Vulcan Materials Q2 2026 Earnings Call - Reaffirms $2.4B-$2.6B EBITDA Guidance Amid Sticky Diesel Costs and Strong Public Infrastructure

Bo, Conference Call Coordinator, Vulcan Materials Company: Good morning, everyone. Welcome to the Vulcan Materials Company second quarter 2026 earnings call. My name is Bo, 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 would like to turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Please go ahead, sir.

Mark Warren, Vice President of Investor Relations, Vulcan Materials Company: Thank you, operator. I am joined today by Ronnie Pruitt, Chief Executive Officer, and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Before we begin our prepared remarks, please note that a press release and a supplemental presentation related to this call are available at our website, vulcanmaterials.com. Today’s discussion may include forward-looking statements, which are subject to risks and uncertainties. Details on these risks, other legal disclaimers, and reconciliations of any non-GAAP financial measures are defined and described in our earnings release, supplemental presentation, and other filings with the Securities and Exchange Commission. For the question-and-answer session, we kindly ask that you limit your participation to one question. This will help us address as many questions as possible during the time we have available. With that, I will turn the call over to Ronnie.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thanks, Mark, and thank you all for your interest in Vulcan Materials. The resiliency of our aggregates-led business and the importance of our strategic disciplines are evident in periods of inflationary pressure. I am proud of how our commercial and operating teams have navigated the first half of the year to deliver adjusted EBITDA growth and aggregates cash gross profit per ton expansion. Most importantly, they did so while keeping each other safe. In the quarter, we generated $654 million of adjusted EBITDA, approximating the prior year despite energy headwinds of almost $40 million. Our teams executed well, earning higher prices for our products in each segment and driving operational efficiencies to help offset inflationary increases in our input costs. Second quarter aggregates cash gross profit per ton topped $12 and was $0.14 higher than the prior year.

Shipments increased 1% compared to the prior year and varied widely across geographies depending upon weather conditions. Aggregates freight adjusted selling prices moved higher both sequentially and year-over-year. On a mix-adjusted basis, average selling prices in the quarter improved 5% compared to the prior year, with improvement widespread across geographies. Our commercial teams continue to execute our Vulcan Way of Selling disciplines to capture value for our products and deliver solutions for our customers. Excluding diesel, aggregates freight adjusted unit cash cost of sales increased 3% compared to the prior year. Our Vulcan Way of Operating disciplines were executed well to drive efficiencies and control spending, even with lower than expected volumes in many areas due to wet weather.

From coast to coast, our teams are aligned with a relentless focus to drive compounding improvements in the profitability of our existing portfolio and to win the future in aggregates. Winning the future will also mean continuing to strategically add to our portfolio through acquisitions and greenfield projects. Both of these growth pipelines remain active, including numerous acquisition opportunities likely to be finalized this year. The strength of our balance sheet gives us the financial flexibility to pursue those opportunities that will drive the most value for our shareholders. During the second quarter, we completed several strategic portfolio actions. We finalized the divestitures of our concrete operations in California and our non-core operations in the U.S. Virgin Islands, generating cash proceeds that can be redeployed to strategically grow our aggregates business. A clear example was our acquisition of an aggregate operation from Brannan Sand & Gravel in early June.

This acquisition expanded our reach into southern Colorado and strengthened our distribution network in Dallas-Fort Worth. Our team is already hard at work capturing synergies and driving value from this strategic acquisition. In terms of the demand environment, what I see ahead of us is similar to what the views that I shared on the last call. We still expect strong public activity in our markets and improving private large project opportunities to drive year-over-year shipments growth in 2026. Trailing 12 months highway awards in Vulcan markets remain up double digits from a year ago, far outpacing non-Vulcan markets. The same is true for public infrastructure awards, which are up 20% year-over-year in Vulcan markets, yet down in other markets.

The amount of work in the pipeline bodes well for public shipments for the next several years, providing good demand visibility, which is important for a healthy pricing environment. With the August recess upon us, as expected, there will likely be a continuing resolution to fund federal highway spending while Congress completes this work. The House Transportation and Infrastructure Committee passed its BUILD America 250 Act with overwhelming bipartisan support in late May. The bill enhanced the focus on aggregate-intensive construction and shifted to a formula first distribution approach compared to the Infrastructure Investment and Jobs Act, both changes benefiting Vulcan. While the final text and timing remain uncertain, we anticipate a smooth transition between funding programs given the significant amount of IIJ funds that are yet to be spent. On the private side, large project opportunities continue to drive non-residential activity, particularly data centers.

Our footprint is well-aligned with data center activity. In addition to power infrastructure expansion, recently announced LNG projects, and other manufacturing opportunities. Our scale, quality, and customer service make us a supplier of choice for these large, complex projects. Residential construction continues to struggle due to the ongoing lack of affordability. Longer term, there remains a fundamental need for additional housing, and our footprint is well-positioned to benefit from an eventual recovery. With a continued expectation of modest growth in aggregate shipments in 2026, a healthy pricing environment, and a solid year-to-date execution from our operating teams, we reiterate our full year adjusted EBITDA guidance range of $2.4 billion-$2.6 billion. Now I’ll turn the call over to Mary Andrews to provide some additional commentary on our second quarter performance before we take your questions.

Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, Vulcan Materials Company: Thanks, Ronnie, and good morning. The strong cash generation of our business, coupled with the recent proceeds from divestitures Ronnie commented on earlier, have the balance sheet extremely well-positioned for us to continue to pursue our disciplined and balanced capital allocation strategy. Reinvesting in our business, growing our franchise through strategic acquisitions, and returning capital to shareholders through both dividends and share repurchases. Through the first six months of this year, we have invested $370 million in maintenance and growth capital projects, $75 million in a strategic aggregate acquisition, and returned over half a billion dollars to shareholders, including $400 million of share repurchases. We continue to expect between $750 million and $800 million of capital expenditures for the full year.

During the second quarter, we used cash on hand to pay down our outstanding commercial paper balances of approximately $200 million and maintained approximately $300 million of cash at quarter end. At June 30, net debt to adjusted EBITDA leverage stood at 1.7 times, providing plenty of capacity to support an active acquisition pipeline. We are focused on improving our return on invested capital as we continue to compound profitability in our existing business and make disciplined capital allocation decisions. Our trailing 12 months return on invested capital improved 20 basis points from a year ago to 16.1% at quarter end. SAG expenses in the first six months were 2% lower than the prior year. Trailing 12 months expenses of $558 million, or 6.9% of revenues, 30 basis points lower than the prior year period. We continue to closely manage our overhead costs.

As Ronnie said, we are pleased with the first half execution and results that our teams delivered and are reaffirming our full year adjusted EBITDA outlook. Now, before we take your questions, I’ll pass back to Ronnie to provide an update on Vulcan’s arbitration against Mexico.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thanks, Mary Andrews. As previously disclosed, Vulcan pursued an arbitration against Mexico under the North American Free Trade Agreement, commonly referred to as NAFTA. We received the award on Monday. All three members of the tribunal found that Mexico’s actions were arbitrary, grossly unfair, and unjust. All three members of the tribunal also found that numerous actions taken by Mexico clearly violated NAFTA, including those related to the claims associated with the large majority of damages. The two members of the tribunal, who wrote the majority opinion, awarded us only immaterial damages. The third member dissented, disagreeing with the low damages award.

As we look ahead, we remain focused on driving improved profitability in our business, and I would like to thank the men and women of Vulcan Materials for a great performance here in the quarter, controlling our cost and expanding our cash gross profit per ton while keeping each other safe. Mary Andrews and I will be happy to take your questions.

Bo, Conference Call Coordinator, Vulcan Materials Company: Thank you, Mr. Pruitt. Ladies and gentlemen, at this time, if you do have any questions or comments, please press star one. If your question has been addressed, you may remove yourself from the queue by pressing star two. Once again, that’s star one for questions. We’ll go first this morning to Anthony Pettinari with Citigroup.

Anthony Pettinari, Analyst, Citigroup: Good morning.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Morning.

Anthony Pettinari, Analyst, Citigroup: Ronnie, can you talk a little bit more about the puts and takes on demand and maybe specifically what gives you confidence in the second half of the year to meet the full year volume guidance?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yes. Thank you. Good morning, Anthony. I would say, first of all, demand is tracking as we expected. We’re an outdoor sport, so we’re always going to have some weather disruptions. I would say overall, tracking is expected. As we entered the year, we had healthy backlogs, and as we sit here today, we have healthy backlogs, and our quoting activity continues to remain very robust. On the positive side, trends across public infrastructure, public highways, data centers, and other forms of manufacturing are all good. We’ve also seen a pickup in LNG projects along with energy generation and power infrastructure expansion, which is really being driven by the data centers. Conversely, we continue to see single-family and residential growth remain weak.

Other parts of light non-res, they’re going to follow rooftops, and so that’s another area that as we see single family start to recover, I think light non-res will follow. I will also remind you of our advantage footprint. Where we’re at, and that matters, and when we start seeing single family recovery, I like our footprint, and I think we’re in a really good position to capture that.

Anthony Pettinari, Analyst, Citigroup: Okay. That’s helpful. I’ll turn it over.

Bo, Conference Call Coordinator, Vulcan Materials Company: Thank you. We go next now to Tyler Brown with Raymond James.

Tyler Brown, Analyst, Raymond James: Hey, good morning.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Hey, Tyler.

Tyler.

Hey. I got a couple questions on cost, but cost performance was pretty solid here in Q2. It maybe came in slightly better than the guidance despite fuel and let’s call it some weather friction. Mary Andrews, if we look at the full year guide, it seems to imply that that cost inflation is maybe a bit better in the second half than the first half. Can you just give us any color on what’s driving that and just your confidence in hitting those trends? Thanks.

Yeah, Tyler. Thank you. I’ll address the first part. Then I’ll give it to Mary Andrews to talk about some of the numbers. As I look at our Q2 performance, it was really good. I would say it was better than a lot of expectations. We dampened the impact of a $26 million diesel headwind. We really did that through our Vulcan Way of Operating disciplines. When I look at our production efficiencies that we continue to focus on with VWO, as well as our labor scheduling and how we continue to focus on how we’re going to get the most out of that, and really in the backdrop of wet weather, that does impact our cost as well.

I’m very pleased with where we’re at. I think VWO continues to be something that is evident in our results, and the productivity is that. For the rest of the year, I think there’s other levers that we’ll continue to look at as far as oil continues to be inflated. We’re going to continue to really think about our operating efficiencies and how we drive that through our process intelligence and labor efficiencies. Also there’s things, levers we can pull with our stripping. We’re focused on things that are heavily consuming of diesel. Stripping is one of those. We’ll continue to focus on that. Also leverage our liquid asphalt storage that we’ve had. We’ve got one in Southern California.

We recently closed on another one in Northern California. That’s another way for us on the downstream business to fight some of those headwinds of volatility and cost.

Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, Vulcan Materials Company: Yeah. Tyler, just to add to what Ronnie covered on some of the levers that we have in the second half. Another dynamic in the second half is how unusual the second half of last year was from a cost standpoint, particularly the fourth quarter. We faced unusually concentrated repair costs and higher insurance costs last year that we don’t expect to repeat this year. Those anomalies and some benefit of seasonally higher tonnage in the second half compared to the first, are also things that should drive both a much improved year-over-year performance and an improved absolute cost performance in the back half. Even, as Ronnie said, even as those diesel prices remain sticky, likely, and right now at levels still similar to the second quarter.

One other thing I’d mention is since we’re talking about cost.

is our year to date SAG expense, which we’ve maintained at levels lower than last year. In fact, I would expect full year SAG expenses to probably be $10 million-$15 million lower now than the initial range we provided, of $580 million-$590 million back in February. Overall, we are pleased with the cost execution in the first half and confident in a solid performance in the second half as well.

Tyler Brown, Analyst, Raymond James: All right. Excellent detail. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thanks, Tyler.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Trey Grooms with Stephens.

Trey Grooms, Analyst, Stephens: Hey, good morning, everyone. Thanks for taking my question. Ronnie, you guys talked about some mid-years out there in some market, mid-year price increases in some markets and given the diesel backdrop. Any update you can give us on mid-year increases? If I could sneak just one more in, just given the Mexico situation, I really appreciate your prepared comments there. Any additional color you could give us at this time around the tribunal’s decision there? I think they said unfair and unjust, which is, I think, an understatement here. At any rate, any additional color there? Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Trey, thanks. I’ll take the second part first, then I’ll talk about mid-year second. With regards to Mexico, really what I said in my prepared remarks, I’ll reiterate from a standpoint of the decision was disconcerting to us. All three arbitrators agreed that Mexico had clearly violated NAFTA, yet they awarded immaterial damages. That’s really all I’m going to say about that. What I will also say, though, is that, look, we’ve continued to move forward with running our business. Even since the illegal taking of Calica back in 2022, we’ve successfully continued to supply the Gulf Coast and really meet the needs of our customers in a very dynamic market. I would say overall, our EBITDA has grown more than 50% over those four years. We’ve done things to continue to grow the company.

I’m very pleased with the efforts that our people have given for that. When I look at the Gulf Coast today, it’s still a very dynamic area. It’s still going to be challenged on how material gets to the Gulf Coast. We’ve still got the best distribution network along the Gulf Coast, and we’re going to continue to serve that through different forms and fashions. We will remain very well positioned to supply our customers there. Remember, we still own the land, and we still own the land around the port, which are two very valuable things when it comes to Mexico. With regards to your second part, or your first part really, your pricing question.

When I look at mid-years, I would say they went as expected, and when I really compare them year-over-year, we do a lot of comparisons. Sequentially, we’re almost two times better than we were last year. We intentionally pulled mid-years forward. We pulled those forward to June, and I think we’ve had some success in that shows in our mix adjusted as we sit today of 5% on our pricing. I would tell you, our biggest lever to overcome fuel continues to be price. What you will continue to see from us is discipline around that, and I’m confident in our commercial team, our execution on Vulcan Way of Selling, that we will continue to use price as our biggest lever.

If we continue to see fuel being as sticky as it is, I think you’ll see us continue to be very aggressive in moving price throughout the remainder of the year.

Trey Grooms, Analyst, Stephens: Great. Thanks for all the color there, and I did want to say hats off on the cost. You guys did a great job.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thanks, Rick.

Bo, Conference Call Coordinator, Vulcan Materials Company: Thank you. We’ll go next now to Philip Ng with Jefferies.

Philip Ng, Analyst, Jefferies: Hey, guys. Ronnie, great color. Any more color in terms of how demand is shaping up in July? I know certainly Tukey had some weather-related issues, color on that front. You talked about orders and backlogs quite good right now, good momentum. Can you kind of quantify how things were to start the year and, I guess, how orders and backlogs, perhaps from a growth standpoint, are shaping up today?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. I would tell you that as we sit today, backlogs look very similar as they did as we entered the year. A lot of that is the puts and takes of where weather happens, geography matters. We had probably abnormal weather in Texas, and a little bit of abnormal weather in the Southeast. As we sit here in July, I would tell you, we’ve continued to see strange weather patterns, but shipments are continuing as expected. There’s a lot of puts and takes around that and where it’s raining at, maybe dry somewhere else, that’s why we continue to look at the mix adjustment of the geography impact because all markets are not the same.

As I look forward and thinking about the dynamics of where we’re at with the end uses, I look at some of our starts momentum, and referring to Dodge awards. On the highway side, North Georgia on a trailing 12 is up 189%. These are large dollar projects, we can give you some specifics of those projects, a lot of this is the 400 toll roads and some of this public-private partnership and other ways of looking at things that are funding mechanisms outside of the federal program. Total infrastructure in the Gulf Coast is up 360% over the last 12 months. A lot of public. That’s where we get our confidence in public. On the private side, continues to be really driven by data centers, we are seeing some other manufacturing things.

I would tell you that I think the power side of power generation and power infrastructure is going to continue to be a tailwind as we move throughout the data center build-out. Those are projects that are being reflected both in our quoting activity as well as some booking activity. We also talked about some LNG projects. We’ve seen that along the coast as well. Those are different types of projects that we’ve seen in the past. Those have been relifted. Really, the only part that we see continue to be on the negative side is single family. I believe that with the two legs of our stool, we continue to be confident in a year of growth.

If the other leg of the stool would kick in, I think, again, our footprint is a really dynamic footprint, very advantaged, and we would get the benefit of that.

Philip Ng, Analyst, Jefferies: Ronnie, any color on warehouses? You really haven’t talked much about that.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. I would tell you, we’re seeing a couple of green shoots in very specific markets, but overall, warehousing continues to be overall flat. We’re not seeing any green shoots in warehouses from an overall perspective. I do think it’s one that as we see that kind of recovery as well, again, our footprint is very advantaged on that as well.

Philip Ng, Analyst, Jefferies: Okay. Thank you. Appreciate the call.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Steven Fisher with UBS.

Steven Fisher, Analyst, UBS: Thanks. Good morning. Congrats again on the cost management. Just to follow up on the discussion about the large project activity. We too are hearing a lot about the momentum there. Just curious what that might look like from a timing perspective for aggregates. Based on what you’re seeing and hearing, is there a particular time frame when you think those will start to be more visible in your shipments? Is that sort of just on a rolling basis, or is it more that these things are going to take a little time to ramp up, so maybe like first half of 2027 or second half of 2027? Just curious when we could really start to see these big projects really kind of show up in the shipments. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. Thank you. Great question. I would tell you, we see them every day. It is going to be more of that consistent approach, even though you think about the way these bookings come into us and the influence they can have on our backlog. When you actually go to put the work in place, it’s still a customer out there that’s taking the material, putting it down on a public job or on a private job. It still takes their scheduling and their tools to do that. In the end, you’re not going to see these big massive swings because a bigger job starts one place, and you’re always wrapping one up and you’re starting another one.

We love slow and steady, especially with the compounding interest of the nature of our business and how we’re focused on growing our cash gross profit per ton. I would tell you our backlog shapes up as we see it today. It’s very predictable, and I would tell you it’s slow and steady for us is what we would want to continue to see. Thank you very much.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Keith Hughes with Truist.

Keith Hughes, Analyst, Truist: Thank you. What kind of mix adjusted price are you anticipating in the guide in the second half of the year, given that midyears have been rolling in all second quarter?

Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, Vulcan Materials Company: Yeah. Keith, for pricing cadence, I think is playing out exactly like we saw at the beginning of the year, which would mean the lower end of the range in the first half and will be exiting at the upper end in the back half. That is really reported and mix adjusted. It’ll just depend on what those comps look like. I would tell you that compared to our pricing plans coming into the year, we are executing just as we expected, playing out like we thought.

Keith Hughes, Analyst, Truist: On volume, would that be the similar to where you’re at the higher end of the range in the second half versus the first half? Same trend?

Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, Vulcan Materials Company: Yeah.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: I think the volume was the opposite. We were at the higher end at the first half. I think it’ll continue to be consistent in the second half. Obviously, weather’s always a factor in the fourth quarter, but I would say that we look at it today and we think to hit our range that we said, it really is kind of continuing the shipping paces that we’ve seen throughout the second quarter. The second half would be similar to that.

Keith Hughes, Analyst, Truist: Okay. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thanks, Keith.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Kathryn Thompson with Thompson Research Group.

Kathryn Thompson, Analyst, Thompson Research Group: Hi. Thank you for taking my question today. You gave a lot of great color on end markets and what’s driving demand. We’d like to step back and look at the forest for the trees and just conceptually, more things are going to be made in the U.S., built in the U.S., for a variety of different parts. Granted, as you said earlier, there’s been a lot of focus on data centers, but it’s a bit more than that. You did touch on comments on power. It’d be helpful if you could pull the string a little bit more on that on a couple of different levels. First, where are you seeing the power expansion? Then what type? There’s now a variety of different power type structures. It’s not just in Texas, but it’s also in other parts of the U.S.

Maybe just give a broader, a more fleshed out view of what you’re seeing in power and how Vulcan is supporting that growth. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah, you’re absolutely right, Kathryn. Thank you. I would tell you it’s a lot of different forms. We’ve still got a combination of renewables. We’re still seeing solar work. We’ve bid several solar manufacturing ones. Then we’re seeing, I think the first phase of this, we’re seeing we have four projects that are converting coal fire power plants back to natural gas. We’re seeing Georgia Power, Alabama Power be very active in those kind of projects. Obviously in Texas, we’re seeing a lot of growth there. We’re also seeing this combination of some of the dollars you see tied up with these data centers is because they include power. It’s hard when you look at the data center numbers, when you talk about dollars, and then you start kind of stripping that out. Well, what is that?

Is the real data center itself, and what part of that is power? I would tell you a lot of these are now to get them approved, they’re coming with full power supply to the data center. We’re seeing a mix of that. I would say overall, when we look at our quoting activity in the category of power generation, we’re just seeing a lot more quoting activity. Now, I’m not going to tell you it’s going to go as fast as data centers because you and I both know that approval process is going to look a little different. We just see it as another form of healthy forward-looking demand of our products. Again, we like slow and steady, and we like our ability to continue to compound our cash gross profit over the future.

I just see this as another area of future aggregate demand that’s going to be needed, and it’s very aggregate intensive.

Kathryn Thompson, Analyst, Thompson Research Group: Great. Thanks so much and good luck.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Angel Castillo at Morgan Stanley.

Angel Castillo, Analyst, Morgan Stanley: Morning. Thanks for taking my question. Ronnie, just wanted to go back to price a little bit. You noted, I guess, a little bit of a pull forward here on price. If I heard correctly, I think you mentioned that you might still pull the price lever throughout the remainder of the year. Just wanted to make sure or clarify, I guess. Does that mean that you might still be announcing additional price increases in the second half? If that’s right, I guess how should we think about the likelihood of that? Is it just energy price dependent? To the extent that you do move forward with any additional price, I guess, how should we think about the implications on January one increases and the ability to do those?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah, I think we’ll be giving you a lot more color of that by our next call. Look, as we went into the midyears, we pulled them forward anticipating what oil was doing to us at the time. At that time, we were also anticipating that this was going to be short-lived. As we see it continue to drag on, that’s where we’ve told you in the past and will continue to be very disciplined around price is our biggest lever when it comes to overcoming headwinds like this and inflationary pressures. What I’m saying is that continues to be our strongest lever. We’re evaluating that as we speak. We will continue to protect our margins. We have to. These inflationary things are hitting us, they’re hitting our customers, they’re hitting everyone.

It’s not like there’s one side of the supply chain that’s isolated in that. Our expectations would be that we continue to be very disciplined around our pricing approach. I would tell you more color on that as we work through the year. It’s a very fluid situation with what we see oil prices doing. They just became more sticky than three months ago. We thought it would be a little less sticky than this. They haven’t been. We’re going to continue to look at that. Again, that’s our biggest lever. We’ll continue to exercise our ability to protect the margins that we have.

Angel Castillo, Analyst, Morgan Stanley: That’s very helpful. Maybe just on the M&A pipeline, I guess some of your closest peers have done some larger, more kind of transformative deals. Was hoping you could just talk about your pipeline of potential M&A, just whether that includes anything more transformative or just remind us how we should be thinking about the evolution of your strategy, just key areas of interest and potential size of that pipeline and what you have coming forward.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah, I would say, in my prepared remarks, I said we have a healthy pipeline we will most likely see some of those transition or transactions close in the second half of the year. Those transactions for us are going to continue to be very aggregate disciplined. Look, we’re good at what we do. We’re good at aggregates. We’re going to be the most pure play aggregate company when all these other deals that are announced in the market gets done. We like what we do. What you will see out of us is very much disciplined approach to continuing to do what we’re good at. That’s producing and driving value for our shareholders based on the aggregate business.

Nothing we do or nothing we have in the pipeline or anything you see us announce in the future will be of any surprise.

Angel Castillo, Analyst, Morgan Stanley: Very helpful. Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll take our next question now from Rohit Seth at B. Riley.

Rohit Seth, Analyst, B. Riley: Hey, thanks for taking my question. Just on your prepared remarks, you had touched on the BUILD America 250 Act, you compared and contrast to the IIJA. You mentioned something about more new construction in the BUILD America 250. I just wonder if you can elaborate on that.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. Rohit, I would tell you as we look at the BUILD America 250, two things there, really, when we look at the aggregate intensity of the projects that we believe will happen because of going back to a matching program instead of the grants program. That’s one that we believe when you go back to the old formulas that we’ve experienced in the past, you’re really going to rely on getting money to states where the miles are, which is where Vulcan’s footprint is. That’s why we continue to say that’s going to be better aggregate intensive for us, as well as the bridge program. As you unwind kind of the headline number, remember with IIJA, there was a lot of other stuff in it.

There was a lot of green projects, a lot of buses and other things that had no aggregate consumption whatsoever. It was a great headline number, when you unpacked it all, we really focused on what was moving the needle with aggregates. You really talk about highway, those infrastructure projects, then you layer in the bridge side. As we look at it today with what came out of the House version of it, we’re pleased with that, I think the Senate will take that on. As I said, we’re most likely going to get a continued resolution. We’re fine with that. We think we’re in a good place with the House version of it, we’re pleased with, we think the Senate has the ability to add more to that. It’s going to be more aggregate intense, which is good for us.

Rohit Seth, Analyst, B. Riley: Ultimately, the takeaway for you guys is the BUILD 250 is better for the business than the IIJA was?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: I think when you wind back to what was truly focused on highway, infrastructure, and bridges, yes.

Rohit Seth, Analyst, B. Riley: Okay. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Ivan Yi with Wolfe Research.

Ivan Yi, Analyst, Wolfe Research: Hey, good morning, guys. Thanks for the time. Sticking with pricing, just a quick clarification. Are any of the mid-year price increases included in your unchanged guidance or the mid-year is incremental to that? Also costs exceeded pricing by about 200 basis points. When do you expect this price cost spread to inflect positive? Can we see pricing exceed costs in 3 Q, in 4 Q? Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah, I would say as we exit the year, we talked about that on our last call. Look, when we came into the year, we said costs were going to be higher on the front end and price was going to be slower to develop, and we would exit the year with price being higher and cost being lower, which is what’s in our guidance, and you can see that. I would tell you that when we look at our guidance, all of it’s in. When we think about what’s happening in the mid-years, we think about where we’re at in all the markets. That’s what our best view of it is today. Again, what’s not in it is if we decide to pull things forward and try to move the price again for the remainder of the year. That’s not in there.

As we sit today with the success we had in mid-years and where we see things as we sit today, that is in our numbers. That’s where we’re saying that four to six, and we say we’ll exit the year at the higher end of that range of the four to six. The pricing will continue to accelerate throughout the year and cost will continue to decelerate.

Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, Vulcan Materials Company: In terms of margin, Ivan, obviously the second quarter was pressured with the higher energy. We do expect those inflationary energy headwinds to continue in the second half. I think for the second half, we should see some expansion in gross margin year-over-year, driven largely by the fourth quarter. Margins likely will still on a gross margin basis, are likely to still be perhaps down in the third quarter, growing in the fourth quarter and up a little bit overall in the back half.

Ivan Yi, Analyst, Wolfe Research: Thank you so much.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thanks, Ivan.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Michael Dudas with Vertical Research.

Michael Dudas, Analyst, Vertical Research: Good morning, Mark Warren, Mary Andrews Carlisle, Ronnie Pruitt.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Hey, Michael Dudas.

Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, Vulcan Materials Company: Morning.

Michael Dudas, Analyst, Vertical Research: Hey, maybe you can, Ronnie Pruitt, share some thoughts on, over the last 18, 24 months, some of the acquisitions, asset positions you’ve made. Certainly we think about the one in North Carolina. How progress has been on a pricing marketing front, product mix front, getting to the targets where you’d anticipate. Just quickly on the Colorado, it seems like that was opportunistic, but is that a focus area part of the country that you are taking another look at?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. Let me talk about the past first. Then we’ll talk about the present. When I think about the acquisitions that we did over the last two years really referring to Superior Ready Mix as well as Wake Stone Corporation. In Superior Ready Mix, look, we’ve executed exactly what we said. We said we’re going to go buy this business. We were going to evaluate the downstream. We wanted it for its aggregates. We were able to execute that. We were able to spin off and redeploy the downstream assets to a very good company in CalPortland Company will be a very good customer of ours long term. In the end, we were able to do exactly what we said. We’re going to buy the business for the aggregates we wanted.

I would tell you, in the market there, and that market, there wasn’t as many separation between where a Vulcan price market would’ve been and where Superior was. There was some, and we’ve been able to focus on getting those operations up to more like a Vulcan standard market when it comes to pricing. I’m very pleased with the execution of our California team. It’s not easy when you buy these companies to integrate them and then spin things off. Our California team really stepped up and performed well through all of this time and uncertainty of getting that thing done. When it comes to Wake, I’m extremely pleased with where we’re at.

I would tell you, we said going into when we closed on Wake, that it was significantly below the Vulcan standard when it came to what we felt like the value of those products should be. That team and instituting our Vulcan Way of Selling and the disciplines around that, and really the ownership of that local team as well, has really performed well. I would tell you, we said it was going to take a couple of years, and I would tell you we’re right on schedule. I’m very pleased with where we’re at. The acquisition is doing exactly what we thought it would. As we look forward, that’s the things that we’re going to be really good at.

We’re going to continue to focus on those kind of businesses that are aggregates led, the things we can institute Vulcan Way of Selling, institute Vulcan Way of Operating and continue to drive margin improvement. Brannan was an opportunity for us. When you look at Brannan, it’s a small one. It’s an entrance into Colorado, yes. About half of the volume out of that, let’s roughly say about a million to a million and a half tons of annual production out of Brannan. About half of that stays locally. It’s on the south side of Denver, so it does reach into the southern Denver market.

The other half comes to DFW in Dallas-Fort Worth, and the rail facility that we acquired there, if you were leaving Fort Worth driving west, the rail facility is just on the west side of Fort Worth, and then you would hit our Weatherford quarry. Very complementary to our market strategy there. Again, dealing with selling to the same customers that we’re already familiar with, that are familiar with Vulcan and our strategy and what we’re going to do. I’d say Brannan is a small. It’s pretty much a bolt on, but it also gives us some access to a new market. I would say the things that I’ve talked about in the future, those are the things that we’re going to continue to focus on.

The ones that we can do, the ones that are very aggregate intensive, the ones that are easy for us to integrate, and the ones that we can continue to institute Vulcan Way of Operating and Vulcan Way of Selling disciplines in, and drive margin improvement. I’m very pleased with where we’re at.

Michael Dudas, Analyst, Vertical Research: Excellent, Ronnie. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Brent Thielman of Oppenheimer.

Brent Thielman, Analyst, Oppenheimer: Hey, thanks. Hey, Ronnie, when you look across the footprint, wanted to get your reaction just to how competitors have responded with price increases. Are you seeing any higher frequency of attempts to capture share by competitors just by holding price? Maybe there was a view energy cost inflation would be temporary, so they’re in a holding pattern. Has the response been pretty rational just to higher costs? I guess also just wondering if any of that’s implicit in your volume outlook as well.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah, I would tell you, look, at the end of the day, inflationary pressures, whether they’re diesel or whether there are other factors involved in it, no one’s immune to that. Everybody feels it. That includes our downstream customers feel it. Everyone feels it. I would tell you the reactions and the disciplines and all those things have been as expected. Everyone’s in this for the long term, even though we’re measured in very short-term increments of quarter to quarter. We still have to focus on this business long term. I would tell you, we’re in a great position to continue to execute on what we do with Vulcan Way of Selling and Vulcan Way of Operating. I think our competitors feel the same pressures that we do. In the end, no one is immune to diesel.

Everyone has to use it. It’s just a part of the production process and everything we touch. I would tell you, when things like that happen, everybody feels it. Will everybody react the same? I don’t know. In the end, I think we’re in a very disciplined market, and I like the position we’re in.

Brent Thielman, Analyst, Oppenheimer: Okay. Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to David MacGregor at Longbow Research.

David MacGregor, Analyst, Longbow Research: Yeah, good morning, everyone. Thanks for taking my question.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Good morning.

David MacGregor, Analyst, Longbow Research: Ronnie, you talked about the continuing resolution, it’s pretty clear that’s where we’re heading. I wonder if I could get you to just talk a little bit about how you grow shipments in that kind of environment. Sorry about that. I guess, the quick and dirty is nothing changes in a continuing resolution. We just stay the course. I wonder if I could get you to just maybe give us a little more of a nuanced look and what changes in terms of the competitive position? Does it trigger change in how you may win in non-res business? How do people respond to that condition?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. Look, this is not abnormal for us to go through a continuing resolution. We’ve had lots of them in the past, and we’ll have probably lots of them in the future, and that’s just kind of the way that the D.C. model and getting things through the House and the Senate work. I would tell you, we don’t see it as any change. Look, the continuing resolution continues to spend at current levels. You got a lot of carryover with IIJA, and I think that’s going to be the unique thing about the transition of this bill. Historically, we haven’t had that much carryover between bill to bill. We still, when we talk about the 60% of funds that are still going to be spent as the carryover, so you got that. You got really healthy state budgets as well.

Remember, federal spending is only a third of the way we look at public funding. I think we’re in a good position. Look, we want slow and steady growth. We’ve said through all of IIJA, everyone was waiting on, well, when’s that big step change coming? It wasn’t going to happen. It’s going to be slow and steady because that’s the way work gets performed. That’s the way the states led it, that’s the way the contractors look at it, and that’s the way they actually perform the work. I look at it, I don’t see any disruption as far as the public side. I think we’re going to continue to be slow and steady. I think public will continue to be in growth mode. I think we got healthy states. I think we got healthy local measures.

I think we got other ways that we’re funding projects as well. I don’t see any disruption of, is it going to change the way you look at private non-res and large projects and all that? No, I don’t believe so. We got good visibility, and we continue to rely on public being very steady.

David MacGregor, Analyst, Longbow Research: Does it change how you think about CapEx when you get into that state?

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: No. No, it does not.

David MacGregor, Analyst, Longbow Research: Thanks very much.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: We’ll go next now to Brian Brophy at Stifel.

Brian Brophy, Analyst, Stifel: Yeah, thanks. Good morning, everybody. Appreciate you taking my question. Just kind of continuing the conversation on the public side, realize it’s a moving target, but what are your latest thoughts on when we may see a new federal infrastructure bill? Thanks.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: I would tell you, we’re definitely headed straight towards a continuing resolution, then time will tell whether that’s before midterms or not. I wouldn’t get caught up in it because at the end, I think. We’ve had them where they’ve lasted a year. We’ve had them where they’ve lasted longer than a year. In the end, we’ve got a healthy level of spending. Remember, a continuing resolution continues that healthy level of spending. I don’t want to try to predict that. If you can predict anything in D.C. today, good luck. In the end, let’s just focus on, we’ve got methods in place to continue public funding at a very healthy spot, and we’re pleased with that.

Brian Brophy, Analyst, Stifel: Appreciate it.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: Thank you. We’ll go next now to Garrett Greenblatt at J.P. Morgan.

Garrett Greenblatt, Analyst, J.P. Morgan: All right, thanks for taking my question. On the demand side, power generation has come up a few times earlier in the call. I’m curious if you could help us size out the impact of that to demand volumes. I think when we think about data centers, it’s something like 3%-5% of your overall volumes. I wonder if you could put some numbers around power generation and where that could go over the next couple of years into 2027, 2028.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Yeah. It’s hard to predict today. It represents a very low percentage because if you think about power generation in the country, it’s been a very slow growth area because of the way that they have to plan capital, the way they have to get their approvals. We haven’t seen power generation being a tailwind for a long time. I think you look at it in terms of the next four to five years and not the next year, because it’s not going to be a short-term blip. These are things that take a lot of planning, a lot of regulatory. Each individual state has its own ways if they’re going to have to address that. I would look at it as another form of aggregate consumption long-term that’s going to build in consistency in aggregate supply.

I wouldn’t get ahead of it saying it’s going to look similar to data centers because it just can’t move that fast.

Garrett Greenblatt, Analyst, J.P. Morgan: Got you. Makes sense. Thank you.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: Thank you. Mr. Pruitt, it appears we have no further questions, sir. I’d like to turn the conference back to you for any closing comments.

Ronnie Pruitt, Chief Executive Officer, Vulcan Materials Company: Thank you, Bo. Thank you all for joining our call today. Our first half results demonstrate the resiliency of our uniquely advantaged pure-play aggregates business. I am confident that we have the right strategy and the right people to execute that strategy to create long-term value for our shareholders. We look forward to speaking with you next quarter. Thank you.

Bo, Conference Call Coordinator, Vulcan Materials Company: Thank you, Mr. Pruitt, and thank you, Ms. Carlisle. Again, ladies and gentlemen, this will conclude the Vulcan Materials Company second quarter earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.