Vulcan Materials Co
NYSE:VMC
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
211.16
292.31
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Vulcan Materials Co
You don't have any saved screeners yet
Good morning, ladies and gentlemen, and welcome to the Vulcan Materials Company's First Quarter 2023 Earnings Call. My name is Travis, and I will be your conference call coordinator today. [Operator Instructions].
Now, I would like to turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin, sir.
Good morning and thank you for your interest in Vulcan Materials. 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. Additionally, a recording of this call will be available for replay, later today, at our website.
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 any non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation, and other SEC filings. In the interest of time, please limit your Q&A participation to one question. This will allow for more questions during our time together.
With that, I will turn the call over to Tom.
Thank you, Mark, and thanks all of you for joining our call this morning.
Vulcan Materials is well-positioned to deliver attractive growth in 2023. We got off to a solid start in the first quarter and now expect to deliver between $1.85 billion and $1.95 billion in adjusted EBITDA this year, a 14% to 20% improvement versus the prior year. In the quarter, we generated $338 million of adjusted EBITDA, a 15% improvement over the prior year.
Despite lower volumes in each of our major product lines, total gross profit improved 12% and gross margin expanded by 90 basis points. I'm pleased with our team's execution as they remain focused on our Vulcan of selling and Vulcan way of operating disciplines. The pricing environment is healthy. Year-over-year adjusted average price improved 19% in the quarter. Prices also improved in our downstream products by 15% in asphalt and 12% in concrete. As always, we are focused on capitalizing on pricing momentum and controlling costs to expand our margins.
In the Aggregates segment, gross margin improved by 170 basis points. Shipments declined 2% versus a prior year with wide variations across markets. Some areas benefited from favorable weather and carryover shipments from the wet fourth quarter. Others like California and Texas were challenged by excessive rainfall.
All geographies delivered double-digit price improvement. And importantly, our cash gross profit per ton improved by 23% in the quarter, surpassing $8 per ton on a trading 12-month basis.
In asphalt, gross margins improved by 220 basis points despite higher natural gas and liquid asphalt cost and 11% lower volumes. Significant rainfall negatively impacted shipments in California and Arizona our largest asphalt markets. Prices improved by 15% and more than offset higher raw materials costs. Cash unit profitability in asphalt improved by 90% in the quarter.
The concrete segments cash gross profit was negatively impacted by the 2022 divestiture of our New York, New Jersey, and Pennsylvania operations, as well as weather impacted volume in Texas and California, and the resulting cost challenges.
Now shifting to the dynamic demand environment, which remains mixed, both in terms of end users and timing. We expect modest growth in overall public demand but contraction in private demand. While single-family housing starts continue to fall, some markets have begun to show early signs of decelerating declines. Multi-family housing starts have recently turned negative. However, they remained at high levels, particularly in Vulcan markets and continue to dampen some of the impact of single-family weakness.
Affordability is the fundamental driver of the declines in single-family activity. Low inventories, favorable demographic trends and employment growth in our markets continue to support demand for new residential construction. While the pipeline of private, non-residential projects remain supportive of near-term demand starts have eased in recent months. A positive trend in non-residential construction activity is the increasingly broad base composition of starts. Industrial and manufacturing projects now count for more than 60% of starts. Recent trends in supply chain management, onshoring and clean energy investment are among the catalysts for this shift in the drivers of non-residential construction. Our geography and service capabilities enable us to capitalize on these large projects.
We have booked and are currently shipping to a number of these projects in many of our key markets, such as battery plants, electric vehicle manufacturing facilities, LNG facilities and large warehouse parks.
On the public side, momentum is building with trailing 12-month highway starts now exceeding $100 billion. The infrastructure investment in Jobs Act dollars are flowing. The impact of these historic levels of public construction awards on 2023 aggregate shipments will depend upon how quickly starts can turn into shipments.
Other infrastructure starts are also growing with trailing 12 months starts up 23%, in addition to significant IIJA funding for water, energy, ports, and airports, strong state and municipal revenue support, non-highway infrastructure investment. Overall, 2023 demand for Aggregates continues to be dependent upon the depth of decline in residential construction activity and the timing of highway starts converting into aggregate shipments. Our durable Aggregates business and best-in-class execution position us well to successfully navigate any shifts in demand.
Now, I'll turn the call over to Mary Andrews for some additional commentary on our first quarter performance and update 2023 outlook. Mary Andrews?
Thanks, Tom, and good morning.
In the first quarter, our adjusted EBITDA margin expanded 140 basis points with solid operational execution and disciplined SAG cost management. Our SAG expenses as a percentage of revenue improved by 60 basis points in the quarter and moved below 7% on a trailing 12-month basis. We remain focused on continuing to leverage our SAG cost base while making strategic investments in talent and technology to support our business needs.
Net debt to adjusted EBITDA was 2.2x at quarter end squarely within our stated target range of 2x to 2.5x. Our investment grade balance sheet gives us flexibility and optionality to continue investing in both organic and inorganic opportunity.
During the quarter, we invested $113 million in capital expenditures and continue to expect to spend between $600 million and $650 million for the full-year. As we allocate capital, we are focused on improving our return on invested capital. On a trailing 12-month basis, our return on invested capital improved sequentially by 20 basis points from year-end to 13.7%.
Tom shared with you our increased adjusted EBITDA outlook for 2023. On the heels of a strong 2022 in which adjusted EBITDA improved by 12%, we now expect to exceed that growth in 2023 with 14% to 20% improvement. Based on the success of our Aggregates pricing efforts in the first quarter, which yielded 10% sequential improvement and 19% mix adjusted year-over-year improvement, we now expect prices to improve approximately 15% for the full-year.
Coupling the strong pricing momentum with our industry-leading operational execution, we expect to deliver even stronger year-over-year improvement in cash gross profit per ton than our original guidance. All other aspects of the full-year guidance we communicated in February remain unchanged.
I'll now turn the call back over to Tom for some closing remarks.
Thank you, Mary Andrews.
In closing, I want to remind you of two things that we are focused on each and every day. First, keeping our people safe. Our people are the lifeblood of our business and our culture. Second, improving unit profitability and growing earnings regardless of the demand environment. Our Aggregates led business and our best-in-class execution positioned us well for driving long-term sustainable value for all of our stakeholders.
And now, Mary Andrews and I'll be happy to take your questions.
[Operator Instructions].
Our first question comes from Trey Grooms, Stephens.
Nice work on the quarter and Aggregates pricing particularly strong. So hats off to you and the team for such strong execution there. And Tom, I was hoping maybe you could talk a little more specifically about the overall pricing environment and your thoughts on kind of the rest of the year as we look through the balance of the year for pricing.
Sure, Trey. As you saw, prices up 19% mix adjusted for the quarter. So a great start. Our January 1 price increases were successful and they were really broad base. So I appreciate our team's hard work on earning price and based on that success, you saw us raise the guidance to 15% for the full-year.
As -- Trey, as we said, the pricing comps will get a lot tougher in the second half of the year. So a good start to the year, but it's always worked to be done to earn price. And we feel really good about the 15%. But remember, you still have to take that price to the bottom line, which is what happened in the first quarter where we improved our unit margins by some 23%. And that kind of unit margin expansion is generally consistent with what was in our guidance. And that's just the bulk way of ops in the bulk way of selling at work.
Trey, one other thing on that note, on the margin side, we were pleased to for Aggregates gross margin to expand 170 basis points in the first quarter after being compressed each quarter year-over-year last year. As we took those rapidly rising costs through the P&L and our pricing efforts in 2022 that Tom talked about and has begun now into 2023, returned us to gross margin growth. And we would expect the year-over-year improvement to continue to accelerate as the year progresses.
Our next question comes from Stanley Elliott, Stifel.
Hey, good morning, everyone. Thank you for the question and congratulations on the strong start. Tom, you mentioned kind of some nuances developing within the end market because I think that's one thing that's different this year versus maybe some other cycles in the past. Would love to get your kind of thoughts around what's happening on the private non-res side since there's seems to be more moving parts as we're looking forward.
Good morning, Stanley. Yes, you're right. Non-res construction as shipments continues to be really healthy and we saw that evidenced in the first quarter. We would continue to expect the non-residential sector to maintain the really high levels that we came off of last year. And it's really driven by warehouses, distribution, and now manufacturing and industrial.
If I had to risk and reward that sector, I would put the risk in that sector would include maybe some slowing in warehouses. We have not seen that yet, but we're watching it. And the other question I would have is, does light non-res that follows subdivision, does it start to slow again? Haven't seen that yet, but watching it.
Now the flip side, the potential upside to shipments in non-residential construction for me would include the number of massive industrial and manufacturing projects that are on the horizon or just starting to ship. To give you some color around that, we have now have some 20 -- excuse me, some 12 major industrial projects most of which are in our backlogs that total 8.5 million tons. Now, some of those are multi-year projects. All that's not going to go in 2023. So I would describe non-res right now as very healthy so far, so good for a healthy non-residential demand in 2023.
Our next question comes from Anthony Pettinari, Citi.
Hey, I think previously you talked about ag shipments to public projects expected to be up maybe low-single-digits in 2023 with IIJA maybe flowing through in the back half. And I was wondering if you had any sort of updated thoughts on the cadence of those public volumes over the remaining quarters of the year, or maybe between the first half and the second half. How we should think about the flow-through especially with IIJA projects?
Yes. I would tell you back half loaded simple answer to that question, the sector -- the highway sector is really the whole public sector, but particularly highways is set up for a really robust future. Funding is at all-time record levels. And importantly, all three areas of funding of government are at record levels. You got federal, state, and municipal all at all-time highs. And all of that is starting to flow into lettings.
Give you a little color around lettings, which are really healthy in California. And the fourth quarter of last year, the first quarter of this year combined those lettings will be over $2 billion, which is an all-time high for two quarters in California. Moving to Texas is even better. And the first two quarters of 2023, the lettings will be at some almost $8 billion, again, all-time high.
So highway contract awards as we said are now over $100 billion. And we still -- so we'll still see -- we'll see 2023 shipments. We predict in low-single-digit, and that is just -- that is indicative of how much time it takes for those big lettings to flow-through the shipment, so a solid 2023, but a much larger growth in 2024.
Our next question comes from Jerry Revich, Goldman Sachs.
Hi, Jerry.
Good morning.
Hi good morning, Tom, Mary Andrews, Mark, nice quarter. I wanted to ask a couple of things stood out in the quarter on the volume side, if we just think about normal seasonality off of your first quarter run rate, that suggests your volumes could actually be up year-over-year in the second quarter. And I'm just wondering is that consistent with the cadence that you're seeing in the business? And similar vein really strong gross margins for Aggregates in the quarter. Normally your margins are up 10 points, 2Q versus 1Q. And I'm wondering, is that the cadence we should be thinking about here as well? Thank you.
Yes, I'll take the volume and let Mary Andrews handle the margin. I think the volumes were in the quarter, we were down 2% and weather had a big play on that. Weather in California and Texas and Arizona were a drag on us. But the weather in the East and Southeast were really positive. And in the East and Southeast we probably had some volume that pushed from the fourth quarter last year, which had really wet weather into the first quarter of this year.
As far as our outlook it really hasn't changed. The two -- negative two to six, we've got challenges in single-family, which are going to be more second half loaded. Non-res, as you heard me say is really solid and highways is coming on, but it takes a little time. I think for me the timing is going to be key of how fast those highway shipments go from lettings to shipments. But in all of this, I think is a backdrop. You -- we've got the Vulcan way of selling, the Vulcan way of operating, which gives me confidence that will continue to improve our performance regardless of demand challenges, which you've seen us do quarter in and quarter out over the last few years.
Yes. And Jerry, in terms of margins, yes, I think that the typical sequential improvement is what you should expect. And as I said on a year-over-year basis, we'll see significant acceleration quarter-to-quarter as we progress off that 170 basis points from the first quarter.
Our next question comes from Mike Dahl, RBC Capital.
Good morning. Thanks for taking my questions. Mary Andrews, with respect to the other parts of the guidance, I think last quarter, I'm not sure if this was formal guide, but you talked about cost inflation being up high-single-digits and the release said that cost and ags was tracking consistent with expectations. So I'm wondering kind of if that's still the expectation and then if it is, is it right to think about from a gross profit per ton standpoint, the new price on top of that might suggest something in kind of like a low-20s year-on-year increase percentage wise for gross profit per ton?
Yes. Quickly, you're correct on your assumption on gross profit per ton improvements. If I step back and look at cost, we're still facing the impact of stubborn inflation in parts and services. If you looked in the first quarter, weather on the West had negatively impacted the first quarter cost. As -- but remember as we progress through the year, our comps on costs get a whole lot easier. So we're still guiding to the high-single-digit cost inflation. And I would describe that as probably higher than expected parts and services and also delays in delivery is costing us just because it keeps equipment down that's offset some by probably better than expected diesel cost.
We'll -- but all that being said, we'll continue to work on our operating efficiencies to the Vulcan way of operating. But at this point, I think we're still very comfortable with that high-single-digit guide.
Yes. And Mike, just on the gross profit per ton and cash gross profit per ton improvement from the beginning, we thought that'd be much more consistent this year. And so that 23% you saw in the first quarter and the low-20s for the rest is a good assumption.
Our next question comes from Kathryn Thompson, Thompson Research Group.
Good morning, Kathryn.
Good morning. Great quarter. Just have a clarification based on our channel checks, we're seeing as you already described pretty robust demand in the year and even possibly some tightness in materials in some key markets or multiple markets throughout the U.S., as we enter the construction season. In light of the strong pricing commentary you had in the quarter, does this open up the possibility for additional pricing actions mid-year? And then also along with that, more of a mid to long-term view, when you look at reassuring population shift and government supported funding for IIJA Inflation Reduction Act and the CHIPS Act, how does this play into your mid to long-term view on pricing? Thanks so much.
Yes. I think that so as far as pricing the rest of the year, we did not assume a second half price increase in our 15% guide. That said, we are -- have announced mid-year price increases in most in the vast majority of our markets. We feel like you got to earn that first. So we'll report on our progress on those mid-year efforts in August as far as bid work, we're pushing price day in and day out on our bid work, and that's just part of our Vulcan way of selling.
As far as the -- you're spot on the large projects both on the public side, highways and non-highway, we're going to see a lot more large projects and a lot more money flowing. We are also, as you said, starting to see the big manufacturing industrial projects, which we think continue well into the future. All of that bodes extremely well for pricing because that gives us and our customers' visibility to coming demand. And those large projects both public and the big industrial ones tend to be there's more surety to those projects then once they announce them they're going to happen and so that also gives surety demand, which is a very good backdrop for pricing.
Our next question comes from Keith Hughes, Truist Securities.
Hi, Keith.
Good morning.
Hey, thank you very much. I guess switching to the discussion on non-residential, specifically on heavy there's a lot of positives out there right now. How far of visibility do you have on that business? In other words, could we be seeing several years of really strong heavy work to be done?
Yes. That you are going to see a number of years both in manufacturing, industrial, and in the big energy projects along the coast. There is a healthy pipeline of that both in either they're budgeting, they're bidding, or they're engineering. And so I -- like you said, I believe we'll see years of this and I think it will really bode well both for volumes and price.
And you're on that your light business that give that shorter cycle, your visibility is not nearly that long on light. Is that correct?
That's correct.
Our next question comes from Brent Thielman, D.A. Davidson.
Hey, Brent.
Good morning.
Hey, good morning. Hey, Tom, I'm just curious on the balance, what was the hit from the residential sector this quarter because with volume only down 2%, including weather, just on the surface, it doesn't look like that much.
So if you look at it about half of our markets took a hit in res and about half were positive. So I'd tell you probably mid-single-digit. But as we said, the -- we'll feel the impact of the fall and starts permits and starts in single-family. We'll really feel that in the second half of the year. So pretty much as expected right now, I think it's a -- and plus weather in Arizona, Texas, and California masks some of that. So it's harder to see. But I -- we think that is more of a second half play as it -- as those starts have to go through the pipeline.
Our next question comes from Phil Ng, Jefferies.
Hi, Phil.
Good morning, Phil.
Hi, good morning. This is actually Colin [ph] on for Phil. I just wanted to touch on the geographic mix. I know pricing was aided by that favorable mix, but could you talk about how that mix might have helped gross margins and how we should think about that mix benefit going forward? Thank you.
I don't think it's going to -- I don't think it has a big play on gross margin. It was only 1% on price. So it really did not -- it really didn't have an impact on much impact on price or on margins.
Our next question comes from Timna Tanners, Wolfe Research.
Good morning, Timna.
Hey, good morning.
Hey, Tim. Hey.
Two things I haven't heard you address, and I would like to hear from, please. One is just the labor markets broadly. I know it's been a bigger issue for your customers, but would appreciate and updated thoughts there. And then it's been I think May will be a year anniversary since the Mexican operations were shut and there's been some noise down there, so I would love your take on that as well. Thanks.
Yes. I would describe the labor market as easing. I think it's a combination of the labor market's easing, and I think we've gotten better with retention over the last year and done a lot of work on that. So it is still an issue, probably still a bigger issue for our customers, but not like it was 12 months ago or 18 months ago. On Mexico, really not a lot of change. We remain illegally shutdown and the proceedings with the NCRA tribunal continue, we would hope to get a ruling on that sometime in 2024.
Our next question comes from Adam Thalhimer, Thompson Davis.
Hey, Adam.
Good morning.
Hey, good morning guys. Great quarter.
Nice.
Hi, I am starting to get questions from clients on the debt ceiling. If we don't get an increase, you think there's a risk to federal infrastructure support?
Well, I mean, that would be a first time that's happened, so I would -- since I would doubt that, that while everybody's ringing their hands over it, I think we'll solve this problem and we'll continue with our infrastructure spending.
Yes. I mean, prior government shutdowns haven't been a big deal, have they?
Well, I don't want to see one, but I don't think it's going to impact our infrastructure projects.
Our next question comes from Michael Dudas, Vertical Research.
Hey Michael.
Good morning.
Hey, good morning, gentlemen, Mary Andrews. Andrews, just can share your thoughts on how operating free cash flow went through the Q1 and how it looks for the rest of the year. And then maybe Tom, you could discuss the M&A pipeline and will we best guess do we see any visible activity by year-end with what's happening in the marketplace? Thank you.
Yes. So we were pleased with our free cash flow. It's obviously very cash generative business over the trailing 12 months, our free cash flow conversion has stayed over 90%, so we are pleased with that result. And we'll be -- take our consistent disciplined approach as we think about how to allocate that capital along our waterfall priorities.
On M&A, it remains; I guess we have a number of smaller bolt-ons in the pipeline along with a number of Greenfields that we're working on. I would tell you kind of normal from the smaller bolt-on and Greenfield perspective, as far as large projects are large M&A, those tend to be lumpy. When they come along, we'll be in the game and we'll take advantage. And as always, we'll be disciplined and all of this about what markets we're in, what synergies are unique to us and what we pay for it. So -- and we look forward to reporting that as they come about.
Our next question comes from Garik Shmois, Loop Capital.
Hi, Garik.
Good morning, Garik.
Hey, good morning. Nice quarter. Wanted to ask on the highway outlook, you're counting on demand showing up later this year. Curious just has the lag between project starts and when volumes occur, has that changed at all? Just given the size of the projects in the pipeline?
I think it's a little bit; we would always call that 9 months to 12 months. But larger projects can take longer just because of more complex engineering, more complex permitting and more complex planning around those. And when they run into a snag, it stops a big chunk of work or pushes it back. I would not change the 9 months to 12 months rule of thumb, except for every once in a while now you'll come across a multimillion ton highway project that can get pushed out past that limit. But I think the 9 months and 12 months is still a good rule of thumb.
Our next question comes from David MacGregor, Longbow Research.
Hey, David.
Good morning.
Hey, Tom and Andrews, congratulations on a strong quarter. Phenomenal.
Thank you.
Yes. I guess I'd be interested in just any update you've got on transportation. I know you've got some long haul tonnage there. You're talking about the strength down along the coast. How is that changing? Is it changing for the better? Do you view that as a potential risk and have you been able to lock up capacity and if so for how far forward?
I think as we talk about rock is still short on all coast and it's driven primarily by bottlenecks on railroads. I think the railroads are working hard to improve and they're making progress, but there's still gaps there. And I don't know that I see it as risk for 2023. It has its challenges but I think we'll work us with our partners in the railroad work through those challenges and be fine in 2023.
Our next question comes from Michael Feniger, Bank of America.
Hey, Michael.
Good morning.
Good morning, guys. Thanks for taking my questions. Just two. So the first one, the pricing obviously very strong with 18.5% and your full-year range of 15%, so does pricing kind of finish the year -- actually the year below that range do you think we still are in that double-digit territory. I'm just trying to think of that pricing cadence. And then the second question, just the operating leverage and Aggregates, I think you typically target like a 60% flow-through is -- are there periods where that can be above that level? I guess I'm just trying to think out mid-year price increases, potentially sticking diesel rolling over. Could we see flow-through above that target range for certain periods? Thank you.
You can. First of all, on the flow-through piece of this, you can see that above and you can see it below inflation, your big inflationary jumps, put pressure on that, as we said, as does fuel. I think if you look at this year, I would be a little bit cautious because you're still going to have some really sticky inflationary pressures on parts and services.
I think as what we've said is that as we progress to the year, the percentage price increase won't stay up at the 20% range because the -- you're comping over such a sequentially high marks through 2022 in price.
The flip side of that is in cost, as we've said, you're seeing really high year-over-year cost at this point. They should ease as we go through the year because the inflationary comps ease as we go. That all that put all that together we think we're pretty consistent in that 20% range improvement in unit margins
Our final question comes from Dillon Cumming, Morgan Stanley.
Hey, good morning. Thanks for the question. Just wanted to ask if you could put a finer point in some of the non-res commentary. I think there are just some concerns out there with regards to a tighter financing environment, how that could impact both the light and heavy non-res comments side of the equation. Just curious if you're hearing since then around that from customers and what the kind of latest update and the thinking there is.
I would put it this way. So far what we're seeing in non-res is really solid some shifting towards heavy industrial and manufacturing. But we've not seen any impact on our markets yet on non-residential. Now that being said, we're watchful and we're watching it, but so far, so good in non-res for 2023. But to your point, I think everybody's watching that, but we haven't seen any impact at this point.
I would now like to turn the call back over to Tom Hill for any closing remarks.
We appreciate your interest and your time this morning. We appreciate your interest in Vulcan Materials. We look forward to seeing you throughout the quarter to update you on our progress. We hope that you and your families remain healthy and safe and we'll talk to you throughout the quarter. Thanks.
This does conclude today's program. Thank you for your participation. You may disconnect at any time.