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spk12: Good morning, ladies and gentlemen, and welcome to Vulcan Materials Company's second quarter 2023 earnings call. My name is Angela, 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.
spk08: Good morning, and thank you for your interest in bulk materials. With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlyle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted 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 said, in the interest of time, please limit your Q&A participation to one question. And with that, I'll turn the call over to Tom.
spk14: Thank you, Mark, and thank all of you for your interest in Vulcan materials today. Our results through the first half of 2023 highlight both the attractive fundamentals of our agri-led business and Vulcan's commitment to compounding profitability through our solid execution of our Vulcan way of selling and Vulcan way of operating strategic disciplines. I'm proud of our teams for delivering yet another quarter of improvement in our trading 12-month average cash growth profit per ton. That marks 20 of the last 22 quarters. This exceptional execution, coupled with better than expected demand environment, gives us confidence in our ability to deliver between $1.9 and $2 billion in adjusted EBITDA this year. In the quarter, we generated $595 million of adjusted EBITDA, which is a 32% improvement over the prior year. Gross margin expanded by 480 basis points, and importantly, each product line delivered year-over-year improvement. In the aggregate segment, gross margin improved by 290 basis points. Cash gross profit per ton improved by 22%, with healthy year-over-year price improvement and moderating year-over-year cost increases. Shipments declined a modest 1% in the quarter, but were varied across markets. On the one hand, we saw solid growth in our key southeastern markets, where we have the most attractive aggregate footprint. And we were pleased with the rebound of sales in California after a very wet first quarter. On the other hand, weather continued to be a challenge in Texas, and remember, softer residential activity weighed on most markets. All geographies benefited from the continued strong underlying price environment. Our mixed adjusted sales price improved 15% in the quarter. Attractive price growth should continue to drive improvement in our unit profitability as we progress to the back half of this year and into next year. In asphalt, cash gross profit nearly tripled from the prior year to $66 million, and cash unit profitability improved over $10 a ton. Volume growth of 16%, price improvement of 9%, and lower liquid asphalt costs all contribute to the stable results. Gross margin improved almost 1,200 basis points. Concrete cash unit profitability improved by 24% in the quarter, and this is despite lower volumes that were impacted by the slowdown in residential construction activity. Prior year concrete segment benefited for the contribution of the now divested New York, New Jersey, and Pennsylvania concrete operations. Now, starting with residential, let me provide a few thoughts about each end market. To date, the impact of the slowdown in residential activity has not been as significant as most of us initially feared. Recent permits and starts were showing that some areas have reached the bottom, and the sentiment among homebuilders is much improved. These trends along with the solid underlying fundamentals for residential demand growth, such as low inventories, favorable demographic trends, and employment growth in our markets, suggest that single-family demand will bottom in the second half of this year and then start recovering thereafter. In the private non-residential construction segment, starts remain at healthy levels with particular strength in large manufacturing and industrial projects. Our strong southeastern footprint and logistics innovation efforts are making us a supplier of choice on many of these projects. As an example, we have booked and are currently shipping to projects such as battery plants, electric vehicle manufacturing facilities, LNG facilities, and large warehouse parks. On the public side, demand is unfolding largely as we expected. Funding from the Infrastructure Investment and Jobs Act is beginning to flow through, and the pipeline is building with 12-month highway starts up over 20%. 2024 state budgets are at very healthy levels, and internally, our bookings and backlog reflect this increased activity. The level of this year's shipments will depend upon how quickly this increased activity converts to shipments. We expect accelerating growth into next year and continued growth for the next several years. Trending 12-month other infrastructure starts are also up over 20%. In addition to significant IJA funding for water, energy ports, and shipments, strong state and local revenues support growth in non-highway investment. Based on the improved private demand backdrop and our first-half shipments, we now expect aggregate volumes to decline between 1% and 4% in 2023, as compared to our initial expectations of a decline between 2% and 6%. Of course, regardless of the demand environment, our focus is to consistently improve unit profitability and grow earnings in order to create value for our shareholders. We're well positioned to do exactly that this year and deliver approximately 20% year-over-year improvement in both our cash gross profit per ton and adjusted EBITDA. And now I'll turn the call over to Mary Andrews for some additional commentary on our second quarter and an update for 2023 outlooks.
spk13: Thanks, Tom, and good morning. Our strong operational performance through the first six months in this year exhibits the benefits of our strategic focus on enhancing our core, We have improved our adjusted EBITDA margin by 350 basis points year-to-date through a combination of gross margin expansion and disciplined SAG cost management. This operational execution and resulting cash generation have allowed us to deploy capital toward each of our longstanding priorities, to improve our return on invested capital, and to maintain the strength of our investment-grade balance sheet. Over the last 12 months, we have invested $677 million in maintenance and growth capital, including strategic greenfields. Additionally, we have deployed $340 million for acquisitions, and we have returned $271 million to shareholders via a combination of dividends and share repurchases. We have improved our return on invested capital by 110 basis points on a trailing 12-month basis. and we have reduced our leverage on a net debt to adjusted EBITDA basis to two times at June 30, 2023, from two and a half times at June 30, 2022. We are well positioned to execute on our strategic objectives of further enhancing our core and also expanding our reach. Talent and technology are critical to achieve our business objectives, and we continue to invest in both while remaining focused on further leveraging our SAG cost. Trailing 12-month SAG expenses as a percentage of revenue have improved by 50 basis points. Now let me shift to the updates to our full-year guidance. As Tom mentioned, we now expect to generate between $1.9 and $2 billion of adjusted EBITDA in 2023, a 17% to 23% improvement over the prior year. Our revised outlook results from the update to our aggregate volume expectations that Tom described, in addition to the momentum in our asphalt business. With our non-aggregate businesses now in margin recovery mode, we expect to generate approximately $295 million of cash gross profit from our downstream businesses, with 50% to 55% of the total expected from asphalt and 45% to 50% of the total expected from concrete. We continue to expect to spend between $600 and $650 million on maintenance and gross capital. Additionally, we expect to spend approximately $200 million on opportunistic purchases of strategic reserves in California, North Carolina, and Texas, three important markets for Vulcan materials. Because reserves are critical to our long-term success, our land portfolio is extensive and a strategic focus for us. we take a disciplined approach to securing high-quality reserves, the timing of which often depends on a combination of availability, alternative uses of cash, and tax efficiency. We manage the entire lifecycle of our land to create maximum value for the business, for our shareholders, and for our communities, putting land to work both before and after mining. Our excess properties, once completely mined and often reclaimed to their highest and best use, can generate significant value, such as the 2021 sale of previously mined property in Southern California that was reclaimed for commercial and retail development and sold for over $180 million. Of course, the timing of buying and selling land can be uneven, but our focus is on the strategic management of our land portfolio. All other aspects of the full year guidance, as reaffirmed or updated in May, remain unchanged. I'll now turn the call back over to Tom for some closing remarks.
spk14: Thank you, Mary Andrews. In closing, I want to thank and congratulate our teams on an outstanding performance in the first half of this year. And I want to challenge them to remain focused on our Vulcan way of selling and Vulcan way of operating disciplines so that we can continue to compound improvements and drive value for our shareholders. Most importantly, we will remain committed to each other and to keeping each other safe. And now, Mary Andres and I will be glad to take your questions.
spk12: Mary Andres At this time, if you would like to ask a question, please press star 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. As a reminder, please limit yourself to one question. Once again, that is star one to ask a question. We will pause for a moment to allow questions to queue. The first question today comes from Trey Grooms with Stevens. Please go ahead.
spk03: Hey, good morning, Mary Andrews and Mark. Nice work in the quarter.
spk14: Thanks, Trey. Good to talk to you.
spk03: Likewise. So I guess I wanted to touch on the guide specifically, you know, the increase in your volume outlook for the year. And, Tom, I know you've touched on some things maybe from a high level, but could you maybe go into a little bit more detail on the primary drivers there, you know, especially as you kind of look on the private side, on res and private non-res. And is that adjustment that you've made here for the full year, you know, based more on what you've seen in the results here to date or an improvement in the outlook for the balance of the year? Thank you.
spk14: I think the last part of that is I'd say both. You know, we had a strong start and I think things are looking better than what we thought at the beginning of the year. You know, volume of the quarter was only down 1%. It was a great recovery in California where we had You know, we had a big washout in the first quarter. Texas was wet in the first quarter, was wet in the second quarter, causing shipments to be down year over year. You know, interesting in the second quarter, the southeast was also wet. But after those wet days, we're seeing a faster recovery in these markets. I mean, volumes go up. As soon as it dries out, volumes pop. And so that's good news for all of us. The private demand has been stronger than we anticipated, both single-family and multifamily shipments. have held up better than I think our original projections. Non-res has also been better, as we said, driven by the heavy side. So that's why we raised our guidance to negative one to negative four. Highways, I think, finishes the year about where we thought, low single digit. We got really, you know, backlogs and bookings are growing. So, you know, we're really building in 2024. But at the end of it, the private side was just stronger, has been stronger, will be stronger than we originally anticipated.
spk03: Got it. Thank you so much.
spk12: The next question comes from Garrett Shboy with Loop Capital. Please go ahead.
spk06: Oh, hi. Thanks. Just wanted to piggyback on Trey's question with respect to the volume outlook. I'm wondering if you could speak a little bit more just to the light non-res side of the equation, recognizing that the heavy piece has been strong. Are you seeing any change in trend there? And then also, you know, highways are, it sounds like as expected, you know, this year, just curious, you know, if there's any visibility to what kind of growth we might anticipate into 2024.
spk14: I'll take nine reps first. As I said, it's been a lot better than we thought. It's really driven by as you would expect, warehouses, distribution center, and now we've got the heavy industrial projects coming on, which have been very helpful. You know, I would say a little bit of risk in some geographies and some sectors next year, as we've seen maybe some slowing in starts in Texas and warehouses. That said, if you look at that segment, the warehouse segment, And some of our stronger markets like Georgia, Florida, California, Arizona, we're still seeing growth in sorts and warehouses in those markets. So a little bit mixed bag of warehouses. I'd say other really good news in non-res is that we continue to see the big growth in the heavy industrial projects in our footprint. And these projects carry substantial volume needs. We have... I think 11 of these are big projects that we've already booked. Most of them we're already shipping on, and they'll carry out through 2024. On top of that, we're currently bidding on a number of projects that, as you know, won't ship until 2024, 2025. So in this sector, geography really does matter. So, you know, better growth than non-res than I think we originally expected. Oh, I'm sorry. Your second question was on highway demand. It's really a matter of timing. We're seeing a lot of growth in, we'll say growth in bidding. The funding, as you know, the federal side, the state side, the local side is very good. Highway lettings continue to build. Our bookings and our backlogs and highways continues to build. And as you know, what we're bidding today, what we're booking today will ship in 24. So Again, low single digits in this sector in 23, but it's setting up very well for 24 and 25 and 26.
spk12: The next question comes from Stanley Elliott with Stifel. Please go ahead.
spk17: Hi, Stanley.
spk12: Morning, Stanley.
spk17: Hey, Tom. Mary Andrews, good morning. Thank you for the question. Could you guys talk about the pricing environment? You mentioned pretty broad-based momentum through the first half of the year. You did leave the pricing guidance unchanged. Is that regional mix? Is it maybe some timing? And to what level are you guys thinking about second price increases and maybe even how that carries off into 2024?
spk14: Yeah, I'll tell you that the pricing in 23 is unfolding as we thought it would. Prices were up 15% in the quarter. We expect them to be up 15% that carry through the full year. But I think you got to step back and remember the sequence in pricing was very different between 22 and 23. In 23, as we told you, we went out much higher much earlier than we did in 2022. We've gotten more price in 23. We got more price in 23, and we've gotten it earlier. So if you kind of look at, a good reference would be slide five in that deck. And if you looked at 22, the full year, year over year, from January 1 to December 31, we went up $1.53. So from the beginning of this year till the end of June for 23, we're already up $2.28. So, you know, it is compounding. It is much faster, much higher. Second half price increases, while they were mixed, will only help that. I'd tell you they really are a good setup for 2024. And we'll continue this momentum. And the reason why is the momentum is very good, as you know. But demand is looking better. The private side is better. The public side is growing. So all of us in the sector have very good visibility to a more positive man picture. And our customers, I would tell you, continue to be quite confident. So I feel good about the momentum. We're right now planning our January 1 price increases, which will go out in a few months. And I would expect us, again, to go out higher earlier than we did. One point to this, though, and I think it's really important, is our ultimate goal is to take that price to the bottom line. And that's really important that we continue that margin expansion. We're up We're in the first quarter, low 20s. In the second quarter, we expect that to continue for the next few quarters. And that is a really important number. And we get there in the second half of the year a little different, probably a little as a percentage-wise. We got tougher comps on price but easier comps on cost. So we continue that low 20s margin expansion.
spk17: Great. Thanks so much, Besselon.
spk14: Thank you.
spk12: The next question comes from Mike Dahl with RBC Capital Markets. Please go ahead.
spk01: Good morning, Mike. Good morning.
spk09: Thanks for taking my question. So I have a question on downstream businesses. So it's nice to see the start of the legacy property, and you're referencing now you're in margin recovery mode. You took up the guy for this year. You know, when I take a step back and look at kind of your legacy business combined with the previous U.S. concrete business, legacy business, it seems like there would be still like quite a bit more work or runway left on what, you know, quote unquote normal to be in downstream. So just wanted to get your thoughts on that in terms of timing. Should we be thinking that that Your combined businesses could be like $400 million instead of $295. I'm not saying this year or next, but is that the right normal to be thinking about, or how should we frame that?
spk14: Yeah, I think we were very encouraged that this quarter we had unit margin growth in all three product lines. You know, we battled that a little bit in asphalt for a year or two, and then we, you know, had to catch up. We said we'd catch up this year in concrete, and we got it in the second quarter. I'll take the product lines kind of one at a time. Really strong quarter for asphalt. You know, gross margins were up. They were at $66 million. They were at $26 last year. Volumes were up 16% in spite of wet weather in Texas. California and Arizona asphalt volumes were really strong after a tough first quarter because of rain. Prices were up 9% and our liquid costs were down. You know, great quarter in asphalt. We told you guys we would continue to grow this margin, and we are, so really encouraged by that. And, you know, that will only get better as you see the funding from IJA and local and state funding go to work in the public sector. Ready Mix, you know, we had a really tough first quarter, slow start to the year. We got really blown up with weather. We recovered. I thought the team there did a really nice job recovering rapidly in the second quarter, and it was really driven by unit margin expansion. So on the same sort of basis, our volumes were down actually 11%, a combination of rain in Texas and the impact of single-family demand. Prices were up 10%, and unit margins were up 24%. We said we'd get back to growth mode in ReadyMix. I think we are, and I think we'll continue that recovery. But I'm really proud of the ReadyMix team's recovery and the Asphalt team's continued performance and those product lines.
spk13: Yeah, and, Mike, just on a sort of, you know, longer-term horizon, I think, you know, in the ReadyMix business, we still think that low double-digit gross margins is where we, you know, need to be. And so if you look at the – We saw, you know, great recovery in the second quarter. If you look at where we are in the trailing 12, as you said, we still have runway ahead of us, and that's the margin expansion that we're looking forward to going forward. And similarly in the asphalt business, you know, we've sort of long said high single digit, you know, maybe low double digit long-term gross margins in asphalt. We've, you know, hit 10%. on a trailing 12-month basis. And I think with where we are right now with the pricing environment and the demand environment ahead of us, you know, we can still see some expansion there as well, but would, you know, still think of high single-digit, low double-digit over the long term.
spk09: Great. All right.
spk12: The next question comes from Anthony Pettenary with Citi. Please go ahead.
spk10: Good morning. Hey, just following up on margins, I think you previously pointed to cash costs up high single digits year over year this year. I'm just wondering, is that still a fair expectation? And I think costs were up a little bit more than that in 2Q. You talked about comps getting easier in the second half. Just any kind of further detail in terms of the cadence from 3Q to 4Q? And if there's any sort of, you know, good guys or bad guys from a cost perspective that we should, you know, especially keep in mind for the second half.
spk14: Yeah, you know, we're getting better at the aggregate cost, but they're still high. They were up 99% in the quarter. And you really feel the impact of the inflationary pressures on parts and services. As we said, comps get easier throughout the year. Our guidance is the high single, which would put us in kind of mid for the balance of the year. Parts and service costs continue to plague us. We also have issues or challenges with parts delivery, which hurts our efficiencies. That also is getting better. I think we do have a good guy in the quarter of diesel, which was probably an impact around $25 million today. And our operating efficiencies continue to improve and will help us offset some of this. So we guide you for the full year to high single digit, which would put us kind of mid in the back half of the year, but comping over a lot easier numbers.
spk13: Yeah, and Anthony, you know what I think is most important is it has been a challenging couple of years with inflationary pressure, certainly, but aggregates is a price-cost winner, and our growth margin on a trailing 12-month basis returning to expansion in the second quarter was great to see. We've got a good runway ahead of us on that, and as Tom highlighted earlier, still expect low 20% growth this year in our cash growth profit per ton.
spk10: Okay, that's very helpful. And maybe just on labor, are you seeing any change there? Maybe not in terms of, you know, wage rate or dollar, but, you know, in terms of availability of labor that's maybe helping you or hurting you this year?
spk14: It's still tight. I think the labor market has gotten better from our perspective. I think we've also gotten better at retention and how we handle that. So still a challenge, but much improved from where it was over the last couple of years.
spk10: Okay. That's very helpful. I'll turn it over. Thank you.
spk12: The next question comes from Jerry Revich with Goldman Sachs. Please go ahead. Yes, hi.
spk15: Good morning, everyone.
spk14: Hi, Jerry. Thank you.
spk15: Tom, Mary Andrews, why don't you just talk about how you're thinking about pricing for 24? It feels like, you know, what a big lesson learned for the industry from 2022 is to price for a higher level of inflation and, you know, conflations lower, just get the benefits of that. How are you thinking about the magnitude of those January one price increase that you spoke about versus the historical, you know, four to 5% CAGR that you and the industry have delivered given the backdrop that we've seen, you know, over the past 18 months.
spk14: So, as I said, I think we got a lot of momentum going with this and this, the, the, the, private side demand on this being better is helping that everybody's got good visibility to um to the the public side i think that if you go out there and talk to the to to the segment to the construction materials and construction segment people are feeling a lot better about the future than maybe we were six months ago and you got to see more of the demand so that that That positive sentiment, the momentum on pricing, and better visibility to demand, all are good setup for price. As far as magnitude, we're working on that right now, but our strategy last year was to go out higher on January 1. I thought that worked very well, and I think I wouldn't see us straying from that strategy as we look to 2024. Thanks. Thank you.
spk12: The next question comes from Tyler Brown with Raymond James. Please go ahead.
spk16: Hey, good morning. Good morning. Hey, Mary Andrews. So I'm a little unclear on the CapEx. So I think CapEx is expected to be $600,000, $650,000, but does that include the $200 million in land purchases, or will that be on top of it? Maybe I'm mixing it, but those maybe flow on the acquisition line on the cash flow statement. I'm just not sure. And then just, Tom, any color on the M&A pipeline? Thanks.
spk13: Yeah, so Tyler, to clarify, the $200 million that we're planning to spend on strategic reserve is in addition to the $600 to $650 million. It will show up as PP&E as it is land, but I think you're thinking about it right in terms of it being, you know, more of an opportunistic strategic, you know, acquisition type opportunity. And I'll let Tom hit M&A.
spk14: Yeah, I would simply describe, you know, the acquisition opportunity With the improving picture and clarity to the private's demand, and it probably looked a little better than maybe we thought, I would expect that to improve the M&A pipeline. We've got, you know, we always have a couple we're working on, but strategic bolt-ons, but I would think this will help the pipeline.
spk12: The next question comes from Tidna Tanners with Wolf Research. Please go ahead.
spk11: Yeah. Hey, good morning. I wanted to follow up on the strategic cash uses. So talking about property purchases, is this because of opportunistic you know, availability or is this, you know, a need to reshore reserves? Is that just some color there? And similarly, just wondered if you would comment on the first year buyback since the pandemic and what that might illustrate for your future plans.
spk14: I think we'll split that question. I'll take the land piece. You're exactly right. It is opportunistic. It's a lot of times these are when they come up, much like both on acquisition, and that's both for, you know, buying reserves, but also, you know, both buying reserves and selling land are going to be lumpy by nature. You heard me, Andrews, I think it was in 21 where we sold $180 million worth of land. So, It is. It comes when it comes. It's hard to plan. Sometimes you can. Most of the time you can't. I will tell you, I'm very pleased with the runners we got. They were primarily in California, Texas, and North Carolina. So glad to get them. Good use of capital. And pleased with the team's effort on that.
spk13: Yeah, and in terms of, you know, share repurchases, returning excess cash to shareholders, you know, through repurchases has been part of our, you know, longstanding capital allocation priorities. We, you know, believe appropriately following reinvesting in the business through operating and maintenance CapEx. after growing the business and returning cash through the dividend. So with attractive cash generation and slower M&A in the first half of the year, we repurchased $50 million of shares in the second quarter. And really our capital allocation decisions in the back half of the year will, you know, just follow our same disciplined approach.
spk11: Okay, great. Thanks so much.
spk13: Thank you.
spk12: The next question is from Phil Ng with Jefferies. Please go ahead.
spk18: Hi, Bill. Good morning. Hey, guys. Congrats on this round quarter. Thank you. My question is your guidance for average volumes. You're calling for it to be down, call it 1% to 4%. And you want it down modestly in 2Q. And with housing bottoming and you're calling out pretty good momentum on the infrastructure and heavy commercial side with, frankly, easier confidence back at it, It feels kind of conservative. Any one-offs that we should be mindful of. And when we look at the 2024, Tom, you were talking about how you're seeing momentum building on infrastructure and heavy on the industrial side. Andy Culler, how do you think about the growth profile in those two markets when we kind of look at 2024? Thank you.
spk14: Yeah, I think, you know, if you look at kind of the upside-down side to our guidance here, The low side, the minus four, would tell you that single-family shipments would have to fall off worse than we've seen. I think we've bottomed, or we're seeing kind of the bottom in single-family, and I think that it gets better for 2020. Hopefully it'll get better for 2024. On the high side, if to the minus one, we'd have to see a little more volume. Some of our projects would have to start up a little faster. It could happen, and that's why we've got the range where we do. I do think that The heavy piece is going to help us in the second half. I think it's going to be more help in 2024 on the heavy industrial.
spk18: Is there a way to think about how that growth profile is going to look next year? I mean, low single digits per year. Is that like a mid to high single-digit growth story next year?
spk14: On other infrastructure, you mean?
spk18: Just infrastructure in general, right? I mean, Tom, you're talking about low single-digit growth this year, right? So when we look at the 2024 with all the lettings and bidding actively flowing through, is that a mid-single-digit growth or high-single-digit growth?
spk14: I think it's too early to call. We've just got to see more. I would address that we haven't talked about the non-highway infrastructure yet. is also looking very good uh like like highways you know the local state and federal funding is extremely healthy and has the ij in it uh sparks and that and the other non-highway infrastructure were up and click six months was up 18 percent and trying three is up 20 so you know good for 23 probably again low single digit but much better for 24. okay thank you thank you
spk12: The next question comes from Catherine Thompson with Thompson Research Group. Please go ahead.
spk01: Hey, good morning. This is actually Brian Byroson for Catherine. Thank you for taking my question. Sure. It's just on the asphalt business. Can you touch a little bit more on the performance there, maybe the volume risk specifically, just kind of what projects are you seeing come to market in that business, if it's more repair work or maybe it's more new work coming down the pipeline? Thank you.
spk14: As far as the paving is both. You're seeing both new and recovery. You do have overlays. I was pleased with the volume growth because we had a lot of rain in Texas, which is a big asphalt. Flip side of that is California and Arizona probably had some catch-up. from the first quarter, which we just didn't do much at all. I am very pleased with the pricing performance and the unit margin performance. So I think, you know, a really good start to the year in asphalt. We're back in unit margin growth mode. And the, you know, the growth in funding for highways is only going to help this product line. Thank you.
spk07: Thank you.
spk12: The next question comes from Adam Thalheimer with Thompson Davis. Please go ahead.
spk00: Hey, good morning, guys. Great quarter. Thanks, Adam.
spk12: Hey, thank you.
spk00: Tom, I think you characterized the mid-year price increases as mixed. Why was that? I think there was hope a month or two ago it might be better. And does that bode well for January increases next year?
spk14: Yeah, remember, as I said, the sequencing from 22 to 23 was very different. We intentionally went out much higher much earlier in 2023. So kind of as expected, the midyear was successful in some markets. It was successful in some market segments. It will have a little bit of an impact on 23, but it's going to have a much larger impact on 24, and that's simply a matter of timing from project pricing to shipment and also maybe some backlogs. It does impact 2024. I don't think it slows any momentum for January 1 price increases. Again, that strategy of high early worked really good in 23, and we'll carry that strategy towards 24. So I would tell you that's as expected.
spk07: Good. Thank you. Thank you.
spk12: The next question is from Keith Hughes with Truist. Please go ahead.
spk07: Thank you. Hey, Keith. How are you doing? Give us an update on the situation in Mexico with the quarry there, the process, any sort of movement at all.
spk14: So, you know, the short answer is the same, no news. We've got the NAFTA claim. We'll have the final hearing on the NAFTA tribunal this year. We should have a result of that in 2024. We feel very good about our position. We feel very good about our case. We feel very good about the evidence. But, you know, we'll finish the legal proceedings this year and have a final ruling in 2024.
spk07: And what would be the best-case scenario if you're successful on that?
spk14: I think that we get a large check because of the shutdown of our business. The magnitude of that we can't disclose because we have a confidentiality agreement with the tribunal. I understand. Thank you.
spk07: Thank you.
spk12: Next question comes from David McGregor with Longbow Research. Please go ahead.
spk05: Yeah, good morning everyone. Tom, nice quarter. I wanted to maybe just ask a little bit on the guidance and you talked about the first quarter being wet in California, Texas in the second quarter. What's your sort of best estimate of the carry forward tons into the second half due to the disruptive first half weather?
spk14: I think you saw that in California, Arizona in the quarter. You probably will have some of that in the third quarter. In Texas, as I said earlier, what I'm impressed with is we're seeing a lot speedier recovery after wet days in our markets, which tells me that our The firepower of our contractors is getting much better, and I'm sure it is because of the work that they got coming at them from all the public funding. So I think maybe a little bit in Texas, everybody else I think you don't see a lot of carry forward because they've been able to catch up pretty quick.
spk01: Thanks very much.
spk14: Thank you.
spk12: The next question comes from Michael Dudas with Vertical Research. Please go ahead.
spk04: Good morning, Mary Andrews, Mark, Tom. Good morning. Good morning. Tom, as you provided some very helpful observations on expectations for second half year in the 24, but if you're going to isolate either better than expected pricing, better than expected cost, or better than expected volume, as we maybe exit the 23 and the 24, what would you point towards? Or maybe all the above.
spk14: Are you saying as we go from 23 to 24?
spk04: Yeah, as we get through the second half of the year, as results come through, your expectation would have been getting to year end, like say the high end of your EBITDA range, or would it be better pricing, better cost utilization and execution, or better volumes?
spk14: I would tell you we probably have the best shot at highway work coming on a little faster maybe than we expected. The flip side of that is obviously that if you see a bigger slowdown, a more slowdown on res, which at this point we don't think is going to happen, unless we take it one at a time, on pricing, I think we've got it about right, how we got it, because we've got a little bit in the mid-year, but it's going to flow through in 24. The cost piece, I think, again, we've got to be mid-single digits at the end of the year, and I think that between efficiencies and comps, we get there. I guess at the end of the day, if I had to pick one, I would probably pick the volume piece of that. Excellent. Thank you, Tom. Thank you.
spk12: The next question comes from Brent Thielman with DA Davidson. Please go ahead.
spk02: Brent Thielman Great. Thanks. Hey, Tom, nice to see the continued improvement in aggregates gross margin this quarter. I guess my question was more to the quarter and thinking about this going forward. With the East under some pressure due to weather and some of those variables, was that actually a net negative to your reported profitability in that segment?
spk14: I'm sorry. You said you couldn't understand what you were pointing out as a possible negative.
spk13: The east. Oh. You know, we do have very attractive margins in our, you know, east coast business. I think while there was, you know, some wet weather, a lot of the, you know, strength in the private non-res and these large industrial projects is in those areas. And so, you know, our volumes were quite healthy in those markets.
spk14: I also would tell you that I think the east, what I was impressed with, we had wet weather in the east, but the recovery time when those thunderstorms would blow through the next couple days was impressive.
spk12: It appears we have no further questions at this time. I will now turn the program back over to Tom for any additional closing remarks.
spk14: Well, thank you all for your interest and your time and your support of Vulcan Materials Company. We look forward to talking to you throughout the quarter, and we hope that you and your families stay healthy and safe. Thank you.
spk12: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
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