Vulcan Materials Company

Good morning, ladies and gentlemen, and welcome to the Vulcan Materials Company's second quarter earnings call. My name is Katie, and I will be your conference coordinator today. During the Q&A portion of this call, we ask that you put your participation to one question. This will allow everyone the opportunity to participate. Now I would 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 and thank you for your interest in Volcker materials with me today or Tom Hill chairman and CEO Suzanne would senior vice president and chief financial officer and Mary Andrews Carlisle vice president of finance. Today's call is accompanied by a press release and a supplemental presentation posted to our website Volcker materials dot 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 risk 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 will 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 Company. Our teams delivered another solid performance in a challenging macro environment. The resilient nature of our agri-led business actually stands out in times like these. We've grown our cash gross profit per ton in 15 of the last 16 quarters, and it expanded our trailing 12-month unit profitability at a compounded annual growth rate of 5.5% over that four-year period. These consistent results come from our unwavering commitment to executing on our strategic disciplines, which allows us to capitalize on pricing opportunities to mitigate cost pressures and to drive improvement in unit profitability. During the second quarter, we grew our aggregate cash growth profit per ton despite significant external headwinds. Importantly, our year-over-year improvement expanded sequentially each month. We are poised to carry this momentum forward and deliver both aggregate cash unit profitability growth and double-digit adjusted EBITDA growth this year. We generated $450 million of adjusted EBITDA in the quarter, an 11% increase over the prior year. These results include an approximate $20 million impact from the unexpected and arbitrary shutdown of our operation in Mexico in May. The results were also hampered by ongoing energy cost headwinds and other inflationary pressures. Pricing improvement was robust across all product lines. Year-over-year growth in aggregate mix adjusted price has increased sequentially for six quarters. Both asphalt and ready mix delivered strong double-digit price improvement, which helped offset rising energy costs. Turning now to each segment. Aggregate's gross profit improved 8% to $402 million. Demand remained healthy across our footprint during the second quarter, with the majority of geographies showing shipment growth. Overall volume improved 9% or 2% on a same-store basis. Ongoing pricing momentum helped margins return to growth in the second quarter. Freight adjusted pricing increased 9% over the prior year's quarter. Mixed adjusted pricing improved 10%. We expect continued momentum through the balance of the year as second half price increases and new project work backlogged at higher prices begin to flow through into the third quarter. It's worth noting that price and momentum building in 2022 will continue to deliver benefit into 2023. As expected, our costs were elevated in the quarter on a year-over-year basis due to significantly higher energy costs and other inflationary pressures. Our operators remain focused on controlling what they can control. by driving improved efficiencies in our plants to continue offsetting the impacts of higher input costs. In the second quarter, aggregate cash gross profit improved 2% to $7.99 per ton. In the asphalt segment, both volume and pricing improvements were geographically dispersed. Pricing actions that began last year yielded a 19% improvement in average selling prices in the quarter and helped to mitigate a $33 million energy headwind. Volumes improved 9%. Asphalt cash gross profit in the quarter held to 2021 levels despite the significant year-over-year increases in liquid asphalt and natural gas costs. Concrete cash growth's profit in the second quarter benefited from the addition of U.S. concrete, growing from $14 million in the prior year to $51 million this year. Volume, price, and material margins all improved as higher selling prices offset higher material costs. Continued improvement in private non-residential construction activity and the onset of infrastructure investment remain catalysts for the concrete segment. Now let's shift to the broader demand environment. We continue to expect private and public demand to grow in 2022. Residential construction activity in the second half of 2022 will remain good, and multifamily permits and starts are showing particular strength. Headwinds to single-family construction have resulted in slowing permits and starts, But after multiple years of strong growth, single-family construction remains at high levels, and Vulcan states continue to outperform the U.S. average. Private non-residential demand has returned to growth and has broadened in 2022 beyond aggregate intensive warehouses and distribution projects to now include other non-residential categories like office, manufacturing, and institutional work. On a 12-month basis, square footage for total private non-residential starts has grown 20% in Vulcan Surf markets and is now above pre-COVID levels. Other leading indicators, like the Architecture Buildings Index and the Dodge Momentum Index, also point toward growth. The ABI remains in positive growth territory, and the Dodge Momentum Index hit a 14-year high in June. On the public side, we've entered growth mode, and while public demand has been somewhat muted in the first half of the year, we anticipate secondhand growth in both highways and infrastructure. The bidding and booking activity we saw in the second quarter reflected record levels of public funding. In addition, we anticipate that the Federal Infrastructure Investment and Jobs Act funding will begin to flow into shipments in 2023 and for years to come. Now remember, the ultimate timing of the impact of the IIJA will depend upon the pace at which states continue to allocate additional funds and the time horizon needed to move from design to letting to construction. Overall, our markets are positioned to continue to outperform other parts of the country. and our strong execution and tireless commitment to expanding our unit margins will ensure that we continue to drive value for our shareholders. I will now turn the call over to Suzanne and Mary Andrews to comment further on our results and the full year outlook. Suzanne?