VMC
#Well, it was a combination of the two.
We saw shipments get impacted in coastal Texas with weather, extreme weather, and some timing of projects, it's one of our higher-priced ---+ it's healthy pricing in that one, so that was geographic, and then you saw some substantial base jobs and shot rock jobs, particularly in Florida, so you put all those together was just under a percent.
Yes, I think what we've seen is the growth in recent activities weakened just a little bit.
Longer-term, our backlogs are growing, the pipeline has strengthened, employment levels and other factors point to sustained growth.
And at any given time that activity at different geographies will vary pretty widely, but if you look at the leading indicators, the Dodge Momentum Index, ABI, they point to a renewed pace of growth in 2017 and beyond.
And then just the simple fact that you've got single-family construction growing at the pace it's growing will pull non-residential up, and that we'll see that coming.
Our shipments to private non-residential work in the quarter were still pretty healthy, so they can vary market to market, but I think we've all probably called the death of non-residential spending prematurely several times now.
Even if we see a little bit of weakness in near-term start indicators with our customers and then the data we look at, we're seeing just as much if not more, strength in the longer-term pipelines.
We still see growth across all of the individual segments we are talking about, with the one thing that surprised us being slow kind of jumps out is really public infrastructure spending.
So, again, the outlook there is strong, but we haven't seen as much in public infrastructure as we would've expected so far this year.
All of the fundamentals are there, but the spending hasn't been quite where we would have thought it would have been.
On the infrastructure piece, it's really just now you're starting to see the big capital projects, water airports, those kind of projects if you look at tax receipts in our markets, they are all at or near all-time highs, so it's going to happen.
It's just a matter of timing, and I think the local governments making the decision to go forward with the capital projects, but you'll see that come on in 2017 and probably more in 2018.
It's a little bit of, I'm going to call it a little bit of conjecture from us, <UNK>, but we at least hear some comments about just ---+ I'm going to call it overall election cycle uncertainty.
Putting some near-term brakes on public infrastructure spending in some places.
But again, as <UNK> said, some of the spending on things like sewers and water infrastructure is not even really discretionary.
If you're going to build as much new residential as we're building, you are going to have to build new water, so it's really a question of timing in our view, but it's one area that so far in 2016 we haven't seen the kind of growth we would have expected.
Well, <UNK>, I'll jump in and say as the CFO that we can't comment on the third quarter yet, but in the spirit of that question, one thing I'd note is you know, if May had the same kind of shipping rate trends that we had seen in June and April, we would probably have a very different feel to this call and results.
We wouldn't be asking some of these questions, so as <UNK> said, it's not uncommon to have some variability in shipping rates week-to-week, month-to-month in a business that's all outdoors.
But again, we haven't seen anything from our view that would indicate any kind of deceleration or anything that would take us off long-term trend.
This is still a business with solid outlook for 2016, strengthening visibility for 2017, and in our view, multiple years of growth ahead of us.
I think, <UNK>, we'll keep up with that number, but let me give you a couple of important reminders.
Our core CapEx spending, as a portion of that $400 million is about $275 million, so think about that as core operating maintenance capital, and then there's another $125 million in that number that's essentially growth capital.
Non-M&A growth capital.
So our CapEx outlook, both now and through the balance of the recovery, remains unchanged.
We have not seen anything in the marketplace conditions, and I'd underscore this, that would cause us to put brakes on our own capital spending or on our pursuit of M&A.
Again, our view on the business and its outlook, if anything, is probably strengthening, so nothing from a external market condition point of view that would cause us to adjust our capital spending.
Yes, <UNK>, obviously we had healthy price in the quarter, and that will continue, but I thought our folks did a really nice job with their operating costs, particularly with a little bit lower volumes and they continued to not only leverage the volume but also just improve on the key operating efficiencies and disciplines that drive the profitability of the business, so it was a combination of the two.
To answer your question on diesel, total diesel was an impact of about $7 million.
Thanks, <UNK>.
I think we have over 2 million shares left on the authorization, so I'd say it's not a question of authorization.
Our path on share repurchase I would call unchanged.
As we've said before, we'll continue to return excess cash to shareholders at this point in the cycle, primarily through share repurchase.
We'll remain opportunistic in doing so, as opposed to give any particular commitment to a certain level of repurchase activity in advance.
But again, our basic approach to capital allocation remains unchanged, and as such, we may continue to repurchase shares as another way to return capital to shareholders.
Good morning, <UNK>.
Well, it will be all over the place, obviously with large projects.
Let me give you a little bit of a view on some large projects, and put a little flavor on that.
So if you look at Virginia, for example, I mentioned northern Virginia, the route 66 projects will be probably 6 million tons, I-85 ---+ and that job will actually go in 2017.
I-85 in southern Virginia is over 800,000 tons, but you'll see some of that in 2016 but a lot has it pushed into 2017.
And in North Carolina, the I-85 widening, it's probably 1.2 million tons, and those will see a little bit of that in 2016, but a majority of it in 2017.
The northwest corridor in Atlanta is 1.5 million, and that's the widening of I-75.
It's 1.5 million tons, and that will probably do a little more, we'll probably get 700,000, 600,000 tons in 2016, so it will be all over the place.
Again, as <UNK> said earlier, it's going to be a matter of timing.
The good news is the contractors and our customers want to get the work done, they are going to press to get it done, because they have visibility and know what's coming in 2017, and so they've got to get this off their books so they can free their crews up and go on to other projects.
So the desire is there, it's just a matter of will they have the crews in the fourth quarter and will the weather allow them to do it.
I don't think there's anything unique about it except for ---+ very similar to last year.
I would underscore what I just said about the contracts and desire to get it done.
They are pressed even more in 2016 than they were in 2015 to get this work done because there's so much work coming for 2017.
You'll see, both on the commercial side and highway side, so the desire is there, and the third quarter is always healthy, but depending on weather, the fourth quarter can be great too.
We'll just have to wait and see.
Sure, <UNK>.
I think we still say 60% as our long-term as in through the entire recovery and expansion cycle number, but that's a multi, multi-year view.
We've obviously been doing better than that of late, sometimes substantially better.
I think for the balance of the year, I'm not sure we see a much different trajectory than we've been on so far this year in terms of incrementals.
Some of that in a very short period of time, if you took an individual month or maybe an individual quarter, can be influenced by the mix of price and volume in our growth, but overall, our teams continue to do a great job.
Again, I come back to something <UNK> said in his remarks.
You know, the work is there.
The demand is there.
Importantly, <UNK>, to your question, the profitability is there, core profitability in our business maybe running a little ahead of our plan.
So what we come down to for 2016 is really a question of timing of the shipments and how much gets done this year versus next.
But again, the work is there, the demand is there; importantly, the profitability is there, and we see that trend continuing.
First of all, as <UNK> said, you've got a lot of well-known funding and budget issues.
Although they did reaffirm the highway spending in Illinois, on one hand the positive, and they also cut the tollway spending in half which will cost us about $700 million in the state for next year.
I think the positive side of that is you're still seeing growth on the private side, and as <UNK> said, this is a very good business for us, and we have a very, very strong market position.
And our teams up there have done a great job of improving their unit margins, even with some falling volume.
Some of that volume also, <UNK>, is we were at two very large jobs, one at O'Hare and one the tollway, that we were working on last year.
And those are starting to wind down, so some of that's just, again, timing of projects, but overall it's a strong market for us, and an important market, and one that I think our folks have done a nice job improving.
They're still out there.
We've got a number of them, as <UNK> said in his comments, that we're working on, when they will close is always each one separate, each one is timing.
But you always have to be disciplined about what you are buying and what you are paying, and what the unique synergies that we have for Vulcan are, and how do we leverage those.
So it's there.
We're hard on that trail, and we've got a number of them in the pipeline.
And only thing we would add to your question, which we also addressed in our comments, is if anything we're pushing harder on opportunities, particularly those that fit us strategically.
We're going to stay disciplined on valuations, obviously, but we've worked hard to be in a position where we now have the financial capacity to really do good deals where they exist, to make the right ongoing capital investments in our business, and to return some capital to shareholders.
So we can balance all those things, and we certainly have the financial flexibility to pursue M&A- led growth.
All that said, we're going to stay really disciplined about it.
I think that the story, as you said in Texas, was the coastal piece of it.
Weather was a big impact.
Let's face, coastal Texas was underwater for more than a month, and so that impacted.
We also had, as <UNK> says, timing on large projects.
We had the Grand Parkway and some big energy projects we are working on last year.
We've worked some of that work off, there's still some in the pipeline.
Golden Pass, Beaumont LNG, so you'll see some of those tons come back next year.
It's hard to tell what's going on in residential and non-residential with the weather pattern we had in the second quarter, probably some softening in Houston.
But behind that, you've got huge increases in highway spending.
We've seen some of that in 2015 and 2016, but you're going to see more of that in 2017 and 2018 and 2019.
And nothing, <UNK>, if we summed up, the visibility is not great because the weather is so bad in a quarter where you have volumes drop to 30% in one market.
It's hard to get a lot of visibility with that kind of drop, but as you look at it you've got strengthening public spending that should offset potentially some weakening private spending.
We haven't seen that weakening elsewhere in Texas yet by the way.
The little bit we've seen around Houston, we've not seen spread to the rest of Texas.
And finally your question about price impact or impact on logistics out of our quarry in Mexico, I don't think anything I'd call material anyway---+
Well, I think you have to remember, the quarry in Mexico, we ship to some 17 or18 port facilities all the way around from Brownsville all the way around to Jacksonville, Florida, so where you might have some temporary softening and timing in projects on the coast of Texas, you've got the southeast and Florida, and those markets picking up substantially, so there's a lot of flexibility in that overall business, and I think we think we're fine with it.
Again, on pricing, which is just really a mix issue, not a fundamental underlying price issue, I don't think we would expect these kind of declines we saw in the second quarter and in future quarters, so I don't see anything that I would try and model in on pricing.
I think the good news there is everybody is talking about it.
Both presidential candidates, you've got a number of people in Washington concerned about the country's infrastructure.
They all know it's an issue, and they also understand that it is stimulus if we do it correctly.
So like I said, we have a five-year bill, but we still have a degraded highway system, and that bill is not going to improve that grade.
So it is an issue.
Now what's going to happen, we don't know even what's going to happen with the election, but it is an important issue, and one that people are putting out there in front of everyone.
<UNK>, it's <UNK>, because I may have made the comments.
Just to add to that.
My comments weren't reflective on the nature of the dialogue around future infrastructure spending, which we actually, as <UNK> said, see quite positive at a federal level, state level, and local level across many geographies.
It's more just a negative tone, and some degree of uncertainty, that would seem to affect private investment levels.
You'll know more about this than us, but you may have seen some of that in second quarter GDP data.
And we probably have some customers who, on balance, just give a negative tone out there, particularly on the private side, are a little more reluctant than they would be in a different time to add their own additional capacity to make their own big capital investments, whether that's new equipment, or land for development, or larger staffs.
So I wouldn't want to make it too big a deal.
What's interesting to us is just this disconnect, if you will, between the tone you hear in the middle of an election cycle, which is really negative, and what we see in our own business which, frankly, is pretty positive but nothing ---+longer-term, the dialogue around higher levels of public infrastructure spending particularly on road infrastructure and other infrastructure we are pretty excited about.
I think that the ---+ first of all, the labor issue, yes, we're seeing shortages with our customers, whether it's ready mix truck drivers, or finishers, or carpenters on residential, so there are labor constraints out there, and it is a bottleneck for our customers and therefore for us.
I think they are working through it.
We've been on this theme for now about a year, and that's actually good news, because it means it's growing and growing faster than they can fill the ranks, and the work isn't going to go anywhere; it's just a matter, again, of timing.
On your question about normal, it wouldn't change our view of normal, but as we've discussed many times before, these bottlenecks, whether they are labor or others, that some of our customers face, they probably do constrain on the margin the rate of growth or the rate of recovery, keeping us for now in the 7%, 8%, 9% rate as opposed to something that the underlying demand would justify being higher.
Flip side is, it can create a generally positive pricing climate, but it may make for a longer recovery at a slightly slower rate, like that 7%, 8%, 9% rate, as opposed to something that would get up into the sustained double digits for a very long period of time.
As you look out towards the second half of the year, and the price of diesel last year versus the price of diesel this year, it is probably not going to be a big cost advantage going forward.
I think there was ---+ as I said earlier, our folks are doing a really good job of concentrating on our own operating efficiencies that we can control.
Volume coming back will help that, so I feel pretty good about our cost and our ability to take incremental revenues to the bottom line.
As far as capital projects, they are all over the place.
Some as simple as replacement of mobile equipment, screens and crushers, usually when you do plant capital, it's a combination of both replacement and process improvement to get more throughput or reduce downtime, which helps on your cost, obviously other than just like-for-like replacement.
On the growth side, we've got a number of facilities who are working on, our distribution network both rail and blue water.
All of them are different stages of completion, and then we've got a number of Greenfield projects that we're working on at different stages in completion.
Only additional color I might add is, while we not have the same tail winds from diesel moving forward, we should be beginning to work out of a period where we had elevated repair maintenance costs earlier in the recovery.
So we're hopeful those trends will offset each other a little bit, some more work to do there.
Just a reminder, we've got a lot of fixed costs yet to leverage in this recovery.
So as <UNK> said, we're pretty proud of what our teams did, and particularly as an example in a quarter without much volume growth, and still with very uneven production schedules due to weather challenges.
To control your costs in a quarter like the one we just finished, is a good sign of the right disciplines, so we have a pretty positive outlook about our margin performance looking forward.
They will come on line at different stages next year, and they will both be more efficient, both particularly in fuel.
Also, they have less draft and more tonnage capacity so we'll see improvements, cost-wise, with those ships as they come on line, and we'll be excited to get those.
Probably a little early to talk about it specifically, though.
That may be something that's more a 2017 item.
Probably a little too early to talk about it, specifically, but they are good investments.
Both.
Primarily bolt-on.
I mean, those are some of our best returns, and it proves the efficiencies in the overall franchise, but ---+ and it's healthy.
And then as far as new markets, we did that 18 months ago in New Mexico, and where we have a path to a number one or a number two position we'll look at new places.
If not, we probably won't.
You said it well.
We like aggregates.
Thank you.
Sure.
I talked about California.
That they were going to lose a little bit of funding, but there are a number of ---+ three bills in particular that would add between $3 billion and $7 billion, and they have to address their roads.
And then the local impact, which is in total, if they all pass, would be $2 billion a year, so Texas is one of the fastest growing highway markets.
We saw a 30 in our markets in Texas, in just the highway legs alone.
In 2016 we'll see an improvement of over 30%, state as a whole improvement of over 20%.
And a lot of that will go in 2017 and then you'll have improved funding again in both 2017 and 2018.
That will go up about 15% or 20% in 2017, and then there's another over $2 billion that comes on to Texas in 2018.
Georgia basically doubled their highway funding.
That passed a year ago, and we'll see a little bit of that in 2016, as I said earlier, a majority will come in 2017 and 2018.
North Carolina has improved their funding, as has Florida, as has South Carolina, as has Virginia.
There are bills being discussed in Alabama and probably won't be addressed until 2017.
I'd tell you a similar story in Tennessee, where it needs to be addressed, and they have not.
It won't happen in 2016; hopefully it will happen in 2017.
So as I said, a lot of our states have marked improvement in funding.
The vast majority of that, except for Texas, will flow through in 2017 and 2018.
So we're really looking forward to this, and this is a real bright part of our future.
You bet.
Good morning.
I think the average price, as I've said earlier, was healthy in spite of some geographic and product mix issue.
Probably one of the bigger impacts in the quarter was on that was just the mix issue was coastal Texas, as <UNK> said volumes were down 30%.
It's a very ---+ it has healthy pricing, and so that had a little bit of an impact but overall, the environment for pricing across our footprint remains healthy, it's strong.
Throughout the entire construction segment pricing is moving up, and that's driven by demand increases, and it is also driven by the visibility of what everybody sees coming in 2017 and 2018.
Just to give it a little more color, if it helps, I think our average selling prices, if you take all of the moving pieces and adjust as best you can on a like-for-like basis, probably would have been $0.03 or $0.04 higher than what we reported.
Again, a lot of that is having a big decline in coastal Texas.
At the same time, that is accounting for some of our southeastern markets which have good pricing, too, growing pretty quickly.
So on a total like-for-like basis, if you look at geographic issues and if you look at some of the product mix issues, our rate of price growth year-over-year would have been a little closer to eight than what we reported.
But I wouldn't let any of that distract you from what <UNK> said, which is the core pricing outlook and climate remains positive, given where we are in the recovery.
And I'd also just remind you prices went up pretty healthily in those very same markets that were volume-challenged ---+ so Virginia, Illinois, California, Texas ---+ those are all markets that have had good pricing in margin improvement, not just in this quarter, but for the last few quarters.
No.
I don't think it's more.
I think that it's just a piece of it.
So part of it is going to be the large projects, as we said earlier.
Part of it, just across the entire market segments, it's going to be the contractors and can our customers get the work done in the time that they have.
So we talked about labor shortages, you have those and those are an issue, So it about both timing of large projects, our customers' ability to get work out, and then how many days do we have of construction in the fourth quarter.
All that will go together to really see how the year turns out.
But I'll remind you, this is exactly what we saw in 2015.
Well first of all, in the quarter, pricing was a combination of ---+ the mix impact was both geographic, which was Texas, and then mix.
So we had some large base work in the southeast, and we also had some large shot rock projects in Florida.
And while they may have an impact on price, it has a overall positive impact on profitability, because you've got to sell those mix of products.
Some of them are cheaper to make, and so the price of the margins ---+ while the price may be lower, the margin is very healthy, and you need to sell the full product line to maximize profitability in our operations.
On your question about highway construction, and coming highway construction, that really plays into our hand in that it is a really healthy mix of what our plants produce.
It has a combination of base in fines because it's new construction, and it has asphalt rock, it has concrete rock, so it gives the full flavor of everything we produce, and just pushes the overall profitability up.
When you think about it geographically, we really like the ---+ particularly, well, we like it now, and we like it longer-term the breadth and positioning of our particular geographic mix.
These trends we're seeing and where we see the growth and the nature of the increased public spending that we commented on earlier, if anything, these should give us tail winds from a geographic mix point of view.
We're well-positioned against where the growth is coming.
Over and beyond that, on aggregates, it also fits into our hand with our asphalt business.
So we have very strong positions in a number of states with asphalt, which is a lot more public- driven, so all of the spending on highways will help that business.
You're welcome.
Thank you for your interest in Vulcan Materials, and we look forward to talking to you this quarter and over the balance of the year.
And I would like to thank our employees for all of their hard work and the things they do to make this Company great.
Thanks.
