Vulcan Materials Company

Good morning, ladies and gentlemen, and welcome to Vulcan Materials Company's second 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.

Thank you, Operator, and good morning, everyone. 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 legal 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 our time together. With that, I'll now turn the call over to Tom.

Thank you, Mark, and thanks to everyone for joining the call this morning. We appreciate your interest in Vulcan materials and hope that you and your families continue to be safe and healthy. I want to begin today's call by taking a moment to congratulate our team for their solid execution during the first half of the year. Our performance through the first two quarters further demonstrates the strength of our aggregates-led business. We expect the momentum we generated in the first half of the year to carry through the second half, and we reiterate our full year 2021 adjusted EBITDA guidance range of $1.38 billion to $1.46 billion. For the first half of the year, our adjusted EBITDA increased by 7%, and our average cash gross profit per ton expanded by 5% through a combination of volume growth, higher pricing, and improved operating efficiencies. Adjusted EBITDA for the second quarter was $406 million, essentially unchanged versus the same quarter last year. We achieved this result despite a $25 million headwind from much higher diesel and liquid asphalt costs. Diesel costs rose by $15 million in the quarter. Liquid asphalt costs were $10 million higher than the same period last year. And together with wet weather negatively impacted the profitability of our non-aggregate segments. Even after considering the energy headwind, our aggregate cash gross profit per ton grew by 2% in the quarter due to our team's consistent execution of our four strategic disciplines. With a 4% increase in aggregate volume in the second quarter and the market's current visibility to demand, the pricing environment continues to improve. Freight adjusted aggregate pricing increased 3% in the quarter, and the rate of growth improved sequentially throughout the quarter. Adjusted for mix, freight adjusted price improved 2.6%, twice the growth rate realized in the first quarter. Along with improved volume and pricing, operating efficiencies and cost control helped to offset inflationary pressures. Our total cash cost of sales increased by 4% in the quarter versus the prior year. Excluding the diesel headwinds, cash costs of sales grew by less than 1%. During the second half of the year, we will remain diligent and focused on controlling what we can control and on driving further improvements in our profitability. This solid aggregate performance helped to offset reduced profitability in the non-aggregate segment. Our second quarter non-aggregates gross profit declined year over year due primarily to the higher liquid asphalt costs, which I mentioned earlier, and lower volumes in both asphalt and concrete. Wet weather impacted asphalt shipments, while a shift in timing of projects, particularly in Virginia, resulted in lower than anticipated concrete shipments. Turning now to the demand picture. It has improved across our major end markets, as well as geographies. The residential end use has shown continued strength with solid starts in single-family housing. We've also seen an uptick in multi-family housing starts. Now, with respect to the non-residential outlook, improvement continues in a number of leading indicators, and we have begun to see month-over-month improvement in starts. The strongest non-residential sector continues to be the work related to e-commerce and technology infrastructure. but lighter traditional non-residential demand is also recovering. The level of highway starts remained healthy in the first half of 2021 as states got back to normal funding and budget levels. On the broader subject of federal highway and infrastructure spending, we're encouraged by the progress made toward a highway bill with substantially higher funding over the FAST Act levels. We've also seen an acceleration of starts in public infrastructure, such as water and sewer treatment systems, airports, and storm and flood control. Before turning the call over to Suzanne, I want to briefly touch on our growth strategy and the recently announced agreement to acquire U.S. Concrete. We have three paths to growth, and it's important to strike the right balance between these three in order to drive higher returns. Those paths are organic growth, green fields, and M&A. We always start with organic growth because it offers the most attractive and compelling value proposition on a risk-adjusted basis. We have a unique and irreplaceable asset base spread across the most attractive geographies in the U.S. Our four strategic disciplines are designed to accelerate our organic growth, and the benefits are clear as we expand our unit profitability. We also have a long and successful history of developing and opening new aggregate locations, particularly in growth quarters where acquisition opportunities may be limited. We like the flexibility that Greenfields provide in regards to timing and pace of capital spending. Our third growth engine is M&A. U.S. Concrete is a great strategic fit for Vulcan as it naturally complements our existing aggregates business. It also brings new geographic exposure to the company, expanding and diversifying our already strong footprint into the Northeast. Along with my colleagues at both Vulcan and U.S. Concrete, I'm very excited about the potential for this combination. It will allow us to further drive sustainable long-term shoulder value and I look forward to welcoming the U.S. concrete team to the Vulcan family. Now I'll turn the call over to Suzanne for further comments.