Operator: And we’ll take our next question from the line of Mike Dahl with RBC Capital markets. Please go ahead.
Mike Dahl: Hi, thanks for taking my question. Just back on kind of the M&A and capital allocation you raised some pretty healthy funds from the sale and in fact it seems like that was the last big chunk because that’s from maybe California of the – US concrete asset. So I just wanted to have you elaborate a little more on kind of rationale behind making the move now. And then when you – as you think about the allocation, you mentioned M&A there’s organic investments, I mean, in the obviously now have pretty healthy capital position. So, relative to that before but Ag specific pipeline and relative size of the deals that you think are potentially out that can cross the finish line this year. Anything you can provide there?
Tom Hill: I would look at the M&A is more traditional bolt-on I think would show which is very much in our footprint. So it has highest returns and deal sizes everything from small and mid-range. Maybe a little better – big some a little bigger than mid-range, but I think that as far as the timing is concerned I think ‘23 was abnormally, I guess, quiet and it was because there was so much insecurity about what we’re going to fall off the cliff is there going to be a recession and so when you have all those unknowns, people tend to slow down both buyers and sellers and I think the fact you got that behind you, you’ll see some catch up in 2024.
Mike Dahl: And rationale for exiting the ready mix assets?
Tom Hill: Well, I think, if you look at our assets, we look at our business as collection of assets. And if there were something more to someone besides us and it’s not strategic then, we got be another owner and we will take that money and put it back in the aggregates business. And so, this is no different than what you’ve seen us do. And we exit businesses at times and we exit different product lines at times. And so, this will make sense strategically for us to sell the Texas Ready mix business.
Mike Dahl: Thank you.
Operator: And we’ll take our next question from the line of Keith Hughes with Truist. Please go ahead.
Tom Hill: Hey Keith.
Mary Andrews Carlisle: Good morning
Keith Hughes : Hey, how are you doing? Thanks for taking the question. Yeah and just to shift to aggregates asphalt concrete you gave guidance, didn’t down a bit of cash gross profit versus the prior year. Can you talk a little bit more in detail what’s going on like this what you are expecting 2024?
Tom Hill: Yeah, I think the asphalt performance in a 13% gross margin was a really good performance. Now, if you look back about three years ago, everybody was to ask me why I don’t you sell that asphalt business and now everybody wants to buy more. So, that’s just the asphalt business, but 13-ish percent is a good number. So it’s performing well. We see flat at very high levels for 2024 and I would call that hot mix prices offsetting increasing liquid cost and increasing aggregate cost. So Asphalt is in a very good place and we like our story there. And I think that those teams are performing well. Ready mix, I’d call it virtually flat with the private side challenge – some challenged markets do know that affects the ready mix business, but it’s not a bad performance based on some of the private challenge we had. But remember ready mix is 2% of EBITDA. So, I think under the circumstances both businesses do advance.
Mary Andrews Carlisle: Yeah, and just in terms of ready mix, Keith, just maybe a couple things helpful to think about the impacts of the divestiture. Our expectations in 2024 for a modest decline and same-store volumes, which were about 4 million cubic yards in 2023. And we expect kind of consistent gross margin performance. I think in longer-term about that. I think that there are low-single – I mean our low-double-digit expectations are still what we’re pushing for, that’s going to take time and better volumes to get there. But one thing about 2024, where we expect relatively flat gross margins with the weight of the non-cash fixed cost on the volume challenges that Tom mentioned really driven by private non-res. We do expect to see some expansion in cash gross profit margins, and also in per unit profitability given the markets where we’ve retained our concrete businesses.
Keith Hughes : Okay. Thank you.
Tom Hill: Thank you.
Operator: And we’ll take our next question from the line of Garik Shmois with Loop Capital. Please go ahead.
Garik Shmois : Well, hi, thanks. Congrats on the nice results. Wanted follow-up on our cost side. I know it’s a little bit more favorable than the preliminary outlook you offered on the 3Q call and you spoke to some broad gauge deformation, getting better as you move through year of operational improvements helping as well. Anything in particular though that changed or has gotten better since the last call that you could point to the cost side. And that’d be helpful.
Tom Hill: Yeah, I think what you’re seeing there is the Vulcan Way of Operating inefficiencies in those plants. And that’s embedded in that is technology. It is training which is so important from a safety side but also from a plant availability and inspection of equipment. And then our throughputs – you are seeing our throughputs of crooks sizes start to improve. So it’s a combination of easing inflationary pressures, comps kind of level out, but also those operating efficiencies are really, really important to making sure that we our job is to beat inflation, not just live with it.
Tom Hill: Got it. Thank you.
Tom Hill: Thank you.
Operator: And we’ll take our next question from the line of Angel Castillo with Morgan Stanley. Please go ahead.
Angel Castillo: Hi, good morning. Thanks for taking my question and congrats on a nice quarter. Maybe understand I thought I heard you say I guess that given the kind of capital that you have, you still have the ability to kind of do organic inorganic and return capital to shareholders. So just wanted to expand on that a little bit. It sounds like on the M&A front you’re looking at more bolt-ons. And if I did the math correctly just moving to the midpoint of your kind of leverage allows you to have at least another kind of $2 billion of what kind of capital that you can deploy which seems plenty for both M&A as well as other ways of kind of returning cash to shareholders. So maybe just could you talk about buyback intentions for the year? And then also willingness of potentially levering up above your range – historical range for the right opportunities and returning cash to shareholders?
Mary Andrews Carlisle: Yeah. Sure. I mean, as you referenced, I think we’re really well positioned to be able to fund all of our capital allocation priorities in 2024. And as it relates to returning cash to shareholders, doing that via repurchases has long been a part of our capital allocation priorities. I think appropriately following reinvesting in the business, growing the business through both M&A and Greenfields and returning cash, through our sustainable dividends. But with the attractive cash generation and you saw what deferred M&A in 2023, We did repurchase $200 million of shares. And we would enter 2024 thinking about making those capital allocation decisions in the same kind of disciplined manner. And in terms of ,leverage I think for us regardless of where we are, and the – against kind of our target leverage range, what’s important is being disciplined about doing the right deals and the deals that are going to have attractive returns for us.
And we certainly have overtime levered up even outside the top end of that range with plans to always quickly get back within that two to two-and-a-half times that that we tend to target.
Angel Castillo: Very helpful. Thank you.
Tom Hill: Thank you.
Operator: And we’ll take our next question from the line of Michael Dudas with Vertical Research. Please go ahead.
Michael Dudas: Good morning, Mary Andrews, Mark, Tom.
Tom Hill: Good morning.
Mary Andrews Carlisle: Good morning.
Michael Dudas: I am curious about your thoughts. You’ve indicated a positive trend for civil public infrastructure and the records state on the transportation budgets, are they prepared and ready to pull through when you see some of the budget numbers in your important States? I’m also curious on how things in California because you hear it certainly CALTRANS has bumped up budget there, but certainly there could be some other issues there. So just a little bit of sense on the public side in your important states how you see the opportunities for bidding and project work going forward?
Tom Hill: Yeah, I think, they’re still challenged but there you go because they got so much money. It’s a lot for them to digest but they are growing into it. And as I said, we’ll see solid growth in highways in ‘24. We saw low-single-digits in ’23. We’d expect mid-single-digit in ‘24 kind of as expected. But also we got to remember that IJ passed in November of ’21. So we’re just past that two year mark and while I say it takes two years. As we’ve said, it will be a ramp up not a step change in this. I think it will be a ramp up over time and I think that the DOTs are growing into their capital – added resources and the revenues continue to be healthy. There is a lot of money out there, but I would – what I would see here I think is kind of slow and steady wins the race and we’ll see improving growth in ‘24 kind of mid-single-digit.
I think that will go up in ’25. Again I think that demand will go from ‘26 and I was thinking to go from ’27. So, that slow and steady improvement in public isn’t bad particularly when you’re compounding unit margins like we are. As far as CALTRANS, I think they’ll be fine. There’s always some rumblings numerous times in CALTRANS and funding and people try to grab it. But remember, it is firewall. It has to be used for infrastructure.
Michael Dudas: Excellent. Thank you, Tom.
Tom Hill: Thank you.
Operator: And we’ll take our last question from the line of Brent Stillman with D.A. Davidson. Please go ahead.
Brent Stillman: Hey, thanks. Tom and Mary. I guess some clarification on the ready mix business kind of refinement of that over the last 12 months. Can you sort of level set us on what that business is now sized? Could you exit it 7.5 million cubic yards in ‘23. Where do we go from here? And I guess my other question on the last is, I think we’ve all been sort of worried about the implications and some this light non-residential activity sort of more interest rates central instructors hitting your business. Could you talk about to what degree that’s actually had an impact? Is it been more resilient than you would have expected?
Tom Hill: I’ll take that one, first and then I’ll let Mary Andrews take the ready mix. I think it’s been fairly weak for us. Obviously opposite has been weak, but last year the right size was pretty weak. So kind of more of the same on that still challenged by interest rates. And Mike, I would tell you that my view of that is that the more traditional ex office building, more traditional like non-residential construction usually follows creation of subdivisions. And so we’re back in growth mode, subdivision. So I would expect us some time, maybe ‘25 middle of ‘25 that starts to impact that sector of the light risk. So it probably has a brighter future than what we’ve seen in ‘23 and ’24. But it was kind of when I try to describe ‘24 is more of the same for ‘23.
