Vulcan(US:VMC)2023-02-16 21:32Financial Data and Key Metrics Changes - The company generated $375 million of adjusted EBITDA in Q4 2022, with an 11% year-over-year growth in aggregates cash gross profit per ton despite a 6% decline in aggregates shipments [7][9] - For the full year, adjusted EBITDA improved by 12%, with all segments posting year-over-year growth in gross profit [9][24] - The net debt to adjusted EBITDA ratio was 2.3 times at year-end, indicating a reduction in leverage back to the target range of 2 to 2.5 times [24] Business Line Data and Key Metrics Changes - In the aggregates segment, gross profit improved by 9%, with a 6% increase in volume and a 10% improvement in average selling prices [10][12] - The asphalt segment saw a 21% increase in pricing, which more than offset a 36% increase in liquid asphalt costs, leading to gross profit improvement from $21 million to $57 million [12] - The concrete segment's full-year gross profit increased by 64% to $89 million, driven by contributions from U.S. concrete assets and improved earnings in legacy businesses [13] Market Data and Key Metrics Changes - The demand environment for 2023 is mixed, with expected modest growth in public demand but contraction in private demand, particularly in residential construction [14][15] - Highway starts grew significantly at 25% on a trailing 12-month basis by the end of 2022, supported by the Infrastructure Investment and Jobs Act funding [18][19] - The company expects aggregate shipments to decline between 2% and 6% in 2023, with pricing momentum expected to increase between 11% and 13% [22] Company Strategy and Development Direction - The company aims to capitalize on strengths in its aggregates-led business and maintain a focus on operational execution to drive profitability [27][32] - Continued investment in both organic and inorganic opportunities is planned, with a capital expenditure budget of $600 million to $650 million for 2023 [30][24] - The company is focused on improving shareholder returns and return on invested capital while managing its balance sheet and overhead costs [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to grow adjusted EBITDA to between $1.725 billion and $1.875 billion in 2023 despite macroeconomic challenges [27] - The company anticipates that the depth and duration of declines in residential construction activity will significantly impact overall demand for aggregates [21] - Management highlighted the importance of timing in highway projects and the potential for increased public infrastructure investment to drive future demand [19][75] Other Important Information - The company completed the sale of its ready-mix assets in New York, New Jersey, and Pennsylvania during Q4 2022 [26] - The return on invested capital at year-end was 13.5%, reflecting the impact of divestitures and operational challenges [26] Q&A Session Summary Question: What changed regarding the volume outlook for 2023? - Management noted that while January showed a bounce-back from bad weather, the full impact of declining single-family housing starts is expected to be felt in Q2, leading to a projected decline in shipments [36][37] Question: Can you elaborate on the pricing and cost dynamics for 2023? - Management indicated strong pricing momentum entering 2023, with expectations for unit margin growth in the mid-teens, despite tougher pricing comparisons in the second half of the year [40][42] Question: How do you view the balance of price and cost in light of historical volatility? - Management expressed confidence in unit margin growth due to consistent performance and operational disciplines, despite challenges from inflationary pressures [51][54] Question: What is the outlook for non-residential construction? - Management expects flat volumes in non-residential construction, with a focus on heavy industrial projects, while monitoring potential impacts from light non-residential sectors [88] Question: How does the company view its portfolio and potential divestitures? - Management stated that they continuously evaluate their assets and are open to divestitures if they do not meet performance expectations, while remaining optimistic about current concrete markets [66][68]