Vulcan(VMC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2025, the company delivered $2.3 billion of adjusted EBITDA, a 13% increase over the prior year, with an adjusted EBITDA margin expanding by 160 basis points to 29.3% [4] - Aggregates cash gross profit per ton grew to $11.33, achieving the previously established target of $11-$12, driving operating cash flow of over $1.8 billion, a 29% increase over the prior year [5][6] - Free cash flow increased by over 40% after reinvesting $678 million in capital expenditures [10] Business Line Data and Key Metrics Changes - Aggregate shipments of approximately 227 million tons increased by 3% for the full year, driven by prior year acquisitions, although same-store aggregate shipments were slightly lower than the prior year [7] - Aggregates mix adjusted price improved by 6% for the full year and 5% in the fourth quarter [8] - SAG expenses for the full year were $564 million, 10 basis points lower than the prior year as a percentage of revenue at 7.1% [11] Market Data and Key Metrics Changes - Public non-highway infrastructure investments grew, with starts in Vulcan markets for water, sewer, and other infrastructure projects increasing double digits in 2025 [15] - Highway starts in Vulcan markets continued to grow at three times the rate compared to the U.S. overall [13] - In California, highway starts were up 47% in 2025 versus 2024, indicating strong demand in key markets [56] Company Strategy and Development Direction - The company aims to expand its industry-leading aggregates franchise in both current and new geographies, focusing on improving underlying business operations [4] - The company anticipates continued growth in public demand complemented by improving private demand, expecting aggregate shipments to grow between 1% and 3% in 2026 [16] - The company plans to reinvest in its franchise through operating and maintenance and internal growth capital expenditures of $750 million to $800 million in 2026 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in leveraging demand growth and a healthy pricing environment for 2026, with expectations of modest overall growth [21] - The company expects to deliver between $2.4 billion and $2.6 billion of adjusted EBITDA in 2026, driven by high single-digit expansion of aggregates cash gross profit per ton [16] - Management noted that while residential activity is expected to be limited in 2026, there are potential opportunities for improvement in the second half of the year [15] Other Important Information - The company returned $260 million to shareholders through dividends and $438 million through share repurchases [11] - The company has improved its adjusted EBITDA margin by over 700 basis points and return on invested capital by over 200 basis points over the last three years [12] Q&A Session Summary Question: Can you discuss your confidence levels regarding end market demand and expectations around pricing and profitability for 2026? - Management indicated that public starts remain solid, and there is a good story for public infrastructure outside of highways, expecting steady public growth [21][22] Question: Can you clarify the pricing dynamics and the impact of geographic and product mix on pricing? - Management confirmed a "triple whammy" impact on pricing due to geographic mix, acquisitions, and product mix, with expectations for pricing to be lower in the first half of 2026 and improve later [36][38] Question: What gives you confidence in keeping costs down in 2026? - Management attributed confidence in cost control to the Vulcan Way of Operating, which focuses on efficiency and productivity in plants [46][49] Question: How is the IIJA reauthorization impacting your guidance? - Management expects a new bill to be passed, with historical trends indicating that it will be higher than the previous bill, and noted that 50% of IIJA funding has yet to be spent [54][56] Question: What is the outlook for M&A activity in 2026? - Management anticipates a very active year for M&A, focusing on aggregates-led opportunities and expanding geographic footprint [72][75]