Vulcan Materials Company

Good morning, ladies and gentlemen, and welcome to Vulcan Material Company's first quarter earnings conference call. My name is Christy, and I will be your conference call coordinator today. During the Q&A portion of this call, we ask that you limit your participation to one question. This will allow everyone who wishes the opportunity to participate. 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.

Good morning. Thank you for joining our earnings call today. With me today are Tom Hill, Chairman and CEO, and Suzanne Wood, 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. A recording of this call will be available for replay later today at our website. Please be reminded that today's discussion may include forward-looking statements which are subject to risks and uncertainties. These risks, along with other disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Reconciliations of any non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation, and other SEC filings. As the operator indicated, please limit your Q&A participation to one question. This will help maximize participation during our time together. With that, I'll now turn the call over to Tom.

Thank you, Mark, and good morning to everyone. We appreciate your interest in Vulcan Materials and hope that you and your families continue to be safe and healthy. I want to begin by saying that our performance in the first quarter was a very promising start to the year. Demand in our markets continues to improve, and our team executed well as evidenced by our financial results. Adjusted EBITDA, which excludes the gain on sale from our reclaimed quarry in California, was $244 million, up 22% compared to last year. This strong growth was driven in part by a 3% increase in aggregate shipments. Despite weather impacts across Texas and parts of the southeast in February, we experienced a pickup in shipments. and March proved to be a strong month. Residential starts continue to accelerate and highway starts also increase due to improved lettings in the third and fourth quarters of last year. We've experienced an increase in both the number of jobs and the shipping speed in the heavy non-residential space, which is also the most aggregate intensive. And finally, Some of the jobs that had been postponed last year have started. With year-over-year improvement across our footprint, pricing was the second driver of our EBITDA growth. Freight adjusted aggregate pricing increased by 2% in the quarter. Adjusted for mix, the increase was 1.3%. This was as expected since we were shipping work that had been bid in the middle of the pandemic when there was uncertainty and a lack of demand visibility. As our 2021 price increases gain traction, we will see pricing improvement throughout the year. The third driver of EBITDA growth and the one most within our control was our exceptional cost performance in the quarter. Aggregate total cost of sales per ton was 2% lower than last year's first quarter. and cash cost of sales per ton declined by 3%. Cost control like this is an accomplishment and requires considerable discipline from our operators. The team focused hard on operational execution and as a result, all of our operating parameters and the quarries improved year over year. We were pleased with the meaningful impact from our four strategic disciplines which will continue to mature. The most compelling metric continues to be our strong unit margin gains across the footprint. Aggregates cash gross profit per ton increased by 9%. This demonstrates the attractive operational earnings power of our aggregate business when demand is combined with strong execution on our four strategic disciplines. Overall, our operating results this quarter helped drive a 90 basis point improvement in our return on invested capital. Suzanne will provide further comments on this and other aspects of our financial performance. Let's now turn to our view of the end markets, and then we'll cover how that influenced our outlook for the full year. Broadly speaking, the demand environment improved considerably over the last few months. Construction starts, as measured by Dodge, got better along with other leading indicators like the Dodge Momentum Index and ABI. Construction employment levels continue to improve as well. Residential construction remains the strongest in market. There is pent up demand for houses and new subdivisions are being built with more to come. The market fundamentals of low interest rates and reduced supply are still in place. which foreshadows continued growth. Housing starts are growing faster in bulk-conserved markets. The outlook for our non-residential end markets remains limited. However, our quote activity has increased and leading indicators are improving which suggests that a turnaround is happening. The strongest non-residential sector relates to e-commerce and technology and encompasses data centers, warehouses, and distribution facilities. According to Dodge, 90% of the growth in this sector will occur in bulk-conserved markets. The majority of non-res starts currently fits within this category, but we believe a strong residential market combined with an increasingly open economy will drive additional demand in other non-residential sectors. With respect to highways, state budgets and lettings are progressing as anticipated. We are seeing the improvement in lettings from the second half of 2020 now turn into shipments. The COVID-19 relief funds have provided a backstop for any lost transportation revenues for highways. Our country's leadership continues to work on an infrastructure package. Both parties have proposed substantial increases in highway funding, and this is a priority for both the Democrats and the Republicans. To summarize, Our view of in-markets, demand is improving. We see evidence of this both on the ground with our customers and in the data from leading indicators. As a result, we've upgraded our aggregate volume guidance for 2021 to a range of 1% to 4% growth compared to 2020, excluding the gain on the sale of the California property We now expect full-year adjusted EBITDA of between $1.38 billion and $1.46 billion. As we look forward to consider opportunities, we have three paths to growth with higher returns. Those paths are organic growth, M&A, and greenfields. I'll take each in turn. First, organic growth is a critical part of any strategy because it offers the most attractive and compelling value proposition on a risk adjusted basis. We have the best geographic footprint in the industry and the best operators in the industry, but we are not satisfied. Our four strategic disciplines are designed to accelerate this organic growth strategy and the benefits are clear as we grow our unit profitability. Second, We regularly review an active list of M&A targets. Last year, the M&A market basically shut down, but it's reopened this year. We have a long history of making both large and small acquisitions when they are a good strategic fit. Since 2014, we've completed more than two dozen value enhancing acquisitions in some of the fastest growing markets in the country. And finally, We had a long and successful history of developing and opening new aggregate locations. This allows us to pinpoint the location of aggregate reserves in growth quarters where there is no acquisition opportunity. Additional benefits include more control over timing of capital investment and not paying a premium for the assets. We like having a balance between organic and inorganic growth. It provides a high degree of flexibility and is an important part of our capital allocation process and our ability to increase our return on invested capital. I'll now turn the call over to Suzanne for further comments.