Vulcan Materials Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2024

There are 13 speakers on the call.

Operator

Good morning, and welcome everyone to the Vulcan Materials Company First Quarter 2024 Earnings Call. My name is Jamie, and I will be your conference call coordinator today. Please be reminded that today's call is being recorded and will be available for replay later today at the company's website. All lines have been placed in a listen only mode. After the company's prepared remarks, there will be a question and answer session.

Operator

Now I will turn the call over to your host, Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Speaker 1

Thank you, operator, and good morning, everyone. With me today are Tom Hill, Chairman and CEO and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, vulcanmaterials.com. Please be reminded that today's discussion may include forward looking statements, which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission.

Speaker 1

Reconciliations of non GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation and other SEC filings. During the Q and A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available. And with that, I'll turn the call over to Tom.

Speaker 2

Thank you, Mark, and thank all of you for joining our Vulcan Materials earnings call this morning. Our Q1 results moved us towards delivering on a 4th consecutive year of double digit adjusted EBITDA growth. Although the weather was unusually cold and wet across many geographies for much of the quarter, our teams executed well and improved our aggregate cash gross profit per ton by 10%. Their commitment to our Vulcan we have selling and Vulcan we have operating disciplines is driving solid results. In the quarter, we generated $323,000,000 of adjusted EBITDA and expanded our adjusted EBITDA margin.

Speaker 2

Importantly, several key trends continued: pricing momentum, cost deceleration, unit profitability expansion, robust cash generation, disciplined capital allocation and return on invested capital improvement. In the aggregates segment, year over year shipments declined by 7%, but the durability of our aggregates business and the consistency of our execution stood out in a weather impacted quarter. We again improved our trailing 12 months average cash gross profit per ton, pushing it to $9.66 per ton and making further progress toward our current $11 to $12 target. The pricing environment remains positive and year over year agris cash cost of sales continues to moderate. Aggregates freight and adjusted price improved 10% in the quarter and increased $1.25 per ton sequentially from the 4th quarter, a clear illustration of the success of January increases and the continuous execution of our Vulcan way of selling disciplines.

Speaker 2

Our Q1 cash cost of sales performance resulted in a 4th consecutive quarter of trailing 12 months cost deceleration and improving sequentially by another 230 basis points. Our relentless focus on improving efficiencies in our plants through our Vulcan way of operating disciplines remains a key driver of managing costs, expanding unit profitability and ultimately generating attractive free cash flow. There is a healthy pipeline of opportunities to deploy this free cash flow for both attractive acquisitions and complementary strategic greenfield development. These targeted opportunities are at varying stages, but as an example, earlier this week we closed on a bolt on agris and asphalt acquisition in Alabama, a top ten state. I'm proud of how our teams continue to execute our 2 pronged growth strategy.

Speaker 2

They are focused on expanding our reach in addition to enhancing our core with consistent expansion of unit profitability by controlling what we can control even in a dynamic macro environment and demand environment. On the demand side, I want to provide a few comments about each end use starting with private demand and then moving to public. Momentum in single family continues to accelerate across our footprint and points to growth in 2024. However, we continue to expect weaker multifamily residential construction to largely offset the single family improvement this year. Overall affordability and elevated interest rates remains a challenge, but the underlying fundamentals of population growth and low inventories in Vulcan markets support the recovery in residential construction.

Speaker 2

An improving residential backdrop is also a positive sign for future activity in certain categories of non residential construction. And recent data has shown some signs of stabilization in overall starts. However, the landscape continues to vary across categories. As expected, continued moderation in warehouse starts will be the biggest headwind to private non residential demand this year. Currently, light commercial activity remains weak, but over time we expected to follow the positive trends in single family housing.

Speaker 2

We continue to see and capitalize on opportunities in the manufacturing category. Our unmatched southeastern footprint and unique logistics capabilities positions us well to service these large aggregate intensive projects. Our footprint is also an advantage on the public side with over 2 thirds of federal highway spending allocated to Vulcan States. Additionally, other public infrastructure activity which benefits from IIJ funding is growing faster in Vulcan States than the country as a whole. A sustained elevated level of highway starts of over $100,000,000,000 coupled with record 2024 state budgets supports healthy growth in highway and infrastructure demand both in 2024 and for the next several years.

Speaker 2

Now I'll turn the call over to Mary Andrews for some additional commentary on our Q1. Mary Andrews?

Speaker 3

Thanks, Tom, and good morning. Tom discussed our solid aggregates results in the quarter and shared some important ongoing trends. In addition to providing a few more details about our Q1 results, I'd like to first expound upon 4 of the trends Tom highlighted early in his remarks: unit profitability expansion, robust cash generation, disciplined capital allocation and return on invested capital improvements. For the last four quarters, we have consistently expanded our trailing 12 months unit profitability in all three of our operating segments, increasing cash unit profitability by nearly $1.50 per ton in aggregate, almost $6 per ton in asphalt and nearly $5 per cubic yard in concrete. Our trailing 12 months gross margin has also steadily improved in each product line.

Speaker 3

This organic growth is underpinned by our daily focus on execution and driving results through our Vulcan Way of selling and Vulcan Way of operating disciplines. Better unit profitability yields better free cash flow. Our free cash flow conversion over the last 5 years has averaged over 90%, enabling us to strategically allocate capital to reinvest in our franchise, grow our business and return cash to shareholders. During the quarter, we invested $103,000,000 in capital expenditures and returned $81,000,000 to shareholders through dividends and share repurchases. We continue to expect to spend between $625,000,000 $675,000,000 on capital expenditures for the full year.

Speaker 3

Our current balance sheet positions us well to continue to deploy capital to each of our priorities. At the end of the first quarter, our net debt to adjusted EBITDA leverage was 1.5 times with $300,000,000 of cash on hand following the March 1 redemption of our 2026 senior notes at par for $550,000,000 liquidity position and financial flexibility are competitive strength as we look to continue to grow and create value for our shareholders. Over the last 12 months, we've achieved a 260 basis points improvement in return on invested capital. Invested capital has increased less than 1%, while adjusted EBITDA has improved 20%. Adjusted EBITDA margin has also improved by 3.50 basis points through consistent operational execution and disciplined SAG cost management.

Speaker 3

SAG expenses in the quarter were in line with our expectations and we continue to expect to spend between $550,000,000 $560,000,000 for the full year. Most importantly, we reaffirm our expectations of delivering adjusted EBITDA between $2,150,000,000 $2,300,000,000 for the full year. At the midpoint, a double digit year over year improvement for a 4th consecutive year. I'll now turn the call back over to Tom to provide a few closing remarks.

Speaker 2

Thank you, Mary Andrews. At Vulcan, our number one priority will always be our people, keeping them safe and fostering our Vulcan culture. They are the foundation of our great company. As a team, we are focused on the daily execution of our Vulcan way of selling and Vulcan way of operating disciplines to ensure attractive cash generation in any macro backdrop. We will be strategic and disciplined in allocating capital to continue to grow our business and deliver value for our shareholders.

Speaker 2

And now, Marion Hughes and I will be happy to take your questions.

Operator

Thank We'll take our first question from Stanley Elliott with Stifel.

Speaker 4

Hey, good morning, Tom. Good morning, Mary Andrews. Thank you for the question. Tom and I start the year, very clean quarter despite kind of some of the weather issues I think a lot of people had and some of the comp issues. Can you talk about how the rest of the year plays out, thinking about this more on like maybe from a demand standpoint?

Speaker 4

And then to any extent commentary you could share on April would be great?

Speaker 2

Sure. Looking at the quarter itself, I'd call the quarter volumes in the quarter as expected with a margin of error. We had less shipping days in March, but about the same amount of shipping days in the quarter overall. January was a slow start really due to wet weather and cold weather. February March, I'd call a bit better, better on a daily shipping basis.

Speaker 2

So Q1, all things considered as expected. As we look forward to the rest of the year, I don't see any real change in our thinking on demand. We'd still guide to the flat to down 4 and the dynamics are very similar to what we said last quarter, headwinds in non residential, some challenges in multifamily. We've got recovering single family construction and growing public demand. I think that our position, our superior position in Southeast really helps the footprint makes a difference and that Southeastern market is probably the healthiest market in the country.

Speaker 2

I think our Vulcan way of selling disciplines and tools are very helpful with this. So at this point, I'd call it confident from a volume outlook. As far as going into the Q2, I'd call it this way, when the sun comes out, we're shipping very well.

Speaker 4

Great guys. That's nice to hear. Thanks so much and best of luck.

Speaker 5

Thank you. Thanks team.

Operator

We'll go next to Jonathan Bentonhausen with Truist Securities.

Speaker 6

Hey guys, thanks for taking my question. I'm on for Q2 this morning. I'm curious about your outlook on midyear pricing. You had conversations with your customers about mid years and also wondering how much

Speaker 7

of that is baked into your guide?

Speaker 2

Yeah, I'd start off with saying that I think the fundamentals in pricing remain very good and very healthy. As you saw we had a solid start in Q1 with prices little north of 10%. That was really across every market. And so it's a really good start and supports our full year guidance. Mid year price increases are not in our guidance at this point.

Speaker 2

We're having those mid year price discussions right now, so it's a little too early to call. Remember that mid years will be good for 2024, but they're going to be even better for 2025. So our teams are working really hard on this and I think I'm sure they'll deliver. The most important thing though I think is that the fundamentals for pricing remain very healthy. And so I think when it comes to mid years we'll revisit pricing guidance in August and give you an update.

Speaker 3

And one more thought on price. We always like to point out how important it is to remember that regardless of what the level of pricing is, the key is really how much price we're able to take to the bottom line. In the Q1, we achieved 10% improvement in cash gross profit per ton and some aggregate margin expansion even given the lower volume quarter due to the weather. Overall, gross margin also improved by 140 basis points and adjusted EBITDA margin expanded as well. So importantly, we expect this margin expansion to continue and to improve further through the balance of

Speaker 2

the year.

Speaker 6

Perfect. Thanks for the color.

Speaker 2

Thank you.

Operator

We'll go now to Anthony Pettinari with Citi.

Speaker 2

Good morning. Good morning, Anthony. Hey, I'm wondering if you could talk a little bit more about how costs have kind of been trending among your major cost categories. If you can touch on maybe some of the non energy categories. And then also just with higher diesel, how that's impacted conversations around price increases or just how you think about the full year from that context?

Speaker 2

Yes, I think the Q1 for cost is always tricky as volumes and weather definitely had an impact on cost in the Q1.

Speaker 8

That said,

Speaker 2

I think we're still comfortable with the cost guidance of up mid single digit for the full year. As always, we would get you to look at cost on a trailing 12 month basis because this is choppy on quarter to quarter. And if you look back on a trailing 12 month basis over the last year, cost increases have fallen from I'd say mid teens to single digit. So as we said in the prepared remarks, we've seen 4 quarters of decelerating cost and as we march through this year, we should see that those increases decline as we march through the year, next quarter better, next quarter better, next quarter better as we saw over the last 4 quarters. So I think we're on a good path to that mid single digit cost for the full year.

Speaker 2

As far as different pieces of this, diesel was probably a slight tailwind in the quarter. What stays up is parts and services remain elevated, but our comps are getting easier. And I think that we also do the bulk of operating, we're improving our operating efficiencies and we'll continue over the next 2 years with that to offset those inflated parts and services. So I think we're in a good place and I think with the teams are working through this and I'm pleased with what I see.

Speaker 3

Yes. And in terms of diesel, Anthony, we do assume in our plan that it will move somewhat higher through the rest of the year. And you're right, while diesel prices for us, well, they're always hard to predict and that they can really be a good thing in this business since since we have the ability to catch it with pricing as it goes up and also take advantage of it when it goes down.

Speaker 2

Got it. Got it. That's very helpful. I'll turn it over.

Speaker 9

Thank you.

Operator

We'll go now to Kathryn Thompson with Thompson Research Group.

Speaker 2

Good morning, Kathryn.

Speaker 5

Good morning. Good morning. Thank you for taking my question today. Stepping back just looking at the bigger picture in last year you divested mainly downstream ops just in terms of optimizing portfolio. As you look into 2024 and beyond, what are your priorities in terms of overall Vulcan Materials and product mix?

Speaker 5

And how does this mix strategy how do you think about that in against the back drop of a broad reindustrialization of the U. S. And putting Vulcan in the best position possible? Thank you.

Speaker 2

Well, as always, we would tell you that it's aggregates and we are an aggregates company. We have the highest percentage of EBITDA in aggregates of probably anybody in the sector and that's what we do. Now we have strategic downstream and as we always say, it's portfolio. We look at it as a portfolio and if one of those sectors or geographies doesn't earn appropriate return or is worth some more to somebody else, we'll divest of it and plow that money back into our aggregates business. So I think that nothing's changed as far as how we look at the world and as we look at the growth part of M and A in Greenfields, it will be aggregates focused.

Speaker 5

Okay. Thank you so much.

Speaker 2

Thank you.

Operator

We'll turn now to Trey Grooms with Stephens.

Speaker 2

Hi, Trey. Good morning.

Speaker 7

Hey, good morning. I kind of want to follow-up on the comment, Mary Andrews, you had earlier about cash gross profit per ton. Clearly, it was up 10% in the quarter. I think you were maybe initially looking for mid- to high single digit improvements, so maybe a little better there. And then full year is mid I think looking for mid teens type of improvement.

Speaker 7

So I guess the first one is kind of how we see that progress. I think it's going to accelerate somewhat as we go through the year, but any way to help us kind of think about that as we progress through the year to get to that mid teens for the full year? And then maybe stepping back a little bit longer term, these are clearly better numbers of better performance than the historical kind of average of profitability improvement. How are you thinking about that longer term? Do you think it has the opportunity to kind of see a long term better kind of consistent improvement versus kind of historicals?

Speaker 2

Yes. Let me take your last question first about long term. This is why we have developed the Vulcan Web selling and Vulcan Web operating disciplines. I think they secure our ability to improve cash gross profit per ton, which we've done on a trailing month basis every quarter except for one flat for 5 years. That's pretty good consistency even with some of the dynamics that are out there.

Speaker 2

So I think that overall in history we're in a better versus history we're in a better place for higher improvements in cash gross profit per ton and that's not by accident, that's by design and we've been working on that now for years and it is working and those tools are only getting better or we're getting better implementing them. I think as far as this year is concerned, as we talked about as we progress through the year, you've got cost increases decelerating and as inflation comps get easier and our operating efficiencies get better. So that's one piece of that. And then I think as we march through the year, we have the ability to continue to raise prices both in what we do on project work, but also fixed plant. So you put all that together, I think as we progress in the year, we have the opportunity to continue to march our unit margins improvement through the year.

Speaker 7

Okay, got it. All right. Thank you very much. I'll pass it on. Sure.

Operator

We'll go next to Jerry Revich with Goldman Sachs.

Speaker 4

Hi, Jerry.

Speaker 9

Hi, Tom, Mary, Andrews, Mark, good morning, everyone. I'm wondering if you could just talk about how you expect the pricing cadence to play out this year over the past couple of years, Q3 versus Q2, we saw a big $0.60 type step up in pricing. Is that feels like that's what you're assuming this year to get to the guidance, but maybe Mary Andrews, you could expand on how you expect the cadence to play out and how much higher could that be if we do implement midyear price increases? Thank you.

Speaker 3

Yes, sure. I would expect a cadence of, Gerry, likely some sequential growth in the second quarter, more in the Q3 as you referenced. And then we would typically see less in the 4th quarter due mostly to seasonality. And the magnitude of the mid years, which as Tom referenced earlier, it's just too early to call at this point, but that's what would influence that Q3 sequential improvement and to what level that gets and where we fall out overall.

Speaker 9

Okay. And then in terms of just the exit rate with double digit pricing growth exiting the year and potential mid years on top of it. I guess that suggests the starting point for 'twenty five should be in the high single digit pricing range just from a carryover effect. And I just want to make sure that that's consistent with how you folks are thinking about it.

Speaker 2

Yes. I think when it comes to mid years, we're going to call that when we earn it. And I think we feel good about mid years and I think those conversations are going fine. As far as I said, they mean a lot for 'twenty five. I do think it's a bit early to call what 'twenty five is going to start out at.

Speaker 2

We got to get mid years under our belt and take a look at what we're going to do in the 1st part of 'twenty five. But it's a I do think that I feel good about the mid years and I think it is a good omen for 2025 pricing. Okay. Thank you. Sure.

Operator

Next we'll hear from Mike Dahl with RBC Capital Markets.

Speaker 2

Hey, Mike.

Speaker 8

Hey, Tom. Hey, Andrew. Thanks for taking the question. I'm going to follow-up again on kind of mid years. I think last quarter, you talked about how those conversations would be April conversations.

Speaker 8

So maybe it's just semantics and you want to have those really finalized before you communicate it to us. But I'm wondering if just given some of the wet weather to start the year, if some of those conversations perhaps got pushed out a little bit relative to your expectations or how you characterize that and any other regional differences in pricing that you may be experiencing relative to what you thought coming into the year?

Speaker 2

I don't think weather had anything to do with it. I think you may have read a little too much into the April month comment. You send the letters out in April, you spend May having those conversations and you finalize them end of May kind of beginning of June. So I don't see anything different in timing or sequencing versus what we did last year. Like I said, I think I'm encouraged by the conversations that we're having and I think that we will implement a solid mid year price increases.

Speaker 2

But I wouldn't read anything into the comment on weather versus excuse me, comment on April versus how this goes. It's really kind of a process. We introduced it in April, have a conversations in May and again finalize it in June.

Speaker 3

And one other thought on pricing for the rest of the year is that we've had positive momentum over the last 12 months in our bid work and that should also be a good catalyst for us from where we ended Q1 to where we expect to be for the full year in addition to whatever is realized on midyear increases.

Speaker 8

Okay, great. Thanks for that. Sure.

Operator

We'll go now to Garik Schmoss with Loop Capital.

Speaker 8

Hi, I wanted to ask on the M and A environment. If you could provide a little bit more color on the bolt on that you just completed? And is it possible at all the maybe size how much you anticipate spending on acquisitions this year and the types of deals you're looking at?

Speaker 2

Yes. As you saw, we had a small but strategic bolt on kind of northeast of Birmingham up towards Guntersville. Is about 2,000,000 tons of aggregates and just under half 1000000 tons of asphalt fits us well. I think as you look at the full year or the next 12 months, M and A outlook is quite good. So more to come.

Speaker 2

And I'm having a lot of those conversations and very encouraged by it. I think as always M and A will be aggregates led and conducted with discipline, but I think we feel very confident that this will be a busy M and A year for us.

Speaker 8

Okay. Very good. Thank you. Thank you.

Speaker 5

And now we'll go

Operator

to David MacGregor with Longbow Research.

Speaker 4

Good morning, everyone. Thanks for taking

Speaker 9

the questions. Tom, I guess I wanted to kind of tap your many years of experience in this business with respect to the second half this year and election years. And in an election year, do you find that projects kind of accelerate as people kind of focus on pork? Or do you think things maybe slow down a little bit as people get a little more tentative and wait to see how the election plays out? I'm just trying to get a sense of how you're thinking about the risk around second half volumes in public sector spending.

Speaker 2

I don't see, I'm a take it in pieces. Overall, I don't see any impact with election year on our demand. I think that our guidance is taking the factors into account. I don't think election year moves the needle on that. I think on the public side it is really the DOTs trying to get highways dollars into lettings and into projects and I think that's happening.

Speaker 2

And I think we call that as you know mid single digit on the private side. I think as we said, you've got some challenges on non res and multi and I think that single family is recovering with health. So that's how I look at it with not much impact from the election year.

Speaker 9

Thanks very much.

Speaker 8

Thank you.

Operator

And next we have Timna Tanners with Wolfe Research.

Speaker 2

Good morning, Timna.

Speaker 10

Good morning. Hey, good morning. Thanks a lot. I wanted to ask about a little bit more on the demand side as well. How is the government infrastructure dollars, how are they flowing through?

Speaker 10

How are you seeing the pace of that activity? Any evidence of some of those larger IRA projects? And any sign that data centers could make much of a dent against the decline in warehouse demand? Thanks.

Speaker 2

Yes. I will start with highways. We're seeing the IIJ money and the local funds flow into lettings. At this point, we'd stick with that mid single digit growth on the public side this year, which is both non highway infrastructure and highways. And we see that kind of steady growth for years to come.

Speaker 2

We're also are seeing additional state funding come into play. We got 3 states with some big dollars. Tennessee added $3,000,000,000 Florida I think added $4,000,000,000 and Georgia just added $1,500,000,000 to their funding. I think when it comes to public demand, slow and steady wins the race on this and DOTs will continue to work hard to get those dollars into lettings. Okay.

Speaker 2

And then DOTs will continue to work hard to get those dollars into Letix.

Speaker 3

And Timna, you also mentioned data centers which have really provided some good opportunities for us in some markets. I can think of some projects we've booked recently in Virginia, Alabama, Georgia and it's obviously a subject that's getting a lot of press. But I do think it's important to remember that the square footage according to Dodge for data centers is only a low single digit percentage of total non res starts. So as you know, there are a lot of different categories and dynamics in private non res. So data centers may not move the needle overall, but overall for us in non res right so far it's playing out as we expected with kind of all those different dynamics.

Speaker 10

Okay, helpful. I'll leave it there. Thanks again.

Operator

We'll go now to Tyler Brown with Raymond James.

Speaker 2

Hi, Tyler. Good morning.

Speaker 11

Good morning. Hey. So, you've done a great job on unit margins, but I am curious what you're seeing on the plant productivity side. Because if I go back on to the working way of operating, some of the technology rollouts in the plants that you talked about at the Analyst Day, I'm just kind of curious how those are tracking and if you're seeing improved plant utilization and is that kind of a continued good guide into 2025?

Speaker 2

Yes. I think that where we are on that, you're talking about the process intelligence on those plants. As we said, we did that in our top 100 plants, which is about 7% of our roughly 7% of our production. The tools are all there. We're about 25%, 30% are actually of those plants are actually fully utilizing those tools and there's a lot of work that has to go into that to get the screens right and everybody trained.

Speaker 2

In those we're seeing marked progress as we march through kind of this year, maybe the 1st part of next year we'll get up to 100% of those, but and as we do we'll see improvement. So where it's working, I think it's working well, maybe a little slower than I would have wanted it to go through as far as full implementation, but we're getting there and I think we'll see that as you said, we'll see progress of that show up in our numbers in 'twenty four and in 'twenty five and into 'twenty six to be honest with you. So, so far so good and we'll keep plugging that.

Speaker 11

Yes, perfect. Thank you.

Speaker 2

Thank you.

Operator

And now we'll hear from Adam Thalhimer with Thomas Davis.

Speaker 5

Hi, Adam. Good morning.

Speaker 4

Good morning, guys. Great quarter.

Speaker 2

Thank you. Thank you.

Speaker 4

Hey, on the demand side, I guess, I wanted to hit that as well. There's a lot of angst out there about just private construction demand in general. Are you guys seeing any incremental weakness or strength there?

Speaker 2

Well, I think it kind of depends on which part of it you're talking about. I'll take them a piece at a time. We're seeing on the non res side you've got weakness in warehouses and kind of traditional light non res. That being said, the warehouses, as you look at starts, they are the fall is decelerating. It's getting better as you look at starts on the short term basis.

Speaker 2

So hopefully that will get better. You've got strength in large manufacturing projects, which we've got 11 of those big projects and we're shipping on them now and I think more to come. So it's too early to call whether it's getting better or getting worse, but we'll that's kind of how we call it for on the non res side. On highways, excuse me, on housing, I would tell you the weakness is in multifamily and continues that I think that doesn't last too long. We'll be past that I think in 2025.

Speaker 2

And then single family res is recovering and I think recovering with some momentum.

Speaker 8

Sounds pretty good. Thanks Tom. Thank you.

Operator

We'll go now to Phil Ng with Jefferies.

Speaker 8

Hi Phil. Hi Phil.

Speaker 4

Congrats on a really strong quarter.

Speaker 11

Thank you.

Speaker 4

I had a question. I mean, a competitor of yours just closed on a deal in the Southeast and they've already announced price increases for mid years in those markets and called out how pricing there is perhaps below their corporate average. I've always thought of the Southeast as actually pretty good pricing market. Do you see that dynamic improving the backdrop on pricing, anything on the structure side of things? And then similarly, California, I think pricing still kind of below what that market probably should warrant just given the cost of demand profile?

Speaker 4

Any thoughts on the momentum on pricing around California as well?

Speaker 2

Yeah, I think we got to be thoughtful when we call out pricing on individual markets. But that being said, the Southeast is very good pricing, some of the best we have and I think that if you look at the western part of the United States, I think we're seeing marked improvement in pricing and we'll continue that momentum will continue. Okay.

Speaker 8

Appreciate the color.

Operator

And now we'll go to Angelo Castillo with Morgan Stanley.

Speaker 2

Good morning. Hi, thanks.

Speaker 12

Good morning. Thanks for taking my question. Just wanted to maybe expand a little bit on some of the dynamics. First, just a quick clarifier. For pricing, is the assumption still 10% to 12% given the kind of unchanged top line?

Speaker 12

And then you mentioned kind of no impact from election year. Could you maybe talk about some of the other dynamics that are at play here in terms of the weakness you're seeing in non resi and the just interest rate environment and kind of some of those challenges? Is that having any kind of impact on your mid years? It sounds like the discussions there have been quite constructive. So just any kind of color there would be helpful.

Speaker 2

Yes. I think you're seeing improvement. We're seeing improvement in single family, which is always helpful. I think the most important thing is that you see growth in public demand, which is so visible and it is a very good foundation for pricing. I don't know that interest rates have had a big impact on pricing.

Speaker 2

Obviously they'll have they've had impacts on demand and volumes. But I think so I think that and I don't think that the election year has had any impact on pricing dynamics. So I think the fact that we've got strong very visible public demand for a long time is good. I think you've got some improvement in revs, all that is helping the pricing dynamics and I think we feel pretty good about a midyear at this point.

Speaker 12

Very helpful. Thank you.

Speaker 9

Thank you.

Operator

We'll go now to Michael Dudas with Vertical Research.

Speaker 2

Good morning. Good morning, Mary Andrews, Mark, Tom.

Speaker 5

Good morning.

Speaker 2

So I've had an interesting highlight on 67% of your of the IIJA dollars are going to the Vulcan states.

Speaker 9

So you can talk a little

Speaker 2

bit about what states is that matching up with some of the DOT budgets in some of your important states and what it may be throughout the business, what regions or states maybe are lagging a bit that may have some opportunity to catch up as we move into the next several quarters? Well, I think a big part of that is you got the big DOTs, Caltrans and TexDOT and Georgia DOT and Virginia, obviously in Tennessee, obviously have excellent funding both state and local. I think that probably the most the best the DOT is best at getting money through at this point because they started earlier with their own funding is Texas. Georgia had some struggles, but I think is catching up with that. So and I think Caltrans is doing a good job getting their money in.

Speaker 2

Illinois, I think, has struggled getting some of their funding out. So that's how I call it. But I think they're all plugging at it and I think they're all getting better at it. It is coming through with improvement in lettings. I think that all of them are going through the 25 budgeting right now, a little too early to call, but I don't see them going down.

Speaker 2

I would expect most of them to go up. So as we said, I think that it's a long road. I think it's steady growth in public and it's not just highways, it's also the infrastructure, which is ports and airports and water and sewage and that will be substantial growth I think this year and for years to come.

Speaker 9

Thank you, Tom. Thank you.

Operator

And at this time, that will conclude our question and answer session. I'd like to turn the call back over to Tom Hill, Chief Executive Officer, any additional or closing comments.

Speaker 2

Thank all of you for your time this morning and your interest and support of Vulcan Materials Company. We hope you and your families are healthy and safe and stay that way through the quarter and we look forward to talking to you over the next few months. Thanks. Thank you.

Operator

Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time.

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Earnings Conference Call
Vulcan Materials Q1 2024
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