Vulcan Materials CO Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: Delivered $550M of adjusted EBITDA in Q4, 16% improvement y-o-y, and adjusted EBITDA margin improved for 8th consecutive quarter. Deployed over $2B towards value-creating acquisitions, expanding presence into new growth areas.
• 2025 Outlook: Focus on execution, controlling what can be controlled. Expect adjusted EBITDA between $2.35-$2.55B in 2025. Pricing environment healthy, with freight-adjusted AGUS price growth 5-7% (net of acquisition mix impact). Aggregate unit profitability expected to expand double-digit y-o-y. Public construction activity growth to offset private activity contraction. Warehouse and data center starts encouraging.
• Balance Sheet and Capital Allocation: In 2024, deployed ~$2.3B towards acquisitions, reinvested $638M in existing franchise and greenfield efforts, returned $313M to shareholders. Net debt to adjusted EBITDA leverage at 2.3 times at year-end. Redeemed 2026 note at par and issued $2B of notes to fund 2024 acquisitions.

Segment Performance

• Aggregated Segment: In Q4, cash gross profit per ton expanded 16% to $11.50. Freight-adjusted price improved 11% for the quarter. Shipments were 3% lower than prior year, but growing public shipments and strong demand in storm-impacted areas offset private construction headwinds. Freight-adjusted unit cash cost of sales increased 5% vs prior year. For 2025, expects freight-adjusted aggregates unit cash cost to increase low to mid-single digits, aggregate shipments to increase 3-5%, and freight-adjusted AGUS price to grow 5-7% (including ~100 basis point negative mix impact from recent acquisitions). Aggregates cash gross profit per ton grew 12% to $10.61 in 2024, with SAG expenses 2% lower than prior year and SAG expenses as % of revenue at 7.2%.

Guidance

• 2025 Adjusted EBITDA: Expect between $2.35 and $2.55 billion.
• Pricing: Freight-adjusted AGUS price to grow 5-7% in 2025, net of ~100 basis point negative mix impact from recent acquisitions.
• Shipments: Aggregate shipments expected to increase 3-5% compared to 2024.
• Costs: Freight-adjusted aggregates unit cash cost expected to increase low to mid-single digits in 2025.

Risks

• Weather Impact: Seasonal weather conditions can affect shipments and operational efficiency.
• Tariffs and Policy: Uncertainty around tariffs and policy decisions could potentially impact business, though management sees little direct impact on public demand and confident in navigating challenges.
• Interest Rates: Affordability issues and elevated interest rates remain headwinds for residential construction activity.

Question and Answer

Q: On aggregates pricing, shift in timing from January to April and cadence of pricing this year.

A: Tom Hill states Q4 2024 pricing up 11% carries momentum into 2025. January price increases support the 5-7% guide, with timing of price increases similar to last year, expected to be consistent quarter to quarter within the range, considering mix impact.

Q: Volume guidance and cadence of organic trend in first half vs second half of 2025.

A: Tom Hill mentions growing public construction offsetting challenged private. Easiest comp is Q3 2024. January-February had slow start due to cold/wet weather, but back half likely loaded with comps and help from single-family and NREZ construction.

Q: Gross margins in Q4 at record level and why for 2025.

A: Tom Hill attributes Q4 gross margin record to weather not being a negative, volumes not as negative, and operating technology improving efficiencies. Expect low to mid-single-digit cost increases in 2025, continuing to enhance operating efficiencies.

Q: Impact of administrative policy and tariffs on business.

A: Tom Hill sees no impact from policy on public demand, confident in government support for infrastructure. On tariffs, sees very little direct impact, and teams confident in navigating challenges.

Q: Pricing mix drag from recent deals, how much lower ASP and how quickly to narrow gap.

A: Tom Hill states recent deals have lower ASP, but already started work to narrow gap. Successful January price increases in those markets, expect to get back to average quickly.

Q: M&A landscape in 2025 and update on Mexico Calico quarry restitution.

A: Tom Hill mentions healthy M&A pipeline, working on several projects. On Mexico, still waiting on USMCA panel decision, feel good about case, anticipating decision this year.

Q: Midyear price increases, impact on 2024 midyears to 2025.

A: Tom Hill says midyear increases definitely had impact, help with notice to customers for January 1 price increases, some impact on amplitude and timing, but helps both.