Q1 2025 Arcosa Inc Earnings Call
Niki: Good morning, ladies and gentlemen, and welcome to the Arcosa Inc. 1st quarter 2025 earnings conference call. My name is Miki, and I will be your conference call coordinator today. As a reminder, today's call is being recorded.
Niki: Now, I would like to turn the call over to your host, Erin Drabek, Vice-President of Investor Relations for Arcosa. Meashtrabek, you may begin.
Speaker Change: Good morning everyone and thank you for joining Arcosa's first quarter 2025 earnings call. With me today are Antonio Carrillo, President and CEO and Gail Peck CFO . A question and answer session will follow their prepared remarks.
Speaker Change: A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release.
Speaker Change: A replay of the webcast will be available for one year on our website under the news and events tab.
Speaker Change: Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAF. Reconciliation of non-GAF financial measures to the closest GAF measure are included in the appendix of the side presentation.
Speaker Change: In addition, today's conference call contains forward-looking statements as defined by the Private Security's Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
Speaker Change: Please refer to the company's SEC filings for more information on their risks and uncertainties, including the press release we filed yesterday and our Form 10Q expected to be filed later today.
Speaker Change: I would now like to turn the call over to Antonio. Thank you, Ian. Good morning, everyone, and thank you for joining us today for a discussion for first quarter results and our outlook for 2025. I am pleased with the financial results with the liver in the core, which plays us on a strong footing for 2025.
Speaker Change: Let me start with a few key takeaways on slide 4. Our first quarter results demonstrate solid execution of our strategic vision, driven by the transformative actions undertaken over the past several years.
Speaker Change: Excluding the divested steel components business from the prior year, we delivered consolidated adjusted a bit that growth of 26 percent, outpacing 12 percent revenue growth in the quarter and expanded our margin by 190 basis points.
Speaker Change: The integration of the 1.2 billion stable acquisition completed in October 2024, continues to progress well, and operations are ramping up for the spring construction season in the northeast.
Speaker Change: As expected, Stavola Contribution was diluted to our first quarter results in its seasonally slowest quarter. So delivering 26% adjusted a bit that growth with significant margin expansion in the quarter shows the strength of Arcosa's legacy business.
Speaker Change: Purse Quarter Organic Performance was led by engineer structures where we operated well in utility structures with strong demand conditions and successfully continued to ramp up our winter facility in Belén, New Mexico.
Speaker Change: In construction products, despite unseasonably cold and wet weather impacting January and February , we expanded unit profitability on strong pricing gains and first-core results finished in light with our expectations.
Speaker Change: Within transportation products, our large business had a solid quarter, both in terms of performing better than expected on strong execution and extending our backlog with new orders.
Speaker Change: We are pleased to maintain our leverage at 2.9 times net data adjusted a bit. As Stavola starts to contribute in the second quarter, we're confident we will continue reducing our leverage. We remain committed to our goal of achieving a leverage starting of two to two and a half times over the next 12
Speaker Change: With operations primarily in the U.S., we expect to benefit from continued investment in the nation's aging infrastructure and the new era of growth for the U.S. power market.
Speaker Change: While the macroeconomic and policy environments continue to evolve rapidly, are causing a good position to navigate this environment because our teams are managing our business as well, most of our end markets continue to demonstrate resilience, and our bad looks provide solid visibility.
Speaker Change: In summary, our strong first quarter results show solid execution from our teams, the strategy for folio moves we have made over the last several years, and the initial benefit of the organic investments of the last few years. I will now turn over the call to Gail to discuss our first quarter segment results in more detail.
Gail Peck: Thank you, Antonio. Good morning, everyone. I'll start with construction products on slide 10.
Gail Peck: Before I discuss first quarter performance, I'd like to highlight a new revenue disclosures as we begin 2025.
Gail Peck: We will now separately disclose revenues for aggregates, which includes natural and recycled aggregates. For the first quarter, our aggregates business represents 69% of our construction materials revenues, which also include our asphalt and specialty material businesses.
Gail Peck: We plan to expand our aggregates' disclosures in coming quarters in line with our peers.
Gail Peck: driven by the contribution from Stavola. On an organic basis, segment revenues to climb 6%, with about half of the decline driven by lower freight revenues in the divestiture of underperforming operations in the prior year. The balance of the change reflects higher pricing that was offset by lower volumes.
Gail Peck: Adjusted segment EBITDA decreased 5% and large part driven by the inorganic impact of Stavola.
Gail Peck: Located in the northeast and more seasonally impacted by cold weather in the winter months than our legacy operations, Stavola reduced adjusted segment EBITDA by $2 million in line with our expectations and diluted adjusted segment EBITDA margins by 320 basis points.
Gail Peck: On an organic basis, adjusted segment EBITDA declined 2%, as volumes were impacted by wet and abnormally cold weather across our footprint.
Gail Peck: On a positive note, organic adjusted segment EBITDA margin expanded 100 basis points due to higher pricing and improved unit profitability.
Gail Peck: In our aggregates business, average organic pricing was up 7% from the prior year. Total pricing was up 10% with the accretive impact of Stavola.
Gail Peck: Organic volumes declined high single digits largely due to wet and seasonally cold weather that impacted demand in January and February , as well as our continued focus on value over volume, including Stavola, total volume was down 2% in the quarter.
Gail Peck: Organically, adjusted EBITDA for aggregates declined while Margin was roughly flat. Overall production volumes were impacted by weather, reducing fixed cost absorption in our seasonally slow first quarter.
Gail Peck: Variable costs continue to show moderating inflationary pressures on a year-over-year basis.
Gail Peck: Turning to our other construction materials businesses, revenues were roughly flat in specialty materials as higher pricing was offset by lower volumes. Adjusted EBITDA for the business increased slightly compared to the prior year, quarter resulting in margin expansion.
Gail Peck: As expected, our asphalt business, which is part of Stavola's vertically integrated operations, was diluted to the quarter's results and drove the 2 million EBITDA loss for Stavola. As we begin the spring construction season, we are pleased with the level of coding activity for this business.
Gail Peck: Finally, revenues for our Trent Shoring business were down 4% due to lower steel prices reducing average selling prices and a slight decrease in volumes, adjusted EBITDA grew and margin expanded in the quarter.
Moving to engineered structures on slide 11.
Gail Peck: Revenues for our utility wind and related structures businesses increased 23% largely due to higher wind tower volumes and the inorganic impact from Amoron, which was acquired in April 2024.
Gail Peck: As expected, first quarter revenues in our utility structures business declined slightly as a double digit volume increase and improved product mix were offset by lower steel prices, reducing average selling prices.
Gail Peck: Adjusted segment EBITDA increased 90% in margin expanded 650 base points, led by the ramp-up in our New Mexico Wind Towers facility and growth in our utility structures business.
Gail Peck: As a reminder, our New Mexico Wind Tower facility was incurring startup costs in the prior year period as it delivered its first towers in the second quarter last year. Adjusted EBITDA and margin for our utility structures business expanded nicely due to improved product mix and operating efficiencies.
Gail Peck: Segment Performance was enhanced by Amron, which hit its one-year anniversary as part of Arcosa in April and continues to perform well.
Gail Peck: We ended the quarter with combined backlog for utility wind and related structures of $1.1 billion dollars and expected to deliver 59% during 2025.
Gail Peck: Turning to transportation products on slide 12, revenues were up 6% and adjusted segment EBITDA increased 13%, excluding the devastated steel components business from the prior year period.
Gail Peck: Higher Tank Barge Volumes and the Associated Operating Leverage resulted in 120 basis points of margin improvement year-to-year for the barge business.
Gail Peck: Barge orders totaled $142 million during the quarter, representing a book to bill of 1.7 with a mix more weighted to tank barges. We ended the quarter with a backlog of $334 million, up 19% from the start of the year.
Gail Peck: I'll now provide some comments on our leveraged position and cash flow performance on slide 13.
Gail Peck: We maintained 2.9 times net debt to adjusted EBITDA at the end of the first quarter, consistent with the start of the year, which was a good outcome and our seasonally slowest quarter for construction material.
Gail Peck: We expect to demonstrate further de-leveraging in the second half of 2025.
Gail Peck: and remain on track to return to our two-to-two-and-a-half times leverage goal over the next 12 months. Our liquidity remains strong at $868 million, including full availability under our $700 million dollar revolver, and we have no material near-term debt maturity.
Gail Peck: First quarter operating cash flow was essentially break even driven by an $81 million increase in networking capital requirements and higher interest payments driven by the additional debt to finance the Stabola acquisition.
Gail Peck: The increase in working capital was primarily due to higher receivables in engineered structures and transportation products, largely due to timing.
Gail Peck: Receivables also increased due to advanced manufacturing production tax credits, recognized for our windtowers business that were subsequently sold in April .
Gail Peck: CapEx for the first quarter was $34 million, down $20 million from the prior period as we focused primarily on maintenance CapEx in 2025. We reaffirm our CapEx guidance of $145 to $165 million for the full year.
Gail Peck: Free cash flow for the quarter was negative $30 million. We expect free cash flow to improve as we move into the second half of the year.
Gail Peck: I will now turn the call over to Antonio for an update on our 2025 Outlook. Thank you, Gail. I will now turn to slide 15 to review our guidance.
Antonio Carrillo: Arcosa is well positioned to navigate the current environment and we expect a strong 2025.
Antonio Carrillo: We executed well in the first quarter and accordingly, we reiterated the full year 2025 guidance that we provided in February .
Antonio Carrillo: At the midpoint of our range, we anticipate revenues of 2.9 billion, up 17% and adjusted a bit of 570 million, up 30% excluding the divested steel components business from 2024 results.
Antonio Carrillo: The full year impact of the acquisitions in 2025 will be supplemented with anticipated double-digit adjusted beta growth from our legacy operations.
Antonio Carrillo: Regarding tariffs are currently outlined, we're in a good position and do not anticipate any material direct impacts to Arcosa. We primarily source our steel in the US and our US NCAA compliant products that are made in Mexico are exempt from tariffs.
Antonio Carrillo: Please turn to slide 16 for a discussion of our business outlet by segment.
Antonio Carrillo: We expect construction products to perform well as we move into a stronger, second and third quarters construction season. We continue to expect significant adjustment of the segment of the growth because of the stable acquisition and high single-digit organic growth.
Antonio Carrillo: We are maintaining our aggregate-spricing outlook of mid-single digit appreciation and solid double-digit volume growth benefiting from Stavola.
Antonio Carrillo: Overall, as we look across regions, infrastructure investment continues to be a tailwind. We see projects moving forward on the public side.
Antonio Carrillo: Single-family residential remains challenged, but we operate in many attractive markets with an under-supply of housing. We will continue to monitor the economic data closely, stay engaged with our customers, and focus on execution.
Antonio Carrillo: Moving next to engineer's structures, the themes remain very consistent in utility structures.
Antonio Carrillo: Increased electrification, Reid Harding and Resiliency, and the renewable energy connection to the grid are driving strong demand. After many years of flat demand for power in the US, we are now experiencing strong growth in the next several years.
Antonio Carrillo: To supply that growth in power demand, new sources of energy will have to be built and connected to an already stressed grid. Therefore, we see a long period of sustained demand growth for utility poles, and we're looking at ways to increase both efficiency and capacity.
Antonio Carrillo: including potentially converting an iron windtower facility to increase capacity in the U.S.
Antonio Carrillo: With respect to the wind energy industry, we believe the increased generation needs in the U.S. require and all of the above energy strategy.
Antonio Carrillo: It becomes clear that renewable energy must play an important role in meeting power demand over the next several years when you compare low growth forecasts with potential new sources of gas power.
Antonio Carrillo: We continue to engage with our wind turbine customers for orders for 2026 while we await additional clarity on renewable energy policy discussions in Washington DC.
Antonio Carrillo: Meanwhile, the ramp up in our New Mexico Winter Facilities, helping us drive both year-over-year volume and margin improvement.
Antonio Carrillo: 2025 continues to be a year of execution against a solid backlog for a wingtower's business.
Antonio Carrillo: Amaron continues to perform well, and we are seeing solid demand for lighting poles and traffic signals. As light rebound and telecom carrier spending is benefiting our telecommunications business as well.
Lath for Discussion and Transportation Prouds
Antonio Carrillo: The broader barge fleet continues to get older and is approaching an average age of 20 years.
Antonio Carrillo: Barge orders received during the quarter-extend our tank-barge battle of deep into 2026.
Antonio Carrillo: Costumer inquiries continue to be healthy for tank barges despite higher steel prices as industry capacity is tight, relatively to future replacement needs.
Antonio Carrillo: On the dry-barge side are backlog extensive into the beginning of the fourth quarter. Dry-hopper-barge customers are more sensitive to steel primes and potential agricultural tariffs, so they're taking a more conservative approach to ordering.
Antonio Carrillo: We're seeing signs of easing in the steel prices which is encouraging.
Antonio Carrillo: We did receive some hopper barges during the quarter and we are confident we will be able to fill our open slots.
Antonio Carrillo: With a fleet aging quickly, replacement needs over the next five years for both barge types are expected to far exceed industry building capacity if customers continue to wait.
Antonio Carrillo: In the meantime, our barge business is delivering outstanding margins at low production rates and we're ready to ramp up production as the man picks up.
Antonio Carrillo: Tommy Rolloff, we have much to be excited about in 2025 and we anticipate another strong year of growth. The global macroeconomic and policy environment remains fluid and we continue to monitor potential impacts on our company.
Antonio Carrillo: Our teams are staying focused on what they can't control and maintaining operational, operational excellence.
Antonio Carrillo: Arcosa is well positioned in the markets we serve, and our portfolio of business is much more resilient today than in previous periods of uncertainty.
Antonio Carrillo: As we head into the second quarter, we should start to see the positive impact of the stable acquisition and continue to see strong organic growth from our legacy businesses.
Antonio Carrillo: I want to thank our employees for their commitment and hard work. Your efforts are making a difference and we're seeing that in many ways across our company, most notably in our safety culture of Arcosa 100.
Antonio Carrillo: As you will see in our 2025 Sustainability Report, which was posted on our website earlier this week, we recorded our lowest number of recorded incidents or TRIR in our cause of history. Together we are building a stronger company. We are now ready to take your questions.
Antonio Carrillo: Thank you, and at this time, if you would like to ask a question, please press the store and one on your telephone keypad.
Antonio Carrillo: You may withdraw your question at any time by pressing star 2.
Antonio Carrillo: Once again, to ask a question, please press the star and one on your telephone keypad. We'll take our first question from Julio Romero with the Cedodian Company. Please go ahead. Your line is open.
Antonio Carrillo: I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Julio Romero: Great, thanks. Good morning, Antonio and Gail. Thanks for taking quite a while.
Speaker Change: Good morning. Hey, so very nice performance in the engineered structures segment. I wanted to dig into the moving pieces there in the quarter. Understanding there is some noise on the margin percentage in the segment due to this steel price on the utility side.
Julio Romero: Can you elaborate on what the wind tower contribution was to sales and profit dollars in the quarter?
Speaker Change: Let Gail give you a little more detail but let me I think the big message here Julio is, you know, for the last several course when you have film volatility.
He creates noise, but the reality is…
The volume growth in utility structures to be is the highlight here.
Speaker Change: We have double-digit growth in volumes in utility structures. The demand is really, really strong.
Speaker Change: and the plants are performing very, very well. Last year we had some hiccups in a few of our operations this year, the plants are operating
Speaker Change: extremely well, and we see a very long period of demand, so…
Blancs are doing well. In wind-sides.
Speaker Change: That's a big picture. We see a very strong demand on the utility side and the operations are performing extremely well. The other thing to mention on utility structures, even though our probes are USMTA compliant, etc. in the previous conference call I mentioned, we did have some steel in Mexico.
Speaker Change: that was left over from what our purchase last year. And we incurred some some some paris during the quarter that were completely absorbed by the efficiencies of the plant and cost-cutting and all the things. So the performance of the businesses were incredibly strong during the quarter and I'll let Gail give you some more
Yeah, good morning, Julio.
Speaker Change: You know, as it relates to growth in the quarter kind of parsing through the different businesses, we did have another quarter, our last quarter of inorganic impact from Amarons, so Amarons is a $95 to $100 million revenue business on an annual basis, so...
Speaker Change: You had that inorganic impact in Q1. As we talked about on our last call, we do expect strong revenue growth in wind this year based on our backlog visibility. So, and as I said in my comments,
Antonio Carrillo: Utility, Structures, Revenue was about flat, maybe a little bit down year over year, and that's really, Antonio talked about related to steel prices.
Your question on the profits, as you know, we don't…
Antonio Carrillo: Disclose profit by business in our financials, but I can say from a margin perspective, wind and amaran continue to be accretive to the segment margin and we saw a strong year-rear improvement in margins for the utility structures business, very happy with the performance for the quarter.
Speaker Change: Okay, great. Thanks for all the color there and I guess that's helpful. I guess just maybe I'm just trying to get a sense of the the wind profit jump because the year over year profit jump in the quarter was really significant. I mean. Yeah, um.
Speaker Change: on a dollar basis. So, I guess maybe asking another way would you say that the volume...
Improvement in Utility Structures
was a bigger...
Speaker Change: Maybe surprise to you in the quarter, then the wind.
then the wind jump on a profit dollar side.
Speaker Change: No, I wouldn't say so, Julio, maybe one thing I might point out, we did expect to have a little bit of profit degradation and wind in the quarter for the sale of tax credits. That sale was executed in April , so we didn't have that.
Speaker Change: that deduct from from Wind in Q1 that we'll have in Q2. But other than that I would say our performance was very much in line with what we expected. We expect strong growth in Wind in 2025 based on the backlog visibility that we have. We expect strong growth in Wind in 2025 based on the backlog visibility that we have. We expect strong growth in Wind in 2025 based on the backlog visibility.
Antonio Carrillo: Blaine, as Antonio said, has ramped up, and so we saw Blaine very creative to the segment margin in the quarter.
Speaker Change: And to your question, I think Julio, both business performed very, very well I think from the
from the margin perspective.
Speaker Change: I was very pleased with both, but the beauty structures was especially important to me because as I said last year we had some hiccups and it shows that the plants are performing really well and the management team is doing a fantastic job so I think it's, I'm excited for what I'm seeing in both businesses.
really helpful there.
Speaker Change: Last one for me would be just, you know, maybe stay on that a little bit longer, just a quick refresher on what the economics of the wind tower business are at, just given the years of continuous improvement, I think maybe even decades that you guys have done in wind tower manufacturing. If you could just kind of...
Contrast
Speaker Change: You know, the economics of that business now, even if you know any incentives whatever go away maybe compared to last cycle. [inaudible]
Speaker Change: Yes, that's a great question and I think that's a good way to phrase it. Let me give you a first big picture.
Speaker Change: Last cycle versus this cycle the biggest difference to me for getting about the production is the Man Factor.
Speaker Change: In the previous cycles, windtowers, outer renewable energy in general, but wind specifically.
Speaker Change: We're nice to have. We were living in a period of flat power demand in the U.S., so you could substitute retiring co-plants with wind or solar and that's okay, you can do a transition.
Speaker Change: And that change over the last few years were now power demand is growing.
Speaker Change: If you look at the numbers of turbines that can be built in the U.S. and the expansion happening gas turbines.
Speaker Change: Gas turbines will not be able to supply the power that this country needs for the next 5-70 years.
Nuclear plants are far away.
Speaker Change: You can delay a little bit of the cold plant retirement, but that doesn't solve the problem. The only thing that's really shovel ready and can get really production real fast is renewables.
So, with that in mind.
Speaker Change: Before the tax grades, we had a very viable business. The developers were getting tax grades and what we wanted to do is produce towers and that's what we did. Today we have an additional tax rate that we get and we love the tax rate and it's all great.
Speaker Change: I don't think there's a scenario where it goes away. We haven't heard anything that tells us that it will go away.
Speaker Change: There might be tweaks, adjustments here and there. And we will adjust our business model with our customers according to the cars we're dealt. So, if the wind tower tax rates get reshoveled one way or another, we'll have a conversation with our customers for future orders and there might be different economics within them.
Speaker Change: But we expect good economics for Arcosa because we have those economics in the previous cycles without...
Speaker Change: Any Tax Credit? So, very long answer to your short question, but I think the big picture is there's strong demand that's needed for powers for wind and second, even without a tax rate or with some disruptions in tax rates, we still have a very viable and profitable business. [inaudible]
Speaker Change: And one more thing, if the tax grades get, let's say the timing gets reduced or something changes, what we've seen in the past is that people get...
Speaker Change: Anxious about it and they order a lot so that they can take advantage of the tax credit so there's a scenario where you know reducing the time can be good for the man in the short term so that's that's a very long answer to your short question.
Great, thanks for the color. I'll pass it on.
Speaker Change: Thank you. Our next question comes from Brent Thielman with the A. Davidson. Please go ahead. Your line is open.
Speaker Change: Hey, thanks. Good morning. One more on engineering structures, if I could, maybe to approach it a different way. Is there any reason you shouldn't continue to be producing it, sort of 18 plus percent EBIDA margins? Absent, the fact that I know you're selling needs.
Brent Thielman: Tax Credits, and then Gail, is there any way to kind of handicap with that?
Gail Peck: That tax credit sale will do to margin less than a hundred basis points, just wanted to level
Brent Thielman: Good morning, Brent. Thanks for the question. On the monetization of the tax credits, there continues to be a good market for the sale of tax credits. So, as I said in my script, we subsequently sold.
Brent Thielman: Our Q1 Tax Credits in April , so we did not accrue the loss, but in terms of the loss in the sale, we had about a $2.5 million loss in Q4 of last year.
Brent Thielman: Maybe a little bit on the higher end because we sold some...
Brent Thielman: Credits that weren't in addition to those that were generated in the quarter but you could think about that kind of two-ish million as a range.
Brent Thielman: for what we would see as we continue to monetize these credits on a quarterly basis.
Speaker Change: And if you remember Brent, what we've said is for utility structures, our goal is to...
Brent Thielman: I'm around when we bought it was a little above 20% so that will be a creative and then you have wind which is also a creative so ideally we should get close to that 18% that you that you referred when you combine the business.
I think what one last point, Brent would be…
on Berlin. We ramped in Q1. So...
Brent Thielman: You're going to see that level out as we move through the year so that continues to perform very well but that year of a year benefit is going to start to neutralize as we're at full ramp in our Belinda Mexico facility now.
Okay. Okay. And then. Okay.
I guess a question just on-
Brent Thielman: The construction products, business, maybe to get to speak to, I guess it's things that are fine out in the Northeast, how Stavolva is ramping up and maybe just a level set on...
Brent Thielman: You know, the cadence of the contributions you're expecting through the course of the rest of the year, but to be helpful.
Brent Thielman: Sure, absolutely. I'll give you some color first. I think the biggest thing here is there's no surprises here. We have now have no surprises with the business. We're very pleased with the management team.
Brent Thielman: The plants, the operations, so nothing that happened in Stabola surprises at all, we expected something like this.
Brent Thielman: And when you see the corner, if you go deeper into the corner, you know, January was a disaster because it's basically shut down, February a little better and March was quite a bit better.
Brent Thielman: I think the important thing here is we are seeing very good demand and very good orders for April and going forward.
Brent Thielman: Stavola operates a little different than our other businesses, they have larger contracts and a lot more infrastructure oriented.
So we were saying really good bidding and really good orders.
Brent Thielman: for the business. So, we're excited about what we're seeing in Stavola with there's a lot of things that we're doing as a team, some improvements in our operations, we're investing, there were a lot of capex, a lot of the capex you're seeing in Arcosa is coming from Stavola things, parties that we're being already developed.
I think the asphalt, specifically Gail Mention.
Brent Thielman: was the biggest hit in the corner, and you can sell some rocks when it's snowing, but you cannot lay asphalt, so asphalt is a little more volatile, and we're seeing very good demand for it. It's a little soft.
Brent Thielman: No surprises, things are moving along and we expect a pretty significant improvement in the second quarter and going forward.
Speaker Change: Okay, that's great, Antonio. Maybe it's the last one. I mean, nice order activity in the barge business this quarter.
Speaker Change: You understand your comments a lot's happened, I guess, towards the end of quarter and after the quarter. Your sense on how customers are responding to all that kind of noise in the market post liberation day and it does seem like steel prices that at least flattened out. So
Speaker Change: What sort of your expectation for orders in the short term is we kind of work through the rest of the year just based on customer dialogue you're having.
Speaker Change: Sure, let me start with Steele. I think when you see Steele prices, of course, tarot scale and Steele and immediately prices jump.
Speaker Change: And the reality is that the demand for steel in the US is not there. I mean, still are still operating at a very low capacity. If you look at steel operations lower this year than for the last couple of years and the demand is not there. So pricing is artificially high due to tariffs.
Speaker Change: and the way I would phrase it is, we are seeing steel mills willing to negotiate prices.
Speaker Change: which is normally not the case when the man decides. So I think we are in a period where this thing will stabilize and the steel pipes as we see them cannot stay here for a long time.
with this demand. So...
Speaker Change: You know, still does not a huge worry for me. And then on the demand for barges, there's two sides. One, 10th barges, I think demand is a little more consistent.
Speaker Change: The types of customers and the products that are moved are a lot more sensitive to the age of the barge and the quality of the barge.
Speaker Change: Still is a smaller component of the cost of the barge because there's a lot of equipment on those tank barge, so we see very good things happening on the tank side. Our backlog extends now deep into 2026, even though we're still running at low capacity.
Speaker Change: And when you look at the demand that the replacement needs over the next five years we really need to get going if we want to, if the customers want to replace those barges otherwise we will not have the capacity.
Speaker Change: On the right-hand side, I would say still is a big thing for people who are more concerned about steel but I think the biggest thing there is really the trade situation with China on the commodities specifically soybean and corn and some other commodities.
Speaker Change: So I think trade talks that based on this morning they have announced that there's trade talks with China are important and getting some certainty in our customers that the US will continue to be a huge exporter of agricultural process is very important.
Speaker Change: and I think once that noise, let's say, goes away at some point in the next few months.
Speaker Change: I think still will be a less of a factor and we are excited about again the position. If you look at the demand for hopper barges over the next five years, we need to get started also replacing them because they are aging really, really fast.
Okay, very good, thank you.
Speaker Change: Thank you. Our next question comes from a Garik Shmois with Loop Capital Market. Please go ahead and your Lennie's open.
Garrick Schmoys: Thanks, good morning, congrats on the results. Two questions on construction products. It's first on aggregate pricing. I think I've heard you correct.
Garrick Schmoys: Pricing was up 7% organic in the quarter, but it was more overall do the stable I think was up 10%. So just wondering how to think about that moving forward is maybe that 300 basis points difference.
Garrick Schmoys: You know, between organic and kind of all-in, the stable, a good way to think about your aggregate pricing through the rest of the year.
Garrick Schmoys: Good morning, Gary. Yes, you're correct on the pricing for the quarter. So, good pricing growth. You know, as Antonio mentioned in his script on the outlook, we maintain the mid-single digit price growth on a full-year basis.
Garrick Schmoys: and it's early in the year. Our January 1 price increases went through as expected.
Garrick Schmoys: We'll have conversations about mid-years but it's a very market-by-market conversation and an assessment on local market conditions, so we're maintaining our full year of mid-single digit for 2025.
As you see here, if you think about Stavola, it's a...
Garrick Schmoys: It's a hard rock business so the average price is higher.
Garrick Schmoys: and the business is a lot more seasonal than the other regions we have. So, as that region picks up with more rock than sand that we have in other areas, also that will, let's say, create some positive momentum on our pricing.
Speaker Change: No, that makes sense. Thank you. And then I guess the follow-up question is just on the segment margins. You know, number of moving parts, you know, you just spoke to pricing.
It looks like-
Oil-based costs are starting to come down, which could be...
Speaker Change: Positive for aggregate operations, and maybe potentially for asphalt inputs, at least in the near term. I'm wondering if you're thinking on the second margin.
Speaker Change: It's changed since we last heard from you and maybe a little bit more, hand holding on what we should expect from margin progression the rest of the year.
[inaudible]
Okay.
Speaker Change: I'll take that one, Garik. I don't think our outlook has changed as it relates to the segment performance for margin. We expect margin on an organic basis to be up in 25 relative to 24. As I said in the quarter, you know, even with.
Cost Pressures on the variable side.
So very positive outlook as it relates to margins.
Antonio Carrillo: You know, maybe one other point on organic for construction, as we see the year and we reiterated an Antonio script that we do see high single digit EBITDA growth on an organic basis for construction.
Okay, great. Thank you very much.
Speaker Change: Thank you. Our next question comes from Ian Zaffino. With Oppenheimer, please go ahead. Your Lenny's open.
Ian Sofino: Thank you very much. You know, just building on the pricing on the aggregate side on the Carrill side.
Ian Sofino: How are you thinking about pushing price versus any type of volume declines that you might see or that you have seen your facts?
Ian Sofino: Yes, Ian, I'll take that. You know, it's a fine equation that you have to make.
in terms of absorbing your fixed cost versus shot.
Ian Sofino: just focusing on the pure margin per ton. And as we've said, we have been focusing on margin and writing volume.
Ian Sofino: And that's where you will see the average price increase, we gave you guidance on that, but the average price tells you there's going to be a wide variety of price increase across the company. And so many of us will probably have a lot more and so many of us will have a lot less.
to try to balance that...
Ian Sofino: That pricing momentum at the same time cost-absorbed from based on volume. So that is the way to manage the business and that those are the discourses that our team is having on a very local basis.
Ian Sofino: And I think that they are very good at it. So I'm excited about what we're seeing in terms of process of how they come up with solutions.
Speaker Change: Okay, thanks. And then I guess we're almost in kind of mid-May here. What do you need to see potentially to put Kuru another? No, no, no.
Speaker Change: Letter on the material side, a mid-year increase, you know, what we can need to see, and then also can you maybe just comment on kind of what geographies you're seeing the most strengthened, and where you're me seeing some taughtness, thanks.
[inaudible]
Speaker Change: So we will plan to, we have scheduled price increases in several regions of the company.
Speaker Change: Each one a little different, but we have several prizes that we will be doing mid-year.
Speaker Change: We did price increase in January in several locations also and it stuck well
I would say that-
Speaker Change: We're seeing demand on the infrastructure piece. We're seeing good demand on the infrastructure side on projects and things are moving along well. New Jersey specifically, I think the demand continues to be relatively strong.
Speaker Change: We saw a lot of weakness in the Arizona market on the housing side over the last several quarters already.
Speaker Change: Texas has been also relatively slow on the housing side, so probably that's a more temporary thing.
Speaker Change: I think the industrial piece is what we're seeing in some positive momentum. I think Texas, the Gulf, Florida are areas where we're seeing very positive things and when you look at Arizona I think we're starting to see some pick up back on the warehousing and some other things. So,
Speaker Change: The mix, I would say, is I'm encouraged by the industrial side and I'm encouraged by the infrastructure piece of the equation, housing continues to be where things are, let's say, still not very positive.
Okay, thank you very much.
Speaker Change: Thank you, and as a reminder, it is StarN1 if you would like to join the queue. We will move next with Trey Grooms with Stevens. Please go ahead, your Lenny's open.
Hey, good morning, everyone. Real quick, just
Speaker Change: Following up, I guess on maybe some of the comments, kind of as we were heading through April . Antonio, you mentioned...
Speaker Change: You know, some of the, or touched on some of the trends in Stavola, which sound like they're, they're picking up seasonally and you're seeing, you're, you're happy with what you're seeing there. Any, any color on April , you know, demand trends in the, in the rest of the legacy construction products business that you could share with us. You're, you're, you're, you're, you're, you're,
Speaker Change: Yes, I think when the weather cooperates, we're seeing good demand for the products, we're seeing solid demand. I will tell you that the
Speaker Change: You know, when you look at January in February with the weather, which was pretty, pretty heavy.
Speaker Change: It was not only the amount of bad weather, it was also, normally it would fall or no, Tuesday, Wednesday, which is, kill the whole week.
Speaker Change: So I think when the weather cooperates we're seeing good demand.
Speaker Change: I'll give you a couple of other things that we track closely.
Speaker Change: Our Shoring Business, which is a leading indicator in our view because before you start construction you normally make the hole for the foundation and you use the shoring piece.
Speaker Change: The man has been very strong, our back looks are growing, so that's kind of a very positive thing.
Speaker Change: On our Amaron products, they sell lighting poles and normally when you're developing a new industrial development or housing development you start with the infrastructure and the lighting poles going first.
Speaker Change: And the demand has been very, very strong. Our backlogs are as strong as we've seen since we bought the business. So some leading indicators lead us to believe that the demand continues to be there and is holding strong.
Okay, great.
Speaker Change: Thanks for that. You mentioned residential slow, that's been the case for you guys for a while, for most. I believe the guide had assumed kind of a back half.
Speaker Change: Single Family or maybe back end of 25 single family pickup. Is that still kind of the way you're thinking about it or is that what's still kind of in the guide that's what you need to see or how are you thinking about that as we kind of look further out into the year?
Speaker Change: Yes, when we say we expected a better second half than first half, we're not thinking about a booming housing market at all, it's just we expected to stabilize and at least start recovering. So yes, that's in our expectations for the second half of the year.
Speaker Change: Good morning, Trey. As it relates to housing, we're seeing pockets of more activity like in the Houston market. Residential continues to be...
Speaker Change: Stable, which is helpful for our recycled and our stabilized sand business. As we talk about housing in general, we're coming off from some blows, but we have some areas where there's good activity.
Trey: Okay, and Gail, you brought up Stabilized Sand, I know.
Trey: You guys, you know, you buy a lot of cement in those markets, I think, specifically kind of of the house for where Houston may be some others.
Trey: Can you talk about what you're seeing on the input side there? It sounds like you know some of the increases for maple got moved around but it does seem kind of very to very market by market so just any any comment you could give us on that. [inaudible]
Trey: Yeah, I think we're seeing some relief on a year-to-year basis on input costs, so we're encouraged by that.
Trey: The trend seems to be heading in the right direction for us from a raw material perspective.
Trey: Okay, thanks a lot for answering my questions. Have a great day.
Thank you.
Speaker Change: Thank you. And they self-conclude our Q&A session. I will now try the call over to Mr. Drabek for closing remarks.
Speaker Change: Thank you all for joining our first quarter update today. We appreciate your time and attention and we hope you will join us again next quarter.
Speaker Change: Thank you, and this does conclude today's program. Thank you for your participation. You may disconnect at any time.
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