Vulcan Materials Q1 2024 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
May 2, 2024
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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. 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.

Mark Warren
Investor Relations at Vulcan Materials

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.

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.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you, Mark. And thank all of you for joining our Vulcan Materials earnings call this morning. Our first quarter results moved us towards delivering on a fourth 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 areas[Phonetic], cash gross profit per ton by 10%. Their commitment to our Vulcan way of selling and Vulcan way of operating disciplines, is driving solid results.

In the quarter, we generated $323 million of adjusted EBITDA and expanded our adjusted EBITDA margin. Importantly, several key trends continue. 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 aggregates 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, aggregates cash cost of sales continues to moderate. Aggregates freight adjusted price improved 10% in the quarter and increased a $1.25 per ton sequentially from the fourth quarter. A clear illustration of the success of January increases and the continuous execution of our local way of selling disciplines. Our first quarter cash cost of sales performance resulted in a fourth 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 Aggregates and Asphalt acquisition in Alabama, a top ten[Phonetic] state. I'm proud of how our teams continue to execute our two pronged growth strategy.

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 in 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 approval 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.

And improving residential backdrop is also a positive sign for future activity in certain categories of nonresidential construction and recent data shown some signs of stabilization and overall starts. However, the landscape continues to vary across categories. As expected continued moderation in warehouse stars will be the biggest headwind to private and non residential demand this year. Currently, like commercial activity, remains weak, but over time, we expected to follow the positive trends in single family housing. 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 aggregates intensive projects. Our footprint is also an advantage on the public side. With over two-thirds of federal highway spending allocated to Vulcan states. Additionally, other public infrastructure activity which benefits from IIJA funding is going faster in Vulcan states than the country as a whole. A sustained elevated level of highway starts of over $100 billion, coupled with record 2024 state budgets supports healthy growth in highway and infrastructure demand, both in 2024 and for the next several years. Now, I'll turn the call over to Mary Andrews for some additional commentary on our first quarter. Mary Andrews?

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

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 first quarter results, I'd like to first expound upon four of the trends Tom highlighted early in his remarks. Unit profitability expansion, robust cash generation, disciplined capital allocation, and return on invested capital improvement. For the last four quarters, we have consistently expanded our trailing twelve 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 twelve months gross margin has also steadily improved in each product line. 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 five 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 million in capital expenditures and returned $81 million to shareholders through dividends and share repurchases. We continue to expect to spend between $625 and $675 million on capital expenditures for the full year. 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 million of cash on hand following the March 1 redemption of our 2026 senior notes at par for $550 million. Our liquidity position and financial flexibility are competitive strengths as we look to continue to grow and create value for our shareholders.

Over the last twelve months, we've achieved a 260 basis points improvement and return on invested capital. Invested capital has increased less than 1% while adjusted EBITDA has improved 20%. Adjusted EBITDA margin has also improved by 350 basis points through consistent operational execution and disciplined SAG cost management. SAG expenses in the quarter were in line with our expectations, and we continue to expect to spend between $550 and $560 million for the full year. Most importantly we reaffirm our expectations of delivering adjusted EBITDA between $2.15 and $2.3 billion for the full year. At the midpoint, a double digit year over year improvement for a fourth consecutive year.

I'll now turn the call back over to Tom to provide a few closing remarks.

Tom Hill
Chairman and CEO at Vulcan Materials

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 grow our business and deliver value for our shareholders. And now Mary Andrews and I will be happy to take your questions.

Skip to Participants
Operator

Thank you. [Operator Instructions] We'll take our first question from Stanley Elliott with Stifel.

Stanley Elliott
Analyst at Stifel Nicolaus

Hey. Good morning, Tom. Good morning Mary Andrews. Thank you for the question. Tom I searched 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, and then to any extent commentary you could share on April would be great.

Tom Hill
Chairman and CEO at Vulcan Materials

Sure. Looking at the quarter itself, I'd call the quarter -- volumes of the quarter as expected, [Indecipherable]. 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 call a bit better on a daily shipping basis. So Q1, [Indecipherable] 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 would still guide to the flat to down four 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 in that Southeastern market is probably the healthiest market in the country. I think our Vulcan way of selling disciplines and tools are very helpful with this. So at this point, I'd call it confident [Indecipherable] outlook. As far as going into the second quarter I call it this way when the sun comes out we're shipping very well.

Stanley Elliott
Analyst at Stifel Nicolaus

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

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Thanks team.

Operator

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

Jonathan Bettenhausen
Analyst at Truist securities

Hey, guys, thanks for taking my question. I'm on for Keith Hughes this morning. I'm curious about your outlook on mid year pricing. If you had conversations with your customers about mid years and also wondering how much of that is baked[Phonetic] into your guide.

Tom Hill
Chairman and CEO at Vulcan Materials

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 a 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. 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 '25. 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 midyear's, we'll revisit pricing guidance in August and give you an update.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

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 first quarter, we achieved 10% improvement in cash gross profit per ton, and some aggregates 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 the year.

Jonathan Bettenhausen
Analyst at Truist securities

Perfect. Thanks for the color.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

We'll go now to Anthony Pettinari with Citi.

Anthony Pettinari
Analyst at Smith Barney Citigroup

Good morning. I'm wondering if you could talk a little bit more about how costs have kind of been trending among your major cost categories you know 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.

Tom Hill
Chairman and CEO at Vulcan Materials

Yeah, I think the first quarter for cost is always tricky as volumes and weather definitely had an impact on cost in the first quarter. That said, 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 it's going to be 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 four quarters of decelerating cost and as we march through this year, we should see those increases decline as we march through the year. Next quarter better, next quarter better, next quarter better. As we saw over the last four quarters, so I think we're on a good path to that mid single digit cost for the full year.

As far as different piece 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 through the Vulcan way of operating, we're improving our operating efficiencies and will continue over the next two 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 this[Phonetic].

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

And in terms of diesel Anthony, we do assume in our plan that it'll 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 we have the ability to catch it with pricing as it goes up and also take advantage of it when it goes down.

Anthony Pettinari
Analyst at Smith Barney Citigroup

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

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

Good morning, Kathryn.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good Morning.

Kathryn Thompson
Analyst at Thompson Research Group

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 a portfolio. As you look into 2024 and beyond, what are your priorities in terms of overall Vulcan Materials and product mix. And how does this mix strategy, how do you think about that against the backdrop of a broad reindustrialization of the US and putting Vulcan in the best position possible. Thank you.

Tom Hill
Chairman and CEO at Vulcan Materials

Well, as always, we would tell you that it's Aggregates and we are an Aggregates company. We have the highest percentage of EBITDA and Aggravates of probably anybody in the sector, and that's what we do. Now we have strategic downstream and as we always say, it's a portfolio. We look at it as a portfolio and if one of those sectors or geographies doesn't earn appropriate return or somebody else would invest[Phonetic] of it and plough 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&A in Greenfields it will be Aggregates focused.

Kathryn Thompson
Analyst at Thompson Research Group

Perfect. Thank you so much.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

We'll turn now to Trey Grooms with Stevens.

Tom Hill
Chairman and CEO at Vulcan Materials

Hi, Trey.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Trey Grooms
Analyst at Stevens

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, I think, looking for mid teens type of improvement. 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 anyway, 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 or 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 or kind of consistent improvement versus kind of historicals?

Tom Hill
Chairman and CEO at Vulcan Materials

Yeah. Let me take your last question first about long term. This is why we have developed the Vulcan way of selling and Vulcan way of operating disciplines. I think they secure our ability to improve cash gross profit per ton which we've done trademark basis every quarter except for one flat for five years. That's pretty good consistency, even with some of the dynamics that are out there. So I think that overall in history -- 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 a fixed plan so you put all that together. I think as we progress through the year, we have the opportunity to continue to march our unit margins improvement through the year.

Trey Grooms
Analyst at Stevens

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

Tom Hill
Chairman and CEO at Vulcan Materials

Sure.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

Hi, Jerry.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Jerry Revich
Analyst at The Goldman Sachs Group

Hey. 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, third quarter versus second quarter, we saw 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.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Yeah, sure. I would expect a cadence of Jerry, likely some sequential growth in the second quarter, more in the third quarter as you referenced, and then we would typically see less in the fourth quarter due[Phonetic] 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 third quarter sequential improvement into what level that gets and where we fall out overall.

Jerry Revich
Analyst at The Goldman Sachs Group

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 '25 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.

Tom Hill
Chairman and CEO at Vulcan Materials

Yeah. 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 midyears, and I think those conversations are going fine. As I said, they mean a lot for '25. I do think it's a bit early to call what '25 is going to start out at. We got to get mid years under our belt and take a look at what we're going to do in first part of '25, but I do think that I feel good about the mid years and I think it is a good omen for 2025 pricing.

Jerry Revich
Analyst at The Goldman Sachs Group

Thank you.

Tom Hill
Chairman and CEO at Vulcan Materials

Sure.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

Hi, Mike.

Mike Dahl
Analyst at RBC Capital Markets

Hi, Tom. Hi, Andrews. 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 conversation. So maybe it's just [Indecipherable] and you want to have those really finalized before you communicate 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.

Tom Hill
Chairman and CEO at Vulcan Materials

I don't think weather had anything to do with. I think you may have read a little bit 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, but I wouldn't read anything into the comment on whether versus -- comment on April versus how this goes. It's really kind of a process we introduced in April, have conversations in May and again finalize it in June.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

And one other thought on pricing for the rest of the year is that we've had positive momentum over the last twelve 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's realized on mid year increases.

Mike Dahl
Analyst at RBC Capital Markets

Okay, great. Thanks for that.

Tom Hill
Chairman and CEO at Vulcan Materials

Sure.

Operator

We'll go now to Garik Shmois with Loop capital.

Garik Shmois
Analyst at Loop Capital

Oh, hi. Thanks for taking my question. I wanted to ask on the M&A environment. If you could provide a little bit more color on the bolt-on that you just completed and is it possible in all the maybe size, how much you anticipate spending on acquisitions this year and the types of deals you're looking at?

Tom Hill
Chairman and CEO at Vulcan Materials

Yeah, as you saw, we had a small but strategic bolt on kind of Northeast of Birmingham up towards Gunnersville. It's about 2 million tons of Aggregates and just under 0.5 million tons of Asphalt. It fits us well. I think as you look at the full year, in the next 12 months, M&A outlook is quite good. So more to come. And I am having a lot of those conversations and very encouraged by it. I think it's always M&A will be Aggregates-led and conducted with discipline. But I think we feel very confident that this will be a busy M&A year for us.

Garik Shmois
Analyst at Loop Capital

Okay. Very good. Thank you.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

Now we'll go to David MacGregor with Longbow Research.

David MacGregor
Analyst at Longbow Research

Good morning, everyone. Thanks for taking the questions. I guess I wanted to kind of tap your many years of experience in this business with respect to the second half of this year in election years. And in an election year, do you find that projects kind of accelerate as people kind of focus on work [Phonetic]? Or do you think things maybe slow down a little bit as people get a little more candid[Phonetic] 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.

Tom Hill
Chairman and CEO at Vulcan Materials

I don't see -- I will take it in pieces. Overall, I don't see any impact with the election year on our demand. I think that our guidance is -- has taken 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. And I think we call that, as you know, mid-single digit on the private side, I think, as we said, we've got some challenges on -- 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.

David MacGregor
Analyst at Longbow Research

Thanks very much.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

And next we have Timna Tanners with Wolfe Research.

Tom Hill
Chairman and CEO at Vulcan Materials

Good morning Timna.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Timna Tanners
Analyst at Wolfe Research

Hey, good morning. Thanks a lot. 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? 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.

Tom Hill
Chairman and CEO at Vulcan Materials

Yes. I will start with highways. We're seeing the IIJA[Phonetic] 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. We also are seeing additional state funding come into play. We've got three states with some big dollars. Tennessee added $3 billion, Florida I think added $4 billion, and Georgia just added $1.5 billion to their funding. I think when it comes to public demand, slow and steady wins the race on this, and particularly when you're compounding your margins like we are so I think a good healthy sector with steady growth for years to come and I think the DOTs will continue to work hard to get those dollars into lettings.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

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 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[Phonetic] for data centers is only a low single-digit percentage of total non-res start[Phonetic]. So as you know, there are a lot of different categories and dynamics and 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.

Timna Tanners
Analyst at Wolfe Research

Okay. Helpful. I'll leave it there. Thanks again.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

Hi, Tyler.

Tyler Brown
Analyst at Raymond James

Good morning.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Tyler Brown
Analyst at Raymond James

Hey. So you all are doing a great job on unit margins, but I am curious what you're seeing on the plant productivity side. If I go back on to the Vulcan 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 if you're seeing improved plant utilization? And is that kind of a continued good guidance to '25?

Tom Hill
Chairman and CEO at Vulcan Materials

Yes. I think that where we are on that, and you're talking about the process intelligence on those plants. As we said, the -- we did that in our top 100 plants, which is about 7% of our -- roughly 7% of our production. The tools are all there. About 25%, 30% are actually -- 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 in those, we're seeing marked progress as we march through kind of this year, maybe the first 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 -- we'll see progress of that show up in our numbers in '24 and '25 and into '26, to be honest with you. So, so far, so good, and we'll keep plugging at it.

Tyler Brown
Analyst at Raymond James

Yes. Perfect. Thank you.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

HI, Adam.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Adam Thalhimer
Analyst at Thompson Davis

Good morning, guys. Great quarter.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Thank you.

Adam Thalhimer
Analyst at Thompson Davis

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?

Tom Hill
Chairman and CEO at Vulcan Materials

Well, I think it depends on which part of it you're talking about, and 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, we -- if you look at starts, they are -- the fall is decelerating. It's getting better as you look at starts on a short-term basis. 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 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 it doesn't last too long, we'll be past that, I think, '25. And then single-family res is recovering, and I think we're covering with some momentum.

Adam Thalhimer
Analyst at Thompson Davis

Sounds pretty good. Thanks, Tom.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

We'll go now to Phil Ng with Jefferies.

Tom Hill
Chairman and CEO at Vulcan Materials

Hi, Phil.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning Phil.

Phil Ng
Analyst at Jefferies Financial Group

Congrats on a really strong quarter. I had a question. I mean, a competitor of yours has just closed on a deal in the Southeast, and they've already announced price increases for midyears in those markets and called out how pricing there is for us below their corporate average. I've always thought that the Southeast is actually a 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 and demand profile. Any thoughts on the momentum modern pricing around California as well?

Tom Hill
Chairman and CEO at Vulcan Materials

Yes, I think we've 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.

Phil Ng
Analyst at Jefferies Financial Group

Okay. Appreciate the color.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

Good Morning.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Angel Castillo
Analyst at Morgan Stanley

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? 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 just interest rate environment and kind of some of those challenges. Is that having any kind of impact on your midyears? It sounds like the discussions there have been quite constructive. So just any kind of color there would be helpful.

Tom Hill
Chairman and CEO at Vulcan Materials

Yes. I think you're seeing improvement. We're seeing improvement in single-family, which is always helpful. And the most important thing is that you see growth in public demand, which is still visible and it is a very good foundation for pricing. I don't know that interest rates have had a big impact on pricing. 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 that 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 res. All of that is helping the pricing dynamics. And I think we feel pretty good about a midyear at this point.

Angel Castillo
Analyst at Morgan Stanley

Very helpful. Thank you.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank you.

Operator

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

Tom Hill
Chairman and CEO at Vulcan Materials

Good morning.

Michael Dudas
Analyst at Vertical Research

Good morning Mary Andrews, Mark, Tom.

Mary Andrews Carlisle
Senior Vice President and Chief Financial Officer at Vulcan Materials

Good morning.

Michael Dudas
Analyst at Vertical Research

So it's an interesting highlight on 67% of your -- of the IIJA dollars are going to the Vulcan states. So you can talk a little bit about what states does 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?

Tom Hill
Chairman and CEO at Vulcan Materials

Well, I think a big part of that is you've got the big DOTs, Caltrans and TxDOT and Georgia DOT and Virginia. Obviously, Tennessee, obviously, have excellent funding, both state and local. I think that probably the most -- the best -- DOT is best at getting money through at this point because they started earlier with their own funding with Texas. Georgia had some struggles, but I think is catching up with that. So I think Caltrans is doing a good job getting their money in. 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. 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.

Michael Dudas
Analyst at Vertical Research

Thank you, Tom.

Tom Hill
Chairman and CEO at Vulcan Materials

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, for any additional or closing comments.

Tom Hill
Chairman and CEO at Vulcan Materials

Thank all of you for your time this morning and your interest in 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.

Operator

[Operator Closing Remarks]

Corporate Executives
  • Mark Warren
    Investor Relations
  • Tom Hill
    Chairman and CEO
  • Mary Andrews Carlisle
    Senior Vice President and Chief Financial Officer
Analysts

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