NYSE:SUM Summit Materials Q3 2023 Earnings Report $52.54 +0.09 (+0.17%) Closing price 02/10/2025Extended Trading$52.54 0.00 (0.00%) As of 02/10/2025 04:33 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Summit Materials EPS ResultsActual EPS$0.81Consensus EPS $0.75Beat/MissBeat by +$0.06One Year Ago EPS$0.70Summit Materials Revenue ResultsActual Revenue$742.00 millionExpected Revenue$735.61 millionBeat/MissBeat by +$6.39 millionYoY Revenue Growth+8.20%Summit Materials Announcement DetailsQuarterQ3 2023Date11/1/2023TimeAfter Market ClosesConference Call DateThursday, November 2, 2023Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Summit Materials Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Good morning. My name is Jeremy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Summit Materials Inc. 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Operator00:00:12After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Andy Larkin, Vice President of Investor Relations. Speaker 100:00:33Hello, and welcome to the Summit Materials' 3rd quarter 2023 results conference call. Yesterday afternoon, we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation and a supplemental workbook highlighting key financial and operating data. All these materials can be found on our Investor Relations website. Management's commentary and responses questions on today's call may include forward looking statements, which by their nature are uncertain and outside of Summit Materials' control. Speaker 100:01:00Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. Speaker 200:01:07For discussion with some of the Speaker 100:01:08factors that could cause actual results to differ, please see the Risk Factors section of Summit Materials' latest Annual Report on Form 10 ks as updated from time to time in our subsequent filings with the SEC. You can find reconciliations of historical non GAAP financial measures discussed in today's call in our press release. Today, I'm pleased to be joined by Ann Noonan, Summit's CEO and Scott Anderson, our Chief Financial Officer. Ann will begin with opening commentary, Scott will then review our financial performance, and then Ann will conclude our prepared remarks with our view on the path forward. After that, we will open the line for questions. Speaker 100:01:42With respect for other analysts and the time we have allotted, please limit yourself to one question and then return to the queue so we can accommodate as many analysts as possible in the time we have available. I'll now turn the call over to Ann. Speaker 300:01:53Thanks, Andy, and thanks to everyone joining today's call. We've certainly been very diligent in progressing multiple work Since our last call in August. Alongside all of our undertakings, our Summit family hasn't lost sight of our top obligation To create and foster a safe working environment for our employees and our communities. Each of us has a duty and commitment to put safety first in service of the common good. And although our journey is ongoing, we are taking steps each day to build a 0 harm culture and a safer Summit Materials. Speaker 300:02:22This quarter, before Scott takes you through the financials, I'd like to provide some high level commentary on our Q3 financial performance, our 2023 outlook as well as provide a progress report on other relevant topics this quarter. First, we continue to execute our Elevate Summit strategy, Making significant progress against our financial priorities. In the Q3, we generated record levels of net revenue, cash gross profit and adjusted EBITDA. Furthermore, leverage remains near all time lows, ROIC at all time highs. And this quarter, we set an Elevate Summit high watermark our trailing 12 month EBITDA margin at 24%. Speaker 300:03:02Critical to our overall margin trajectory is the contribution from our materials lines of business. As expected, Aggregates margins stepped up materially this quarter. Adjusted cash gross profit margins increased 5.70 basis points year on year in Q3 and is now positive on a year to date basis. Likewise, cement EBITDA margins were up 2 60 basis points in Q3 to 41.5 percent. In both businesses, we are moving towards our North Star objectives, With aggregates 170 basis points closer to its cash gross profit margin NorthStar objective of 60% And Cement, 250 basis points closer to its NorthStar EBITDA margin objective of 40%. Speaker 300:03:46In a moment, Scott will unpack the drivers for you, but essentially, Commercial and operational execution is fueling greater profitability, an important component of our value creation model. 2nd, regarding our 2023 outlook. Today, we are increasing the low end of our full year 2023 EBITDA range to 560,000,000 thereby upgrading the midpoint of our guide to $565,000,000 This puts us on track to deliver mid teens EBITDA growth year on year And EBITDA margins of between 23.5 percent 24% in 2023. Our confidence to increase our forecast yet again is underpinned by our year to date performance and the collective execution of our Summit teams. 3rd, we continue to pursue a complete retirement of our TRA liability And collapse our Upsea structure, which when completed will significantly reduce corporate complexity and streamline our organizational structure. Speaker 300:04:43This may take some time to fully complete, but consistent with the Blackstone portion of the agreement, we intend to follow a disciplined approach that is value created for our shareholders. Lastly, we remain on track to close the Argos transaction before the end of Q1 of 2024. From a process standpoint, we have filed our preliminary Cleared HSR review and are positioned to file our definitive proxy later this month. At that point, we'll announce the date of our shareholder vote. With Bridge Financing in place, we have the flexibility to opportunistically undertake financing when markets are most advantageous for us to do so. Speaker 300:05:21In the interim, we are developing detailed integration plans, designing a talent rich, highly effective organization And positioning the enterprise to immediately start to deliver on our synergy commitments upon flows. When complete, the combination will accelerate our materials led strategy, Enhance our scale and reach in Cement and bolster our cash flow generation to fuel further aggregates oriented organic and inorganic growth opportunities. Now before turning the floor to Scott, I'd like to recognize and thank my Summit colleagues across our footprint who have remained laser focused on their 2023 commitments. Thanks to them, we are on course to achieve record financial results this year. They have a lot to be proud of, and I applaud them on their efforts and diligence this year. Speaker 300:06:05With that, I'll turn it over to Scott to walk you through the quarter. Speaker 400:06:08Thanks, Ann. Turning to Slide 6. I'll pick up where Ann left off by adding specifics To our Elevate Summit scorecard. For leverage, we remain at 2.3x, flat versus prior quarter and well below our long standing commitment to be below 3x. This is especially impressive considering we used $122,900,000 of cash to acquire, Among others, all of Blackstone's rights and interest in the TRA were approximately 80% of the total TRA liability at a substantial discount to its carrying value. Speaker 400:06:41For ROIC, we again saw progress, up 20 basis points sequentially to 10.3% And moving further ahead of our 10% minimum. And as Anne mentioned, our last 12 month EBITDA margin is up to 24%, driven not only by a notable acceleration in aggregates margin, but by margin growth across all lines of business in Q3. 24% represents an Elevate Summit record and positions us to deliver on our stated goal of 23.5% to 24% for the full year. Adding color to that margin picture, on Slide 7, you'll see our Q3 financial highlights. Net revenue increased 8.2% driven by ongoing pricing momentum across each of our lines of business, fueled by midyear price increases in aggregates and cement As well as pass through pricing for our downstream businesses, our commercial teams are effectively pricing to what our local markets will bear. Speaker 400:07:37Pricing growth in combination with sound operational execution drove adjusted cash gross profit and adjusted EBITDA growth of 15.5% and 12.8%, respectively, in the quarter. This came despite volumes that have been negatively impacted by the residential air pocket and unfavorable weather conditions in certain markets. Segment performance on Slide 8 shows each business segment grew both EBITDA dollars And EBITDA margin in the quarter. Our West segment registered strong pricing growth across all lines of business and continues to benefit from public Infrastructure demand in our 2 largest asphalt markets, North Texas and the Intermountain West. The 3rd quarter was the 1st full quarter of our newly entered Phoenix market, And so far, the business has been operating better than we originally anticipated. Speaker 400:08:27The East segment, which is nearly a pure play aggregates business, Grew EBITDA 13.5 percent in the quarter and is up 17.8% in 2023 as Greater Greenfield contributions, Together with strong pricing and operational improvements is generating solid sustainable growth. Cement achieved positive top line growth in the quarter Despite lower volumes, as wet conditions in northern markets, particularly Minnesota and Iowa, combined with reduced import volume, led to lower volumes relative to Q3 2022. That said, mid year price execution remained strong as average selling price increased to $155.79 up nearly $6.70 per ton from Q2, reflecting solid price realization and driven by healthy supply demand Dynamics along our river markets. Overall, 3rd quarter adjusted EBITDA increased 8.1% and EBITDA margin improved 2 60 basis points year on year. Moving now to pricing on Slide 9. Speaker 400:09:28And I'd start by simply reiterating our general view that demand conditions And persistent cost inflation have supported a constructive pricing environment in 2023. And as Anne will talk about, We expect those conditions to carry into 2024. 3rd quarter average selling price for aggs increased 14.4% year over year and 4.6% sequentially, primarily reflecting the mid single digit mid year price increases implemented across our footprint. We saw solid traction throughout with strongest gains in Houston, Missouri, Northern Kansas and Utah. In cement, our $10 per ton price increase effective July 1 saw nearly 70% realization with the strongest reflection in our northern cement markets along the river as expected. Speaker 400:10:16For our upstream businesses, Given progress so far this year, we are very confident that pricing trends will endure and will achieve at least low teens pricing growth in ags and mid teens growth in cement on a full year basis. Downstream, high cement input costs continue to feed higher ready mix pricing And the demand environment for asphalt together with higher liquid asphalt cost has and will continue to drive pricing growth moving forward. On the volume side, Slide 10 bridges from organic to reported by line of business. Aggregates volumes are tracking towards our full year Expectations with year to date growth in Kansas and Virginia more than offset by lower volumes in our more residentially exposed markets, specifically Salt Lake City and Houston as well as British Columbia. As mentioned, cement volumes in the quarter were negatively impacted by a combination of wet weather in our northern markets And reduced import volume. Speaker 400:11:13In fact, lower imports accounted for roughly half of the overall volume decrease in the quarter. Ready Mix volumes continue to be impacted by challenging residential and light nonresidential conditions, although as comparisons ease in Q4, We would expect volumes to begin to stabilize. Furthermore, as we add the high growth all season Phoenix market to the portfolio, Reported ready mix volume should continue to grow as we close the year. Finally, on asphalt, we saw public demand continue to drive positive organic volume growth with especially good performance in the Intermountain West and British Columbia. Adjusted gross profit margin is shown on Slide 11, Clearly demonstrating improved profitability across the portfolio on both a quarter to date and year to date basis, each line of business is extending a positive price cost relationship and effectively countering cost inflation that has not materially relented. Speaker 400:12:08If you recall, we had previously discussed Cost inflation moderating in the second half and generally fall in that mid single digit range. Thus far through October, we have not seen that occur. So we have factored in recalibrated cost expectations into our Q4 outlook. One especially notable area is for our cement business where higher cost to fuel our I'll round out my commentary on Slide 12 by briefly noting adjusted diluted net income increased 15.7% in the quarter and is up more than 31% in 2023, primarily reflecting strong execution and overall operating performance during the year that more than offset the higher interest expense. And finally, as of Q3, for the purposes of calculating adjusted diluted earnings per share, Please use a share count of $120,200,000 which includes 118,900,000 Class A shares and 1,300,000 LP units. Speaker 400:13:20With that, I'll turn it back to Ann for our latest outlook. Speaker 300:13:24Thanks, Scott. The way I'd like to close is to frame up our 2023 expectations, then at a high level, discuss our preliminary view on 2024 and wrap up by reiterating our view of the Argos transaction. Slide 14 has our 2023 outlook. By increasing the low end of our EBITDA range, we are increasing the midpoint to $565,000,000 This implies solid mid teens growth on a full year basis, But more moderate growth expectations for Q4. The Q4 profile mainly reflects 3 factors. Speaker 300:13:561st Is our typically restrained stance regarding unknown weather conditions to close the year. If weather cooperates and the construction season is extended, we could exceed expectations. But as a managerial team, we don't make a habit of predicting Q4 weather conditions. To give you a sense of our weather sensitivity, In Salt Lake City, one of our highest margin markets, each extra day of favorable weather could generate $1,000,000 or more in EBITDA. The second factor affecting Q4 are low river levels along the Mississippi. Speaker 300:14:26Our latest view incorporates roughly 2,000,000 dollars of increased operational cost to manage through these river levels. As you heard Scott say earlier, we have an experienced team exploring every possible option to meet our customer commitments, and we plan to deliver the quality and service our customers expect. That said, the reality is that we may have to incur higher costs Associated with light loading barges and dredging certain parts of the river. Right now, while we have an advantaged position relative to competition, Our primary concern is around our Memphis terminal, and we thought it appropriate to incorporate this risk into our year to go forecast. And finally, variable cost inflation has not materially eased. Speaker 300:15:05So we are embedding the assumption that cost headwinds persist as we close the year. For CapEx, we're maintaining our midpoint expectations at $250,000,000 with roughly $65,000,000 to $70,000,000 of that occurring in Q4. Our modeling items include G and A at approximately $210,000,000 interest expense at roughly $110,000,000 And DD and A at $220,000,000 for 2023. Now turning to a preliminary look at 2024 on Slide 15. Our teams are in the late stages of formulating their bottoms up 2024 budget. Speaker 300:15:40And as we fine tune our expectations, what has emerged is a list of knowns and a list of unknowns. Let's start first with what we know and that is 2024 is setting up to be another strong year for pricing. For cement, we are already out with our January 1 price increase of $15 per tonne, which we believe adequately reflects a high input cost environment, including significantly higher barge rates as well as the unique value we bring to the marketplace. For aggregates, we will implement fresh pricing on January 1 across all markets With exact increases dependent on demand and competitive conditions in each of our local markets. And importantly, we firmly believe that we have shifted to a more dynamic pricing model, with customers now expecting at least 2 price increases a year. Speaker 300:16:26This multiple pricing approach allows for us to more quickly flow through Market and cost intelligence via value pricing. For 2024 and similar to 2023, We expect that our commercial execution will outpace anticipated cost inflation and create that positive price net of variable cost relationship we're aiming for. Additionally and unique to Summit, our flexible energy model along with operational excellence initiatives should provide material offsets to cost inflation, providing further headroom between price and cost next year. For 2024 end market demand, the picture is still in flux With strong visibility in the public end markets and more mixed indicators in private construction. For public, which comprises 35% to 40% of our revenue, Our leading indicators for future activity are flashing green. Speaker 300:17:16Fiscal 2024 DOT budgets for our top 5 public states are up 14%. Lettings on a trailing 12 month basis are up nearly 26%, more than 7 points ahead of the national average. And our public backlogs in key markets are nearly double prior year as demand is robust and accelerating for infrastructure projects. For residential, knowing its sensitivity to interest rates, we remain cautiously optimistic that single family in 2024 will at a minimum stabilize, if not begin to recover next year. What we're contemplating is how the higher for longer Fed approach We'll ripple through residential activity. Speaker 300:17:57Positive lock in impacts will mitigate some of the affordability concerns, but it's too early to say to what extent. Nevertheless, we remain bullish on residential in the long run and especially where we over index, namely Salt Lake City, Houston and now Phoenix. Bottom line is that the desire for homeownership is strong and durable, while supply remains willfully constrained. We are big believers that we'll be a Primary beneficiary as that equation inevitably corrects itself in the long run. Lastly, on non residential, we currently see the divergent trends from 2023 carrying into 2024. Speaker 300:18:32Specifically, we expect light nonresidential to remain relatively dormant As knock on effects from the residential air pocket will impact the non res community build out that lags residential trends. On the other hand, we see sustainable growth in certain heavy nonresidential verticals. On shoring of manufacturing is a durable trend Underpinned by public funding and private companies looking to bolster their domestic supply chains. What's especially encouraging is that these large scale projects have a multiplier effect. They create high paying jobs that in turn lead to single family home construction and the commercial developments to support these communities. Speaker 300:19:09That said, not all markets will benefit equally. For us, we have advantaged exposure to the battery belt in the Southeast, The country's semiconductor hub in Phoenix and green energy projects in America's heartland and along the Mississippi River. As we sharpen our pencils for next year, we will add specificity to our nonresidential view. But for now, our working view is that directionally, we should witness Similar trends from 2023 extend into 2024. Let me sum up our 2024 perspective by stepping back. Speaker 300:19:40We think 2024 is shaping up to be a very positive year for Summit Materials. We will have to navigate dynamic market conditions, But on balance, we firmly believe we will have several factors working in our favor: a stronger, more materials led portfolio, Robust pricing momentum, a full set of self help margin opportunities and a balance sheet capable of making aggregates oriented portfolio moves. As is customary, we'll be out with a more granular view in February. But as you heard us say last month, we think our business is Certainly capable of achieving double digit EBITDA growth next year. Central to our growth ambitions for next year and the years that follow is our integration with Argos USA. Speaker 300:20:22Together with Argos, our enterprise will be able to utilize our combined platforms and capabilities to capitalize on the tremendous growth opportunities in Cement and our high growth markets. You've heard me say before, but it's worth repeating. We have the proven experience and expertise to deliver profitable growth through rapid synergy realization. We are confident that our well run and transferable playbook in Cement and Ready Mix will deliver at least $100,000,000 in synergies as part of this combination. And critically, our growth strategy in Cement and our more cash generative portfolio perfectly complements and accelerates our ongoing intentions for aggregates growth Through organic and inorganic avenues. Speaker 300:21:02On Slide 16, you'll see our top priorities as we move through the close process. Consistent with our commitment to transparency and everything we do, you can expect us to report against these four priorities as we integrate with Argos USA. First off, we will continue to invest in Aggregates growth, focus on operational excellence to expand Ag's margins and profitably grow that piece of the portfolio. We can do that while safely integrating the companies with agility and a focus on people, culture and change management. After closing, we'll immediately start to deliver on our commitment of greater than $100,000,000 in operational synergies, while at the same time swiftly refining and executing on upside Commercial synergies. Speaker 300:21:45And finally, our ongoing priority is to optimize the portfolio while strengthening the balance sheet. These four priorities will inform our decisions, guide our actions, so I'm confident and optimistic our team can execute on them moving Summit forward and creating industry leading value for our shareholders. With that, I'll ask the operator to open the line for questions. Operator00:22:07Perfect. Thank you so much. All right. Our first question comes from the line of Stanley Elliott from Stifel. Stanley, please go ahead. Speaker 500:22:23Hey, good morning, everyone. Thank you all for the question. Curious if you guys could kind of hash out a little bit more on the pricing outlook. I mean, Certainly a lot of momentum here, finishing strong to the year. How should we think about pricing into next year with some of the other Players in the space haven't talked about kind of double digit ish sort of numbers. Speaker 300:22:46Yes. Thanks for the question, Stanley. So let's kind of deal with aggregates First, so we'll exit the year here in 2023 at low teens, if not better, As we go out and that's really driven by outstanding performance in Texas, Utah and Missouri. And so we're now out with our January 1st Price increases across all of our aggregates markets. And basically those will be value priced using all the tools that we've put in place through our commercial excellence efforts It's really optimized price in each of those markets and you can expect them to be in the high single digit to double digit and we'll refine that further in February. Speaker 300:23:24The other thing I would say about pricing in Ags, I believe we're now in a standard industry mode of 2 price increases per year. And so you will expect to see that momentum. So I've got a lot Confidence in pricing both from the carryover, which was very strong in our mid year pricing and then with our pricing that were out in January. So you can expect aggregates that price net of cost to expand further. We're very positive on that going into 2024. Speaker 300:23:49For cement, our pricing again, we did very strong pricing in 2023. We'll exit the year there in mid teens. We're out for our January 1 price increases at $15 a ton. Our mid year price increases come in at about 70% realization. So I would expect that same kind of realization along our river markets as we go through that. Speaker 300:24:10So overall, my commentary had very strong pricing continuing in 2024 And you can see the margin profile of both our cement and aggregates businesses doing that. And then the downstream pricing has been very strong. You saw our margins even with Some restrained volumes coming into our ready mix. Area saw us continue to expand margins through our pricing analysis. So really good execution by the team, Stanley. Speaker 500:24:34Great. Thanks so much and best of luck. Operator00:24:38All right. Thank you. And our next question comes from the line of Trey Grooms from Stephens. Trey, please go ahead. Speaker 600:24:45Hey, good morning and thanks for taking my question. First off, congrats on the nice work on the aggregates margins and the acceleration there. And can you talk About some of the drivers there that are kind of pushing those margins up? And do you think that or do you expect, I guess just to continue into Q4 and maybe any early thoughts on the margin trajectory there in 3 there in aggregates looking into next year. I think you mentioned a favorable price cost outlook, but any more color you could give us there? Speaker 600:25:21Thank you. Speaker 300:25:23Yes. So thanks, Trey. So we were very encouraged by our aggregates profitability this quarter and the progress that the team has made. So on a year on year basis, expansion of 5.70 basis points was definitely very significant for us. On a unit profitability basis, we were up 27% And sequentially 13.6 percent. Speaker 300:25:45And most importantly, the number that you hear me talk about a lot is that best in class Target of our North Star of getting to 60% cash gross profit margin. This quarter we started bumping up on a trailing 12 month basis to that 50%. And that's purely by execution and it's the things we've talked about before, trade pricing that I just explained from Wynn Stanley, we're very positive on the momentum we have Coming out of 'twenty three and going into 'twenty four, so that price net of cost, expect that to continue to expand. But the second area that I'm Extremely encouraged by our operational excellence that has started to take hold. And this is where we have a unique opportunity and some self help opportunities at Summit. Speaker 300:26:27And we saw year to date, our continuous improvement projects in ags has allowed us to add 9,000,000 To the bottom line and we have a pipeline that we've gone out and done continuous improvement events, of course about third of our quarries right now and that's about a 25,000,000 EBITDA pipeline and what you can expect is in 2024, we'll even supercharge that. We're adding resources in the form of project management, Lean And so we're continuing to stay extremely well focused on that as well. And then the third point of drivers that I point to is our flexible energy model. Diesel, we have a 50 we're actually hedged 49% right now. Our pricing is at $2.75 for that and on a full year basis for 2023, we're over $3.17 So those three factors of price, operational excellence and our flexible fuel model should really allow us to continue to fuel our ag's profitability into 2024. Speaker 200:27:27Wonderful. Thanks for the color, Ian. Speaker 300:27:30Thanks, Trey. Operator00:27:32All right. Our next question comes from the line of Garik Shmooh, Sark, please go ahead. Speaker 700:27:39Hey, thank you. I wanted Speaker 200:27:40to follow-up just on your comment around growing the aggregates Business even as you move forward with closing on the Argos USA deal. Is The opportunity set consistent with and just your prior comment around some of these internal initiatives, or Are there opportunities on the M and A side to accelerate growth in aggregates? And maybe just Speak to your ability to make additional acquisitions while integrating Argos once you get to that point. Speaker 300:28:21Yes. So thanks, Garik. So you're absolutely right on target there because we are intending to grow both organically and inorganically. And to your point on organic growth, that's very much heavily driven, 1st of all, by our operational excellence and growing that bottom line and also having additional price growth. But also I put greenfields in that category. Speaker 300:28:42We continue to have additional greenfields coming online and they're very margin accretive also. So that's kind of our organic growth side. We have a very rich pipeline of inorganic growth potential. And we've talked before about The recent acquisition we did in Phoenix wanting to build out that aggregates platform, our team is very active out there right now, trying to build out aggregates around that Strong ready mix position that we have. And then Florida is the same. Speaker 300:29:07Our team are out there scouring every opportunity for greenfields and for M and A. We feel with the higher cash flow generation from a bigger cement profile, we're going to actually be able to accelerate our number 6 position in aggregate. So We are very positive about this and feel that the Argos transaction will only help us accelerate that position. Operator00:29:33All right. Thank you. Our next question comes from the line of Phil Ngi. Phil, please go ahead. Speaker 800:29:40Hey, good morning. This is actually Colin on for Phil. I appreciate the high level commentary around the different end markets, but can you put some number ranges Your preliminary view for volumes in 2024 with your peers talking about aggregates volumes being flat to down low single digits next year. I guess, is this something also achievable by Summit? Or do you anticipate some variance either to the upside or the downside? Speaker 300:30:02Yes. So Colin, thanks for the question. Let me start by saying we are refining our numbers. So we'll come out with a much more clear guide to you in February as we always do. But I'll kind of share with you where our mind is right now around volumes. Speaker 300:30:14So let's start with the one with the most visibility, which is in the public side. This year, we saw mid single digit growth, solid mid single digit growth. That pipeline is only increasing. So public, we see the IIJA dollars flowing through. We see that in our major Texas and Kansas states, and we're actually seeing that happen. Speaker 300:30:34So Definite proof that that has started and will accelerate only into 2024. The other thing we look at is our contract highway and paving awards in public, which are up 27% Year on year, which is 7 percentage points above the national average. So that's all starting to play through. And then if we look at our state DOT budgets for 2024, they're up 14% for our top 5 states or $4,500,000,000 like Texas alone is 24 percent to $18,500,000,000 Utah is up $2,900,000 Kansas is up 2.3 Missouri around $4,100,000,000 and then Virginia is at $8,100,000 So very strong pipeline. The whole point of giving you that data is to prove that. Speaker 300:31:18And then our backlogs, which is really what we have in hand. And I always use Texas as our bellwether state on how we're doing on backlogs. They're nearly double What we had last year and they're building. So bottom line for all that data I gave you was public is very strong. We continue to see that into 2024. Speaker 300:31:36Let's switch a little bit to residential. So residential, we believe we're cautiously optimistic it will stabilize if not recover, It's a little different by our end markets. So in Houston, we're seeing that recovery come back faster. You can see that in the form of single family permits are improving, that Trend decline is improving and actually see if you look at our forecast of single family permits been turning positive in 2024. We actually see that in our business. Speaker 300:32:03And the Texas market is held up by a very strong economy, both from an energy Household formation and population growth. So we expect the Houston market to continue to recover faster. Salt Lake City, a little bit slower. There, the larger builders are faring better than the regional builders. But again, single family permits, the trend is improving there. Speaker 300:32:24So you could potentially see some recovery. But our Planning stance is kind of longer trough there. And then finally, our Phoenix market in residential, it's actually we're not as Over indexed on residential there were heavier commercial, which is doing extremely well. But even the residential there, the single family permit trend is improving as well. Bottom line on residential stabilized if not recovery, but the point I'd give you on residential, which I think is very important is we were down 20% this year. Speaker 300:32:53And the reason we've kept our margins up and done very well on our pricing is we're in the right markets with advantaged assets and leading positions And we're overall very bullish on residential in the long term. So we can see that being a swing factor in 'twenty four. And then let me move to non residential, which I think has Some real positives to it. Just to remind you, we've had a flat stance on that and it's played out pretty much as expected with the Heavy from onshoring and manufacturing and energy offsetting the light non residential. We've seen that play out. Speaker 300:33:25We feel we have very good advantaged positions for non residential. If you look at our Southeast markets in Carolinas And Atlanta, they're growing heavily with the EV battery factory. And then if you think about along our river markets and the Gulf Driven by a lot of the energy verticals and then Phoenix is the epicenter for semiconductor manufacturing. And actually, if you look at The funding that's come from the IRA and CHIPS Act so far, over 60% of that has gone into our top states. So we're very encouraged By that, the other thing we love about the non residential is they're very ags and cement intensive. Speaker 300:34:03And so we're getting that materials portfolio strength compound itself Over the years and then you have the multiplier effect as we look out over time of building out single family homes and further light non residential. So all that's to say is we can see a path to maybe flat growth next year. It will be really the drivers will be we're very positive on public residential, we could get that recovery that would be a driver upwards And then non residential, I would say start from a flat perspective, Colin, and then we'll update our pipeline to you, which is quite rich right now on the non Operator00:34:47The next question comes from the line of Anthony Pettinari from Citi. Anthony, please go ahead. Speaker 900:34:54Good morning. Good morning, Eric. Hey, you got good ag pricing in ags in 3Q And I think organic volumes were down 7.5%. You talked about dynamic pricing and value pricing. I'm just Wondering, are you walking away from any business? Speaker 900:35:13And if so, would that be any component of that 7.5% decline? And then maybe just an add on question. I guess your expectation is for cement pricing to outpace aggregates pricing in 2023. I'm not sure if there's Too much to read into that, if those markets are just a little bit stronger or maybe you just have more of an opportunity there from a commercial excellence perspective or if there's any color you can give there? Speaker 300:35:39Yes. So Anthony, let me address Ag's volumes and pricing in Q3, 1st of all. So obviously they were down because residential has been down. So that's a big driver of your ags being down. The other point I point to really answer your question around pricing It's in our British Columbia market. Speaker 300:35:55There we are leaders in pricing and we tend to lead and we'll lose a little bit of volume and then it'll come back. That's just the way it works every year. We saw the trend from Q2 to Q3 improve on our volumes there. So we're positively encouraged that that will turn around. That being said, price the value of our pricing way outweighed that volume decline in Q3 on aggregates. Speaker 300:36:17Cement, I think you just read into that more that we started from such a high Point in January, in cement pricing, if you recall, we had to go very high on our pricing. It was like a $17 a ton increase in January followed by a mid year 10 Dollar a tonne and that was really because as we were in cement pricing in 2023 with those really high energy costs at the beginning of the year We have very strong supply demand dynamics, but generally cost inflation was quite high. So we had very strong realization on mid year price increase of 70%. And frankly, as we go into 2024, we're going to go out with that $15 a tonne and I'd expect that same realization. So cement, the supply demand dynamics stay strong. Speaker 300:36:58Our costs are going to be higher. Again, maybe have Scott talk a little bit about our cement costs as we go into. We believe this will keep pricing up frankly in 2024, Because we have some significant increases in costs that are a little different in 2024 than 2023. So Scott, maybe you want to talk a little about that. Speaker 400:37:15Yes, yes. Let me just lay out the cost picture. As you heard in my prepared remarks, they have not relented. So Actually, I'll start with the buckets or the categories that have eased off a bit and really and that's around our hauling cost And our subcontracting costs, those have eased off a bit. But when you start looking at the rest of the costs, they have really stuck around. Speaker 400:37:39I think if you remember early in the year, we They would moderate by this time and come back down to that mid single digit range and they haven't. We're still pushing up against that High single digit even to a double digit. And when you look at labor, we're right up against that double digit. It's high single digit across all of our labor costs. And then materials that go into our downstream, those are actually in your mid teens increases year over year. Speaker 400:38:08And then the one that's really sticking with us is repair and maintenance. We have a lot of equipment, a lot of equipment intensity And the repair costs are still 12% to 15% up. So when you look at all that, we're not seeing the easing in cost yet. So we factored that into our Q4 expectations. But I do think next year they will start moderating And that will help that price cost relationship next year. Speaker 300:38:39Hopefully that answers your question, Anthony. Speaker 900:38:42No, that's super helpful. I'll turn it over. Speaker 300:38:46Thank you. Speaker 200:38:48All Operator00:38:48right. Our next question comes from the line I have Kathryn Thompson from the Thompson Research Group. Kathryn, please go ahead. Speaker 1000:38:55Hi. Thank you for taking my question today. Just looking back bigger picture as you contemplate the integration, central integration of Argos, It will be a higher CapEx spend just with greater concentration of cement in the mix. How are you planning to balance maintenance and potential catch up maintenance For Argos assets along with some of the growth initiatives that you talked about earlier in this call. And you've been in a journey of winnowing down assets that perhaps don't fit That's been the strategy of Summit. Speaker 1000:39:41Is that process mostly wrapped up? And are there any other assets That you could see, trimming to help with cash flows for anticipated increase in CapEx. Thank you. Speaker 300:39:54Yes. Thanks for the question, Catherine. I'll kind of answer the latter part of your question at a high level here and then turn to Scott for more specificity around the CapEx and catch up. So overall, I think one of the things that's important to understand that the cement assets are actually less capital intense Than aggregates assets. So we see that in our base business. Speaker 300:40:14So that's something to understand as we think about free cash flow conversion. The point of view of our growth initiatives, we feel that we'll be in a really good position because of that higher cement portfolio, better free cash flow conversion to further accelerate aggregates. To your point, Catherine, we are definitely continue to be focused on portfolio optimization. Every quarter we meet as a team and we have what we call our Tier 1 divestiture list. And that list gets we examine every single asset and business in the portfolio and if they're not going to meet our ROIC and margin profiles, they get put on the list. Speaker 300:40:45And there is more opportunity there and we are very confident in our ability to delever the balance sheet. Scott, maybe I'll turn to you on the CapEx. Speaker 400:40:52Yes. So Catherine, when you look at the pro form a combined basis on the CapEx, you'll see that we still maintain that historical about 10% On the 10% of net revenue on the CapEx. And then really that goes along for about 3 to 4 years and then you'll see it start coming back towards a traditional 8% where we'd like to be. But that 10% does give us the bandwidth. When you think about the cement business actually is less capital intensive than our Ags business. Speaker 400:41:27And so it does give us bandwidth to fit in those growth projects and those debottlenecking projects that we have On the Argos as well as our green initiatives with the alternative fuels that you'll see kind of ramp up as in the year 2 3. So we do have that. And then we'll still continue to do our greenfielding. Speaker 200:41:50As a Speaker 400:41:50matter of fact, this year we've got $10,000,000 to $15,000,000 into greenfields, we'll still have that and that's modeled in as well that we'll be continuing that on the ag side. So Overall, maintaining that 10% profile is very doable. Speaker 300:42:06The other thing I'd add, Catherine, is that we're very confident in our ability to deliver on our synergies. So we've said in our prepared comments before that over 50% of our synergies within the 1st 18 to 24 months, we feel Very doable. And that's only on the operational synergies. I'm actually really looking forward to when we close and get our commercial teams together and really supercharge those commercial Opportunities which aren't even in the $100,000,000 stat will help a lot with cash flow as well. Speaker 1000:42:35Thank you. Thank Speaker 300:42:36you. Thanks, Catherine. Operator00:42:39All right. Our next question comes from the line of David MacGregor from Longbow Research. David, please go ahead. Speaker 700:42:47Yes. Good morning, everyone. I wanted to ask you about in your deck Slide number 9. And in aggregates, you guide to low teens aggregate pricing. I guess based on the year to date numbers, this seems to imply a mid single digit increase in 4Qs. Speaker 700:43:01Am I reading that right? And if so, Can you talk a little bit about what might be coming to bear on the pricing growth? And then on the ready mix chart, I guess pricing gains in 3rd quarter decelerated Rather sharply, can you talk about how you're seeing market conditions maybe evolving in Salt Lake City and Houston? And how is the addition of Phoenix maybe Contributing to the change in ASP growth. Thanks. Speaker 300:43:25Yes. I'll let Scott will talk a little bit about the ags growth here in the Q4 impact. Speaker 400:43:31Okay. David, just on the aggs, the pricing, when you think about Q4, the comp does get harder. If you remember last Our price increase in Q4 was about 13.9%. So that does get harder. So you won't see quite the price increase in Q4, But we still think the mid teens or low teens is attainable on the full year. Speaker 1100:43:57Was that the? Speaker 300:43:58Yes. Let me talk about the ready mix side. So all of our markets have held up really well, honestly, with 20% down Good morning, David. I've been extremely impressed by our ready mixed team. They've managed to keep in that 20s, which we've done. Speaker 300:44:13And I've said The Summit is very good in the downstream and we're even better today because we're in the right markets with leading assets and leading positions And we've added our centers of excellence where we've been able to expand those margins as well. So I wouldn't focus too much on the pricing in those ready mix markets because we're really just Pass through and that we always add a little bit of margin. It's much more important to be in the right markets to be able to add our center of value proposition onto our margins to expand, but the pricing is going to go a little bit with where cement goes in those various markets and or Short load fees, etcetera, that we're very focused on. Speaker 400:44:50I might add one more thing, David, just on the ag pricing too. When you think of the seasonality, As we get into the colder months, that's where you start shifting away from your clean stone, your higher ASP clean stone and more to your base materials. So that The mix will actually bring that down just inherently a bit too in that Q4. Speaker 100:45:11Okay. Thanks very much. Speaker 300:45:13Thanks, David. Operator00:45:17All right. Our next question comes from the line of Adam Thalhiner. Adam, please go ahead. Speaker 1200:45:24Hey, good morning. Nice quarter. Speaker 300:45:26Thanks, Adam. Speaker 1200:45:28And can you talk about seasonality in the Cement segment? I wasn't modeling Margins down that much sequentially. So I'm just wondering if that was a maintenance timing issue and what's your outlook for cement margins is? Speaker 300:45:43Yes. I would talk if you're talking about seasonality in cement, I would say if you're looking at Q3 volumes, The impact there, we always got to watch the amount of import we did 1 year versus the next. So if you look, our volumes were down in Q3 in cement and the major reason for that was About 50% of that decline was because we had more imports last year. We had more of those LNG projects, which of course is dilutive to margin, good for dollars EBITDA. On the other side, we had a little bit of weather in Minnesota and Iowa. Speaker 300:46:12So that's why you see kind of volumes down in Q3, but They're just kind of one time events. I would say our ability to continue to expand margins in Cement is very strong. On a year on year basis, we were up 2 60 basis This team has done a phenomenal job of increasing towards that trailing 12 month North Star objective 40% EBITDA margins, this quarter we were at 37.6% on a trailing 12 month basis, And that's from the value pricing that we talked about a lot earlier in the call, but it's also about the investments we've done around improving what you call our operational Equipment effectiveness, which for Davenport were best in class. Hannibal has a ways to go to get to that 85%. Our team is very focused on that. Speaker 300:46:56We also invested in the Davenport Storage Dome, which has helped our operational costs. We continue to drive PLC across all of our network. And then As you go into 'twenty four, think about Green America Recycling. We're expanding that in Davenport with our Flex Fuel technology investment, which will allow us again to continue to expand margins. So all those four key elements of pricing, operational excellence, Green America And PLC will allow us to continue to have that strong pricing capability and supply to underpin by strong supply demand dynamic in cement, Adam. Speaker 1000:47:30Thanks, Ann. Speaker 300:47:32Thanks. Operator00:47:35All right. Our next question comes from the line of Brent Thielman from Davidson. Brent, please go ahead. Speaker 200:47:43Hey, great. Thanks. Just had a question on aggregates and maybe just the different cost Buckets, I think you indicated the costs are hanging around higher for longer. Maybe where are you seeing some abatement and where are you seeing some influence For a higher cost in that business going forward. Speaker 400:48:03Brent, this is Scott. I'll answer that one. When you think of ag cost, your 2 biggest cost drivers there is your labor and your equipment cost. And frankly, Brent, we're not seeing those abate. Those are still driving up there. Speaker 400:48:20And like I commented earlier, the labor is up there pushing Double digit. And on your equipment cost, the fuel earlier this year, we thought we were going to get some tailwind on fuel. And unfortunately, that's kind of went away since fuel costs have upticked. And as you know, our ag business is very dependent on diesel fuel. So where we thought we were going to get maybe an $8,000,000 $6,000,000 to $8,000,000 tailwind on that is actually probably more like a $2,000,000 and most of that's already been realized. Speaker 400:48:53So don't anticipate any tailwind on the fuel costs going into the Q4 either. So not a lot of abatement Going into Q4, we are hopeful for next year that labor will start coming off and we're hearing the signs of that. We're just waiting for it to see waiting to see it pass through now. Speaker 200:49:18Great. Thank you. Speaker 300:49:20Thanks, Brent. Operator00:49:22Our next question comes from the line of Mike Dahl from RBC. Mike, please go ahead. Speaker 200:49:29Thanks for taking my question. Just to stick with the cost side, I know there's a lot of moving pieces here, but based on what you're seeing Today, now I'm betting into your Q4 guide, you've talked about it moderating or you think it will moderate In 2024, can you give us any sort of finer point on what your current planning assumption would suggest For cost increases in both Ags and Cement for 2024? Speaker 400:49:59Yes, Mike. First of all, we are hopeful in 2024 that we will see that moderation and we're actually going through our budgets right now. And we are seeing some cost actually barging cost is one that's actually surprised us to see the increases we're hearing in the barging side Along the Mississippi River. So we're going to accommodate that in our budget for next year. But overall, on the specific assumptions, we're in that mid single digits right now. Speaker 400:50:32But as Anne mentioned, we'll have a finer point on that when we come back to you in February On the broader? Speaker 300:50:39Yes. I think just to give you a word of magnitude, Mike, one of the reasons why we're going out with a very strong price increase in cement With $15 a tonnage because our barge costs are up about 9% to 10% even with mitigation by our team. So We're working hard on that. We continue, as Scott said, to see cost inflation, but we do think it will moderate somewhat next year. Well, we're going to continue with a strong pricing stance and control what we can control on our costs, really focus on operational excellence on both Ags and Cement And really drive our costs down. Speaker 300:51:10That's what we can control in 2024. Speaker 200:51:15Okay. Thanks, Dan. Thanks a lot. Speaker 300:51:17Thanks, Mike. Operator00:51:19All right. Our next question comes from the line of Jerry Revich from Goldman Sachs. Jerry, please go ahead. Speaker 1100:51:27Yes. Hi, good morning, everyone. Speaker 300:51:29Good morning, Ken. Speaker 1100:51:30Hi. I'm wondering if we just talk about The margin potential of the products business as it stands today and what the opportunity is for margin expansion From here, assuming flattish volumes, historically, this business at some point has gotten into the high 20s on a cash gross profit margin basis, Obviously, the portfolio has evolved. So just wondering for that part of the portfolio specifically, how do you feel about the opportunity to push Price ahead of costs over the medium term. Speaker 300:52:07Yes. So one of the things we do like, so this is our downstream businesses Essentially, and if you look at both, let's take them separately. So our ready mix business, we've clearly shown our ability in the past to do 20s and we're good at ready We're just very good at the downstream. And with the portfolio work that we've done, I wouldn't have said this 2 years ago, with the portfolio work we've done, we're in the right markets with advantaged assets And we have leading positions. The other thing our team has done a lot of work on in Ready Mix is we very much lead in innovation. Speaker 300:52:36The team has done a lot of work around AI, around the ad mixtures. So the value proposition that they bring and the ability to expand margins in these strong markets is where we see that ability to pop that 20%. But very importantly, all these downstream business have heroic and that's why we're in these markets and that's a key part. The other point I Point you to is on our asphalt and construction. They're very much upheld by very strong public demand right now. Speaker 300:53:02Liquid asphalt has moderated off a little bit. So that price net of cost And asphalt, you can see that pop in the margin. So I'm very confident that our team will at least be able to continue to add points in margin And both of our downstream business because of where we play and because of our focus on our improvement of our operational capability and value proposition to the customer. Speaker 1100:53:26Super. Thanks. Speaker 1000:53:28Thanks, Jared. Operator00:53:30All right. Our next question comes from the line of Keith Hughes from Truist. Keith, please go ahead. Speaker 200:53:37Thank you. On the aggregate pricing in the 4th quarter guide, I see historically you're talking about have some seasonal declines from 3rd to 4th. Given these numbers, this looks particularly large. Is there something unusual going on this year that you're going to see more of a seasonal impact than you would in past years? Speaker 300:53:57No, I mean, I'll let Scott go to specifics if you want, but honestly, it's not any different. We always see this seasonality in Q4 Around pricing, so it can get a little bumpy around that, but our pricing is still very strong. If you think about our aggregates pricing from the mid year price increases, At the top end of that, our carryover ags pricing will be in that mid single digit, but it was very strong execution. So I wouldn't read anything into that Q4 other than our typical seasonality. Scott, would you like to add in? Speaker 300:54:28I don't Speaker 400:54:28think so, Ann. I think we're on track for That low teens and the mid teens on the full year. And yes, we take a More of a conservative approach on that, with the mix, but I don't anticipate it to be a drop here. We're going to continue the pricing. And it will drop to the margins. Speaker 400:54:50We'll continue as we've said, we're targeting overall EBITDA margins of a record of 23.5 Speaker 300:55:00Percent to 24%. Yes. Keith, as we've seen the compounding effect of the strong pricing over the last That's why you're starting to see a lot of these margins pop. So I wouldn't over index on Q4 at all. That's just kind of a seasonality thing. Speaker 300:55:15We'll exit low teens or better And continue to have strong pricing in our January 1 price increases. The teams are out there with very strong price increases of mid single digit to high. Speaker 200:55:26Okay. What's one other one on cement? You talked about why the volume was down in the 3rd. Are we going to see some of that in the 4th as well in terms of the way volumes are? Speaker 300:55:38Q4 in cement will see the same seasonality that we've always seen. They'll be down a little bit Just because of the river levels, etcetera, we're doing everything to meet our customers' demand, but the barges will be lower than Operator00:55:52Yes. Speaker 400:55:53I would comment just on the import volume will be a change from the prior year. We did have a heavier import Volume last year, which we won't have, which as we've talked about in the past, we use that as kind of a flex for those projects Ann talked about Earlier, the LNG projects that we target down in the Gulf Coast. Speaker 200:56:16Okay, great. Thank you. Thank Speaker 300:56:18you. Thank you. Operator00:56:20All right. There are no further questions at this time. So I'd like to turn the call back over to Ann Noonan for closing remarks. Speaker 300:56:26Thank you, Jeremy. Once again, I'd like to thank our Summit team for putting us on course for a record setting year financially and for moving us forward strategically. Our strong Q3 results underpin our belief that our portfolio is stronger, more resilient and we are executing across the business. At this point, we remain laser focused on meeting or beating our 2023 commitments, setting ourselves up for continued success in 2024, while at the same time progressing the value accretive Argos combination. I want to thank you for joining our call today. Speaker 300:56:58We look forward to our continued dialogueRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallSummit Materials Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Summit Materials Earnings HeadlinesLarge M&A Fizzles Worldwide In FebruaryMarch 14, 2025 | seekingalpha.comNigeria to host Africa raw materials summitFebruary 25, 2025 | msn.comYour Wealth is Being Erased – Save It Before It’s Gone ForeverWhat If America's Gold Reserves Are a Lie? For decades, the U.S. government has claimed to have thousands of tons of gold locked away in Fort Knox. But there hasn't been an independent audit in over 50 years—and now, both Elon Musk and former Congressman Ron Paul are demanding answers.May 7, 2025 | Hamilton Gold Group (Ad)Summit Materials, Inc.: Summit Materials Announces Stockholder Approval of Quikrete TransactionFebruary 11, 2025 | finanznachrichten.deSummit Materials, Inc.: Summit Materials Completes Merger with QuikreteFebruary 11, 2025 | finanznachrichten.deSummit Materials (SUM) Receives a Hold from D.A. DavidsonFebruary 11, 2025 | markets.businessinsider.comSee More Summit Materials Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Summit Materials? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Summit Materials and other key companies, straight to your email. Email Address About Summit MaterialsSummit Materials (NYSE:SUM) is a vertically integrated construction materials company, which engages in manufacturing construction materials and related downstream products. It operates through the following segments: West, East, and Cement. The West segment includes operations in Texas, Utah, Arizona, Colorado, Idaho, Wyoming, Oklahoma, Arkansas and British Columbia, Canada. The East segments refers to its East and Central regions and serves markets extending across the Midwestern and Eastern United States. The Cement segment is involved in Hannibal, Missouri and Davenport, Iowa cement plants, and distribution terminals along the Mississippi River from Minnesota to Louisiana. The company was founded by Thomas W. Hill on September 23, 2014 and is headquartered in Denver, CO.View Summit Materials ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 13 speakers on the call. Operator00:00:00Good morning. My name is Jeremy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Summit Materials Inc. 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Operator00:00:12After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Andy Larkin, Vice President of Investor Relations. Speaker 100:00:33Hello, and welcome to the Summit Materials' 3rd quarter 2023 results conference call. Yesterday afternoon, we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation and a supplemental workbook highlighting key financial and operating data. All these materials can be found on our Investor Relations website. Management's commentary and responses questions on today's call may include forward looking statements, which by their nature are uncertain and outside of Summit Materials' control. Speaker 100:01:00Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. Speaker 200:01:07For discussion with some of the Speaker 100:01:08factors that could cause actual results to differ, please see the Risk Factors section of Summit Materials' latest Annual Report on Form 10 ks as updated from time to time in our subsequent filings with the SEC. You can find reconciliations of historical non GAAP financial measures discussed in today's call in our press release. Today, I'm pleased to be joined by Ann Noonan, Summit's CEO and Scott Anderson, our Chief Financial Officer. Ann will begin with opening commentary, Scott will then review our financial performance, and then Ann will conclude our prepared remarks with our view on the path forward. After that, we will open the line for questions. Speaker 100:01:42With respect for other analysts and the time we have allotted, please limit yourself to one question and then return to the queue so we can accommodate as many analysts as possible in the time we have available. I'll now turn the call over to Ann. Speaker 300:01:53Thanks, Andy, and thanks to everyone joining today's call. We've certainly been very diligent in progressing multiple work Since our last call in August. Alongside all of our undertakings, our Summit family hasn't lost sight of our top obligation To create and foster a safe working environment for our employees and our communities. Each of us has a duty and commitment to put safety first in service of the common good. And although our journey is ongoing, we are taking steps each day to build a 0 harm culture and a safer Summit Materials. Speaker 300:02:22This quarter, before Scott takes you through the financials, I'd like to provide some high level commentary on our Q3 financial performance, our 2023 outlook as well as provide a progress report on other relevant topics this quarter. First, we continue to execute our Elevate Summit strategy, Making significant progress against our financial priorities. In the Q3, we generated record levels of net revenue, cash gross profit and adjusted EBITDA. Furthermore, leverage remains near all time lows, ROIC at all time highs. And this quarter, we set an Elevate Summit high watermark our trailing 12 month EBITDA margin at 24%. Speaker 300:03:02Critical to our overall margin trajectory is the contribution from our materials lines of business. As expected, Aggregates margins stepped up materially this quarter. Adjusted cash gross profit margins increased 5.70 basis points year on year in Q3 and is now positive on a year to date basis. Likewise, cement EBITDA margins were up 2 60 basis points in Q3 to 41.5 percent. In both businesses, we are moving towards our North Star objectives, With aggregates 170 basis points closer to its cash gross profit margin NorthStar objective of 60% And Cement, 250 basis points closer to its NorthStar EBITDA margin objective of 40%. Speaker 300:03:46In a moment, Scott will unpack the drivers for you, but essentially, Commercial and operational execution is fueling greater profitability, an important component of our value creation model. 2nd, regarding our 2023 outlook. Today, we are increasing the low end of our full year 2023 EBITDA range to 560,000,000 thereby upgrading the midpoint of our guide to $565,000,000 This puts us on track to deliver mid teens EBITDA growth year on year And EBITDA margins of between 23.5 percent 24% in 2023. Our confidence to increase our forecast yet again is underpinned by our year to date performance and the collective execution of our Summit teams. 3rd, we continue to pursue a complete retirement of our TRA liability And collapse our Upsea structure, which when completed will significantly reduce corporate complexity and streamline our organizational structure. Speaker 300:04:43This may take some time to fully complete, but consistent with the Blackstone portion of the agreement, we intend to follow a disciplined approach that is value created for our shareholders. Lastly, we remain on track to close the Argos transaction before the end of Q1 of 2024. From a process standpoint, we have filed our preliminary Cleared HSR review and are positioned to file our definitive proxy later this month. At that point, we'll announce the date of our shareholder vote. With Bridge Financing in place, we have the flexibility to opportunistically undertake financing when markets are most advantageous for us to do so. Speaker 300:05:21In the interim, we are developing detailed integration plans, designing a talent rich, highly effective organization And positioning the enterprise to immediately start to deliver on our synergy commitments upon flows. When complete, the combination will accelerate our materials led strategy, Enhance our scale and reach in Cement and bolster our cash flow generation to fuel further aggregates oriented organic and inorganic growth opportunities. Now before turning the floor to Scott, I'd like to recognize and thank my Summit colleagues across our footprint who have remained laser focused on their 2023 commitments. Thanks to them, we are on course to achieve record financial results this year. They have a lot to be proud of, and I applaud them on their efforts and diligence this year. Speaker 300:06:05With that, I'll turn it over to Scott to walk you through the quarter. Speaker 400:06:08Thanks, Ann. Turning to Slide 6. I'll pick up where Ann left off by adding specifics To our Elevate Summit scorecard. For leverage, we remain at 2.3x, flat versus prior quarter and well below our long standing commitment to be below 3x. This is especially impressive considering we used $122,900,000 of cash to acquire, Among others, all of Blackstone's rights and interest in the TRA were approximately 80% of the total TRA liability at a substantial discount to its carrying value. Speaker 400:06:41For ROIC, we again saw progress, up 20 basis points sequentially to 10.3% And moving further ahead of our 10% minimum. And as Anne mentioned, our last 12 month EBITDA margin is up to 24%, driven not only by a notable acceleration in aggregates margin, but by margin growth across all lines of business in Q3. 24% represents an Elevate Summit record and positions us to deliver on our stated goal of 23.5% to 24% for the full year. Adding color to that margin picture, on Slide 7, you'll see our Q3 financial highlights. Net revenue increased 8.2% driven by ongoing pricing momentum across each of our lines of business, fueled by midyear price increases in aggregates and cement As well as pass through pricing for our downstream businesses, our commercial teams are effectively pricing to what our local markets will bear. Speaker 400:07:37Pricing growth in combination with sound operational execution drove adjusted cash gross profit and adjusted EBITDA growth of 15.5% and 12.8%, respectively, in the quarter. This came despite volumes that have been negatively impacted by the residential air pocket and unfavorable weather conditions in certain markets. Segment performance on Slide 8 shows each business segment grew both EBITDA dollars And EBITDA margin in the quarter. Our West segment registered strong pricing growth across all lines of business and continues to benefit from public Infrastructure demand in our 2 largest asphalt markets, North Texas and the Intermountain West. The 3rd quarter was the 1st full quarter of our newly entered Phoenix market, And so far, the business has been operating better than we originally anticipated. Speaker 400:08:27The East segment, which is nearly a pure play aggregates business, Grew EBITDA 13.5 percent in the quarter and is up 17.8% in 2023 as Greater Greenfield contributions, Together with strong pricing and operational improvements is generating solid sustainable growth. Cement achieved positive top line growth in the quarter Despite lower volumes, as wet conditions in northern markets, particularly Minnesota and Iowa, combined with reduced import volume, led to lower volumes relative to Q3 2022. That said, mid year price execution remained strong as average selling price increased to $155.79 up nearly $6.70 per ton from Q2, reflecting solid price realization and driven by healthy supply demand Dynamics along our river markets. Overall, 3rd quarter adjusted EBITDA increased 8.1% and EBITDA margin improved 2 60 basis points year on year. Moving now to pricing on Slide 9. Speaker 400:09:28And I'd start by simply reiterating our general view that demand conditions And persistent cost inflation have supported a constructive pricing environment in 2023. And as Anne will talk about, We expect those conditions to carry into 2024. 3rd quarter average selling price for aggs increased 14.4% year over year and 4.6% sequentially, primarily reflecting the mid single digit mid year price increases implemented across our footprint. We saw solid traction throughout with strongest gains in Houston, Missouri, Northern Kansas and Utah. In cement, our $10 per ton price increase effective July 1 saw nearly 70% realization with the strongest reflection in our northern cement markets along the river as expected. Speaker 400:10:16For our upstream businesses, Given progress so far this year, we are very confident that pricing trends will endure and will achieve at least low teens pricing growth in ags and mid teens growth in cement on a full year basis. Downstream, high cement input costs continue to feed higher ready mix pricing And the demand environment for asphalt together with higher liquid asphalt cost has and will continue to drive pricing growth moving forward. On the volume side, Slide 10 bridges from organic to reported by line of business. Aggregates volumes are tracking towards our full year Expectations with year to date growth in Kansas and Virginia more than offset by lower volumes in our more residentially exposed markets, specifically Salt Lake City and Houston as well as British Columbia. As mentioned, cement volumes in the quarter were negatively impacted by a combination of wet weather in our northern markets And reduced import volume. Speaker 400:11:13In fact, lower imports accounted for roughly half of the overall volume decrease in the quarter. Ready Mix volumes continue to be impacted by challenging residential and light nonresidential conditions, although as comparisons ease in Q4, We would expect volumes to begin to stabilize. Furthermore, as we add the high growth all season Phoenix market to the portfolio, Reported ready mix volume should continue to grow as we close the year. Finally, on asphalt, we saw public demand continue to drive positive organic volume growth with especially good performance in the Intermountain West and British Columbia. Adjusted gross profit margin is shown on Slide 11, Clearly demonstrating improved profitability across the portfolio on both a quarter to date and year to date basis, each line of business is extending a positive price cost relationship and effectively countering cost inflation that has not materially relented. Speaker 400:12:08If you recall, we had previously discussed Cost inflation moderating in the second half and generally fall in that mid single digit range. Thus far through October, we have not seen that occur. So we have factored in recalibrated cost expectations into our Q4 outlook. One especially notable area is for our cement business where higher cost to fuel our I'll round out my commentary on Slide 12 by briefly noting adjusted diluted net income increased 15.7% in the quarter and is up more than 31% in 2023, primarily reflecting strong execution and overall operating performance during the year that more than offset the higher interest expense. And finally, as of Q3, for the purposes of calculating adjusted diluted earnings per share, Please use a share count of $120,200,000 which includes 118,900,000 Class A shares and 1,300,000 LP units. Speaker 400:13:20With that, I'll turn it back to Ann for our latest outlook. Speaker 300:13:24Thanks, Scott. The way I'd like to close is to frame up our 2023 expectations, then at a high level, discuss our preliminary view on 2024 and wrap up by reiterating our view of the Argos transaction. Slide 14 has our 2023 outlook. By increasing the low end of our EBITDA range, we are increasing the midpoint to $565,000,000 This implies solid mid teens growth on a full year basis, But more moderate growth expectations for Q4. The Q4 profile mainly reflects 3 factors. Speaker 300:13:561st Is our typically restrained stance regarding unknown weather conditions to close the year. If weather cooperates and the construction season is extended, we could exceed expectations. But as a managerial team, we don't make a habit of predicting Q4 weather conditions. To give you a sense of our weather sensitivity, In Salt Lake City, one of our highest margin markets, each extra day of favorable weather could generate $1,000,000 or more in EBITDA. The second factor affecting Q4 are low river levels along the Mississippi. Speaker 300:14:26Our latest view incorporates roughly 2,000,000 dollars of increased operational cost to manage through these river levels. As you heard Scott say earlier, we have an experienced team exploring every possible option to meet our customer commitments, and we plan to deliver the quality and service our customers expect. That said, the reality is that we may have to incur higher costs Associated with light loading barges and dredging certain parts of the river. Right now, while we have an advantaged position relative to competition, Our primary concern is around our Memphis terminal, and we thought it appropriate to incorporate this risk into our year to go forecast. And finally, variable cost inflation has not materially eased. Speaker 300:15:05So we are embedding the assumption that cost headwinds persist as we close the year. For CapEx, we're maintaining our midpoint expectations at $250,000,000 with roughly $65,000,000 to $70,000,000 of that occurring in Q4. Our modeling items include G and A at approximately $210,000,000 interest expense at roughly $110,000,000 And DD and A at $220,000,000 for 2023. Now turning to a preliminary look at 2024 on Slide 15. Our teams are in the late stages of formulating their bottoms up 2024 budget. Speaker 300:15:40And as we fine tune our expectations, what has emerged is a list of knowns and a list of unknowns. Let's start first with what we know and that is 2024 is setting up to be another strong year for pricing. For cement, we are already out with our January 1 price increase of $15 per tonne, which we believe adequately reflects a high input cost environment, including significantly higher barge rates as well as the unique value we bring to the marketplace. For aggregates, we will implement fresh pricing on January 1 across all markets With exact increases dependent on demand and competitive conditions in each of our local markets. And importantly, we firmly believe that we have shifted to a more dynamic pricing model, with customers now expecting at least 2 price increases a year. Speaker 300:16:26This multiple pricing approach allows for us to more quickly flow through Market and cost intelligence via value pricing. For 2024 and similar to 2023, We expect that our commercial execution will outpace anticipated cost inflation and create that positive price net of variable cost relationship we're aiming for. Additionally and unique to Summit, our flexible energy model along with operational excellence initiatives should provide material offsets to cost inflation, providing further headroom between price and cost next year. For 2024 end market demand, the picture is still in flux With strong visibility in the public end markets and more mixed indicators in private construction. For public, which comprises 35% to 40% of our revenue, Our leading indicators for future activity are flashing green. Speaker 300:17:16Fiscal 2024 DOT budgets for our top 5 public states are up 14%. Lettings on a trailing 12 month basis are up nearly 26%, more than 7 points ahead of the national average. And our public backlogs in key markets are nearly double prior year as demand is robust and accelerating for infrastructure projects. For residential, knowing its sensitivity to interest rates, we remain cautiously optimistic that single family in 2024 will at a minimum stabilize, if not begin to recover next year. What we're contemplating is how the higher for longer Fed approach We'll ripple through residential activity. Speaker 300:17:57Positive lock in impacts will mitigate some of the affordability concerns, but it's too early to say to what extent. Nevertheless, we remain bullish on residential in the long run and especially where we over index, namely Salt Lake City, Houston and now Phoenix. Bottom line is that the desire for homeownership is strong and durable, while supply remains willfully constrained. We are big believers that we'll be a Primary beneficiary as that equation inevitably corrects itself in the long run. Lastly, on non residential, we currently see the divergent trends from 2023 carrying into 2024. Speaker 300:18:32Specifically, we expect light nonresidential to remain relatively dormant As knock on effects from the residential air pocket will impact the non res community build out that lags residential trends. On the other hand, we see sustainable growth in certain heavy nonresidential verticals. On shoring of manufacturing is a durable trend Underpinned by public funding and private companies looking to bolster their domestic supply chains. What's especially encouraging is that these large scale projects have a multiplier effect. They create high paying jobs that in turn lead to single family home construction and the commercial developments to support these communities. Speaker 300:19:09That said, not all markets will benefit equally. For us, we have advantaged exposure to the battery belt in the Southeast, The country's semiconductor hub in Phoenix and green energy projects in America's heartland and along the Mississippi River. As we sharpen our pencils for next year, we will add specificity to our nonresidential view. But for now, our working view is that directionally, we should witness Similar trends from 2023 extend into 2024. Let me sum up our 2024 perspective by stepping back. Speaker 300:19:40We think 2024 is shaping up to be a very positive year for Summit Materials. We will have to navigate dynamic market conditions, But on balance, we firmly believe we will have several factors working in our favor: a stronger, more materials led portfolio, Robust pricing momentum, a full set of self help margin opportunities and a balance sheet capable of making aggregates oriented portfolio moves. As is customary, we'll be out with a more granular view in February. But as you heard us say last month, we think our business is Certainly capable of achieving double digit EBITDA growth next year. Central to our growth ambitions for next year and the years that follow is our integration with Argos USA. Speaker 300:20:22Together with Argos, our enterprise will be able to utilize our combined platforms and capabilities to capitalize on the tremendous growth opportunities in Cement and our high growth markets. You've heard me say before, but it's worth repeating. We have the proven experience and expertise to deliver profitable growth through rapid synergy realization. We are confident that our well run and transferable playbook in Cement and Ready Mix will deliver at least $100,000,000 in synergies as part of this combination. And critically, our growth strategy in Cement and our more cash generative portfolio perfectly complements and accelerates our ongoing intentions for aggregates growth Through organic and inorganic avenues. Speaker 300:21:02On Slide 16, you'll see our top priorities as we move through the close process. Consistent with our commitment to transparency and everything we do, you can expect us to report against these four priorities as we integrate with Argos USA. First off, we will continue to invest in Aggregates growth, focus on operational excellence to expand Ag's margins and profitably grow that piece of the portfolio. We can do that while safely integrating the companies with agility and a focus on people, culture and change management. After closing, we'll immediately start to deliver on our commitment of greater than $100,000,000 in operational synergies, while at the same time swiftly refining and executing on upside Commercial synergies. Speaker 300:21:45And finally, our ongoing priority is to optimize the portfolio while strengthening the balance sheet. These four priorities will inform our decisions, guide our actions, so I'm confident and optimistic our team can execute on them moving Summit forward and creating industry leading value for our shareholders. With that, I'll ask the operator to open the line for questions. Operator00:22:07Perfect. Thank you so much. All right. Our first question comes from the line of Stanley Elliott from Stifel. Stanley, please go ahead. Speaker 500:22:23Hey, good morning, everyone. Thank you all for the question. Curious if you guys could kind of hash out a little bit more on the pricing outlook. I mean, Certainly a lot of momentum here, finishing strong to the year. How should we think about pricing into next year with some of the other Players in the space haven't talked about kind of double digit ish sort of numbers. Speaker 300:22:46Yes. Thanks for the question, Stanley. So let's kind of deal with aggregates First, so we'll exit the year here in 2023 at low teens, if not better, As we go out and that's really driven by outstanding performance in Texas, Utah and Missouri. And so we're now out with our January 1st Price increases across all of our aggregates markets. And basically those will be value priced using all the tools that we've put in place through our commercial excellence efforts It's really optimized price in each of those markets and you can expect them to be in the high single digit to double digit and we'll refine that further in February. Speaker 300:23:24The other thing I would say about pricing in Ags, I believe we're now in a standard industry mode of 2 price increases per year. And so you will expect to see that momentum. So I've got a lot Confidence in pricing both from the carryover, which was very strong in our mid year pricing and then with our pricing that were out in January. So you can expect aggregates that price net of cost to expand further. We're very positive on that going into 2024. Speaker 300:23:49For cement, our pricing again, we did very strong pricing in 2023. We'll exit the year there in mid teens. We're out for our January 1 price increases at $15 a ton. Our mid year price increases come in at about 70% realization. So I would expect that same kind of realization along our river markets as we go through that. Speaker 300:24:10So overall, my commentary had very strong pricing continuing in 2024 And you can see the margin profile of both our cement and aggregates businesses doing that. And then the downstream pricing has been very strong. You saw our margins even with Some restrained volumes coming into our ready mix. Area saw us continue to expand margins through our pricing analysis. So really good execution by the team, Stanley. Speaker 500:24:34Great. Thanks so much and best of luck. Operator00:24:38All right. Thank you. And our next question comes from the line of Trey Grooms from Stephens. Trey, please go ahead. Speaker 600:24:45Hey, good morning and thanks for taking my question. First off, congrats on the nice work on the aggregates margins and the acceleration there. And can you talk About some of the drivers there that are kind of pushing those margins up? And do you think that or do you expect, I guess just to continue into Q4 and maybe any early thoughts on the margin trajectory there in 3 there in aggregates looking into next year. I think you mentioned a favorable price cost outlook, but any more color you could give us there? Speaker 600:25:21Thank you. Speaker 300:25:23Yes. So thanks, Trey. So we were very encouraged by our aggregates profitability this quarter and the progress that the team has made. So on a year on year basis, expansion of 5.70 basis points was definitely very significant for us. On a unit profitability basis, we were up 27% And sequentially 13.6 percent. Speaker 300:25:45And most importantly, the number that you hear me talk about a lot is that best in class Target of our North Star of getting to 60% cash gross profit margin. This quarter we started bumping up on a trailing 12 month basis to that 50%. And that's purely by execution and it's the things we've talked about before, trade pricing that I just explained from Wynn Stanley, we're very positive on the momentum we have Coming out of 'twenty three and going into 'twenty four, so that price net of cost, expect that to continue to expand. But the second area that I'm Extremely encouraged by our operational excellence that has started to take hold. And this is where we have a unique opportunity and some self help opportunities at Summit. Speaker 300:26:27And we saw year to date, our continuous improvement projects in ags has allowed us to add 9,000,000 To the bottom line and we have a pipeline that we've gone out and done continuous improvement events, of course about third of our quarries right now and that's about a 25,000,000 EBITDA pipeline and what you can expect is in 2024, we'll even supercharge that. We're adding resources in the form of project management, Lean And so we're continuing to stay extremely well focused on that as well. And then the third point of drivers that I point to is our flexible energy model. Diesel, we have a 50 we're actually hedged 49% right now. Our pricing is at $2.75 for that and on a full year basis for 2023, we're over $3.17 So those three factors of price, operational excellence and our flexible fuel model should really allow us to continue to fuel our ag's profitability into 2024. Speaker 200:27:27Wonderful. Thanks for the color, Ian. Speaker 300:27:30Thanks, Trey. Operator00:27:32All right. Our next question comes from the line of Garik Shmooh, Sark, please go ahead. Speaker 700:27:39Hey, thank you. I wanted Speaker 200:27:40to follow-up just on your comment around growing the aggregates Business even as you move forward with closing on the Argos USA deal. Is The opportunity set consistent with and just your prior comment around some of these internal initiatives, or Are there opportunities on the M and A side to accelerate growth in aggregates? And maybe just Speak to your ability to make additional acquisitions while integrating Argos once you get to that point. Speaker 300:28:21Yes. So thanks, Garik. So you're absolutely right on target there because we are intending to grow both organically and inorganically. And to your point on organic growth, that's very much heavily driven, 1st of all, by our operational excellence and growing that bottom line and also having additional price growth. But also I put greenfields in that category. Speaker 300:28:42We continue to have additional greenfields coming online and they're very margin accretive also. So that's kind of our organic growth side. We have a very rich pipeline of inorganic growth potential. And we've talked before about The recent acquisition we did in Phoenix wanting to build out that aggregates platform, our team is very active out there right now, trying to build out aggregates around that Strong ready mix position that we have. And then Florida is the same. Speaker 300:29:07Our team are out there scouring every opportunity for greenfields and for M and A. We feel with the higher cash flow generation from a bigger cement profile, we're going to actually be able to accelerate our number 6 position in aggregate. So We are very positive about this and feel that the Argos transaction will only help us accelerate that position. Operator00:29:33All right. Thank you. Our next question comes from the line of Phil Ngi. Phil, please go ahead. Speaker 800:29:40Hey, good morning. This is actually Colin on for Phil. I appreciate the high level commentary around the different end markets, but can you put some number ranges Your preliminary view for volumes in 2024 with your peers talking about aggregates volumes being flat to down low single digits next year. I guess, is this something also achievable by Summit? Or do you anticipate some variance either to the upside or the downside? Speaker 300:30:02Yes. So Colin, thanks for the question. Let me start by saying we are refining our numbers. So we'll come out with a much more clear guide to you in February as we always do. But I'll kind of share with you where our mind is right now around volumes. Speaker 300:30:14So let's start with the one with the most visibility, which is in the public side. This year, we saw mid single digit growth, solid mid single digit growth. That pipeline is only increasing. So public, we see the IIJA dollars flowing through. We see that in our major Texas and Kansas states, and we're actually seeing that happen. Speaker 300:30:34So Definite proof that that has started and will accelerate only into 2024. The other thing we look at is our contract highway and paving awards in public, which are up 27% Year on year, which is 7 percentage points above the national average. So that's all starting to play through. And then if we look at our state DOT budgets for 2024, they're up 14% for our top 5 states or $4,500,000,000 like Texas alone is 24 percent to $18,500,000,000 Utah is up $2,900,000 Kansas is up 2.3 Missouri around $4,100,000,000 and then Virginia is at $8,100,000 So very strong pipeline. The whole point of giving you that data is to prove that. Speaker 300:31:18And then our backlogs, which is really what we have in hand. And I always use Texas as our bellwether state on how we're doing on backlogs. They're nearly double What we had last year and they're building. So bottom line for all that data I gave you was public is very strong. We continue to see that into 2024. Speaker 300:31:36Let's switch a little bit to residential. So residential, we believe we're cautiously optimistic it will stabilize if not recover, It's a little different by our end markets. So in Houston, we're seeing that recovery come back faster. You can see that in the form of single family permits are improving, that Trend decline is improving and actually see if you look at our forecast of single family permits been turning positive in 2024. We actually see that in our business. Speaker 300:32:03And the Texas market is held up by a very strong economy, both from an energy Household formation and population growth. So we expect the Houston market to continue to recover faster. Salt Lake City, a little bit slower. There, the larger builders are faring better than the regional builders. But again, single family permits, the trend is improving there. Speaker 300:32:24So you could potentially see some recovery. But our Planning stance is kind of longer trough there. And then finally, our Phoenix market in residential, it's actually we're not as Over indexed on residential there were heavier commercial, which is doing extremely well. But even the residential there, the single family permit trend is improving as well. Bottom line on residential stabilized if not recovery, but the point I'd give you on residential, which I think is very important is we were down 20% this year. Speaker 300:32:53And the reason we've kept our margins up and done very well on our pricing is we're in the right markets with advantaged assets and leading positions And we're overall very bullish on residential in the long term. So we can see that being a swing factor in 'twenty four. And then let me move to non residential, which I think has Some real positives to it. Just to remind you, we've had a flat stance on that and it's played out pretty much as expected with the Heavy from onshoring and manufacturing and energy offsetting the light non residential. We've seen that play out. Speaker 300:33:25We feel we have very good advantaged positions for non residential. If you look at our Southeast markets in Carolinas And Atlanta, they're growing heavily with the EV battery factory. And then if you think about along our river markets and the Gulf Driven by a lot of the energy verticals and then Phoenix is the epicenter for semiconductor manufacturing. And actually, if you look at The funding that's come from the IRA and CHIPS Act so far, over 60% of that has gone into our top states. So we're very encouraged By that, the other thing we love about the non residential is they're very ags and cement intensive. Speaker 300:34:03And so we're getting that materials portfolio strength compound itself Over the years and then you have the multiplier effect as we look out over time of building out single family homes and further light non residential. So all that's to say is we can see a path to maybe flat growth next year. It will be really the drivers will be we're very positive on public residential, we could get that recovery that would be a driver upwards And then non residential, I would say start from a flat perspective, Colin, and then we'll update our pipeline to you, which is quite rich right now on the non Operator00:34:47The next question comes from the line of Anthony Pettinari from Citi. Anthony, please go ahead. Speaker 900:34:54Good morning. Good morning, Eric. Hey, you got good ag pricing in ags in 3Q And I think organic volumes were down 7.5%. You talked about dynamic pricing and value pricing. I'm just Wondering, are you walking away from any business? Speaker 900:35:13And if so, would that be any component of that 7.5% decline? And then maybe just an add on question. I guess your expectation is for cement pricing to outpace aggregates pricing in 2023. I'm not sure if there's Too much to read into that, if those markets are just a little bit stronger or maybe you just have more of an opportunity there from a commercial excellence perspective or if there's any color you can give there? Speaker 300:35:39Yes. So Anthony, let me address Ag's volumes and pricing in Q3, 1st of all. So obviously they were down because residential has been down. So that's a big driver of your ags being down. The other point I point to really answer your question around pricing It's in our British Columbia market. Speaker 300:35:55There we are leaders in pricing and we tend to lead and we'll lose a little bit of volume and then it'll come back. That's just the way it works every year. We saw the trend from Q2 to Q3 improve on our volumes there. So we're positively encouraged that that will turn around. That being said, price the value of our pricing way outweighed that volume decline in Q3 on aggregates. Speaker 300:36:17Cement, I think you just read into that more that we started from such a high Point in January, in cement pricing, if you recall, we had to go very high on our pricing. It was like a $17 a ton increase in January followed by a mid year 10 Dollar a tonne and that was really because as we were in cement pricing in 2023 with those really high energy costs at the beginning of the year We have very strong supply demand dynamics, but generally cost inflation was quite high. So we had very strong realization on mid year price increase of 70%. And frankly, as we go into 2024, we're going to go out with that $15 a tonne and I'd expect that same realization. So cement, the supply demand dynamics stay strong. Speaker 300:36:58Our costs are going to be higher. Again, maybe have Scott talk a little bit about our cement costs as we go into. We believe this will keep pricing up frankly in 2024, Because we have some significant increases in costs that are a little different in 2024 than 2023. So Scott, maybe you want to talk a little about that. Speaker 400:37:15Yes, yes. Let me just lay out the cost picture. As you heard in my prepared remarks, they have not relented. So Actually, I'll start with the buckets or the categories that have eased off a bit and really and that's around our hauling cost And our subcontracting costs, those have eased off a bit. But when you start looking at the rest of the costs, they have really stuck around. Speaker 400:37:39I think if you remember early in the year, we They would moderate by this time and come back down to that mid single digit range and they haven't. We're still pushing up against that High single digit even to a double digit. And when you look at labor, we're right up against that double digit. It's high single digit across all of our labor costs. And then materials that go into our downstream, those are actually in your mid teens increases year over year. Speaker 400:38:08And then the one that's really sticking with us is repair and maintenance. We have a lot of equipment, a lot of equipment intensity And the repair costs are still 12% to 15% up. So when you look at all that, we're not seeing the easing in cost yet. So we factored that into our Q4 expectations. But I do think next year they will start moderating And that will help that price cost relationship next year. Speaker 300:38:39Hopefully that answers your question, Anthony. Speaker 900:38:42No, that's super helpful. I'll turn it over. Speaker 300:38:46Thank you. Speaker 200:38:48All Operator00:38:48right. Our next question comes from the line I have Kathryn Thompson from the Thompson Research Group. Kathryn, please go ahead. Speaker 1000:38:55Hi. Thank you for taking my question today. Just looking back bigger picture as you contemplate the integration, central integration of Argos, It will be a higher CapEx spend just with greater concentration of cement in the mix. How are you planning to balance maintenance and potential catch up maintenance For Argos assets along with some of the growth initiatives that you talked about earlier in this call. And you've been in a journey of winnowing down assets that perhaps don't fit That's been the strategy of Summit. Speaker 1000:39:41Is that process mostly wrapped up? And are there any other assets That you could see, trimming to help with cash flows for anticipated increase in CapEx. Thank you. Speaker 300:39:54Yes. Thanks for the question, Catherine. I'll kind of answer the latter part of your question at a high level here and then turn to Scott for more specificity around the CapEx and catch up. So overall, I think one of the things that's important to understand that the cement assets are actually less capital intense Than aggregates assets. So we see that in our base business. Speaker 300:40:14So that's something to understand as we think about free cash flow conversion. The point of view of our growth initiatives, we feel that we'll be in a really good position because of that higher cement portfolio, better free cash flow conversion to further accelerate aggregates. To your point, Catherine, we are definitely continue to be focused on portfolio optimization. Every quarter we meet as a team and we have what we call our Tier 1 divestiture list. And that list gets we examine every single asset and business in the portfolio and if they're not going to meet our ROIC and margin profiles, they get put on the list. Speaker 300:40:45And there is more opportunity there and we are very confident in our ability to delever the balance sheet. Scott, maybe I'll turn to you on the CapEx. Speaker 400:40:52Yes. So Catherine, when you look at the pro form a combined basis on the CapEx, you'll see that we still maintain that historical about 10% On the 10% of net revenue on the CapEx. And then really that goes along for about 3 to 4 years and then you'll see it start coming back towards a traditional 8% where we'd like to be. But that 10% does give us the bandwidth. When you think about the cement business actually is less capital intensive than our Ags business. Speaker 400:41:27And so it does give us bandwidth to fit in those growth projects and those debottlenecking projects that we have On the Argos as well as our green initiatives with the alternative fuels that you'll see kind of ramp up as in the year 2 3. So we do have that. And then we'll still continue to do our greenfielding. Speaker 200:41:50As a Speaker 400:41:50matter of fact, this year we've got $10,000,000 to $15,000,000 into greenfields, we'll still have that and that's modeled in as well that we'll be continuing that on the ag side. So Overall, maintaining that 10% profile is very doable. Speaker 300:42:06The other thing I'd add, Catherine, is that we're very confident in our ability to deliver on our synergies. So we've said in our prepared comments before that over 50% of our synergies within the 1st 18 to 24 months, we feel Very doable. And that's only on the operational synergies. I'm actually really looking forward to when we close and get our commercial teams together and really supercharge those commercial Opportunities which aren't even in the $100,000,000 stat will help a lot with cash flow as well. Speaker 1000:42:35Thank you. Thank Speaker 300:42:36you. Thanks, Catherine. Operator00:42:39All right. Our next question comes from the line of David MacGregor from Longbow Research. David, please go ahead. Speaker 700:42:47Yes. Good morning, everyone. I wanted to ask you about in your deck Slide number 9. And in aggregates, you guide to low teens aggregate pricing. I guess based on the year to date numbers, this seems to imply a mid single digit increase in 4Qs. Speaker 700:43:01Am I reading that right? And if so, Can you talk a little bit about what might be coming to bear on the pricing growth? And then on the ready mix chart, I guess pricing gains in 3rd quarter decelerated Rather sharply, can you talk about how you're seeing market conditions maybe evolving in Salt Lake City and Houston? And how is the addition of Phoenix maybe Contributing to the change in ASP growth. Thanks. Speaker 300:43:25Yes. I'll let Scott will talk a little bit about the ags growth here in the Q4 impact. Speaker 400:43:31Okay. David, just on the aggs, the pricing, when you think about Q4, the comp does get harder. If you remember last Our price increase in Q4 was about 13.9%. So that does get harder. So you won't see quite the price increase in Q4, But we still think the mid teens or low teens is attainable on the full year. Speaker 1100:43:57Was that the? Speaker 300:43:58Yes. Let me talk about the ready mix side. So all of our markets have held up really well, honestly, with 20% down Good morning, David. I've been extremely impressed by our ready mixed team. They've managed to keep in that 20s, which we've done. Speaker 300:44:13And I've said The Summit is very good in the downstream and we're even better today because we're in the right markets with leading assets and leading positions And we've added our centers of excellence where we've been able to expand those margins as well. So I wouldn't focus too much on the pricing in those ready mix markets because we're really just Pass through and that we always add a little bit of margin. It's much more important to be in the right markets to be able to add our center of value proposition onto our margins to expand, but the pricing is going to go a little bit with where cement goes in those various markets and or Short load fees, etcetera, that we're very focused on. Speaker 400:44:50I might add one more thing, David, just on the ag pricing too. When you think of the seasonality, As we get into the colder months, that's where you start shifting away from your clean stone, your higher ASP clean stone and more to your base materials. So that The mix will actually bring that down just inherently a bit too in that Q4. Speaker 100:45:11Okay. Thanks very much. Speaker 300:45:13Thanks, David. Operator00:45:17All right. Our next question comes from the line of Adam Thalhiner. Adam, please go ahead. Speaker 1200:45:24Hey, good morning. Nice quarter. Speaker 300:45:26Thanks, Adam. Speaker 1200:45:28And can you talk about seasonality in the Cement segment? I wasn't modeling Margins down that much sequentially. So I'm just wondering if that was a maintenance timing issue and what's your outlook for cement margins is? Speaker 300:45:43Yes. I would talk if you're talking about seasonality in cement, I would say if you're looking at Q3 volumes, The impact there, we always got to watch the amount of import we did 1 year versus the next. So if you look, our volumes were down in Q3 in cement and the major reason for that was About 50% of that decline was because we had more imports last year. We had more of those LNG projects, which of course is dilutive to margin, good for dollars EBITDA. On the other side, we had a little bit of weather in Minnesota and Iowa. Speaker 300:46:12So that's why you see kind of volumes down in Q3, but They're just kind of one time events. I would say our ability to continue to expand margins in Cement is very strong. On a year on year basis, we were up 2 60 basis This team has done a phenomenal job of increasing towards that trailing 12 month North Star objective 40% EBITDA margins, this quarter we were at 37.6% on a trailing 12 month basis, And that's from the value pricing that we talked about a lot earlier in the call, but it's also about the investments we've done around improving what you call our operational Equipment effectiveness, which for Davenport were best in class. Hannibal has a ways to go to get to that 85%. Our team is very focused on that. Speaker 300:46:56We also invested in the Davenport Storage Dome, which has helped our operational costs. We continue to drive PLC across all of our network. And then As you go into 'twenty four, think about Green America Recycling. We're expanding that in Davenport with our Flex Fuel technology investment, which will allow us again to continue to expand margins. So all those four key elements of pricing, operational excellence, Green America And PLC will allow us to continue to have that strong pricing capability and supply to underpin by strong supply demand dynamic in cement, Adam. Speaker 1000:47:30Thanks, Ann. Speaker 300:47:32Thanks. Operator00:47:35All right. Our next question comes from the line of Brent Thielman from Davidson. Brent, please go ahead. Speaker 200:47:43Hey, great. Thanks. Just had a question on aggregates and maybe just the different cost Buckets, I think you indicated the costs are hanging around higher for longer. Maybe where are you seeing some abatement and where are you seeing some influence For a higher cost in that business going forward. Speaker 400:48:03Brent, this is Scott. I'll answer that one. When you think of ag cost, your 2 biggest cost drivers there is your labor and your equipment cost. And frankly, Brent, we're not seeing those abate. Those are still driving up there. Speaker 400:48:20And like I commented earlier, the labor is up there pushing Double digit. And on your equipment cost, the fuel earlier this year, we thought we were going to get some tailwind on fuel. And unfortunately, that's kind of went away since fuel costs have upticked. And as you know, our ag business is very dependent on diesel fuel. So where we thought we were going to get maybe an $8,000,000 $6,000,000 to $8,000,000 tailwind on that is actually probably more like a $2,000,000 and most of that's already been realized. Speaker 400:48:53So don't anticipate any tailwind on the fuel costs going into the Q4 either. So not a lot of abatement Going into Q4, we are hopeful for next year that labor will start coming off and we're hearing the signs of that. We're just waiting for it to see waiting to see it pass through now. Speaker 200:49:18Great. Thank you. Speaker 300:49:20Thanks, Brent. Operator00:49:22Our next question comes from the line of Mike Dahl from RBC. Mike, please go ahead. Speaker 200:49:29Thanks for taking my question. Just to stick with the cost side, I know there's a lot of moving pieces here, but based on what you're seeing Today, now I'm betting into your Q4 guide, you've talked about it moderating or you think it will moderate In 2024, can you give us any sort of finer point on what your current planning assumption would suggest For cost increases in both Ags and Cement for 2024? Speaker 400:49:59Yes, Mike. First of all, we are hopeful in 2024 that we will see that moderation and we're actually going through our budgets right now. And we are seeing some cost actually barging cost is one that's actually surprised us to see the increases we're hearing in the barging side Along the Mississippi River. So we're going to accommodate that in our budget for next year. But overall, on the specific assumptions, we're in that mid single digits right now. Speaker 400:50:32But as Anne mentioned, we'll have a finer point on that when we come back to you in February On the broader? Speaker 300:50:39Yes. I think just to give you a word of magnitude, Mike, one of the reasons why we're going out with a very strong price increase in cement With $15 a tonnage because our barge costs are up about 9% to 10% even with mitigation by our team. So We're working hard on that. We continue, as Scott said, to see cost inflation, but we do think it will moderate somewhat next year. Well, we're going to continue with a strong pricing stance and control what we can control on our costs, really focus on operational excellence on both Ags and Cement And really drive our costs down. Speaker 300:51:10That's what we can control in 2024. Speaker 200:51:15Okay. Thanks, Dan. Thanks a lot. Speaker 300:51:17Thanks, Mike. Operator00:51:19All right. Our next question comes from the line of Jerry Revich from Goldman Sachs. Jerry, please go ahead. Speaker 1100:51:27Yes. Hi, good morning, everyone. Speaker 300:51:29Good morning, Ken. Speaker 1100:51:30Hi. I'm wondering if we just talk about The margin potential of the products business as it stands today and what the opportunity is for margin expansion From here, assuming flattish volumes, historically, this business at some point has gotten into the high 20s on a cash gross profit margin basis, Obviously, the portfolio has evolved. So just wondering for that part of the portfolio specifically, how do you feel about the opportunity to push Price ahead of costs over the medium term. Speaker 300:52:07Yes. So one of the things we do like, so this is our downstream businesses Essentially, and if you look at both, let's take them separately. So our ready mix business, we've clearly shown our ability in the past to do 20s and we're good at ready We're just very good at the downstream. And with the portfolio work that we've done, I wouldn't have said this 2 years ago, with the portfolio work we've done, we're in the right markets with advantaged assets And we have leading positions. The other thing our team has done a lot of work on in Ready Mix is we very much lead in innovation. Speaker 300:52:36The team has done a lot of work around AI, around the ad mixtures. So the value proposition that they bring and the ability to expand margins in these strong markets is where we see that ability to pop that 20%. But very importantly, all these downstream business have heroic and that's why we're in these markets and that's a key part. The other point I Point you to is on our asphalt and construction. They're very much upheld by very strong public demand right now. Speaker 300:53:02Liquid asphalt has moderated off a little bit. So that price net of cost And asphalt, you can see that pop in the margin. So I'm very confident that our team will at least be able to continue to add points in margin And both of our downstream business because of where we play and because of our focus on our improvement of our operational capability and value proposition to the customer. Speaker 1100:53:26Super. Thanks. Speaker 1000:53:28Thanks, Jared. Operator00:53:30All right. Our next question comes from the line of Keith Hughes from Truist. Keith, please go ahead. Speaker 200:53:37Thank you. On the aggregate pricing in the 4th quarter guide, I see historically you're talking about have some seasonal declines from 3rd to 4th. Given these numbers, this looks particularly large. Is there something unusual going on this year that you're going to see more of a seasonal impact than you would in past years? Speaker 300:53:57No, I mean, I'll let Scott go to specifics if you want, but honestly, it's not any different. We always see this seasonality in Q4 Around pricing, so it can get a little bumpy around that, but our pricing is still very strong. If you think about our aggregates pricing from the mid year price increases, At the top end of that, our carryover ags pricing will be in that mid single digit, but it was very strong execution. So I wouldn't read anything into that Q4 other than our typical seasonality. Scott, would you like to add in? Speaker 300:54:28I don't Speaker 400:54:28think so, Ann. I think we're on track for That low teens and the mid teens on the full year. And yes, we take a More of a conservative approach on that, with the mix, but I don't anticipate it to be a drop here. We're going to continue the pricing. And it will drop to the margins. Speaker 400:54:50We'll continue as we've said, we're targeting overall EBITDA margins of a record of 23.5 Speaker 300:55:00Percent to 24%. Yes. Keith, as we've seen the compounding effect of the strong pricing over the last That's why you're starting to see a lot of these margins pop. So I wouldn't over index on Q4 at all. That's just kind of a seasonality thing. Speaker 300:55:15We'll exit low teens or better And continue to have strong pricing in our January 1 price increases. The teams are out there with very strong price increases of mid single digit to high. Speaker 200:55:26Okay. What's one other one on cement? You talked about why the volume was down in the 3rd. Are we going to see some of that in the 4th as well in terms of the way volumes are? Speaker 300:55:38Q4 in cement will see the same seasonality that we've always seen. They'll be down a little bit Just because of the river levels, etcetera, we're doing everything to meet our customers' demand, but the barges will be lower than Operator00:55:52Yes. Speaker 400:55:53I would comment just on the import volume will be a change from the prior year. We did have a heavier import Volume last year, which we won't have, which as we've talked about in the past, we use that as kind of a flex for those projects Ann talked about Earlier, the LNG projects that we target down in the Gulf Coast. Speaker 200:56:16Okay, great. Thank you. Thank Speaker 300:56:18you. Thank you. Operator00:56:20All right. There are no further questions at this time. So I'd like to turn the call back over to Ann Noonan for closing remarks. Speaker 300:56:26Thank you, Jeremy. Once again, I'd like to thank our Summit team for putting us on course for a record setting year financially and for moving us forward strategically. Our strong Q3 results underpin our belief that our portfolio is stronger, more resilient and we are executing across the business. At this point, we remain laser focused on meeting or beating our 2023 commitments, setting ourselves up for continued success in 2024, while at the same time progressing the value accretive Argos combination. I want to thank you for joining our call today. Speaker 300:56:58We look forward to our continued dialogueRead morePowered by