Vulcan Materials Expects Continued Growth in 2024, According to Recent Earnings Call
Strong Performance and Positive Outlook
In their recent earnings call, leading construction materials company Vulcan Materials Company highlighted their impressive performance in 2023 and provided an optimistic outlook for 2024. The company reported a remarkable $2 billion in adjusted EBITDA and saw a significant 27% improvement in their fourth-quarter results. Additionally, Vulcan Materials showcased a notable 21% increase in aggregate cash gross profit per ton.
Anticipated Growth in Aggregates Unit
Looking ahead, Vulcan Materials is confident in its ability to continue growing its aggregates unit and projects a 10% to 12% rise in freight-adjusted aggregate prices. While the company expects a slight decline in aggregate shipments, it remains optimistic about the profitability of this segment. To support its growth, Vulcan Materials plans to reinvest in its franchise with capital expenditures totaling between $625 million and $675 million.
Three-Pronged Growth Strategy
Vulcan Materials' CEO, Tom Hill, expressed confidence in the company's three-pronged growth strategy, which encompasses organic growth, mergers and acquisitions (M&A), and Greenfield expansion. Hill believes that this strategy will enable Vulcan Materials to achieve a fourth consecutive year of double-digit growth in adjusted EBITDA.
Strong Financial Forecast for 2024
For 2024, Vulcan Materials forecasts adjusted EBITDA between $2.15 billion and $2.3 billion. The company expects mid-single-digit cost inflation, which is an improvement compared to previous quarters. While public sector demand is expected to remain robust, the company acknowledges mixed performance in the private sector. A modest decline in demand for 2024 is anticipated, with aggregate shipments potentially decreasing by up to 4%. Furthermore, ready mix sales volumes are expected to decline slightly due to challenges in private non-residential markets.
Promising Growth in the Asphalt Business
On the positive side, Vulcan Materials' asphalt business has been performing well, boasting a gross margin of approximately 13%. The company expects public infrastructure projects to drive slow and steady growth in the coming years. Vulcan Materials is also poised to benefit from the Infrastructure Investment and Jobs Act (IJ) as it ramps up. While the impact of interest rates on non-residential construction has been weak, improvement is expected from around mid-2025.
Vulcan Materials Company remains optimistic about its future prospects, with its strong performance in 2023 and positive outlook for 2024. The company's growth strategy, coupled with its solid financial forecast, positions it well for continued success in the construction materials industry.
Analyst comment
This news is generally positive. Vulcan Materials Company has reported strong performance in 2023, with a significant improvement in their fourth-quarter results. They anticipate continued profitability growth in 2024, with a forecasted increase in freight-adjusted aggregate price. The company plans to reinvest in its franchise and CEO Tom Hill expressed confidence in their growth strategy. However, they forecast a modest decline in demand and a potential decrease in aggregate shipments in 2024. Ready mix sales volumes are also expected to decline due to challenges in private non-residential markets.
