Vulcan Materials Company — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are with FY 2022 unless stated otherwise. Vulcan is a U.S.-focused construction materials producer, led by aggregates, with asphalt, ready-mixed concrete and calcium businesses.
Business context
Vulcan reported 397 active aggregates facilities and 15.6 billion tons of proven and probable aggregates reserves at year-end. Aggregates shipments serve public and private construction markets; management cited infrastructure funding and population growth in its markets as demand supports. Production and sales at the Calica operations in Mexico remained halted.
Financial and operating performance
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Total revenues | $7.782 billion | $7.315 billion |
| Gross profit / margin | $1.949 billion / 25.0% | $1.558 billion / 21.3% |
| Operating earnings | $1.427 billion | $951.4 million |
| Net earnings attributable to Vulcan | $933.2 million | $575.6 million |
| Diluted EPS | $6.98 | $4.31 |
| Operating cash flow | $1.537 billion | $1.148 billion |
| Adjusted EBITDA (non-GAAP) | $2.011 billion | $1.626 billion |
Aggregates sales rose 12% to $5.910 billion, while shipments declined 1% to 234.3 million tons. Freight-adjusted price increased 15.9% to $19.00 per ton; gross profit was $1.734 billion, or $7.40 per ton. Asphalt gross profit increased to $149.6 million. Concrete gross profit fell to $62.1 million, with shipments down 29%, partly reflecting divestitures. Calcium gross profit was $3.2 million.
At year-end, cash and cash equivalents were $931.1 million, plus $18.1 million of restricted cash. Total debt was $3.878 billion; total debt to Adjusted EBITDA was 1.9x and net debt to Adjusted EBITDA 1.5x. Available liquidity was reported as $2.448 billion. The company reported an effective weighted-average interest rate of 4.9% and a weighted-average debt maturity of about 10 years. Capital expenditures were $872.6 million. Dividends totaled $228.4 million, and $200.0 million was spent on share repurchases.
Changes, unusual items and management commentary
- Revenue increased 6%; gross profit rose 25%, and operating earnings rose 50%. Management attributed the improvement mainly to aggregates pricing and unit profitability, alongside stronger asphalt results.
- Aggregates gross profit per ton improved 24% to $7.40; cash gross profit per ton, a non-GAAP measure, increased 21% to $9.46. Return on invested capital, also non-GAAP, rose 280 basis points to 16.3%.
- FY 2023 results included a $67.1 million pretax net gain from real estate and business sales, $28.3 million of impairment charges, $7.9 million of divested-operation charges, and a $14.7 million pretax discontinued-operations loss. A $12.9 million tax valuation allowance was recorded for Calica deferred tax assets.
- Management expects continued earnings growth and strong cash generation in 2024, while noting that pricing momentum and execution are expected to support aggregates unit-profitability improvement even if demand is weaker.
Outlook and key risks
For 2024, management forecast total shipments flat to down 4%, aggregates freight-adjusted price improvement of 10% to 12%, and continued improvement in aggregates cash gross profit per ton. It projected net earnings attributable to Vulcan of $1.070 billion to $1.190 billion and Adjusted EBITDA of $2.150 billion to $2.300 billion. Capital spending guidance was $625 million to $675 million. These are forward-looking estimates, not guarantees.
- Calica / Mexico: Mexican authorities shut down operations in May 2022. Vulcan is pursuing NAFTA arbitration and expected a tribunal decision during 2024; the company said recovery, if any, could not be quantified.
- Legal and environmental contingencies: Several claims have uncertain outcomes or loss ranges. The Hewitt Landfill matter was identified as a critical audit matter; incremental exposure related to potential claims involving nearby groundwater remediation could not be reasonably estimated.
- Market and operating risks: Results are sensitive to construction cycles, interest rates, weather, public infrastructure funding, pricing, labor constraints, fuel and energy costs, and transportation availability. Permitting and reserve access are also important risks.
- Debt and liquidity: In February 2024, after year-end, Vulcan elected to redeem $550 million of 5.80% notes due 2026, expecting to complete the redemption in March using cash on hand.
- The 2024 outlook assumes ongoing pricing and operating execution; actual results may differ materially. Several performance measures cited above, including Adjusted EBITDA and cash gross profit per ton, are non-GAAP measures.
Important facts for investors to verify
- Track actual 2024 shipment, pricing, unit-cost and earnings performance against management’s outlook.
- Check the status and potential financial impact of the Calica shutdown and NAFTA arbitration decision.
- Review debt and liquidity after the planned $550 million note redemption, including interest costs and maturity profile.
- Monitor developments in the Hewitt Landfill and other environmental or discontinued-business litigation matters.
- Assess whether earnings growth is supported by recurring operating performance or by asset-sale gains and other adjustments; reconcile non-GAAP measures to GAAP results.