Vulcan Materials Company

Good morning, ladies and gentlemen, and welcome to Vulcan Materials Company's fourth quarter earnings call. My name is Catherine, 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.

Good morning. and thank you for your interest in Vulcan Materials. 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. 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. With that, I'll 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 Company and hope that you and your families continue to be safe and healthy. As you will have seen from the press release this morning, Suzanne has decided to retire in September to spend some well-deserved time with her family. I'll have more to say on this at the conclusion of our prepared remarks. Now let's move to our fourth quarter performance, and Suzanne will cover the full year performance later on. I want to thank our team for its strong execution during the fourth quarter. Our financial results were ahead of expectations despite ongoing challenges from inflationary pressures, particularly in energy and labor constraints. Focusing on our operating disciplines, and proactive pricing actions, we once again saw expansion in our industry-leading unit profitability. At the same time, we made excellent progress on integrating U.S. concrete into our business. This overall strong finish to the year allows us to carry considerable momentum into 2022. We generated $383 million of adjusted EBITDA this quarter an increase of 23% over 2021. Energy-related inflation was the most significant impact to our business with $36 million worth of higher costs, of which $17 million related to diesel fuel, while the remainder related to liquid asphalt and natural gas. Labor pressures caused higher labor costs due to overtime. In the face of these challenges, we were still able to manage our controllable costs well. Aggregate's cash unit cost of sales increased less than 1% as compared to the prior year's fourth quarter. This was an excellent operating performance, and I'd like to thank all of our operators and congratulate them on a job well done in 2021, and all the while delivering a world-class SAGE performance. Our operating performance helped us improve aggregate cash gross profit per ton by 6% to $7.41. This result includes an $8 million acquisition-related impact for selling acquired material after its markup to fair value. Importantly, this progress on cash unit margin expansion represents the 14th consecutive quarter of improvements. We achieved this by consistently executing on our four strategic disciplines, which helped to drive volume growth, higher pricing, and improved operating efficiencies. These strategic disciplines will help us take advantage of the favorable demand and pricing environment in 2022. Total aggregate volume, including U.S. concrete, increased by 13% versus last year's quarter. On a same-store basis, volume was up 7%. This reflects not only continued improvement in demand across all intermarkets, but also favorable weather in November and December. The aggregate pricing environment continues to strengthen across our footprint. Same-store prices were up 3.7% in the quarter as compared to the prior year, and mixed adjusted prices increased by 4.2%. Year over year, mixed adjusted pricing sequentially improved throughout the year, having started at 1.3% in the first quarter. The pricing actions taken to date, along with better demand visibility, set the stage for a favorable pricing environment in 2022. Asphalt gross profit was $4 million in the quarter compared to $17 million last year as a 35% increase in liquid asphalt costs created a $17 million headwind for us. As we discussed before, liquid asphalt costs were at three-year lows in 2020, and the significant fluctuation of these costs have made for a more difficult comp year over year. The good news is that our selling price for asphalt mix increased 5% from the prior year quarter. Through 2022, as pricing catches up, we will work to get back to asphalt segments long-term averages in terms of margins. Concrete's gross profit grew from $9 million to $22 million in the fourth quarter. This increase was due to the acquisition combined with higher shipments and price growth in our legacy business. Results were negatively impacted by higher diesel prices and the availability of drivers. Before we move on to the overall demand environment, I'll comment briefly on U.S. Concrete. We continue to be excited about this acquisition and how it expands our footprint. It naturally complements our existing aggregate business in California, Texas, and Virginia, and gives us access to new platforms in the Northeast. We moved immediately following the acquisition to begin securing cost savings and synergy opportunities. As I mentioned previously, the integration is going well, and our progress accelerated during the fourth quarter from both operational and back office standpoints. I am pleased with how the business and management teams have blended seamlessly during the first four months of ownership. We remain confident in our ability to generate at least $50 million of initial cost synergies on a 12-month run basis beginning mid-year. Now I'll touch briefly on the demand picture, which is increasingly positive. The key takeaway is that for the first time in many years, all four end uses are expected to grow. The residential end use has continued to show growth in starts in both single-family and multi-family housing, and we expect starts to continue at these high levels. Non-residential starts continue to strengthen over a broader range of categories. Improving non-residential demand will be positive and help drive growth in our aggregates and our concrete businesses. On the public side, growth is expected in both highways and other infrastructure. The recently enacted Infrastructure Investment and Jobs Act will add to existing demand as well as elongating the cycle. Having said that, we do not expect it to have a significant impact in 2022. We are well-positioned in the attractive growth markets we serve, and those markets are poised to benefit greatly from the legislation in coming years. Before I turn the call over to Suzanne, I want to reiterate our confidence and our prospects for 2022, particularly with respect to demand visibility, pricing, and our ability to control what we can control. We will be mindful of potential pressures from both inflationary trends and tight labor markets. We will continue to focus on our operating excellence and our strategic sourcing disciplines to help offset some of these pressures. Now, I'll turn the call over to Suzanne for further comments. Suzanne?