Vulcan Materials Company

Good morning, ladies and gentlemen, and welcome to the Vulcan Materials Company third quarter earnings call. My name is Gretchen and I will be your conference call coordinator today. If you'd like to ask questions, please press star one during the question and answer 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, and thank you for your interest in Vulcan Materials. With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. A couple of housekeeping items before I turn the call over to Tom. First, 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. In the interest of time, please limit your Q&A participation to one question. This will allow for more questions during our time together. Today's call is accompanied by a press release and a supplemental presentation posted to our website, VulcanMaterials.com. Additionally, a recording of this call will be available for replay later today at our website. And with that, I'll turn the call over to Tom.

Thank you, Mark, and thanks to each of you for joining the call this morning. We appreciate your interest in Vulcan Materials Company. During the third quarter, our team showcased the durable growth capabilities of our aggregates-led business model. Volumes, prices, gross profit, and importantly, unit profitability improved in each of our operating segments. Widespread double-digit pricing growth across all segments outpaced continued cost pressures. Our momentum is strong. Throughout our organization, we remain focused on our strategic disciplines, the Vulcan way of operating and the Vulcan way of selling, and the fundamental role they play as we continue to enhance our core business. We also continue to expand our reach, and we've closed several strategic acquisitions this year. Importantly, during the third quarter, we acquired strategic aggregates and downstream assets that complement our existing business in Northern California. In the third quarter, we generated $507 million of adjusted EBITDA, which is a 21% increase over the prior year. Accelerating pricing growth and higher year-over-year shipments drove earnings improvement in each product line. In aggregates, gross profit improved 17% to $436 million. Volume improved 9% or 3% on the same sort of basis, and it was geographically widespread. Pricing momentum continued, going from mid-single digit in the first quarter to high single digit in the second quarter to double digits in the third quarter. Average selling prices on both a reported and mixed adjusted basis increased over 12% from the prior year's third quarter. Current pricing momentum and the visibility into future public demand growth will support a positive pricing environment for the remainder of 2022 and into 2023. As expected, our costs remained elevated in the quarter due to continued inflationary pressures. The price per gallon of diesel was more than 60% higher than the prior year, and most parts and supplies also faced significant inflationary increases. Our focus on driving efficiencies through the Vulcan way of operating is critical to continuing with inflationary pressures and continuing to expand our unit profitability. In the third quarter, aggregate cash gross profit per ton improved 9% to $8.41 per ton. Our asphalt segment also achieved significant improvement in the third quarter with a $22 million year-over-year increase in cash gross profit. The average price of liquid asphalt increased by over $200 per ton compared to the prior year's third quarter. That said, continued pricing momentum and healthy volumes drove favorable results in spite of the ongoing energy-related cost pressures. Asphalt volumes increased 13% and asphalt pricing improved 26%. Both volume and pricing improvements were widespread, with particular strength in Arizona and California, our two largest asphalt markets. Concrete cash gross profit in the third quarter improved $25 million due to the contribution from acquired operations, as well as strong volume and price growth in our legacy operations. Now that we have briefly reviewed the results from the third quarter, let's shift to the underlying demand environment and outlook for construction activity. We see both challenges and opportunities in the future demand environment with different dynamics impacting each end use. Single-family housing is facing considerable headwinds, but multifamily housing and private non-residential starts still show growth. On the public side, leading indicators for highways and other infrastructure are reflecting strong tax revenues and increased funding from the Infrastructure Investment and Jobs Act. I'll share a few highlights on each end use. Starting with residential, single-family demand is now showing the impact of rising construction inflation, home prices, and mortgage rates. Permits and starts are declining, albeit at slower rates in bulk conserved markets than the country as a whole. Multifamily permits and starts remain positive. It's important to remember that residential construction activity remains at high levels. Also, household formations and limited inventories may dampen the magnitude and duration of weakness in residential demand. Private non-residential demand and leading indicators are currently healthy, and the trailing 12-month private non-residential starts are up 21% over the prior year. Additionally, leading indicators remain positive, with the Architectural Billings Index, or ABI, still greater than 50, and the Dodge Momentum Index at high levels. On the public side, we are in growth mode. Trading 12-month highway starts are up 14%, and other infrastructure starts are up 18%. In fact, July and August were the two largest single months for highway awards in the last 10 years. The timing of starts converting to aggregate shipments will be a critical variable impacting next year's demand for aggregates. As we look into 2023, we expect that the current strength in private non-residential construction activity and increased public funding will help to offset contracting residential demand. We also carry strong pricing momentum into 2023. Our teams will be finalizing their annual planning over the next few weeks, and we'll share with you our full year outlook on 2023 in February. Even with uncertainty in the broader economy, We're confident that we are well positioned to capitalize on pricing opportunities, benefit from the generational increases in public funding, and continue to expand our unit profitability. I will now turn the call over to Mary Andrews to comment further on our results and full year outlook. Mary Andrews.