Vulcan Materials Co

NYSE:VMC

Earnings Call Analysis

Vulcan Materials' Q3 Results Highlight Strategic Growth Despite Weather Challenges

In the third quarter, Vulcan Materials demonstrated resilience, generating $581 million in adjusted EBITDA despite a 10% decline in aggregate shipments due to severe weather, including four hurricanes. Crucially, cash gross profit per ton increased for the eighth consecutive quarter, up double digits year-over-year. Looking ahead to 2025, management expects high single-digit price growth alongside solid aggregate shipment increases. With planned capital expenditures between $625 million and $650 million and a strategic acquisition of Wake Stone, Vulcan is well-positioned to capitalize on improving demand amid ongoing weather challenges.

Overview of Performance Amidst Challenges

Vulcan Materials Company faced a tumultuous third quarter in 2024 due to significantly adverse weather conditions, which included four hurricanes disrupting operations in key markets. Despite these obstacles, the company demonstrated resilience with an adjusted EBITDA of $581 million. Although there was a modest year-over-year decline due to a 10% drop in aggregate shipments and the exit from the Texas concrete business, gross margin and adjusted EBITDA margin managed to expand, indicating a strong core performance.

Navigating Severe Weather and Shipment Fluctuations

During the quarter, the company experienced varied shipment levels heavily impacted by weather. July saw a mid-teens decline in average daily shipments due to heavy rainfall in seven of its top ten markets, followed by a rebound in August that was still hampered by the effects of Hurricane Debbie. By September, Hurricane Helen led to a drastic 25% decline in shipments during the last week, ultimately resulting in total shipments being down 10% from the previous year. Despite this, the company highlighted that the pricing environment remained favorable with freight-adjusted average selling prices up by 10% year-over-year.

Strong Margin Expansion Despite Volume Challenges

For the eighth consecutive quarter, Vulcan reported double-digit year-over-year increases in aggregates cash gross profit per ton. The company's strategic focus on its selling and operating disciplines—termed the "Vulcan Way"—proved effective in optimizing customer value and controlling costs, leading to enhanced operational efficiency even in a declining volume environment.

Acquisition Strategy and Growth Outlook

The company announced the acquisition of Wake Stone Corporation, a strategic move to bolster its aggregates-led growth strategy and expand its market presence in the Carolinas. This acquisition aligns with Vulcan's goal to enhance long-term value creation. Management remains optimistic about demand for aggregates, expecting aggregate shipments to grow in 2025 due to robust construction activity and improvements in the private sector market. Additionally, an outlook of high single-digit pricing improvements was set for 2025.

Financial Health and Capital Allocation

Vulcan Materials allocated $206 million towards strategic acquisitions and returned $252 million to shareholders via dividends and buybacks in the year-to-date period. The company's net debt to trailing 12-month adjusted EBITDA leverage stood at a comfortable 1.5x, offering ample capacity to support future investments, including completing the Wake Stone acquisition. The firm expects capital expenditures for the year to be between $625 million and $650 million.

Guidance for 2025: Positive Indicators Ahead

For 2025, management expressed confidence in achieving aggregate shipment growth, supported by increasing public sector funding for infrastructure projects across multiple states. The expectation is that aggregate pricing will continue to improve, with year-over-year increases projected in the high single digits. Furthermore, operating efficiencies are expected to enhance profitability as rising costs begin to stabilize.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. Welcome, everyone, to the Vulcan Materials Company Third Quarter 2024 Earnings Call. My name is Angela, 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, Mr. 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 deals 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 call this morning. We continue to execute on our two-pronged strategy to deliver attractive long-term value creation for our shareholders. Results and activities in the third quarter demonstrate our success and consistently expanding our aggregate profitability and successfully expanding our REIT through strategic acquisition opportunities. Despite the disruption of 4 hurricanes impact our industry-leading South-East footprint, both gross margin and adjusted EBITDA margin expanded in the quarter. And year-over-year aggregates cash gross profit per ton increased double digits for the eighth consecutive quarter.

A testament to the benefits of our unwavering focus on our vocal wave selling and vocal wave operating disciplines. In the quarter, we generated $581 million of adjusted EBITDA, a modest decline versus the prior year, given 10% lower aggregate shipments and the prior year earnings contribution from the now divested Texas concrete business. Shipments in the quarter varied widely month-to-month and across geographies, reflecting the interruption caused by extreme weather hits. So let me walk you through how the quarter played out.

In July, 7 of our top 10 markets experienced significant year-over-year increases in rainfall. And the first of 4 hurricanes, Hurricane Borough made landfall in our footprint. Average daily shipments were down mid-teens for the month. Shipments in August rebounded after a slow start due to Hurricane Debbie tracking up the East Coast. Daily shipments in August, excluding the 2 shipping days, most impacted by the hurricane were only down 4%, consistent with our non-weather-impacted demand view.

As we are all aware, Hurricane Helen, the second of two September hurricanes devastated many communities across Florida, Western North Carolina, East Tennessee and other parts of the South-East. I am thankful to report that all of our employees are safe, and I'm proud of their immediate efforts to help our communities and neighbors.

The catastrophic destruction in Western North Carolina and Eastern Sea is both tragic and historic. Vulcan Materials is well positioned in the affected areas to support the immense rebuilding efforts that will be required. Due to the storm, shipments were down approximately 25% in the final week of September, resulting in quarterly shipment 10% below the prior year.

In spite of the challenges from volume, the pricing environment remains positive. Freight-adjusted average selling prices improved 10% year-over-year, with increases widespread across geographies. We continue to use our Vulcan Way of Selling disciplines and processes to deliver value to our customers and earn their daily business. We also remain focused on our Vulcan Way of Operating disciplines to drive efficiencies and lower unit cost. Although weather and lower volumes were an even more significant headwind in the third quarter than the prior quarter, the rate of cost increases moderated.

At the end of September, we announced the acquisition of Wake Stone Corporation, a leading pure-play agri supplier in the Carolines. This acquisition is consistent with our aggregates-led growth strategy and will be a great addition to the Vulcan family. We look forward to welcoming the Wake Stone team upon closing later this year.

Now shifting to demand. The overall demand environment is improving, but with different dynamics impacting each end use. Higher single-family starts over the last 3 and 12 months provide a solid backdrop for growing single-family demand, particularly with potentially lower mortgage rates on the horizon to help address the ongoing affordability issue. Multifamily stars remain weak but should also benefit from a lower interest rate environment. Fundamentally, there is a consistent need for additional housing in Vulcan markets, which bodes well for future residential constructively.

In private nonresidential construction demand remains vary across categories. Most categories will benefit from improving interest rates since projects in the planning and design pipeline have been accumulating for some time now.

Warehouse equity remains a headwind, but comps are easing and starts seem to be stabilizing near pre-COVID levels. Data centers are still robust, and manufacturing remains a catalyst in some of our markets. Over time, light commercial activity should follow the positive trends in housing. We are closely monitoring the macro dynamics and likely timing of private nonresidential activity making the turn.

On the public side, we continue to expect steady growth for multiple years. Our booking activity points to the conversion of growth in contract awards now flowing into aggregate shipments. I am confident we are well positioned to finish the year strong and deliver approximately $2 billion of adjusted EBITDA in 2024.

Now I'll turn the call over to Mary Andrews to discuss a few more details about the quarter and 2024 before share some preliminary views of 2025. Mary Andrews?

[Mary Carlisle, executive]

Thanks, Tom, and good morning. Tom covered for you some of our important achievements in the Aggregates business during the third quarter. I want to highlight a few other items that underpin our confidence and durability of our business and the solid execution of our team.

Our downstream businesses continue to strategically complement our Aggregates franchise in select markets. The asphalt business maintained healthy margins at nearly 16% in the third quarter, and cash unit profitability improved 11%. Our Concrete business on the East Coast also delivered unit profitability improvement. While the lower volumes related to weak private demand in North Carolina compressed margins in our West Coast concrete business.

Our SAG expenses in the quarter were $129 million or 6.4% of revenue, 10% lower than the prior year and 20 basis points favorable as a percent of revenues. We remain dedicated to both disciplined cost control and making strategic investments in talent and technology to support our business and drive innovation.

Through the first 9 months, we have generated nearly $1 billion of operating cash flow through our constant focus on maximizing our cash gross profit on every ton of aggregates we sell. After reinvesting over $400 million to sustain and improve our existing operations and grow our business through greenfield development, we have yielded a 36% increase and free cash flow to deploy for expanding our reach through M&A and returning cash to shareholders.

Year-to-date, we have allocated $206 million to strategic bolt-on acquisitions, and returned $252 million to shareholders through dividends and common stock repurchases.

For the full year, we now expect to spend between $625 million and $650 million of capital expenditures.

Our balance sheet position provides us the strength and flexibility to grow. At September 30, net debt to trailing 12-month adjusted EBITDA leverage was 1.5x, giving us ample investment capacity within our target leverage range of 2 to 2.5x to fund the Wake Stone acquisition and other growth opportunities that will drive long-term value creation for shareholders.

We continue to focus on our return on invested capital, which was 16.1%, a 70 basis points improvement over the last 12 months with higher adjusted EBITDA generated on lower average invested capital.

I'll now turn the call back over to Tom to provide some preliminary thoughts on 2025 and a few closing remarks.

[James Hill, executive]

Thank you, Mary Andrews. As I look to 2025 and contemplate the demand backdrop, I expect Aggregate shipments to grow next year. construction activity remained robust and the environment is improving for the private construction activity. I am confident that Vulcan Materials will continue to execute at a high level and compound our industry-leading cash gross profit per ton at double-digit levels.

I expect Aggregate price to continue to outpace historical norms and improved by high single digit in 2025. I also expect year-over-year cost trends to improve through a combination of execution on our Vulcan Way of Operating disciplines to drive improved efficiencies in our operations and moderating inflation.

Vulcan Materials has the right products, aggregates in the right markets. But more importantly, I am confident we have the right focus and the right people to execute our strategy and deliver earnings growth in 2025.

And now Mary Andrews and I will be happy to take your questions.

[Operator]

[Operator Instructions] We will go first to Garik Shmois with Loop Capital.

[Garik Shmois, analyst]

I was hoping you can go over a little more detail on the high single-digit pricing outlook for next year. How much carryover is there for big years from this year? Any help on the pacing for pricing next year? And any mix impacts we should be thinking about either from a product mix or geographic mix standpoint?

[James Hill, executive]

Yes. First of all, I don't think we have any mix put in there. But let me go back in time a little bit. If you look at our midyear price increases, they were largely as expected, kind of by market and by customer, very much similar to last year. And so that's a really healthy start for 2025. And I think that if you take midyear price increases and couple that with what we see in our backlogs, it allows us to carry very good pricing momentum and visibility into next year. As we said in the press release, I think our preliminary view is high single-digit increases for 2025. I think I'm confident in that. If you combine that with cost increases, which continue to moderate. I think it makes me feel really good about the continued double-digit unit margin growth throughout 2025.

As you heard us say in the prepared remarks, we've had 8 quarters of double-digit cash gross profit per ton growth. And remember, 7 of those 8 quarters, we were dealing with declining volumes. So I think we're confident we continue that streak into 2025. I guess my -- I want to thank my teams. That's tough to do given the challenges that we've seen with weather and volume throughout this year, particularly in the third quarter. But I think they continue that success into next year. And what that tells me is that the Vulcan team is in control of their destiny, the controlling what they can control.

[Mary Carlisle, executive]

Yes. And remember, Garik, too, the reason we are so focused on that unit profitability improved Tom was talking about is that maximizing cash gross profit on every ton is the key to our free cash flow generation. To me, it's notable that on lower ag volumes and lower revenues year-to-date, EBITDA margin has expanded and free cash flows increased 36%. So as Tom said, our teams have executed very well in a really challenging environment. And frankly, I've provided a perfect example of just how durable this business is.

[Operator]

We'll go next to Trey Grooms with Stephens.

[Trey Grooms, analyst]

So I know it's not always perfect science here easy to do. But as you look at the quarter, could you try to parse out kind of what the weather impacts may have been versus demand? And maybe how each played a role in the down 10% volume that we saw here in 3Q?

[James Hill, executive]

Yes. We try to parse that a little bit by month in the quarter, but obviously, weather has been a big story this year and the third quarter underscored that story. If you look at the year, we've had 17 out of our 20 largest markets with more rain than prior year. I would call underlying demand kind of still down mid-single digit ex weather. Looking forward to the fourth quarter, we saw Hurricane give us a tough start. But since then, we've seen -- we see good weather, and we've seen our daily shipping rates bounce back, which is encouraging. But to get us back down to earth is still Q4. So how we finished the fourth quarter, I think will just depend on the number of good weather shipping days. So far, so good at this point, but we got to see. I think, again, in spite of extreme weather and volumes, our folks continue to expand your margin by double digits. So we can't control the weather, but we control how we service our customers and price and cost. But again, I would call underlying demand mid-single digit and the rest of weather, and we'll just see how the weather allows us to finish the fourth quarter.

[Trey Grooms, analyst]

Got it. And I'm sticking to one question, but I did want to congratulate you on the nice improvement there in gross profit per unit, cash growth profit per unit, especially despite the volume headwinds that you had.

[James Hill, executive]

I appreciate that. I give all the credit to the people that sell and the

[Operator]

We will go next to Keith Hughes with Truist.

[Keith Hughes, analyst]

Questions on volume in '25, I know you said they're going to be up, but -- we have some pretty easy comps on this weather you've discussed. But how much could it be up? And to getting the pricing that you just discussed with '25 or you think you'll have to walk away from some shipments in order to get pricing that

[James Hill, executive]

I don't think that there's any -- if we look at the kind of the volume growth at low single digit, I don't think you're looking at any share moving around. If I look at volume to 2025, first of all, you're going to have some push from '24 to '25, obviously, that volume can go away. It just pushes back. So that will be a little bit of a kill wind for us. And we'll continue to, I think, experience demand challenges from white non-res and warehouse construction. Hopefully, that drop is slowing. I do think we'll see overall growth in residential construction, some challenges on multi, but I think single is and will balance. And then we'll see growth on the public side. So a little bit early to call 2025, flurry thoughts would be kind of low single digits with no impact from price.

[Keith Hughes, analyst]

And that's assuming normal weather?

[James Hill, executive]

I don't know what normal is anywhere -- Yes.

[Operator]

We will go next to Anthony Pettinari with Citigroup.

[Anthony Pettinari, analyst]

Tom, I was wondering if you could talk a little bit more about Wake Stone, just kind of how long you've been looking at that business, the profile of the assets, in terms of kind of the per unit profitability, how it's sort of stands up against a larger company? And just any other details you can share?

[James Hill, executive]

Yes. We've known the Braden's for years, and they run a good company. we're looking at closing that business later this year, so not much of an impact, I would say, for this year. They operate in the Triangle region of Eastern North Carolina, the Raleigh, Durham, Chapel Hill, and that's one of the fastest-growing regions in the country. So a great market. I had the pleasure of meeting with the entire Wake Stone team a few weeks ago. They're a talented bunch, and we look forward to them joining the Vulcan family. We are confident that this will have substantial value creation for our shareholders. And I think we -- like our strategy, we always say this is expanding our reach into some very attractive aggregate markets.

[Anthony Pettinari, analyst]

Okay. That's helpful. Is there a rough estimate of tonnage? Or should we wait for that?

[James Hill, executive]

Historically, they've been in the 8 million to 9 million-ton range.

[Operator]

We will come next to Kathryn Thompson with Thompson Research Group.

[Kathryn Thompson, analyst]

You touched on earlier in the Q&A about the volumes down 10%, yet you were able to get double-digit cash gross profit per ton in the quarter, and you helped us bridge how does this achieve. Following in on that, compare contrast what happened this quarter and in terms of what your outlook is in '25? And are there any particular aspects including cost that could be different in '25 versus current quarter? And then maybe also talk about what will be unchanged? And what are the things that allow to put up double-digit cash gross profit per ton even in the face of double-digit volume declines?

[James Hill, executive]

Yes. I think this -- that is the disciplines of the Vulcan Way of Selling and Vulcan Way of Operating. And that's kind of simply put. You saw us continued pricing disciplines throughout this year. And I thought the team did a good job with that. I think that they did a good job with midyears, which helps us carry good momentum into 2025 from a pricing perspective. And then the conversations that we've had for the January 1 pricing, they're not complete, but they're pretty far down the road. And so that gives us some confidence of that high single digit from a pricing perspective.

On the cost side, we've been sitting here facing double-digit cost -- unit cost for a number of quarters now, which, quite candidly, is extremely high and a lot of that is inflation driven. Some of that this year is impacted by weather and by volume. But I think that our operating teams continue to execute on the disciplines from an operating perspective, and that is plant availability, throughput, tons per hour, tons per man hour and all the metrics that go into what drives cost. So while we continue, I think, good pricing momentum, going into 2025, I think we are starting to see our cost increases moderate. And that's a combination, I think, of inflation moderating, but also our operating efficiency is improving. As far as those operating efficiencies, I think we got a long way to go, we were, I guess, put back a little bit this year because of inclement weather, which gives you that sticky material, it's hard to operate. So I would expect over the next few quarters that to -- the operating to continue to improve.

[Operator]

We will go next to Jerry Revich with Goldman Sachs.

[Jerry Revich, analyst]

Congratulations on the strong unit profitability, given the volumes this quarter mind as well. I want to ask the pricing sequentially. I thought was quite constructive, given the disruption in terms of relative to an attractive part of your footprint here. Can you just talk about how the weaker volumes this year are impacting the pricing cadence, if at all, I'm assuming new spot market business would have come online were it not the demand decline? And how does that impact the planned pricing cadence in terms of the price increases that you've announced to customers for January 1 for '25 compared to the cadence of pricing actions that you took in the beginning of '24, just to calibrate us?

[James Hill, executive]

Look, demand -- I mean, volumes going down never helps price, but I think that the visibility to come in demand, both on the public side, particularly on the public side, but now also, we think some growth on the private side and residential are helpful for price. I think as far as we talked about mid-year price increases, that's a good step for '25. It helped a little bit in '24. I think if you look at the cadence in '24, we were probably up a little bit higher from Q1 into Q2 than last year, probably not quite as high from Q2 into Q3, but that's just timing. And so I think that -- you put all that together, where demand has been a drag. I think as us and our customers look to 2025, I think the future looks much better from a public side and from a residential side and probably not as bad from a nonresidential side. You pull that together. I think we're encouraged by opportunities for price and unit margin as we look out '25.

[Jerry Revich, analyst]

And sorry, Tom, can you comment on the timing part of that question, January 1 versus April 1, how does that look in terms of your plans for compared to last

[James Hill, executive]

Yes. The vast majority of our prices will be January 1. I'm trying to think if there's any there will be April. I'm sure there's a minority out there, but none that I can think of off the top of my head. So that's been changed now for 2 or 3 years, and I don't -- I expect to continue January 1.

[Mary Carlisle, executive]

And just, Jerry, talk the sequential price, you're right. We thought that third quarter sequentially played out in line with what we expected given the execution on the midyear increases. So good momentum moving into the fourth quarter, which obviously we don't usually see, sequential growth at too much mix really to call that.

[Operator]

[indiscernible] Davidson.

[Unknown Analyst]

Tom, I know a lot of attention on the private sector for 2025 and what may come. But on infrastructure, I mean, I know some of the leading indicators out there showed some flattening at relatively high level. I guess my question is, do you think your business can still see an acceleration in those volumes next year? I know you've got the weather step this year, but also just thinking about a lot of projects that are just still getting going that have been released over the last couple of years. Just wanted to get your sense around that?

[James Hill, executive]

Yes, I think we feel good about the public side. I think we're seeing the JA and state and local funds flow into highways now. Overall, we see public demand growth. This year similar to expectations, steady growth as we look forward. And then if you look over and beyond I JA, you've got substantial state funding. In California, 2 of our largest states, and they're at record letting levels. And then you've got Georgia, Tennessee, Florida, South Carolina, that all approved large additional funding, state funding. You put all that together, it will impact some lettings in 2025, which will help us. But it will go past that. So you have 6 of our largest states at record funding levels, and that should support public demand -- I mean this year, next year and obviously the next 3 or 4 years. And then you've got the other infrastructure over beyond highways to support by IJ is a little better than we would have expected at this point. So we feel pretty good about the public side.

[Operator]

We'll go next to Philip Ng with Jefferies.

[Philip Ng, analyst]

I guess, from a cost per ton standpoint, how should we think about the fourth quarter? Does that start to normalize? And when we look out to 2025, your gross profit per ton has been pretty stellar despite weaker volumes. Does that accelerate a little bit more if we get a little more volume growth when we think about next year in terms of cost per ton coming down as well?

[James Hill, executive]

I would expect simply cost -- the cost increases to start moderating. But I think if you -- despite the volumes and the weather challenges that we had in the quarter, we continue to moderate that cost looking backwards and that we stick on material hurts that efficiency. So volume growth in a more normal weather pattern, coupled with the continued of the Vulcan Way of Operating, I think will help our cost issues as we move forward and support that double-digit margin growth. So simply put it, I would expect our cost pressures to start easing over the next few quarters.

[Philip Ng, analyst]

Can we get it back normal, like in that low to mid-single-digit range in the fourth quarter or it's going to take a little longer? And is that a good basis for [ 2025 ]?

[James Hill, executive]

That's a great target. But that's the target. I'm not paying in victory on that one yet, but yes, that's our goal is to get it back down to normal.

[Operator]

We'll go next to Timna Tanners with Wolfe Research.

[Timna Tanners, analyst]

I wanted to ask, if I could, about capital allocation, just shifting gears. So you paused the buyback, wondering given strong forecast the quarter. You talked about more M&A. Is there still some left? I know you accentuated that on the last call. And just wondering in general if you can talk about other uses, including debt paydown potentially into next year with a maturity quarter?

[James Hill, executive]

So I'll let Mary Andrews go first with capital, and then I'll talk about acquisitions.

[Mary Carlisle, executive]

Yes. Timna, I think through the first 9 months, our capital allocation decisions have been consistent with what we always communicate, which is the biggest gating item for us is always growth opportunities. We've obviously announced the Wake Stone opportunity and the pipeline remains active. So I think there's other opportunities ahead of us. We obviously have the balance sheet well positioned to fund those growth opportunities. And also, as you mentioned, are taking into account the notes that are coming due in April of next year.

[James Hill, executive]

On M&A, we saw us close a couple of small bolt-ons in Alabama and Texas earlier in the year where obviously, we're excited about Wake Stone, and looking forward to closing that one. That aside, I think the M&A pipeline remains active. We're working on some other opportunities that we hope to get to the finish line and talk about in the next few quarters.

[Operator]

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

[Michael Dudas, analyst]

Tom, back to looking maybe at the private sector, can you maybe share how your manufacturing, industrial energy customers, how their plans, their back -- how your backlog looks relative to that market? And have you sensed any maybe generally, maybe definitely on the private side, across the board, any hesitancy because of the election and once that gets through? And with maybe rates certainly hopefully normalizing though the market is not cooperating in the last couple of weeks of that giving you a little more better tailwinds to some of the volume numbers that you're sharing with us today?

[James Hill, executive]

Yes. I think, obviously, the warehouses and distribution centers and the like that have been challenges. That being said, I think the drop on that is easing. And as you said, it's offset with heavy and heavy manufacturing and data centers. That's been a good tailwind for us. That continues to be a good tailwind for us going into 2025. But I think it's insightful about what you said about what's in the pipeline. I think there's a lot of projects on hold. If you talk to a number of our customers and the large general contractors, they're bidding a lot of work, but nobody is pushing the button. I think that with election being over, interest rates easing, hopefully in the second half of next year, we'll some see some of these come off the sideline. But there is a lot of pent up out there that's kind of a wait and see. So we hope that a number of factors helps ease that, and we see some of that come off. Second half of -- that will impact second half of '25, but probably a bigger impact on '26.

[Operator]

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

[Patrick Brown, analyst]

Tom, I want to kind of come back to some prior comments. But where are you all on the plant technology journey that you talked about at the Analyst Day? And what do you think that those efficiencies mean increasing cost call it, disinflation perspective over the next couple of years? I mean, does it shave a point or 2 off of those unit costs? Just any way to frame it? I'm just trying to understand just how idiosyncratic it is

[James Hill, executive]

It's -- what your question is a cycle because it's a big deal for us. We're still pretty early stages. I think we probably have that fully implemented in 25%, 30% of our operations. The capital cost is spent on the remaining operations. Remember, it's about the top 110, 120 plants which is about 70%, 75% of our production. What we're seeing out of that is double-digit throughput improvements on the plants where it's fully implemented. Long ways to go on that one. I think we make that journey throughout 2025. The weather probably didn't help us with some of that stuff and some of the distractions we have with storms, but I think that and team are making good progress there, and I think they'll get that done sometime early 2026. And it's hard -- really hard to call. And we spent some time trying to do it. What is the dollar impact for us. And I think we quit doing that and we'll concentrate on what's the throughput impact because we know it's degrees of goods. So -- we'll hopefully finish that journey by first or second quarter of '26. But you are correct, it will have an impact on our cost.

[Operator]

We'll go next to Adam Thalhimer with Thompson Davis.

[Adam Thalhimer, analyst]

I'm still a little fuzzy. What do you want us to plug in for volumes in Q4? And then, Tom, how much demand variability are you seeing by state?

[James Hill, executive]

So on Q4, if you give me the weather report for November, December, I'll give you the volume for Q4. It's just -- it's a hard one to call because it's so dicey. Like I said, October started off slow, but bounced really good. And it's been dry in October, and we shipped appropriately well. But November, December, we all know what can happen in those. So kind of a hard one to call. I would call you to underlying demand for the year is at that probably mid -- down mid-single digits. We've seen some balance of that in October. But again, it's how many shipping days that we have.

[Mary Carlisle, executive]

Yes. And Adam, I think overall, our volume guidance from the second quarter was minus 4% to minus 7%, and that's still what we expect for the full year on a demand environment, like Tom described, is down mid-single digits and the rest of that weather impacted. So where we fall within that will depend on how fourth quarter plays out.

[James Hill, executive]

I'm sorry, what was your second question?

[Adam Thalhimer, analyst]

Demand variability by state.

[James Hill, executive]

That was hard to call because who get washed out -- who got washed out what month this year. But I think all of them are okay. I don't see -- Illinois has been a challenge with the public side, more of a challenge than most of our states. I think Virginia has had its share of challenges. Northern California has been challenged. And the rest of them, I think, kind of in that low to mid-single-digit rate down of what we've seen. So -- and the Southeast is probably healthiest. In Texas, when if you look at Texas, when it quit rain, we should actually shipped quite well, but they got boiling out in the first half of the year, but the second half has been better. But I think most of them are consistently kind of down in that mid-single digit except for the challenged ones I would call out would be Northern California, Illinois, may kind of Virginia area.

[Operator]

We'll go next to Michael Dahl with RBC Capital Markets.

[Michael Dahl, analyst]

Follow-up on Wake Stone, so I appreciate the volume comment. Can you help us understand just how pricing looks both in terms of kind of where you stand -- where that business stands relative to your core portfolio? And also just their pricing strategy has looked over the past couple of years relative to the strategy you employ and what you can do with that? And then if I could sneak one more on weak and just any sense of kind of the cash outlay to close the acquisition?

[James Hill, executive]

So you probably don't love my answer, but that's -- as you know, that's a new market for us. We've not been in that in the Raleigh-Durham Chapel Hill market before. So kind of new ground from a commercial perspective. So -- and we've got to get it closed. So a little bit early for me to make any calls how we operate -- how they operate today or what we would do differently, if anything, in those markets. So that was -- let me get it closed. Let me get a little digested, understand the markets, and we could be -- give a much better answer on that. As a practice, we don't typically disclose purchase price of acquisitions that aren't material to the company. So again, give us a little time on these things, and let's get it closed, and we can be a lot clear on Wake Stone. We are like I said, very excited about this. We're excited about the team, the Wake team, who we think is very talented. We're excited about the assets and we think the markets are a good addition to that Southeastern footprint and in markets where we can be a leader in the market. So excited about it, and we'll have to get back with you a little more information where we can close

[Operator]

We'll go next to Angel Castillo with Morgan Stanley.

[Angel Castillo Malpica, analyst]

Just maybe I wanted to expand on that conversation a little bit more. As you think about more high-level kind of competitive pricing dynamics across your markets, just what are you seeing from maybe kind of the private side of competition in terms of being disciplined on price? And what does that kind of tell you the price disparity of potential acquisition opportunities versus your corporate level?

[James Hill, executive]

It's hard for me to really comment on competitive pricing. Obviously, we get information about markets. But I think that as people look at the aggregates business, they understand the value of the rock in the ground and that's a depleting asset and you shouldn't give it away because you can't replace those tons and people understand that they got to make a return on investment, whether that's the private side or the public side. So I think that the pricing in the aggregates business has always been good and will continue to be good. And I think the onset of growing public demand and particularly growing profit demand only helps that situation.

[Operator]

We'll go next to Michael Feniger with Bank of America.

[Michael Feniger, analyst]

Tom, if you could just talk about, I mean, a few years ago, you guys had a target of 11 to 12 cash gross profit per ton on a much higher number of tonnes you're kind of doing today. So just -- how should we kind thing about that as we're starting to close in on that figure? How are you guys kind of thinking about that? And now that we're moving into next year, it looks like we're going to be starting to see some volume increase or at least to end these volume declines.

[James Hill, executive]

So that we got to give you new goals. We reached a lot faster than what we thought we would have. My hats off to my division presidents and all those division employees who accelerated that target a lot lower volumes than I would have expected, particularly in the face of, as I said, 7 or 8 quarters of falling demand. They just have done a good job, and they've executed on the Vulcan way of Selling and Vulcan Way of Operating. But the short answer is we owe ourselves and you do goals because we're basing down that $11 right now, and we plan on getting some of those new goals in the not-too-distant future.

[Michael Feniger, analyst]

Great. And if I could just maybe squeeze one more in. I'd love to get a Andrew, just on -- for next year, maybe just moving pieces for free cash flow. Obviously, CapEx has done some acquisitions. Just kind of how to think about that as we're moving into 2025, some of the buckets there in terms of working capital or CapEx in next year.

[Mary Carlisle, executive]

Yes. Mike, obviously, in February, we'll give full 2025 guidance and include a lot of the things that you just mentioned. But specific to CapEx, we believe we've been reinvesting at appropriate levels for the current business needs. If you look over the last 5 years, that's ranged 8% to 9% of revenues. As Tom said, we don't even have the acquisitions closed yet. So I don't have a specific view on what CapEx will look like for the acquired operations next year. But as you model, I think that our historical level is a reasonable place to be.

[Operator]

It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional remarks.

[James Hill, executive]

Thank you for your time. Thank you for your interest in Vulcan Materials. We look forward to talking to you throughout the quarter. We hope that you and your families are safe and healthy during the holiday season and look forward to talking to you soon. Thank you.

[Operator]

This does conclude today's program. Thank you for your participation. You may disconnect at any time.