Vulcan Materials Company

Good morning, welcome everyone to the Vulcan Materials Company first quarter 2025 earnings call. My name is David and I'll be your coordinator today. Please be reminded that today's call is being recorded and will be available for replay later on the company's website. All lines have been placed in a listen only mode. After the company's prepared remarks, there will be a question and answer session. Now, I will turn your call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Mark Warren Thank you, Operator, and good morning, everyone. 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 to our website balkanmaterials.com. 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 non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation, and other SEC filings. During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available. And with that, I'll turn the call over to Tom.

Thank you, Mark, and thank all of you for joining the Vulcan Materials earnings call this morning. Our first quarter results showcase the powerful combination of our two-pronged growth strategy to improve earnings through compounding profitability in our organic business. and adding strategic assets to our portfolio. Consistently expanding our cash gross profit per ton is key to successfully growing earnings through varied macroeconomic backdrops. In the first quarter, our teams delivered an impressive 20% year-over-year improvement. Complemented by the contribution from prior year acquisitions, the strong performance in our legacy business led to a 27% improvement in adjusted EBITDA and 420 basis points of expansion in adjusted EBITDA margin. I'm pleased with how our teams are executing on our Vulcan way of selling and Vulcan way of operating disciplines to consistently enhance our performance regardless of the demand backdrop. Aggregate shipments in the first quarter were 1% lower than the prior year. Shipments from acquired aggregate facilities partially offset the impacts of extremely cold weather across many of our markets and one less shipping day in the quarter. Our commercial execution and commitment to January price increases yielded 290 basis points of sequential price growth from the fourth quarter. And aggregate freight adjusted price improved 7 percent on a year-over-year basis. On a mixed adjusted basis, aggregate freight adjusted price improved 8.5 percent over the prior year. Our operational execution and discipline in the quarter were noteworthy. Aggregate's freight-adjusted unit cash cost of sales declined 3% compared to the prior year. Moderating inflationary pressures, a relentless focus on plant efficiencies, and some timing benefits of delayed expenditures due to weather conditions all contributed to the cost performance. Predating 12 months, Aggregate's cash gross profit grew to $10.99 per ton within a penny of our $11 to $12 goal and a ninth consecutive quarter of double-digit growth. Our area's business is performing well. Our downstream businesses are also performing well. Cash unit profitability in both asphalt and concrete expanded considerably by 19 and 77 percent respectively. Total cash gross profit improved by over 50 percent through same-store unit profitability improvement and the benefit of the prior year acquisitions. We delivered a strong start to the year, and we're focused on carrying that momentum forward as we navigate increasing macroeconomic volatility driven by the uncertainty in trade policy and unclear trajectory of interest rates. We believe that private demand will continue to face challenges this year, while public demand remains a healthy offset. Affordability issues and elevated interest rates persist as headwinds in residential construction activity. Single-family starts and permits have been declining recently, and multifamily activity remains weak as anticipated. However, overall single-family inventory levels, particularly in Vulcan states, are below average historic levels, and mortgage performance measures do not point to distress in housing markets. Demographics in Vulcan markets support a consistent need for additional housing, so we continue to believe that the timing of additional interest rate reductions and overall improvement in affordability will dictate when residential construction activity returns to growth. While the trends in private non-residential demand vary across categories, the interest rate environment and macroeconomic uncertainty seem to be delaying the timing of recovery and starts. Importantly, warehouse activity, the largest category in private non-residential construction, appears to be stabilizing after multiple years of declines, and data center activity in our markets continues to accelerate. On the public side, IJ-related spending remains a catalyst, with two-thirds of the highway dollars yet to be spent continued steady demand growth. Trading 12-month contract rewards in Vulcan states continue to outpace other markets. Capital plans in nine of our top 10 states are up, and voters passed $45 billion of transportation spending ballot initiatives in the November election cycle in 12 of our key states. And as I said, public demand is healthy and remains an important offset to private demand challenges in 2025. Our teams are closely monitoring the local market conditions and are well positioned to respond to an ever-evolving environment by controlling what we can control, that is, how we perform on the commercial and operational sides of our business. By staying focused on our disciplines, I am confident in our ability to execute. We continue to expect to deliver between $2.35 and $2.55 billion of adjusted EBITDA in 2025. Now I'll turn the call over to Mary Andrews for some additional commentary on our first quarter. Mary Andrews?