Vulcan Materials Company Q3 FY2025 earnings call

• Solid execution across segments led to gross margin and unit profitability expansion in each segment, with adjusted EBITDA margin expanding 310 basis points. Adjusted EBITDA of $735 million improved 27% compared to the prior year.
• Aggregate shipments increased 12% in the quarter, with year-to-date shipments up 3%. Aggregates cash gross profit per ton grew 9% in the quarter through commercial and operational execution.
• Prior year acquisitions and a higher percentage of base shipments contributed to 150 basis points of mix headwinds in aggregate freight adjusted selling price, but mix-adjusted pricing improved 5% in the quarter and 7% year-to-date.
• Vulcan Way of Operating efforts benefited cost performance, with aggregates freight-adjusted unit cash cost of sales 2% lower than the prior year in the third quarter.
• Discussed demand trends: strong public construction activity, private nonres construction activity improving, residential demand weak with single-family housing starts and permits decelerating, but multifamily residential showing varied growth across geographies. Data center activity robust with significant square feet under construction and proposed.
• Completed disposition of asphalt and construction services assets in early October, with proceeds to be redeployed into attractive growth opportunities.
• Free cash flow increased 31% to over $1 billion over the last 12 months, conversion at 94%. Deployed $442 million toward maintenance and growth capital expenditures year-to-date and plan to spend ~$700 million for the full year.

In the third quarter, aggregates were a key segment. Aggregates cash gross profit per ton grew 9% in the quarter. Adjusted EBITDA was $735 million, which improved 27% compared to the prior year. Aggregate shipments increased 12% in the quarter, with year-to-date shipments up 3%. There is no specific revenue contribution % mentioned for aggregates separately, but aggregates were a central focus of the segment performance discussion.

• Anticipate full year shipments to increase approximately 3%, yielding full year adjusted EBITDA of $2.35 billion to $2.45 billion, a 17% increase over the prior year at midpoint.
• Expect organic shipments to return to growth in 2026 and improve modestly year-over-year.
• Anticipate mid-single-digit pricing improvement in 2026.
• Maintain focus on efficiency gains and cost discipline through Vulcan Way of Operating efforts to continue delivering expansion in aggregate cash gross profit per ton that exceeds historical averages.

Q: Trey Grooms asked Ronnie Pruitt to highlight his top priorities as he takes the reins and transitions into his new position.

A: Ronnie Pruitt said he will continue to build on the culture Tom Hill has grown, with safety as the foundation and people owning and driving results. The strategic approach will focus on enhancing the core through Vulcan Way of Operating and Vulcan Way of Selling, and strategically expand reach through disciplined aggregate-centric acquisitions and greenfield initiatives.

Q: Tyler Brown asked about trends into Q4, driving towards the low end of the full year guide, and details on 2026's modest improvement and big end markets.

A: James Hill said Q3 volumes were boosted by pent-up demand, easy comps, strong public demand, and improving nonresidential demand. Q4 has tough comps due to good weather last year. Ronnie Pruitt added single-family will continue to be challenging until affordability issues are resolved, public is strong with improved funding, and private non-res starts have been positive in markets for the previous 6 months.

Q: Garik Shmois asked about pricing growth in the quarter, confidence in the outlook in 2026, and details on pricing in 2026.

A: James Hill said 5% growth in the quarter had 150 basis points of mix, acquisitions were a drag on prices but pricing in those markets continues to improve as planned. Ronnie Pruitt said improving demand in public and private nonres will support 2026 pricing, conversations about fixed plant price increases in January are going well, and trailing 3-month backlog prices are showing acceleration.

Q: Andrew F. Maser asked about the 2% decrease in unit cost in the quarter, breakdown of drivers, and preliminary thoughts on inflation and cost into 2026.

A: James Hill said it's mostly due to Vulcan Way of Operating, with improved operating efficiencies though still early innings. Ronnie Pruitt said safety performance is good and continuing to improve, investment in technology is working, and there's still improvement ahead with confidence in people, processes, disciplines, and technology.

Q: Asher Sohnen asked about key geographies and what's being seen there.

A: James Hill said it's pretty widespread with no geographies down at this point, Southeast is healthy with higher unit margins, nonres side has turned with data centers and strong public demand growth continuing to accelerate for the next 2 or 3 years, though single-family is still a drag.

Q: Kathryn Thompson asked about thinking about portfolio shaping, including product type and geographic focus.

A: Ronnie Pruitt said he's pleased with the downstream business, evaluating concrete business and divestiture decisions based on private side challenges in California and acquirers finding more value, and strategy remains aggregate-led with complementing aggregate and concrete expertise.

Q: Jesse Barone asked about M&A pipeline, dry powder, and targeted geographies.

A: Ronnie Pruitt said they're still in process with greenfields taking time, M&A opportunities are aggregate-led, timing driven by seller readiness and market conditions, and M&A has been quiet this year but they're still active with a strong list of targets.

Q: Keith Hughes asked about whether 2026 will see similar cash gross profit per ton numbers to the last couple of years and what could take it higher.

A: Ronnie Pruitt said demand recovery will help the pricing story, and Vulcan Way of Operating and Selling support cost and commercial sides, with cash gross profit likely to continue with cost and commercial efforts playing a role and demand helping the pricing side.

Q: Brent Thielman asked about mid-single-digit price growth in 2026, consistency with annual price increases, and volume from acquisitions.

A: Ronnie Pruitt said 5.5% to mid-single digit is a combination of backlog bidding work (60%) and fixed plant announced letters (40%), with conversations going well and backlog bookings prices accelerating. Acquired volumes are about 10 million tons from Wake and Superior last year, and the gap from acquisitions will continue to be made up over the next 12 months.

Q: Steven Fisher asked about pricing expectation for full year 2025 and volumes, and dynamics in 2026.

A: James Hill said Q4 pricing is likely very similar to Q3 with big base volumes. Ronnie Pruitt added single-family is still a headwind but public and private nonres have opportunities, and confidence is good in backlogs and volume growth.

Q: Angel Castillo Malpica asked about quoting activity, projects pipeline acceleration, and private sector growth outside data centers.

A: James Hill said projects are no longer being postponed, backlogs are likely to be shipped with confidence, and nonresidential continues to grow. Ronnie Pruitt said private nonres starts in Vulcan-served markets are up, subsegments like office, data, stores, warehouses, institutional are all up, and quoting activity and bidding are on the same trajectory with data centers being a tailwind but other sectors also giving confidence.

Q: Joseph Nolan asked about breaking down public infrastructure contract awards in key markets and fiscal year 2026 DOT budgets.

A: James Hill said public side is good and getting better, top 10 DOTs are all up for fiscal year 2026, trailing 12-month highway starts are up 17% in Vulcan states and 5% in other states, with only 40% of IIJA funds spent, so long tail ahead. Ronnie Pruitt added public will continue to remain strong with reauthorization expectations and infrastructure needs continuing.

Q: Adrian Huerta asked about the actions taken on cost per ton and how many more quarters of good cost performance can be expected.

A: Ronnie Pruitt said they're still in the early innings of Vulcan Way of Operating, with technology investment complete in top 127 plants (over 70% of production), focusing on human behavioral side with training, and anticipation of continued strong performance with more room for improvement, expecting 2026 to have more momentum than 2025.

Q: Ivan Yi asked about why aggregate pricing year-over-year growth decelerated in recent quarters and guidance for 2026.

A: James Hill said factors include acquisitions headwinds, lower volumes in the Southeast due to weather earlier, but continued acceleration in public and private nonres is helping backlog pricing, which is a good foreshadowing for 2026.

Q: Michael Dudas asked about how Vulcan will look past 2026 and sustainability of growth, pricing, and profit per ton growth.

A: Ronnie Pruitt said Vulcan will continue to be led by enhancing the core through Vulcan Way of Operating and Selling, staying aggregate focused, with growth opportunities remaining aggregate-led and the future looking similar to current execution with continued focus on aggregates.