Scott Anderson: Yeah. Let me just lay out the cost picture. As you heard in my prepared remarks, they have not relented. So, I actually, I’ll start with the bucket through the categories that have eased off a bit, and really, and that’s around our hauling costs and our subcontracting costs, those have ease off a bit. But when you start looking at the rest of the cost, they have really stuck around. I think if you remember, early in the year, we thought they would moderate by this time and come back down to that mid-single digit range, and they haven’t. We’re still pushing up against that high single-digit even to a double-digit. And when you look at labor, we’re right up against that double-digit. It’s high single-digit across all of our labor cost.
And then materials, that go into our downstream. Those are actually in your mid-teens increases year-over-year. And then the one that’s really sticking with us is repair and maintenance. You know, we have a lot of equipment, a lot of equipment intensity, and the repair costs are still, you know, 12% to 15% up. So, you know, when you look at all that, we’re not seeing the easing and cost yet. So we factored that into our Q4 expectations, but I do think next year, they will start moderating and that will help that price/cost relationship next year.
Anne Noonan: Hopefully, that answers your question, Anthony?
Anthony Pettinari: No, that’s super helpful. I’ll turn it over.
Anne Noonan: Thank you, Anthony.
Operator: All right. Our next question comes from the line of Kathryn Thompson from Thompson Research Group. Kathryn, please go ahead.
Kathryn Thompson: Hi. Thank you for taking my question today. Just stepping back, bigger picture as you contemplate the integration — potential integration of Argos, it will be a higher CapEx spend just with a greater concentration of cement in the mix. How — how are you planning to balance maintenance and potential catch-up maintenance for Argos assets along with some of the growth initiatives that you talked about earlier in this call? And you’ve been in a journey of winnowing down assets that perhaps don’t fit best within the strategy at Summit. Is that process mostly wrapped up, and are there any other assets that you could see trimming to help with cash flows for anticipated increase in CapEx? Thank you.
Anne Noonan: Yeah, thanks for the question, Kathryn. I’ll kind of answer the latter part of your question at a high level here and then turn to Scott for more specificity around the CapEx and catch up. So overall, you know, I think the — one of the things that’s important to understand that the cement assets are actually less capital intense than — than aggregates assets. So we see that in our base business. So that’s something to understand as we think about free cash flow conversion. From the point of view of our growth initiatives, we feel that we’ll be in a really good position because of that higher cement portfolio, better free cash flow conversion to further accelerate aggregates. But to your point, Kathryn, we are definitely continued to be focused on portfolio optimization.
Every quarter we meet as a team and we have what we call our Tier-1 divestiture list, and that list gets — we examine every single asset and business in the portfolio. And if they’re not going to meet our ROIC and margin profiles, they get put on the list. And there is more opportunity there and we are very confident in our ability to delever the balance sheet. Scott, maybe I’ll turn to you on the CapEx.
Scott Anderson: Yeah. So, Kathryn, when you look at the pro forma combined basis on the CapEx, you will see that we still maintain that historical about 10%, on the 10% of net revenue on the CapEx, and then, really that goes along for about three to four years and then you’ll see it start coming back towards the traditional 8% where we’d like to be. But that 10% does give us the bandwidth. When you think about the cement, the cement business actually is less capital intensive than our ags business. And so it does give us bandwidth to fit in those growth projects and those debottlenecking projects that we have on — on the Argos as well as our green initiatives with the alternative fuels that you’ll see kind of ramp up as — in the year two and three.
So we do have that and then, you know, we’ll still continue to do our green fielding. As a matter of fact, this year we’ve got $10 million to $15 million into greenfields. We’ll still have that and that’s modeled in as well. That we’ll be continuing that on the ag side. So, overall, maintaining that 10% profile is very doable.
Anne Noonan: The other thing I’d add, Kathryn, is that we’re very confident in our ability to deliver on our synergies. So, we’ve said in our prepared comments before that over 50% of our synergies within the first 18 to 24 months, we feel are very doable and that’s only on the operational synergies. I’m actually really looking forward to when we close and get our commercial teams together and really supercharge those commercial opportunities which aren’t even in the $100 million. That will help a lot with cash flow as well.
Kathryn Thompson: Thank you.
Anne Noonan: Thanks, Kathryn.
Operator: All right. Our next question comes from the line of David MacGregor from Longbow Research. David, Please go ahead.
David MacGregor: Yes. Good morning, everyone. I wanted to ask you about, in your deck, slide number nine and in aggregates you guide to low teens aggregate pricing just based on the year-to-date numbers, it seems to imply a mid-single-digit increase in 4Q. Am I reading that right and if so, you know, can you talk a little bit about what might be coming to bear on the pricing growth? And then on the ready-mix chart, I guess pricing gains in third quarter decelerated rather sharply. Can you talk about how you’re seeing market conditions maybe evolving in Salt Lake City and Houston? And how is the addition of Phoenix may be contributing to the change in ASP growth? Thanks.
Anne Noonan: Yeah. Scott will talk a little bit about the ags growth here for you and the Q4 impact.
