Vulcan Materials Co

NYSE:VMC

Earnings Call Analysis

Vulcan Delivers Strong Q1 with Robust Pricing and Profitability

Despite adverse weather conditions, Vulcan Materials achieved $323 million in adjusted EBITDA in Q1 2024, marking its fourth consecutive year of double-digit growth. Pricing momentum led to a 10% improvement in cash gross profit per ton. The company forecasts adjusted EBITDA between $2.15 billion and $2.3 billion for the year. Key trends include pricing strength, cost management, and a robust cash flow, supporting future investments in acquisitions and strategic developments.

Introduction and Overview

The first quarter 2024 earnings call for Vulcan Materials highlighted a solid start to the year despite challenging weather conditions. The company achieved an adjusted EBITDA of $323 million, reflecting the fourth consecutive year of double-digit growth. This performance was driven by various factors including pricing momentum, cost management, and disciplined capital allocation.

Financial Performance

Vulcan Materials reported significant improvements in key financial metrics. Adjusted EBITDA margin expanded, and the adjusted EBITDA itself reached $323 million. The Aggregates segment saw a decline in shipments by 7% due to weather impacts, yet the cash gross profit per ton improved by 10% to $9.66. This is part of a broader goal to reach $11 to $12 per ton. Overall gross margin improved by 140 basis points.

Market Conditions and Pricing Strategy

The company’s pricing strategy has been robust, with a 10% increase in prices in the first quarter. Future midyear price increases are not yet included in the full-year guidance but are expected to further bolster financial performance into 2025. This underscores the company's strong market positioning and disciplined approach to price management.

Cost Management and Efficiency

Cost management remains a priority, with cost increases expected to moderate to mid-single digits for the full year. The company has seen four consecutive quarters of cost deceleration. Diesel costs provided a slight tailwind, although parts and services costs remain elevated. The Vulcan Way operating disciplines have been crucial in driving these efficiency improvements.

Capital Allocation and Free Cash Flow

Vulcan Materials generated robust cash flow, with an average free cash flow conversion of over 90% over the last five years. In the first quarter, the company spent $103 million on capital expenditures and returned $81 million to shareholders through dividends and share repurchases. The expected capital expenditure for the full year ranges from $625 million to $675 million.

Market Outlook

The demand outlook varies by sector. Single-family residential construction is recovering, while multifamily construction remains weak. Nonresidential construction shows mixed results, with moderation in warehouse starts but strength in large manufacturing projects. Public infrastructure demand continues to grow, aided by federal and state funding.

Growth Strategy

Vulcan Materials continues to pursue strategic acquisitions to expand its footprint. Recently, the company completed a bolt-on acquisition in Alabama, which adds both aggregates and asphalt capacity. These strategic moves are part of a broader two-pronged growth strategy focused on both core enhancements and geographic expansion.

Guidance and Future Expectations

For the full year, Vulcan Materials reaffirms its adjusted EBITDA guidance of $2.15 billion to $2.3 billion, indicating a double-digit year-over-year improvement. Return on invested capital improved by 260 basis points over the last 12 months, driven by a 20% increase in adjusted EBITDA and a modest rise in invested capital. Adjusted EBITDA margin also improved by 350 basis points. The company remains well-positioned for continued growth and value creation for shareholders.

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, and welcome, everyone, to the Vulcan Materials Company First Quarter 2024 Earnings Call. My name is Jamie, 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. [Operator Instructions]

Now I will turn the call over to your host, Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

[Mark Warren, executive]

Thank you, operator, and good morning, everyone. 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.

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 non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation and other SEC filings.

During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available.

And with that, I'll turn the call over to Tom.

[James Hill, executive]

Thank you, Mark, and thank all of you for joining our Vulcan Materials earnings call this morning. Our first quarter results moved us towards delivering on a fourth consecutive year of double-digit adjusted EBITDA growth. Although the weather was unusually cold and wet across many geographies for much of the quarter, our teams executed well and improved our [indiscernible] cash gross profit per ton by 10%. Their commitment to our [indiscernible] with operating disciplines is driving solid results.

In the quarter, we generated $323 million of adjusted EBITDA and expanded our adjusted EBITDA margin. Importantly, several key trends continue: pricing momentum, cost deceleration, unit profitability expansion, robust cash generation, disciplined capital allocation and return on invested capital improvement.

In the Aggregates segment, year-over-year shipments declined by 7%, but the durability of our Aggregates business and the consistency of our execution stood out in a weather impacted quarter. We again improved our trailing 12 months Aggregate's cash gross profit per ton pushing it to $9.66 per ton and making further progress toward our current $11 to $12 target. The pricing environment remains positive and year-over-year Aggregate cash cost of sales continues to moderate. Aggregates freight and adjusted price improved 10% in the quarter and increased $1.25 per ton sequentially from the fourth quarter, a clear illustration of the success of January increases and the continuous execution of our walkaway of selling disciplines.

Our first quarter cash cost of sales performance resulted in a fourth consecutive quarter of trailing 12 months cost deceleration and improving sequentially by another [ 230 ] basis points. Our relentless focus on improving efficiencies in our plants through our Vulcan way of operating disciplines remains a key driver of managing costs, expanding unit profitability and ultimately generating attractive free cash flow.

There is a healthy pipeline of opportunities to deploy this free cash flow for both attractive acquisitions and complementary strategic greenfield development. These targeted opportunities are at varying stages. But as an example, earlier this week, we closed on a bolt-on aggregates and asphalt acquisition in Alabama, [ top 10 ] state. I'm proud of how our teams continue to execute our 2-pronged growth strategy. They are focused on expanding our reach in addition to enhancing our core with consistent expansion of unit profitability by controlling what we can control, even in a dynamic macro environment and demand environment.

On the demand side, I want to provide a few comments about each end use, starting with private demand and then moving the [ public ]. Momentum in single-family continues to accelerate across our footprint and points to growth in 2024. However, we continue to expect weaker multifamily residential construction to largely offset the single-family approval this year. Overall, affordability and elevated interest rates remains a challenge, but the underlying fundamentals of population growth and low inventories in Vulcan markets support recovery in residential construction.

An improving residential backdrop is also a positive sign for future activity in certain categories of nonresidential construction. And recent data has shown some signs of stabilization in overall [ starts ]. However, the landscape continues to vary across categories. As expected, continued moderation in warehouse starts will be the biggest headwind to private and nonresidential demand this year. Currently, light commercial activity remains weak, but over time, we expected to follow the positive trends in single-family housing.

We continue to see and capitalize on opportunities in the manufacturing category. Our unmatched Southeastern footprint and unique logistics capabilities positions us well to service these large aggregate intensive projects. Our footprint is also an advantage on the public side with over 2/3 of federal highway spending allocated to Vulcan states. Additionally, other public infrastructure activity, which benefits from [ IIJ ] funding is growing faster in Vulcan states than the country as a whole. It sustained level of highway starts of over $100 billion, coupled with record 2024 state budgets, supports healthy growth in highway and infrastructure demand both in 2024 and for the next several years.

Now I'll turn the call over to Mary Andrews for some additional commentary on our first quarter. Mary Andrews?

[Mary Carlisle, executive]

Thanks, Tom, and good morning. Tom discussed our solid Aggregates results in the quarter and shared some important ongoing trends. In addition to providing a few more details about our first quarter results, I'd like to first expound upon 4 of the trends Tom highlighted earlier in his remarks, unit profitability expansion, robust cash generation, disciplined capital allocation and return on instated capital improvement.

For the last 4 quarters, we have consistently expanded our trailing 12-month unit profitability in all 3 of our operating segments. Increasing cash unit profitability by nearly $1.50 per ton in Aggregate, almost $6 per ton in Asphalt and nearly $5 per cubic yard in Concrete. Our trailing 12 months gross margin has also steadily improved in each product line. This organic growth is underpinned by our daily focus on execution and driving results through our Vulcan Way of Selling and Vulcan Way of operating discipline. Better unit profitability yields better free cash flow.

Our free cash flow conversion over the last 5 years has averaged over 90%. And enabling us to strategically allocate capital to reinvest in our franchise, grow our business and return cash to shareholders.

During the quarter, we invested $103 million in capital expenditures and returned $81 million to shareholders through dividends and share repurchases. We continue to expect to spend between $625 million and $675 million on capital expenditures for the full year. Our current balance sheet positions us well to continue to deploy capital to each of our priorities. At the end of the first quarter, our net debt to adjusted EBITDA leverage was 1.5x, with $300 million of cash on hand, following the March 1 redemption of our 2026 senior notes at par for $550 million. Our liquidity position and financial flexibility are competitive strengths as we look to continue to grow and create value for our shareholders.

Over the last 12 months, we've achieved a 260 basis points improvement in return on invested capital. Invested capital has increased less than 1%, while adjusted EBITDA has improved 20%. Adjusted EBITDA margin has also improved by 350 basis points through consistent operational execution and disciplined SAG cost management. SAG expenses in the quarter were in line with our expectations, and we continue to expect to spend between $550 million and $560 million for the full year. Most importantly, we reaffirm our expectations of delivering adjusted EBITDA between $2.15 billion and $2.3 billion for the full year. At the midpoint, a double-digit year-over-year improvement for a fourth consecutive year.

I'll now turn the call back over to Tom to provide a few closing remarks.

[James Hill, executive]

Thank you, Mary Andrews. At Vulcan, our #1 priority will always be our people, keeping them safe and fostering our Vulcan culture. They are the foundation of our great company. As a team, we are focused on the daily execution of our Vulcan Way of Selling and Vulcan Way of operating disciplines to ensure attractive cash generation in any macro backdrop. We will be strategic and disciplined in allocating capital to continue to grow our business and deliver value for our shareholders.

And now [indiscernible], now will be happy to take your questions.

[Operator]

[Operator Instructions] We'll take our first question from Stanley Elliott with Stifel.

[Stanley Elliott, analyst]

Tom. Mary Andrews. Tom, I started the year very clean quarter despite kind of some of the weather issues, I think a lot of people had and some of the comp issues. Can you talk about how the rest of the year plays out, thinking about this more like maybe from a demand standpoint? And then to any extent commentary you could share on April would be great.

[James Hill, executive]

Sure. Looking at the quarter itself, I'd call the quarter -- volumes in the quarter as expected within the margin of error. We had less shipping days in March, but about the same amount of shipping days in the quarter overall. January was a slow start, really due to wet weather and cold weather. February and March, I call it a bit better -- better on a daily shipping basis. So Q1 -- all things considered as expected. As we look forward to the rest of the year, I don't see any real change in our thinking on [indiscernible]. We would still guide to the flat to down [indiscernible] and the dynamics are very similar to what we said last quarter, headwinds in nonresidential, some challenges in multifamily. We've got recovering single-family construction and growing public demand. I think that our position -- our superior position in the Southeast really helps the footprint makes a difference. And that southeastern market is probably the healthiest market in the country. I think our Vulcan Web selling disciplines and tools are very helpful with this.

So at this point, I'd call confident for [ volume ] outlook. As far as going into the second quarter, I'd call it this way, when the sun comes out, we're shipping very well.

[Operator]

We'll go next to Jonathan [indiscernible] with Truist Securities.

[Unknown Analyst]

I'm [indiscernible] on for this morning. I'm curious about your outlook on midyear pricing. You had conversations with your customers about midyear. And I'm also wondering how much of that is baked into your guide?

[James Hill, executive]

Yes. I'd start off with saying that I think the fundamentals in pricing remained very good and very healthy. As you saw, we had a solid start in Q1 with prices a little north, 10%, that was really across every market. And so it's a really good start and supports our full year guidance. Midyear price increases are not in our guidance at this point. We're having those midyear price discussions right now, so it's a little too early to call. Remember, the midyears will be good for 2024, but they're going to be even better for '25. So our teams are working really hard on this, and I think I'm sure they'll deliver. The most important thing, though, I think, is that the fundamentals for pricing remain very healthy. And so I think when it comes to midyears, we'll revisit pricing guidance in August and give you an update.

[Mary Carlisle, executive]

And one more thought on price. We always like to point out how important it is to remember that regardless of what the level of pricing is, the key is really how much pride we're able to take to the bottom line. In the first quarter, we achieved 10% improvement in cash gross profit per ton and some aggregate margin expansion even given the lower volume quarter due to the weather. Overall, gross margin also improved by 140 basis points and adjusted EBITDA margin expanded as well. So importantly, we expect this margin expansion to continue and to improve further through the balance of the year.

[Operator]

We'll go now with Anthony Pettinari with Citi.

[Anthony Pettinari, analyst]

I'm wondering if you could talk a little bit more about how costs have kind of been trending among your major cost categories. If you can touch on maybe some of the nonenergy categories. And then also just with higher diesel, how that's impacted conversations around price increases or just how you think about the full year from that context?

[James Hill, executive]

Yes. I think the first quarter for cost is always tricky as volumes and weather definitely had an impact on costs in the first quarter. That said, I think we're still comfortable with the cost guidance of up mid-single digit for the full year. As always, we would get you to look at costs on a trailing 12-month basis because it's just going to be choppy on quarter-to-quarter. And if you look back on a trailing 12-month basis over the last year, cost increases have fallen from, I'd say, mid-teens to single digit. So as we said in the prepared remarks, we've seen 4 quarters of decelerating cost and as we march through this year, we should see that those increases decline as we march through the year, next quarter better, next quarter better, next quarter better as we saw over the last 4 quarters. So I think we're on a good path to that mid-single-digit cost for the full year.

As far as different pieces of this, a [ diesel ] was probably a slight tailwind in the quarter. What stays up is parts and services remain elevated, but our comps are getting easier. And I think that we also to the Vulcan of operating, we're improving our operating efficiencies and will continue over the next 2 years with that to offset those inflated parts and services. So I think we're in a good place, and I think the teams are working through this, and I'm pleased with what I see.

[Mary Carlisle, executive]

Yes. And in terms of diesel, Anthony, we do assume in our plan that it will move somewhat higher through the rest of the year. And you're right, while diesel prices for us -- well, they're always hard to predict and -- but they can really be a good thing in this business since we have the ability to catch it with pricing as it goes up and also take advantage of it when it goes down.

[Operator]

We'll go now to Kathryn Thompson with Thompson Research Group.

[Kathryn Thompson, analyst]

Stepping back, just looking at the bigger picture. In last year, you divested mainly downstream ops just in terms of optimizing our portfolio. As you look into 2024 and beyond what are your priorities in terms of overall Vulcan materials and product mix? And how does this mix strategy -- how do you think about that against the backdrop of a broad reindustrialization of the U.S. and putting book and the best position possible?

[James Hill, executive]

Well, as always, we would tell you that it's Aggregates and we are an Aggregate company. We have the highest percentage of EBITDA in Aggregates of probably anybody in the sector. and that's what we do. Now we have strategic downstream. And as we always say, it's a portfolio, we look at it as a portfolio and if one of those sectors or geographies doesn't -- doesn't earn appropriate return or worse to somebody else would divest of it and plow that money back into our Aggregates business. So I think that nothing has changed as far how we look at the world. And as we look at the growth part of M&A in greenfields, it will be aggregate-focused.

[Operator]

We'll now turn to Trey Grooms with Stephens.

[Trey Grooms, analyst]

I kind of want to follow up on the comment, Mary Andrews, you had earlier about cash gross profit per ton. Clearly, it was up 10% in the quarter. I think you were maybe initially looking for mid- to high single-digit improvement. So maybe a little better there. And then full year is mid -- I think looking for mid-teens type of improvement. So I guess the first one is kind of how we see that progress. I think it's going to accelerate somewhat as we go through the year, but any way to help us kind of think about that as we progress through the year to get to that mid-teens for the full year? And then maybe stepping back a little bit longer term. These are clearly better numbers of better performance than the historical kind of average of profitability improvement. How are you thinking about that longer term? Do you think it has the opportunity to kind of see a long-term better kind of consistent improvement versus kind of historicals?

[James Hill, executive]

Yes. Let me take your last question first about long term. This is why we have developed the Vulcan Way of Selling and Vulcan Way of operating disciplines. I think they secure our ability to improve cash gross profit per ton, which we've done trailing 12-month basis every quarter on flat for 5 years. That's pretty good consistency even with some of the dynamics that are out there. So I think that overall in history, we -- versus history, we're in a better place for higher improvements in cash gross profit per ton, and that's not back so that's by design, and we've been working on that now for years, and it is working and those tools are only getting better or we're getting better implementing them.

I think as far as this year is concerned, as we talked about, as we progress through the year, you've got cost increases decelerating and as inflation comps get easier and our operating efficiencies get better. So that's one piece of that. And then I think as we march through the year, we have the ability to continue to raise prices, both in what we do on project work, but also a fixed plant. So you put all that together, I think as we progress through the year, we have the opportunity to continue to march our unit margins improvement through the year.

[Operator]

We'll go next to Jerry Revich with Goldman Sachs.

[Jerry Revich, analyst]

Tom, Mary Andrews. I'm wondering if you could just talk about how you expect the pricing cadence to play out this year over the past couple of years, third quarter versus second quarter, we saw a big $0.60 type step up in pricing. Is that feels like that's what you're assuming this year to get to the guidance. But maybe Mary Andrews, you could expand on how you expect the cadence to play out? And how much higher could that be if we do implement midyear price increases?

[Mary Carlisle, executive]

Yes, sure. I would expect a cadence of Jerry likely some sequential growth in the second quarter, more in the third quarter, as you referenced, and then we would typically see less in the fourth quarter due mostly to seasonality. And the magnitude of the mid-years, which as Tom referenced earlier, it's just too early to call at this point, but that's what would influence that third quarter sequential improvement and to what level that gets and where we fall out overall.

[Jerry Revich, analyst]

Okay. And then in terms of just the exit rate with double-digit pricing growth exiting the year and potential midyear is on top of it, I guess that suggests the starting point for '25, should be in the high single-digit pricing range just from a carryover effect. And I just want to make sure that, that's consistent with how you folks are thinking about it.

[James Hill, executive]

Yes. I think when it comes to midyear, we're going to call that when we earn it. And I think we feel good about midyear, and I think those conversations are going fine. As I said, they mean a lot for '25. I do think it's a bit early to call what '25 is going to start out. We got to get mid years under our belt and take a look at what we're going to do in the first part of '25. But I do think it's -- I do think that I feel good about the midyears and I think it is a good omen for 2025 pricing.

[Operator]

Next, we'll hear from Mike Dahl with RBC Capital Markets.

[Michael Dahl, analyst]

I'm going to follow up again on kind of midyear. I think last quarter, you talked about how those conversations would be April conversations, so maybe it's just semantics in [indiscernible] have those really finalized before you communicate to us. But I'm wondering if just given some of the wet weather to start the year, if some of those conversations perhaps got pushed out a little bit [indiscernible] of your expectations or how you characterize that? And any other regional differences in pricing that you may be experiencing relative to what you thought coming into the year?

[James Hill, executive]

I don't think weather had anything to do with it. I think you may have read a little bit too much into the April month comment. You send the letters out in April, you spend May having those conversations and you finalize in end of May, kind of beginning of June. So I don't see anything different in timing or sequencing versus what we did last year. Like I said, I -- I think I'm encouraged by the conversations that we're having, and I think that we will implement a solid midyear price increases. But I wouldn't read anything into the comment on weather versus -- excuse me, comment on April versus how this goes. It's really kind of a process. We introduced it in April, have a conversation in May and again, finalize it in June.

[Mary Carlisle, executive]

And one other thought on pricing for the rest of the year is that we've had positive momentum over the last 12 months in our bid work, and that should also be a good catalyst for us from where we ended Q1 to where we expect to be for the full year in addition to whatever is realized on midyear increases.

[Operator]

We'll go now to Garik Shmois with Loop Capital.

[Garik Shmois, analyst]

I wanted to ask on the M&A environment. If you could provide a little bit more color on the bolt-on that you just completed? And is it possible at all to maybe size how much are you going to anticipate spending on acquisitions this year and the types of deals you're looking at?

[James Hill, executive]

Yes. As you saw, we had a small but strategic bolt-on kind of northeast of Birmingham or Gunnersville. It's about 2 million tons of aggregates and just under 0.5 million tons of asphalt. It fits us well. I think as you look at the full year, in the next 12 months, M&A outlook is quite good. So more to come. And having a lot of those conversations and very encouraged by it. I think it's always M&A will be aggregates-led and conducted with discipline. But I think we feel very confident that this will be a busy M&A year for us.

[Operator]

And now we'll go to David MacGregor with Longbow Research.

[David S. MacGregor, analyst]

I guess I wanted to kind of tap your many years of experience in this business with respect to the second half of this year in election years. And in an election year, do you find that projects kind of accelerate as people kind of focus on [indiscernible]? Or do you think things maybe slow down a little bit as people get a little more tenet and wait to see how the election plays out? I'm just trying to get a sense of how you're thinking about the risk around second half volumes in public sector spending.

[James Hill, executive]

I don't see -- I will take it in pieces. Overall, I don't see any impact with the election year on our demand. I think that our guidance is -- has taken the factors into account. I don't think election year moves the needle on that. I think on the public side, it is really the DOTs trying to get highways dollars into lettings and into projects. And I think that's happening. And I think we call that, as you know, mid-single digit on the private side, I think, as we said, we've got some challenges on -- on nonres and multi. And I think that single-family is recovering with health. So that's how I look at it with not much impact from the election year.

[Operator]

And next, we have Timna Tanners with Wolfe Research.

[Timna Tanners, analyst]

I wanted to ask about a little bit more on the demand side as well. How is the government infrastructure dollars, how are they flowing through? How are you seeing the pace of that activity? Any evidence of some of those larger IRA projects? And any sign that data centers could make much of a dent against the decline in warehouse demand?

[James Hill, executive]

Yes. I will start with highways. We're seeing the IIJ money and the local funds flow into lettings. At this point, we'd stick with that mid-single-digit growth on the public side this year, which is both non-highway infrastructure and highways. And we see that kind of steady growth for years to come. We also are seeing additional state funding come into play. We've got 3 states with some big dollars. Tennessee added $3 billion, in Florida I think added $4 billion and Georgia just added $1.5 billion to their funding. I think when it comes to public demand, slow and steady wins the race on this, and particularly when you're compounding your margins like we are. So I think a good healthy sector with steady growth for years to come. And I think the DOTs will continue to work hard to get those dollars into lettings.

[Mary Carlisle, executive]

And Timna, you also mentioned data centers, which have really provided some good opportunities for us in some markets. I can think of some projects we booked recently in Virginia, Alabama, Georgia. And it's obviously a subject that's getting a lot of press. But I do think it's important to remember that the square footage according to [ Dodge ] for data centers is only a low single-digit percentage of total non-restar. So as you know, there are a lot of different categories and dynamics and private nonres, so data centers may not do needle overall. But overall, for us, in non-res right -- so far, it's playing out as we expected with kind of all those different dynamics.

[Operator]

We'll go now to Tyler Brown with Raymond James.

[Patrick Brown, analyst]

So [indiscernible] did a great job on unit margins. But I am curious what you're seeing on the plant productivity side. If I go back on to the Vulcan Way of operating some of the technology rollouts in the plants that you talked about at the Analyst Day. I'm just kind of curious how those are tracking if you're seeing improved plant utilization? And is that kind of a continued good guidance to '25?

[James Hill, executive]

Yes. I think that where we are on that, and you're talking about the process intelligence on those plants. As we said, the -- we did that in our top 100 plants, which is about 7% of our -- roughly 7% of our production. The tools are all there. About 25%, 30% are actually -- those plants are actually fully utilizing those tools. And there's a lot of work that has to go into that to get the screens right and everybody trained in those, we're seeing marked progress as we march through kind of this year, maybe the first part of next year, we'll get up to 100% of those. But -- and as we do, we'll see improvement. So where it's working. I think it's working well, maybe a little slower than I would have wanted it to go through as far as full implementation, but we're getting there. And I think we'll see that -- as you said, we'll see -- we'll see progress to that show up in our numbers in '24 and '25 and into '26, to be honest with you. So, so far, so good, and we'll keep plugging at it.

[Operator]

And now we'll hear from Adam [indiscernible] with [ Thomas Davis ].

[Unknown Analyst]

Great quarter. On the demand side, I guess I wanted to hit that as well. There's a lot of angst out there about just private construction demand in general. Are you guys seeing any incremental weakness or strength there?

[James Hill, executive]

Well, I think it depends on which part of it you're talking about, and I'll take them a piece of time. We're seeing -- on the non-res side, you've got weakness in warehouses and kind of traditional light non-res. That being said, the warehouses, we -- if you look at starts, they are -- the fall is decelerating. It's getting better as you look at starts on a short-term basis. So hopefully, that will get better. You've got strength in large manufacturing projects, which we've got 11 of those big projects, and we're shipping on them now and I think more to come. So it's too early to call whether it's getting better or getting worse, but that's kind of how we call it for -- on the non-res side.

On highways -- excuse me, on housing, I would tell you the weakness is in multifamily and continues that. I think it doesn't last too long, we'll be past that, I think, '25. And then single-family res is recovering, and I think we're covering with some momentum.

[Operator]

We'll go now to Phil Ng with Jefferies.

[Philip Ng, analyst]

Congrats on a really strong quarter. I had a question. I mean, a competitor of yours has just closed on a deal in the Southeast, and they've already announced price increases for midyears in those markets and called out how pricing there is for us below their corporate average. I've always thought that the Southeast is actually a pretty good pricing market. Do you see that dynamic improving the backdrop on pricing, anything on the structure side of things? And then similarly, California, I think pricing still kind of below what that market probably should warrant just given the cost of demand profile. Any thoughts on the momentum [indiscernible] pricing around California as well?

[James Hill, executive]

Yes, I think we've got to be thoughtful when we called out pricing on individual markets. But that being said, the Southeast is very good pricing, some of the best we have. And I think that if you look at the western part of the United States, I think we're seeing marked improvement in pricing, and we'll continue -- that momentum will continue.

[Operator]

And now we'll go to Angel Castillo with Morgan Stanley.

[Angel Castillo Malpica, analyst]

Just wanted to maybe expand a little bit on some of the dynamics. First, just a quick clarifier. For pricing, is the assumption still 10% to 12%, given the kind of unchanged top line? And then You mentioned kind of no impact from election year. Could you maybe talk about some of the other dynamics that are at play here in terms of the weakness you're seeing in non-resi and the just interest rate environment and kind of some of those challenges. Is that having any kind of impact on your mid years? It sounds like the discussions there have been quite constructive. So just any kind of color there would be helpful.

[James Hill, executive]

Yes. I think you're seeing improvement. We're seeing improvement in single-family, which is always helpful. And the most important thing is that you see growth in public demand, which is still visible and it is a very good foundation for pricing. I don't know that interest rates have had a big impact on pricing. Obviously, they'll have -- they've had impacts on demand and volumes. But I think -- so I think that -- and I don't think that the election year has had any impact on pricing dynamics. So I think that -- the fact that we've got strong, very visible public demand for a long time is good. I think you've got some improvement in [indiscernible]. All of that is helping the pricing dynamics. And I think we feel pretty good about a midyear at this point.

[Operator]

We'll go now to Michael Dudas with Vertical Research.

[Michael Dudas, analyst]

Mary Andrews. So it's an interesting highlight on 67% of your of the IIJ dollars are going to the Vulcan states. So you can talk a little bit about what states is that matching up with some of the DOT budgets in some of your important states? And what it may be throughout the business what regions or states maybe are lagging a bit that may have some opportunity to catch up as we move into the next several quarters?

[James Hill, executive]

Well, I think a big part of that is you've got the big DOTs, Caltrans and TxDOT and George DOT and Virginia. Obviously, in Tennessee, obviously, have excellent funding, both state and local. I think that probably the most -- the best -- DOT is best at getting money though at this point because they started earlier with their own funding is Texas. George had some struggles, but I think is catching up with that. So I think Caltrans is doing a good job getting their money in Illinois, I think has struggled getting some of their funding out. So that's how I call it. But I think they're all plugging at it, and I think they're all getting better at it. It is coming through with improvement in lettings. I think that all of them are going through the '25 budgeting right now, a little too early to call, but I don't see them going down. I would expect most of them to go up. So -- as we said, I think that it's a long road. I think it's steady growth in public, and it's not just highways, it's also the infrastructure, which is ports and airports and water and sewage and that will be substantial growth, I think, this year and for years to come.

[Operator]

And at this time, that will conclude our question-and-answer session. I'd like to turn the call back over to Tom Hill, Chief Executive Officer, for any additional or closing comments.

[James Hill, executive]

I thank all of you for your time this morning and your interest and support of Vulcan Materials Company. We hope you and your families are healthy and safe and stay that way through the quarter, and we look forward to talking to you over the next few months. Thanks.

[Operator]

Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time.