it's still a drag, but that's going to follow subdivision, so it's going to take a while.
Speaker Change: So while non-residential construction will be negative in 2025, we think it should gradually get better as we progress through the year, which kind of sets us up for a more positive outlook at this point, very preliminary for 2026.
Speaker Change: Is this helpful? Anything in the quoting activity that you're seeing?
Very helpful. Thank you.
Thank you.
Speaker Change: We will take our next question from Phil Naim with Jeffreys.
Speaker Change: Hey guys, Tom, another strong quarter. I have a few questions around the pricing commentary. You talked about 100 basis points drag on price mix from these recent deals. Can you give us a sense how much lower is ASP for some of these deals versus the corporate average and how quickly do you think you can narrow that over time?
Speaker Change: So I substantially lower I mean in and I'm not going to quote numbers on that But if it had over a hundred basis points on the whole company, it's it is lower. We've already started that work
Speaker Change: I think we were successful with January price increases in those markets and we'll continue that as we progress through the next few quarters and years. I don't think it takes us long to get it back up to where a more reasonable Vulcan market would look like.
Oprah.
And then separately, from a pricing standpoint, if I...
Speaker Change: account for the 100 basis points. You're still talking about really good pricing, but perhaps a little
Speaker Change: software than the high single-digit framework you gave us last quarter. Any puts and takes you want to give us a little more color because it doesn't sound like you know timing is a real issue for you Jen versus April like your competitors so just give us some puts and takes on perhaps what you're seeing in the marketplace on pricing.
Speaker Change: I think we were pretty consistent throughout our geographies on price increases. Same thing within uses.
Speaker Change: I think you got to remember, while you're a little lower than double digit, maybe those same store high single digit, you also are not looking at double digit cost.
Speaker Change: increases. You're looking at mid to low, so we continue that trend of taking money to the bottom line, which is the most important thing we can do, is grow our unit margins by double digits.
Speaker Change: You've seen us do that over the last couple of years, and I think you'll see us do that. That's what our guide is for 2025, and I think we feel pretty good about it.
Thank you.
Speaker Change: We will take our next question from Mike Dahl with RBC.
Hi, thanks for taking my question.
Speaker Change: Tom Suzanne, you obviously put a lot of capital to work with the acquisitions. They did come with some some mix of downstream businesses.
Speaker Change: Can you help us understand kind of how you view the downstream portion, whether those are businesses that are likely to stay within the portfolio, and what is or is not incorporated into the guide with respect to that?
Speaker Change: So the acquisitions are pretty new. They were very successfully run with good management team and good assets.
Speaker Change: Like anything else, we're going to look at this as a set of assets, and if it fits us, we'll run it. If it earns an appropriate return that suits us, we'll run it. If it is more valuable to someone else, then we'll divest of that, and we'll take those proceeds and put them back in the agri-business.
And in terms of
Speaker Change: The guide, you know, assumes we own the businesses like we do.
Speaker Change: Maybe for a little helpful context for you, you know, we've commented in the prepared remarks that there's a hundred and fifty million dollars of EBITDA contribution from the acquisitions That's about 60% in the aggregate segment and about 40% of that would be contributing to the to the downstream businesses
Okay, great. Thank you
Thank you.
Speaker Change: We will take our next question from Adam Thalheimer with Thompson Davis
Hey, good morning guys. Congrats on the Q4 beat.
Mary Andrews, do you have the...
Speaker Change: I was also curious about the downstream portion, because that was a pretty big increase year over year, so that looks like it's from acquisitions. I was curious if you have the...
Speaker Change: The 360 is cash gross profit. Do you have that on a reported basis?
Um
Speaker Change: I'm going to stick with the 360 for now, and we can talk offline about some more specifics. But maybe what would be helpful to you is the improvement in the cash gross profit contribution from the downstream businesses, about 75 percent of that.
Speaker Change: overall improvement is from the acquisitions. We also see, you know, improvement in the underlying business in both segments, and that's about 25 percent of the improvement year over year.
That helps. Okay. Thank you.
Speaker Change: We will take our next question from Timnath Tanners with Wolf Research.
Timnath Tanners: Yeah, hey, good morning. I wanted to ask you a little bit about the M&A landscape after the deal He just finished you know what how you're looking at
Speaker Change: 2025, if it could build from what you just accomplished. And then if I could sneak in a question on Mexico, any update on the Calica quarry restitution efforts with the USMCA panel. Thank you.
Speaker Change: Yeah, so I think there's still a very healthy pipeline of M&A. There's a number of projects we're working on.
Speaker Change: It'll take some time, but I think we'll continue to be successful with that as we go through 2025. On Mexico, I think the short answer there is no real news there. We're still waiting on the...
Speaker Change: The Tribunal to make a decision. We feel very good about our case and think we will win that and we'll you know We'll when they make a decision, we'll let you guys know we are anticipating that sometime this year
Okay, thank you.
Thank you.
Speaker Change: We will take our next question from Garrick Smoyce with Loop Capital.
Garrick Smoyce: Great, thanks for taking my, hey good morning, thanks for taking my question. You spoke to the pricing cadence being similar this year as opposed to last, so would love to hear your thoughts on media increases, what opportunities you see there potentially and what the time frame could be.
Speaker Change: Yeah, so they are not included in our guide, but we will absolutely announce mid-year price increases. We will announce those probably towards the end of the first quarter so we have time to have those conversations.
Again, as I always remind you, mid-years.
Speaker Change: will have a bigger impact on 2026 than they will in 2025. But it's too early to call how successful those will be, but we'll for sure going to announce them. We'll have conversation with customers, and we'll see where we go from there.
Speaker Change: Great. Do you have by chance how much 2024 mid-years are impacting 2025?
Speaker Change: Well, that's a really hard to parse out. They definitely had an impact.
Speaker Change: I think we're pleased with part of the things that they do is help you Give notice to your customers so they have more time to react which allows us to be more successful for a January one So some of it is amplitude the price and some of its timing, but it definitely helped both
Understood. Thanks for that and best of luck.
Thank you.
Speaker Change: We will take our next question from Keith Hughes with Truist.
Keith Hughes: Thank you. I hate to ask the short-term weather questions that everybody asks me. Part of the debate is whether they've been supportive of shipments or if we still had delays year-to-year with some of the storm activity.
Speaker Change: So short-term in January, February has been very cold. We're going to see that this week with
with Cold and Snow.
Speaker Change: Not a great start, but you know, when we put a plan together...
Speaker Change: We expect weather impact at some point in time in the year, and we expect.
Speaker Change: to get lucky in some quarters, but we've tried to look at more normalized weather as we make a
Speaker Change: prediction and our guidance. I think as we pointed out, Q3 was particularly challenged last year. Hopefully that'll be easy comp in the middle of the season. So hopefully that'll help us. X Hurricanes.
Speaker Change: and one other question on the Southern California acquisition. Is that, particularly the downstream, does that mix in well with current operations at Vulcan or does that operate more as a standalone entity?
Speaker Change: So, if you look at the overall, it fits us very well, particularly on an agri perspective. We don't have a lot of downstream ready mix in those markets, but it also has some asphalt that fits. So, part of it fits in agri.
Speaker Change: and Asphalt, as far as us being there, and then the ReadyMix, they have an excellent position in those markets. We were not in the ReadyMix business in those markets.
Okay, thank you.
Thank you. Bye.
Speaker Change: We will take our next question from Brent Thalman with DA Davison.
Speaker Change: Hey, thanks. Hey, Tom, I have a question more on maybe the direct impacts of tariffs on your business, and in Mexico is not really in the conversation, but I was thinking more along the West Coast and what, you know,
Speaker Change: to the extent that tariffs are implemented on some of your assets shipping down from Canada.
Speaker Change: Well, I think we'll follow the letter of the law. We've looked at that. It is a pretty negligible impact for us. And, you know, whatever it is, we'll handle in the business. But I wouldn't – it doesn't move the needle.
Okay, thank you
Thank you.
Speaker Change: We will take our next question from Michael Dudas with Vertical Research.
Good morning Tom, Mark, Mary Andrews.
Good morning.
Morning.
Speaker Change: Do you sense this is even like say your organic volumes are flat and they kind of flattish on the overall market, does this look like maybe a more normalized level pricing relative to history spin or is there still room for upside on that going forward? Thank you.
Speaker Change: Yeah, I think that, you know, it's always upside on price. You've got to earn that with your customers.
Speaker Change: Obviously, growing demand always helps that, and we haven't seen growing demand now for a few years, which puts some pressure on price, but I think if you look at the Vulcan Way of Selling and the way we...
Speaker Change: Service our customers. I think we earn price and I think we're doing that and I can see that in and our performance in 24 and I got in 25
Speaker Change: Once again that is star one to ask the question. We will take our next question from David MacGregor with Longbow Research.
Speaker Change: Good morning, everyone. Thanks. Yeah, good morning, Tom. Congratulations on a really strong quarter. Great performance. Thank you.
Speaker Change: I wanted to ask you about pricing and the Vulcan way of selling. And clearly, this process has been very successful and delivered some very visible results. But as your markets evolve, and I'm thinking, for example, of your ready mix and fixed plant customers, who in many instances are now paying more for their limestone than they are for the cement.
Speaker Change: And then I guess secondly, your Vulcan way of operating process, it's giving you better incremental unit costs. Does the profitability algorithm sort of adjust at some point to rely on slightly smaller price increases in favor of larger unit gains that are achieved, maybe in the way of market share gains from competitors who are continuing to push hard on price increases?
Speaker Change: Yeah, well, let me be clear. I wish we had cement pricing. We don't have it's much lower than cement pricing But also that cost is much lower. I think that as you as you look forward
Speaker Change: I would go back to the strategic initiatives of Volkman of Selling and Volkman of Operating. Volkman of Selling allows you a much better in-depth look into what's going on in the market and gives your sales people the tools.
Speaker Change: to price better and also gives them logistics and other tools to better service your customers.
Speaker Change: I think on the Vulcan way of operating, it allows for better
Speaker Change: and how we inspect our equipment and reduce downtime and also those the technology allows for better throughput and throughput of
critical sizes.
Speaker Change: You put those two together, and I think both of them have a lot better chance of beating history. Both the sales piece and the operating piece, which leads you to better opportunities on unit margin growth, that, again, will beat history, and you've seen us do that.
Speaker Change: It's over over the last nine quarters a double-digit improvement So that's not happening by accident, and it doesn't have back happen by accident going forward
Speaker Change: Again, that's over timeframes when volumes have actually gone down. This year we're calling it flat. But when volumes come back, you have an even better opportunity to improve your unit margins, both on the price side and on the cost side.
Yeah, okay. All right. Thanks, Tom.
Thank you.
Speaker Change: Thank you. It appears we have no further questions in the queue. I will turn the program back over to our presenters for any additional or closing remarks.
Speaker Change: Yes, thank you for your time and your interest in Vulcan Materials today. We appreciate the relationship. We hope that you and your families stay safe, particularly with all the weather we're having, and we look forward to talking to you throughout the quarter. Thank you.
Speaker Change: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
'REAH HILL RHAPSODY THEME'
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