Vulcan Materials Company (NYSE:VMC) Q4 2024 Earnings Call Transcript

Vulcan Materials Company (NYSE:VMC) Q4 2024 Earnings Call Transcript February 18, 2025

Vulcan Materials Company beats earnings expectations. Reported EPS is $2.17, expectations were $1.79.

Sheyna: Good morning. Welcome everyone to the Vulcan Materials Company Fourth Quarter 2024 earnings call. My name is Sheyna, and I will be your conference call coordinator today. Please be reminded that today’s call is being recorded and will be available for replay later today at the company’s website. 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.

Mark Warren: Thank you, operator. Good morning, everyone. With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Today’s call is accompanied by a press release and a supplemental presentation posted to our website vulcanmaterials.com. 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 Securities and Exchange Commission. Reconciliations of non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation, and other SEC filings. During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many people 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. Our two-pronged growth strategy of enhancing our core and expanding our reach is working. We improved our industry-leading average cash gross profit per ton by 12% and deployed over $2 billion towards value-creating higher sled acquisitions. These acquisitions expanded our presence into new attractive growth areas and strengthened our existing franchise in three of our top ten revenue states. We finished the year strong. We plan to capitalize on our solid momentum and deliver attractive earnings growth again in 2025. Before discussing our outlook in more detail, I will provide you some key highlights from our fourth-quarter performance.

Our teams delivered $550 million of adjusted EBITDA in the fourth quarter, a 16% improvement over the prior year. Importantly, adjusted EBITDA margin improved on a year-over-year basis for an eighth consecutive quarter. In the Aggregated segment, cash gross profit per ton expanded 16% to $11.50 the quarter through a combination of continued pricing momentum and moderating year-over-year unit cash cost of sales. Aggregate freight-adjusted price improved 11% in the quarter, consistent with full-year results. Price improvement remained geographically widespread. Are your shipments more mixed in the quarter across geographies and end uses. Shipments were 3% lower than the prior year. 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.

With less disruption from weather, and our consistent focus on maximizing efficiencies, through our Vulcan Wave operating efforts. 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. This continued execution will be a focus for us in 2025. The pricing environment remains healthy and we expect freight-adjusted AGUS price to grow between 5% and 7% in 2025. Now this includes an Uber 100 basis point negative mix impact from recent acquisitions. Inflationary cost pressures continue to moderate, and we’re making progress our evolving operating process intelligence adoption. We expect freight-adjusted aggregates unit cash cost 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.

We expect 2025 aggregate shipments to increase between 3% and 5% compared to last year. This growth outlook is driven by recent acquisitions, coupled with the expectation of stable demand for our legacy business. I expect that continued growth in public construction activity will offset ongoing or modest contraction in private activity. Over the last year, turning twelve months highway starts have increased by another $7 billion to $122 billion. Blown highway input cost inflation and continued IJA-related spinning support ongoing growth highway shipments in 2025 and beyond. 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 local states.

Affordability and elevated interest rates remain headwinds for residential construction activity. Increasing single-family starts over the past twelve months support modest growth in single-family housing in 2025. But multifamily starts, data, and elevated vacancy rates point to another year of declining demand in multifamily housing. Because of demographics in Vulcan market support a consistent need for additional housing, the timing of additional interest rates reductions and overall improvement in affordability will dictate when residential construction activity returns to growth. Likewise, our return to growth in private nonresident construction will also be a matter of timing. 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, boding well for 2026 activity.

Recent trends in both warehouse starts and data centers have been encouraging. Currently, twelve-month warehouse starts, the largest category in private nonresidential construction, have continued to flatten out at pre-pandemic levels after a precipitous drop from historic highs throughout 2023. Current planned data centers activity in our markets remains robust. And according to CoStar data, approximately 7% of proposed data center activity is within 20 miles of a Vulcan Soli. As I said earlier, the focus of our teams is execution. Controlling what we control, against the demand backdrop, I just described, we expect to deliver between $2.35 and $2.55 billion of adjusted EBITDA in 2025. Now I’ll turn the call over to Mary Andrews to provide some and more details around our 2025 outlook.

Mary Andrews Carlisle: Thanks, Sam, and good morning. I commented a year ago that our balance sheet was a source of strength and provided us considerable financial flexibility to continue to grow. In 2024, we deployed approximately $2.3 billion towards strategic acquisitions. Also reinvested in our existing franchise and furthered our greenfield effort with $638 million of operating and maintenance and internal growth capital. And we returned $313 million to shareholders through dividends and share repurchases. At year-end, our net debt to adjusted EBITDA leverage was 2.3 times. In March, we redeemed our 2026 note at par $550 million. And in the fourth quarter, we issued $2 billion of note across five ten, and thirty-year tenors to fund our 2024 acquisition activity.

Recently, we provided notice of our intent to redeem the $400 million of 2025 note with cash on hand. Effective March 28, 2025. Given another year of solid cash generation in 2024, we remain well-positioned to continue our long track record of growth through disciplined capital allocation and consistent execution. In 2024, our teams executed well in a challenging volume environment to expand adjusted EBITDA margin by 190 basis points and deliver $2.1 billion of adjusted EBITDA for the full year. Aggregates cash 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. 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. SAG expenses as a percentage of revenue were 7.2% in 2024. Our return on invested capital at year-end was 16.2%. That’s largely consistent with the prior year. The increase in invested capital was driven by fourth-quarter acquisitions provided very little earnings contribution given the closing date. Absent that timing impact, return on invested capital improved 40 basis points. Bearing strong momentum into 2025, we anticipate another year of attractive margin expansion and earnings growth. Tom highlighted our views around demand, pricing, and aggregates unit profitability.

Let me provide a few additional details around the 2025 guidance. We estimate that recent acquisitions contribute approximately $150 million of adjusted EBITDA in 2025. We expect our downstream businesses to contribute approximately $360 million in cash gross profit with an estimated two-thirds of the contribution from the asphalt segment and one-third from the concrete segment. These expectations reflect expansion and cash unit and the contribution of recent acquisitions. We forecast SG expenses of between $550 and $560 million. 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%. In 2025, we plan to reinvest in our franchise through operating and maintenance and internal growth capital expenditures, between $750 million and $800 million.

Included in this plan is approximately $125 million of spending on three sizable plant rebuild projects that are underway. In addition to capital for recently acquired businesses. Overall, we expect 2025 to mark another year of expansion and adjusted EBITDA margin, attractive growth and adjusted EBITDA, and strong cash generation. I’ll now turn the call back over to Tom to provide a few closing remarks.

Tom Hill: 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. Most importantly, you kept one other safe and look out for your brothers and sisters across the company and communities in which we live, in work. Particularly in the face of persistent inclement and sometimes severe weather. And I am so proud of your consistent execution of the walkway you’re operating and the Volker way of selling strategic disciplines. You proved your mettle and increased cash gross profit per ton every quarter for the second year in a row. I’m excited about what we will achieve in 2025. Together, we remain focused on controlling what we can control and generating value for our customers, our communities, and our shareholders. Now, Mary Andrews and I will be happy to take your questions.

Operator: We will take our first question from Trey Grooms with Stephens. Mr. Grimshaw, you might be on mute. Your line is open.

Q&A Session

Trey Grooms: Hey. I’m sorry. Sorry about that. Good morning, Tom. Good morning, Tom. Mary Andrews and Mark. Well done on the strong finish to the year. Thank you. I wanted to ask on 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 a little bit about that and maybe it’s the success of January increases that you’ve seen and you know, how we should be thinking about maybe the cadence of pricing this year.

Tom Hill: Sure, Trey. So Q4 in the year in the total year last year, where it was pricing up 11%. So that allows us to carry really good pricing momentum into this year. 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. But our January one price increases, you couple that with our booking and back close. I think it supports our guide, as did our I thought our January results. Our 25 results. The timing of price increases, I think, will be very similar to last year. Whether it was in bid work or asphalt or ready mixed pricing. Price increases, the vast majority of our price increases took effect January one.

I think we should should 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 then impact it up or down. But mix adjusted, I think we should be consistently in that 5 to 7 range.

Mary Andrews Carlisle: 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’ve talked about in the prepared remarks will yield low double-digit improvement in cash gross profit per ton consistently each quarter as well. Extending what we’ve now strung together a nine-quarter run on double-digit improvement and really the, you know, the underlying performance of the aggregates business is gonna be the biggest driver of our 2025 EBITDA growth which we expect is gonna improve you know, by about 12% on an organic basis. So really expecting a strong performance from from the ag segment.

Trey Grooms: Yep. 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.

Tom Hill: Thanks, Trudy.

Operator: We will take our next question from Steven Fisher with UBS.

Steven Fisher: Thanks. Good morning. I think you mentioned on the aggregates volumes side sort of an organic steady pace. So I’m assuming that means about sort of flat organic volumes expectation. Is that correct? And feel free to correct me on that. But maybe just curious about the the cadence of of how that plays out during the year. And we’ve been observing this slowdown in overall nonresident. You mentioned the the private side kinda being a little weak to start off. So just curious what you’ve assumed for the cadence of that organic trend in the the first half of the year versus the second half? Do you have actual declines maybe in in the first half before you know, maybe easier comps and then growth in the second half. Thank you.

Tom Hill: Yeah. I think you I think you completely understand it. It is growing public, offsetting some some challenged private. If you look back at 24, we never really got out of the weather problem. The easiest comp to your point will will is Q3. If you look at January, 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 bulk and teams will perform. I think I’ve I’ve complete confidence our full year guide but as you said, back half loaded, probably with some either some either comps coupled with probably some help from single family and NREZ construction in the second half. Terrific. Thank you.

Steven Fisher: Thank you.

Operator: We will take our next question from Catherine Thompson with Thompson Research Group.

Catherine Thompson: Hi. Thank you for taking that good morning. Thank you for taking my question today. And so your your volume guidance in quarter was very close to ours pricing exactly in line, but what jumps out at me is and and correct me if I’m wrong with this, but your gross margins came in at a record Q4 level. Could you you’ve articulated in the past the the bulk of way of operations. But if if you could parse out a little bit more for this quarter and how we should think about next year in terms of that margin of kinda the why behind that record. For Q4, the components, and how that plays into the longer-term strategy, including for this year. Thank you.

Tom Hill: Sure. You know, I cost increase in the fourth quarter, which must improve over the prior three quarters, three reasons why. One was weather was not a negative. Two, volumes were not as negative, and three, our involvement with operating technology and tools and disciplines are improving our efficiencies. And as we look to 2025, we believe we’ll continue to mature the work we have operating, which will continue to enhance our operating efficiencies. We would guide you to the to the kind of low to mid-single-digit increases in 2025. That is a substantial improvement over over the past couple of years. But really kind of that closer to what we’ve seen in history. So I think you what you’re seeing is the the bulk way of operating at work, and offsetting some of the the the the headwinds we would see.

Mary Andrews Carlisle: And, Catherine, on, you know, on gross margin, 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 the cadence of gross 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, you know, carry that momentum into 2025.

Catherine Thompson: Great. Thank you very much.

Tom Hill: Thank you.

Operator: Thank you. Our next question is coming from Anthony Pettinari with Citi.

Ashley Sotto: Hi. This is Hey. Hi. This is Ashley Sotto on to Anthony. 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 ISA rollout or for projects starts from 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 we could expect to come soon.

Tom Hill: So I don’t think we see any impact from policy on on the public demand. It’s IJ, which you’re seeing is the growth in public going to work. And remember that money is protected through dedicated long-term funding, so nothing’s gonna happen to it? Looking forward, we would think this government will support traditional agrarian sensitive public work legislation. So probably a positive from that perspective on tariffs. On agri tariffs directly, we see very little impact on everything else and we’ve looked at, you know, steel and rubber. I’m not sure anyone could tell you what’s gonna happen, but I don’t think it’s a it’s a it’s a big impact to us. And, you know, the flip side of that is I’m confident that both materials teams will navigate whatever’s comes at us?

You know, look, we’ve seen a pandemic. We’ve seen volumes down. We see record inflation. And our teams consistently grow unit margins and earnings, and that’s exactly why we develop book we’re selling book operating, 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 from the tariffs.

Ashley Sotto: Great. Thanks. I’ll I’ll send it over. Thank you.

Operator: We will take our next question from Jerry Revich with Goldman Sachs.

Jerry Revich: Hey, Jerry. Yes. Hi. Good morning, everyone. Hi, Tom. Mary Andrews Mark. Hi. Mary and Julie, I just wanted to pull the thread on on the cost performance. If we back out the period cost absorption, your variable cost were risk per ton were essentially flat in the quarter. So I’m wondering if you could just expand on what part of your cost structure is actually inflationary now. And, you know, if we just straight line the performance into the first quarter with normal seasonality, that would imply cost per ton are about flat year over year in the first quarter, which I just wanna make sure that’s right considering the pricing outlook relative to that is is pretty I think I’ll take that one. I think I would not call cost 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 gonna be choppy. It’s just to make sure it’ll be. So really kinda need to look at it on a trailing twelve-month basis. Fourth quarter was encouraging, but we gotta we gotta string that together. If you look at inflation, I don’t think there’s any deflation or on anything out there that I could think of. You know, as we guide to to twenty five, I would tell you diesel up slightly. Wages, mid-single digit. Electricity, up high single digit. And all of that partially offset by improved operating efficiencies. So but but, you know, I I would not guide you to to to flat. I think you would stay in that longer term that that low to mid-single-digit cost performance.

Jerry Revich: Nice performance. Thank you.

Tom Hill: Thank you.

Operator: We will take our next question from Angel Castillo with Morgan Stanley.

Angel Castillo: Hi. Good morning. Thanks for taking my question. Just wanted to go back to the comments on private non-resi. Utah about potential for kind of starts to maybe bottom in the middle of the year and maybe even rebound in the second half. Can you just maybe help us understand, I guess, what what you’re seeing or hearing, you know, whether it’s from from your customers or terms of quoting activity and maybe just kinda what gives you confidence on on that kind of of a cadence.

Tom Hill: Yeah. So I I think let me be clear. I think we we do see non-residential construction shipments are still down in 2025. I think the good news is we’re starting to see some term 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, and will be addressed still a drag in the near future, I think that’s changing. And if you look at a number of our markets, on a trailing three-month basis, we’ve seen that turn positive. Not everywhere, but it started to turn. So I and then so so I think you’re starting to see some green shoots. I think you’re starting to see some some some things turn. A lot of money sitting on the sidelines.

Light traditional non-res is still is still a drag, but that gonna follow subdivision, so it’s gonna take a while. So while nonresidential 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 for a more positive outlook at this point, very preliminary for 2026.

Angel Castillo: Cell phone, any anything in the quoting activity that you’re saying?

Tom Hill: Yeah. So we’re we’re there’s that’s interesting. I’m glad you asked that. For the last six months, we’ve quoted a lot of non-res work that has that is still sitting on the sidelines. So we think there’s pent-up demand there, but I think people wanna see more. They and they’re hoping interest rates go down and but that’s good news because the you know, at some point in time, that money will go to work.

Angel Castillo: Very helpful. Thank you.

Tom Hill: Thank you.

Operator: We will take our next question from Phil Ng with Jefferies.

Phil Ng: Hey, guys. Tom, congrats on another strong quarter. I had a few questions around the the pricing commentary. You talked about a hundred basis point drag on pricing 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?

Tom Hill: So I I substantially lower. I mean and and I’m not gonna quote numbers on that, but if it had a over a hundred base basis points on the whole company, it’s it is lower. We’ve already started that work. I think we were successful with January price increases in in in those markets, and we’ll continue that as we progress the next few quarters and years, I don’t think it takes us long to get it back up to where a more reasonable bulk in market would look like.

Phil Ng: Okay. And then separately from a pricing standpoint, if I account for the hundred basis points, you’re you’re still talking about really good pricing, but perhaps little softer than the high single-digit framework you gave us last quarter? Any puts and takes you wanna 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 take on perhaps, what you’re seeing in in the marketplace on on price.

Tom Hill: I think we were pretty consistent throughout our geographies on price increases. Same thing within uses. The I think you gotta remember you while you’re a little lower than double-digit maybe, oh, same store, high single-digit. You also are not looking at double-digit cost increases. You’re looking at mid to low. So we continue that trend of of taking money to the bottom line, which is the most important thing we can do is grow our unit margins by double digits, you’ve seen us do that over the last couple of years, and I think you’ll see us do that. But that’s what our guide is for 2025, and I think we feel pretty good about.

Phil Ng: Okay. Appreciate the color. Thank you.

Tom Hill: Thank you.

Operator: We will take our next question from Mike Dahl with RBC.

Mike Dahl: Hi. Thanks for taking my question. Susan, you obviously put a lot of capital to work with the acquisitions. They did come with some some mix of downstream businesses. Can you help us understand kinda how you view the down portion, whether those are businesses that are likely to stay within the portfolio, and and what is or is not incorporated into the guide with respect to that?

Tom Hill: So the acquisitions are pretty new. They were very successfully run. With good management team and good assets. Like anything else, we’re gonna look at this set as a set of assets. And if it fits us, we’ll run it. If it if it earns appropriate return that suits us, we’ll run it. If it is more valuable someone else, then we’ll we’ll divest of that. And we’ll take those proceeds and put them back in the aggregate.

Mary Andrews Carlisle: And in terms of the guide, Mike, the the guide, you know, we own the businesses, like we do, maybe for a little helpful context for you, you know, we commented in the prepared remarks that a hundred and fifty million dollars of EBITDA contribution from the acquisitions. That’s about sixty percent. In the aggregate segment, and about forty percent of that would be contributing to the to the downstream businesses.

Mike Dahl: Okay. Great. Thank you.

Operator: Thank you. We’ll take our next question from Adam Thalhimer with Thompson Davis.

Adam Thalhimer: Hey, good morning, guys. Congrats on the Q4 beat. Mary Andrews, do you have the well, 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 the three sixty is cash gross profit. Do you have that on a reported basis?

Mary Andrews Carlisle: You know, we’re I’m gonna let’s stick with the three sixty for now, and we can 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 business is about seventy-five percent of that overall improvement is is from the acquisitions. We also see you know, improvement in the underlying business in in both segments. And that’s about twenty-five percent of the improvement year over year.

Adam Thalhimer: That helps. Okay. Thank you.

Operator: We will take our next question from Timna Stanners.

Timna Stanners: Yeah. Hey. Good morning. I wanted to ask you a little bit about the m and a landscape after the deal you just finished, you know, what how you’re looking at 2025 that they could build from what you just accomplished. And then if I could sneak in a question on Mexico, any update on the Calico quarry restitution efforts? With the USMCA panel? Thank you.

Tom Hill: Yeah. So on I think there’s still a very healthy pipeline of m and a. There’s a number of projects we’re working on. It’ll take some, you know, 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 the short answer there is no real news there. We’re still waiting on the the tribunal to make a decision. We feel very good about our case. And think we will win that, and we’ll know, we’ll they make a decision, we’ll let you guys know. We are anticipating that sometime this year.

Timna Stanners: Okay. Thank you.

Operator: Thank you. We’ll take our next question from Garik Smois with Loop Capital.

Garik Smois: Great. Thanks for taking my question. We spoke to the pricing cadence being similar this year as opposed the last. So what about the hear your thoughts on midyear increases, what opportunities you see there potentially, and what the what the time frame could be.

Tom Hill: Yeah. So they are not included in our guide. But we will absolutely announce midyear price increases. We will announce those probably towards the end of the first quarter, so we got time to have those conversations. Again, as I always remind you, mid year’s will have a bigger impact on 2026 than they will in 2025. But you also do you know, and I it’s too early to call how successful those will be, but we’ll for sure gonna announce them. We’ll have conversation with customers and we’ll see where we go from there.

Garik Smois: Great. Do you do you have, by chance, how much 2024 midyears are impacting 2025?

Tom Hill: Well, that’s a really that’s a really hard to parse out. They definitely had an impact. 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 it is timing. But it definitely helps both.

Garik Smois: Understood. Thanks for that, and best of luck.

Tom Hill: Thank you.

Operator: We will take our next question from Keith Hughes with Truist.

Keith Hughes: Thank you. Thank you. I I guess I have a short-term weather question that everybody asked me. For the date is whether it’s supportive of shipments or if we still had delays year over year. Some of the storm might go to. So short term and January, February has been very cold. We’re gonna see that this week with with cold and snow. So not a great start. But, you know, we when we when we put a plan together, we expect weather impact at some point in time of the year. We expect to get to get lucky in some quarters. We’re trying to look at more normalized weather as as we make a prediction is and we’ve in our guidance, think as we pointed out, Q3 was particularly challenged last year. Hopefully, that’ll be easy comp in in in the middle of the season. So, hopefully, that’ll help us. Ex hurricanes.

Keith Hughes: Exactly. And one other question on the the Southern California acquisition. Is that particularly the downstream, does that mix and well the current operations at Vulcan or is that operate more as a standalone entity?

Tom Hill: So if you look at the overall, it fits us very well. Particularly on Agri’s perspective. We we know 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 aggregate and asphalt as far as us being there. And then the ReadyBags, they have an excellent position in those markets, but we we were not in the Ready Mix business in those markets.

Keith Hughes: Okay. Thank you.

Operator: We will take our next question from Brent Thalmann with D. A. Davidson.

Brent Thalmann: Hey, bud. Hey. Thanks. Hey. Tom, I had a question more on maybe the direct impacts of tariffs on your business and then Mexico is not really in the conversation, but we’re thinking more along the West Coast and and what you know, Vulcan’s response is gonna be to the extent that tariffs are implemented on some of your assets shipping down from Canada.

Tom Hill: Well, I think our our our will fall 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 handling the business. But I I wouldn’t it it it doesn’t move the needle.

Brent Thalmann: Okay. Thank you.

Operator: It will take our next question from Michael Dudas with Vertical Research.

Michael Dudas: Morning, Tom Amargary Andrews. Morning. Right. Tom with the very solid pricing, it looks like for 2025, even though it’s accelerated from 24, do you do you sense this is you know, even, like, say, your organic volumes are flat and it kinda flattish on the overall market? This look like maybe a more normalized level pricing relative to the history span, or is there still room for upside on that going? Thank you.

Tom Hill: Yeah. I think that, you know, there’s always upside on price. You gotta earn that with your customers. Obviously, growing demand always helps that. And we haven’t seen growing demand now for for for a few years. Which puts some pressure on price. But I think if you look at the bulk of the way of selling and the way we service our customers, I think we earn price, and I think we’re doing that. And I can see that in in our performance in 24 and I got in 25.

Operator: Will take our next question from David MacGregor with Longbow Research.

David MacGregor: Good morning, David. Good morning, everyone. Good morning, Tom. Congratulations on a really strong quarter. Performance. I I wanted to ask you about pricing and the volking the volking way of selling. And and clearly, this process has been very successful, and delivered some very visible results. But your market’s evolved, and I’m thinking, for example, if you’re ready mix and fixed plant customers who in many instances are now paying more for their limestone than they are for the cement, then, I guess, secondly, your Vulcan way of operating process is giving you better incremental unit cost. Does the profitability algorithm sort of adjust at some point to rely on slightly smaller price increases in favor of larger unit shift gains that are achieved maybe in the way of market share gains from competitors who are continuing to push hard on price increases.

Tom Hill: Yeah. Let me be clear. I wish we had some in pricing. We don’t. It’s much lower than cement pricing, but also that cost is much lower. I think that as you as you look forward, I think the the what I would go back to the strategic initiatives of both of selling and bulk of offering. In-depth much better in-depth look into what’s going on in the market. And gives your salespeople the tools price better, and also gives them logistics. Another tools to better service your customers. I think on the bulk way of operating, it allows for better training and better operators in how we inspect our equipment and reduce downtime and also the the technology allows for better throughput and throughput of critical sizes. Put those two together, and I think both of them have a lot better chance of meeting history both to both the sales piece and the operating piece which leads you to better opportunities on unit margin growth that, again, will be history, and you’ve seen us do that you know, it’s it’s over over the last nine quarters, a double-digit improvement.

So that’s not happening by accident, and it doesn’t have by act happen by accident going forward. Again, if you you know, that’s over time frames when volumes have actually gone down. This year, we’re calling it flat. But when volumes come back, you would have even better opportunity to improve your unit margins both on the price side and on the cost side.

David MacGregor: Yeah. Okay. Alright. Thanks, Tom.

Tom Hill: Thank you.

Operator: Thank you. It appears we have no further questions in the queue. I will turn the program back to our presenters for any additional or closing remarks.

Tom Hill: Yes. Thank you for your time and your interest in Vulcan Materials today. We appreciate the relationship. We hope that you and your family stay safe, particularly with all the weather we’re having. And we look forward to talking to you throughout the quarter. Thank you.

Operator: This does conclude today’s program. Thank you for your participation. You may disconnect at any time.