Vulcan Materials Company (holding Company) · NYSE:VMC
Vulcan Materials Company (holding Company) — Investor Day (September 2019)
86 slides from Vulcan Materials Company (holding Company)'s investor day presentation, Sep 17, 2019
Slide 1: 2019 Aggregates Day
2019 aggregates day Exhibit 99.1
Slide 2: Disclaimer: Safe Harbor and Non-GAAP Financial Terms
Disclaimer Safe Harbor Non-GAAP Financial Terms 2019 aggregates day | This presentation contains forward-looking statements. Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to fu
Slide 3: Making the best better
Making the best better Tom Hill, Chairman and CEO
Slide 4: Our Company
Our Company 2019 aggregates day | Aggregates-focused building materials business 16.3 Billion tons (~80 years) Aggregates reserves >350 Aggregates operations Serving attractive U.S. markets across 20 states $4.4 Billion Revenues in 2018 $1.1 Billion Adjusted EBITDA* in 2018 201 Million Tons of aggre
Slide 5: The Vulcan Way
The Vulcan Way 2019 aggregates day | Our culture is at the core of our success
Slide 6: Vulcan's Value Proposition
Vulcan’s Value Proposition 2019 aggregates day | What we offer investors Industry Leader with Unique Aggregates Focus Well Positioned to Benefit from Demand Growth and Operational Excellence Strong Balance Sheet Supports Future Growth
Slide 7: Making the Best Better To Deliver Even Stronger Results
Making the Best Better To Deliver Even Stronger Results 2019 aggregates day | A market leader focused on enhancing profitability and driving sustainable, long-term shareholder value Right Product Right Markets Right People Right Focus
Slide 8: Uniquely Positioned With Aggregates Focus
Uniquely Positioned With Aggregates Focus 2019 aggregates day | 2018 Product Mix Gross Profit (% of total) Revenue (% of total) Right Product
Slide 9: Uniquely Positioned With Aggregates Focus
Uniquely Positioned With Aggregates Focus 2019 aggregates day | Vulcan stands alone as the largest and most aggregates-focused public company Right Product Source: 2018 reported financial information and Company estimates.
Slide 10: Attractive Fundamentals Lead To Compounding Results
Attractive Fundamentals Lead To Compounding Results 2019 aggregates day | Price growth in Aggregates through all parts of a cycle Right Product Source: BLS and Company estimates. Demand in billions of tons. Price is indexed (1982 = 100)
Slide 11: Why Aggregates? The heavy materials supply chain
Why Aggregates? 2019 aggregates day | The heavy materials supply chain Upstream Downstream Right Product Source: Company estimates. COMPRISES ~80% BY WEIGHT COMPRISES ~95% BY WEIGHT AGGREGATES ASPHALT MIX CEMENT READY-MIX CONCRETE
Slide 12: Why Aggregates?
Why Aggregates? 2019 aggregates day | AGGREGATES ASPHALT MIX ~95% Aggregates by weight Upstream Downstream CEMENT READY-MIX CONCRETE ~80% Aggregates by weight Right Product Source: Company estimates. Flexible production capacity Wide logistical moats Barriers to entry Limited substitute products Est
Slide 13: Why Aggregates? Weaker fundamentals downstream
Weaker fundamentals, higher risk through the cycle Inflexible production capacity, high start-up/shut-down costs Weight-to-price ratio limits logistical moat Energy cost is significant Estimated U.S. market size 96 million tons, or $12 billion Flexible production capacity, but often economics driven
Slide 14: Broad End Market Demand For Aggregates
Broad End Market Demand For Aggregates 2019 aggregates day | Highways are most aggregates intensive Private ~50% Public ~50% Buildings and Non highway infrastructure Highways Nonresidential Buildings Residential Aggregates Intensity Less More Right Product
Slide 15: Strong State Transportation Funding
Strong State Transportation Funding Next 5 years could result in the highest growth rate in highway demand across Vulcan’s footprint in the last 30 years 2019 aggregates day | Vulcan is well-positioned to capitalize on an average 60% increase in revenue for highways of VMC Revenues are produced in t
Slide 16: Well Positioned to Benefit In Georgia
Well Positioned to Benefit In Georgia More than $11 billion in transportation investment planned over the next 10 years 2019 AGGREGATES DAY | Metro Atlanta Right Product
Slide 17: Well Positioned to Benefit in California
Well Positioned to Benefit in California 2019 AGGREGATES DAY | Strong pipeline of projects supported by state and local funding increases More than $52 billion in transportation investment planned over the next 10 years Right Product
Slide 18: Strategic Asphalt is a Natural Extension of Aggregates
Strategic Asphalt is a Natural Extension of Aggregates Earns attractive through-the-cycle returns on capital Participation where market structure mirrors aggregates Serves same customer base Benefits from strong public demand Leverages logistics capabilities – 80% delivered 2019 aggregates day | Wha
Slide 19: Selective Concrete Positions Complement Aggregates
Selective Concrete Positions Complement Aggregates Earns attractive through-the-cycle returns on capital Participation where market structure mirrors aggregates Very selective markets with barriers to entry 2019 aggregates day | When is a concrete business strategic? Right Product 9% of 2018 total r
Slide 20: Vulcan's Unique And Irreplaceable Asset Base
Vulcan’s Unique And Irreplaceable Asset Base… 2019 aggregates day | More than 60 years of steady, strategic growth creates a franchise of enduring value 50% Population living within 50 miles of a Vulcan operation 16.3 Billions of tons of aggregates reserves 80% Revenues tied to markets where Vulcan
Slide 21: Also Includes Valuable Logistics Network
…Also Includes Valuable Logistics Network 2019 aggregates day | Shipping by Rail 4-5 truckloads per rail car $0.04-0.12 per ton mile SHIPPING BY BARGE ~65 truckloads per barge $0.02-0.03 per ton mile SHIPPING BY OCEAN VESSEL ~2,500 truckloads per ship Less than $0.01 per ton mile Shipping by Truck 2
Slide 22: Market Positions Are Built Over Decades (1970)
Market Positions Are Built Over Decades 2019 aggregates day | Balanced approach to growth investments through both greenfields and acquisitions Right Markets Aggregates Asphalt Ready-mix Concrete 1970
Slide 23: Market Positions Are Built Over Decades (1980)
Market Positions Are Built Over Decades 2019 aggregates day | Balanced approach to growth investments through both greenfields and acquisitions Right Markets Aggregates Asphalt Ready-mix Concrete 1980
Slide 24: Market Positions Are Built Over Decades (1990)
Market Positions Are Built Over Decades 2019 aggregates day | Balanced approach to growth investments through both greenfields and acquisitions Right Markets Aggregates Asphalt Ready-mix Concrete 1990
Slide 25: Market Positions Are Built Over Decades (2000)
Market Positions Are Built Over Decades 2019 aggregates day | Balanced approach to growth investments through both greenfields and acquisitions Right Markets Aggregates Asphalt Ready-mix Concrete 2000
Slide 26: Market Positions Are Built Over Decades (2010)
Market Positions Are Built Over Decades 2019 aggregates day | Balanced approach to growth investments through both greenfields and acquisitions Right Markets Aggregates Asphalt Ready-mix Concrete 2010
Slide 27: Market Positions Are Built Over Decades (2019)
Market Positions Are Built Over Decades 2019 aggregates day | Balanced approach to growth investments through both greenfields and acquisitions Right Markets Aggregates Asphalt Ready-mix Concrete 2019
Slide 28: Positioned For Growth
Positioned For Growth 2019 aggregates day | The proximity of our operations and reserves creates opportunities for continued growth Right Markets Moody’s Analytics, August 2019
Slide 29: Our People Are Our Greatest Resource
Our People Are Our Greatest Resource 2019 AGGREGATES DAY | Right People We take care of them and our communities
Slide 30: Safety – Industry Leader
Safety – Industry Leader 2019 aggregates day | Commitment to our people Right People MSHA Reportable Injury Rate MSHA = Mine Safety and Health Administration. Injuries per 200,000 hours
Slide 31: Protecting Employee Health
Protecting Employee Health 2019 aggregates day | First in industry to launch comprehensive occupational health program – continually innovating to achieve more Right People 10-Year Average: 98.7% Within Standard MSHA Respirable Dust/Silica Exposure Sampling 10-Year Average 97.3% Within Standard MSHA
Slide 32: Environmental Stewardship
Environmental Stewardship Committed to responsible, sustainable operations Significant reduction in Greenhouse Gas Emissions Retire-and-replace mobile equipment program to meet higher engine emission standards Innovative technologies that improve energy efficiencies of blue-water fleet Utilize close
Slide 33: Making the Best Better To Deliver Even Stronger Results
Making the Best Better To Deliver Even Stronger Results 2019 aggregates day | A market leader focused on enhancing profitability and driving sustainable, long-term shareholder value Right Product Right Markets Right People Right Focus
Slide 34: Competitive Strengths Driving Financial Results
COMPETITIVE STRENGTHS DRIVING FINANCIAL RESULTS Suzanne Wood, Senior Vice President and CFO
Slide 35: Solid Shipment Growth In Aggregates
Solid Shipment Growth In Aggregates 2019 aggregates day | Unique positions in many of the fastest growing U.S. markets Broad based growth in shipments across our footprint Growth since 2013 generally driven by private Increased public funding led by highways beginning to contribute to shipment growt
Slide 36: Compounding Price Improvements In Aggregates
Compounding Price Improvements In Aggregates 2019 aggregates day | Relatively inelastic pricing with growth through the cycle Overall pricing climate remains positive Momentum continues across all geographies Increasing visibility to public demand underpins pricing outlook 4% CAGR Unit price in $ /
Slide 37: Expansion In Aggregates Gross Profit Per Ton
Expansion In Aggregates Gross Profit Per Ton 2019 aggregates day | Strong local leadership focused on execution Disciplined cost control and operational efficiencies resulted in total unit cost of sales growing at only 1% annually Flow-through conversion in line with longer-term target Profitability
Slide 38: Steady Improvement In Non-aggregates Cash Gross Profit
Steady Improvement In Non-aggregates Cash Gross Profit* 2019 aggregates day | Selective downstream investments that complement our aggregates franchise Divested Southern California and Georgia concrete businesses to rationalize portfolio Recent asphalt acquisitions add attractive earnings and streng
Slide 39: Strong Conversion Of Revenue To Earnings
Strong Conversion Of Revenue To Earnings Top line annual growth rate of 9% converted to 20% annual growth rate in EBITDA Revenue and earnings growth across aggregates and non-aggregates product lines Improved SAG leverage 240 basis points 2019 aggregates day | Earnings growth driven by strong aggreg
Slide 40: Investment Grade Balance Sheet Supports Future Growth
Investment Grade Balance Sheet Supports Future Growth Improved financial strength and flexibility Debt amount and structure appropriate to the asset base and through the cycle Target leverage range of 2.0 to 2.5x Capacity to fund growth and return capital 2019 aggregates day | Leverage reduced to wi
Slide 41: Leveraging Our Capital Base To Drive Shareholder Value
Invested Capital 4% CAGR Leveraging Our Capital Base To Drive Shareholder Value 2019 aggregates day | TTM 2Q’13 represents the cyclical low in aggregates volumes. *Adjusted EBITDA is a non-GAAP measure. See Appendix for reconciliation. Improvement in Return on Invested Capital 2Q 2013 versus 2Q 2019
Slide 42: Making the Best Better – Our Strategic Initiatives
Making the Best Better – Our Strategic Initiatives 2019 aggregates day | Each effort supports both near-term performance and longer-term competitiveness OPERATIONAL EXCELLENCE STRATEGIC SOURCING COMMERCIAL EXCELLENCE LOGISTICS INNOVATIONS Controlling what we can control
Slide 43: The Right Focus: People, Process and Execution
The Right Focus: People, Process and Execution 2019 aggregates day | Knowledge, Experience & Passion Harness Information Making the Best Better
Slide 44: Strategic Initiatives: Operational Excellence
Making the Best Better – Our Strategic Initiatives 2019 aggregates day | Each effort supports both near-term performance and longer-term competitiveness OPERATIONAL EXCELLENCE Focus on Operating Disciplines STRATEGIC SOURCING COMMERCIAL EXCELLENCE LOGISTICS INNOVATIONS Controlling what we can contro
Slide 45: The Vulcan Way Of Operating – Sustaining Improvement
The Vulcan Way Of Operating – Sustaining Improvement 2019 aggregates day | Focused on safety, serving our customers and production Enabling Our Great People PROTECTING OUR PEOPLE AND COMMUNITIES UTILIZING OUR ASSETS WINNING WITH CUSTOMERS
Slide 46: Operating Disciplines – Context For Discussion
Operating Disciplines – Context For Discussion 2019 aggregates day | To remain the best and reach our potential requires self reflection and asking the hard questions How can we improve productivity safely? How can we better serve our customers? How can we turn data into useful dashboards of informa
Slide 47: Five Tenets Of Effective Production Performance
Five Tenets Of Effective Production Performance 2019 aggregates day | Focused on executing the fundamentals well and sustaining continuous improvement People – Safety, Health, Performance Management and Coaching Production Planning and Customer Service Plant Availability Plant Throughput Inspection
Slide 48: Defining Success – Where Are We?
Defining Success – Where Are We? Enterprise-wide operational support team Standardized key disciplines and operating parameters Best practices in performance management and coaching Utilizing opportunity searches Regular rhythms for coordination between our sales and operating teams Exploring digita
Slide 49: Defining Success – What Will It Look Like?
Defining Success – What Will It Look Like? Continuous improvement in our industry-leading safety performance Continuous improvement in our operating disciplines Better asset utilization through improved availability and throughput Support for our Commercial Excellence initiatives to improve customer
Slide 50: Strategic Initiatives: Strategic Sourcing
Making the Best Better – Our Strategic Initiatives 2019 aggregates day | Each effort supports both near-term performance and longer-term competitiveness OPERATIONAL EXCELLENCE STRATEGIC SOURCING Serve and Save COMMERCIAL EXCELLENCE LOGISTICS INNOVATIONS Controlling what we can control Jason Teter Pr
Slide 51: Strategic Sourcing – What Is It For Vulcan?
Strategic Sourcing – What Is It For Vulcan? 2019 aggregates day | Leveraging common practices to better serve and save across a distributed business model SERVE SAVE Vulcan’s front line operating teams With a total cost of ownership approach
Slide 52: Strategic Sourcing – Innovation Starts With Self-assessment
Strategic Sourcing – Innovation Starts With Self-assessment 2019 aggregates day | Vulcan embraced innovation in sourcing by taking a hard look at its practices Are our teams properly trained to drive saving and serving? How can we better partner with our suppliers across more sourcing categories? Ca
Slide 53: Where Are We?
Where Are We? Technology/System implementation w/mobile enablement Process improvement Training and role clarity 2019 aggregates day | Over the last 2 years, have made investments in our people, systems and processes SERVE SAVE Redefining our sourcing process Training our teams in category managemen
Slide 54: Results So Far?
Results So Far? Reduction in order time by over 50% Mobile enablement of our field teams resulting in less time in front of a computer Real time freed up to focus on what is important Real savings on the initial categories 2019 aggregates day | We have made real progress with significant opportunity
Slide 55: Defining Success – What Does It Look Like?
Defining Success – What Does It Look Like? 2019 aggregates day | Strategic Sourcing – Locking in and sustaining the process of what great looks like Right part or tool at the right time More time in our plants Category- by-category optimization More time with our suppliers Optimized Total Cost of Ow
Slide 56: Strategic Initiatives: Commercial Excellence
Making the Best Better – Our Strategic Initiatives 2019 aggregates day | Each effort supports both near-term performance and longer-term competitiveness OPERATIONAL EXCELLENCE STRATEGIC SOURCING COMMERCIAL EXCELLENCE Spend Time Where it Counts LOGISTICS INNOVATIONS Controlling what we can control Br
Slide 57: Commercial Excellence – Context For Discussion
Commercial Excellence – Context For Discussion 2019 aggregates day | Long history of above-average price performance +5.1%/yr +4.3%/yr
Slide 58: Commercial Excellence – Context For Discussion
Commercial Excellence – Context For Discussion 2019 aggregates day | To remain the best and reach our potential requires self reflection and asking the hard questions How can we spend less time on non-selling activities? How can we better leverage our strong customer relationships? How can we be mor
Slide 59: Defining Success – Where Are We?
Defining Success – Where Are We? More effective at planning to win Forward-looking information to be more agile Spending more time where it counts More focus on coaching Measurements of success: real-time metrics 2019 aggregates day | Implement Review Adjust
Slide 60: Defining Success – What Does It Look Like?
Defining Success – What Does It Look Like? 2019 aggregates day | The Vulcan Way of Selling – Spending time where it counts creates value More time with our customers Real time, forward-looking metrics Defined roles, responsibilities and rhythms Enhanced, disciplined coaching Value
Slide 61: Strategic Initiatives: Logistics Innovations
Making the Best Better – Our Strategic Initiatives 2019 aggregates day | Each effort supports both near-term performance and longer-term competitiveness OPERATIONAL EXCELLENCE STRATEGIC SOURCING COMMERCIAL EXCELLENCE LOGISTICS INNOVATIONS The Last Mile Matters Controlling what we can control Bert O’
Slide 62: Aggregates Modes Of Transportation
Aggregates Modes Of Transportation 2019 aggregates day | Approximately 60% of aggregates shipments are moved via these four modes of transportation Modes of Transportation % of 2018 Volume Trucking (managed) 36% Rail 12% Blue water 6% Brown water 5% Vulcan customers spend >$1 billion on truck freigh
Slide 63: Last Mile Logistics Can Be A Bottleneck For Shipments
Last Mile Logistics Can Be A Bottleneck For Shipments 2019 aggregates day | $ Value of backlog Pace of additions End-use mix, geographic mix, and size/ complexity of projects Macro-confidence/ uncertainty Complexity of project design, permitting, etc. Developer discipline (e.g. homebuilders delibera
Slide 64: Defining Success – Where Are We?
Defining Success – Where Are We? Logistics Service Centers: Implemented in every major market People: Professional logistics team-members manage delivery on behalf of the customer Process: Teams execute a standard order fulfillment process, from order to schedule to delivery Systems: Digital tools t
Slide 65: Vulcan Has Two Customers For Every Order
Vulcan Has Two Customers For Every Order 2019 aggregates day | CONTRACTORS Customer expectations on deliveries are increasing (i.e. the Amazon effect) On-time performance is getting more difficult; >90% of infrastructure projects are late or over-budget DRIVERS Driver shortages are projected to reac
Slide 66: Building Our Capabilities…Starting With a Strong Foundation
Bring the best of Vulcan to every customer Building Our Capabilities…Starting With a Strong Foundation 2019 aggregates day | Commercial Solutions Sales Training Market Intel / Data & Analytics Logistics Technology Tools Sales Management Practices Sales Service Expanded Time with Customers Logistics
Slide 67: Providing Solutions For The Customer
Bringing It All Together…Providing Solutions For The Customer 2019 aggregates day | CUSTOMER CHALLENGE VULCAN SOLUTION Difficulty locating trucking capacity and operating efficiently Bundled logistics solution Difficulty administering the job, managing the paper trail and getting paid Digital shipme
Slide 68: Providing Solutions For The Customer: Contractor Quote
Bringing It All Together…Providing Solutions For The Customer 2019 aggregates day | ” “Scheduling, speed and accuracy of delivery, invoice reconciliation and process controls have all been greatly streamlined by our partnership with Vulcan Materials. I believe much of this improvement is due to the
Slide 69: Making the Best Better – Our Strategic Initiatives
Making the Best Better – Our Strategic Initiatives 2019 aggregates day | Each effort supports both near-term performance and longer-term competitiveness OPERATIONAL EXCELLENCE Focus on Operating Disciplines STRATEGIC SOURCING Serve and Save COMMERCIAL EXCELLENCE Spend Time Where it Counts LOGISTICS
Slide 70: The Right Focus: People, Process and Execution
The Right Focus: People, Process and Execution 2019 aggregates day | Knowledge, Experience & Passion Harness Information Making the Best Better
Slide 71: Our focus now and moving forward
Our focus now and moving forward Suzanne Wood, Senior Vice President and CFO
Slide 72: Context For Discussion Of Long-term Financial Goals
Context For Discussion Of Long-term Financial Goals Refer to Safe Harbor Disclaimer The figures in the section reflect Vulcan’s current long-range goals Actual future results will depend on many factors, including the ultimate pace of recovery in demand for construction aggregates The Company believ
Slide 73: Five Core Disciplines We Concentrate On Every Day
Five Core Disciplines We Concentrate On Every Day 2019 aggregates day | LEVERAGE FOUR COMPANY-WIDE AREAS OF FOCUS Sales and Marketing Excellence Operational Excellence SAG Productivity Capital Productivity Portfolio Management Grow shipments and revenues faster than the markets as a whole Achieve 60
Slide 74: Where Do We Stand On Outlook From 2015?
Where Do We Stand On Outlook From 2015? 2019 aggregates day | Solid execution despite slower than expected public growth; poised to benefit from stronger highway spending and additional operational upside Volume Unit Profitability Largely outside of our control Largely within our control THEN1 Shipm
Slide 75: Returning to Normalized Demand
Returning to Normalized Demand 2019 aggregates day | Dramatic increases in highway funding in Vulcan’s key states are converting to shipments Exact pace and duration unknown Normal Demand = Long-term average of demand No specific timetable for recovery to normal demand. The company believes a full r
Slide 76: Underlying Demand Drivers Remain Firmly In Place
Underlying Demand Drivers Remain Firmly In Place Current imbalance of housing stock and housing demand Current interest rate environment Household income and wage gains Population growth Total employment Household formations 2019 aggregates day | Slower but bigger public demand with advantage to Vul
Slide 77: $2 Billion EBITDA: Higher Unit Margins and Fewer Tons
$2 Billion EBITDA: Higher Unit Margins and Fewer Tons 2019 aggregates day | Outlook Then1 ~250 MM tons $8.25 / ton Aggregates Volume Aggregates Cash Gross Profit* Outlook Now ~230-240 MM tons $9.00 / ton EBITDA* $2 Billion $2 Billion 1.As outlined at 2015 Investor Day. *Cash Gross Profit and EBITDA
Slide 78: Strong Financial Platform
Strong Financial Platform Investment grade rating will be maintained Average maturity of debt is 15 years Weighted average interest rate of 4.5% Stated leverage target 2.0 to 2.5x 2019 aggregates day | *Adjusted EBITDA is a non-GAAP measure. See Appendix for reconciliation. Debt to Adjusted EBITDA*
Slide 79: Capital Allocation Priorities
Capital Allocation Priorities 2019 aggregates day | Unchanged priorities that drive shareholder value 1. Operating Capital (maintain and grow value of franchise) 2. Growth Capital (including greenfields and bolt-on acquisitions) 4 . Return Excess Cash to Shareholders (primarily via share repurchase)
Slide 80: Leveraging Our Capital Base To Drive Shareholder Value
Leveraging Our Capital Base To Drive Shareholder Value Strategic investments to drive EBITDA are yielding results Continued improvement will remain an area of focus going forward 2019 aggregates day | Improving Return On Invested Capital TTM 2Q’13 represents the cyclical low in aggregates volumes. R
Slide 81: Summary
summary Tom Hill, Chairman and CEO
Slide 82: Summary: Making The Best Better
Summary: Making The Best Better 2019 aggregates day | A market leader focused on enhancing profitability and driving sustainable, long-term shareholder value Our mission is to build and sustain leading and lasting market positions in attractive long-term growth markets We have a clear and compelling
Slide 83: Vulcan's Value Proposition
Vulcan’s Value Proposition 2019 aggregates day | What we offer investors Leading Building Materials Business Uniquely Positioned with an Aggregates Focus Largest U.S. aggregates producer with better geographic diversity #1 or #2 aggregates position in markets accounting for 80% of revenues Operation
Slide 84: Materials Company: Making the Best Better
Materials Company MAKING THE BEST BETTER
Slide 85: Appendix: Reconciliation of Non-GAAP Financial Measures (EBITDA)
Appendix 2019 aggregates day | Reconciliation of Non-GAAP Financial Measures EBITDA EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization and excludes discontinued operations. GAAP does not define EBITDA and it should not be considered as an alternative to earnings
Slide 86: Appendix: Reconciliation of Non-GAAP Financial Measures (Cash Gross Profit)
Appendix 2019 aggregates day | Reconciliation of Non-GAAP Financial Measures Cash Gross Profit Cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization (DDA&A) to segment gross profit. Aggregates segment cash gross profit per ton is computed by dividing Agg