Vulcan Materials (NYSE:VMC) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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View the webcast at https://event.on24.com/wcc/r/5524133/9555723B764C83E9F515D888ECAB7BB9
Summary
Vulcan Materials reported a 5% growth in adjusted EBITDA for Q3 2026, despite $40 million in energy cost headwinds.
The company completed multiple strategic bolt-on acquisitions, expanding its aggregates portfolio in key states like Texas and Tennessee.
Vulcan Materials anticipates $2.4 billion in adjusted EBITDA for 2026, attributing resilience to its aggregates-led strategy.
Despite a mixed demand environment, the company increased aggregate selling prices by 5% year-over-year, offsetting higher diesel costs.
Looking to 2027, Vulcan plans for mid- to high-single-digit aggregate price growth, expecting stable demand in public projects and growth from large private projects.
Full Transcript
OPERATOR
Good morning everyone. Welcome to the Vulcan Materials third quarter 2026 earnings call. My name is Bo and I will be your conference call coordinator today. Just a reminder, today’s call is being recorded for replay at the company’s website. All lines have been placed in a listen-only mode. After the company’s prepared remarks, there will be a question and answer session. I would now like to hand the call over to Mr. Mark Warren, Vice President, Investor Relations.
Please go ahead, sir.
Mark Warren (Vice President, Investor Relations)
Thank you, operator. Joining me today are Ronnie Pruitt, Chief Executive Officer, and Mary Andrews Carlile, Senior Vice President and Chief Financial Officer. Before we begin, please note that a press release and a supplemental presentation related to this call are available at vulcanmaterials.com. Today’s discussion includes forward-looking statements which are subject to risks and uncertainties. Reconciliations of any non-GAAP financial measures and other disclosures are included in our earnings release, supplemental presentation, and other SEC filings. During Q&A, we kindly ask that you limit your participation to one question.
This will help us to address as many questions as possible. Now I’ll turn the call over to Ronnie.
Ronnie Pruitt (Chief Executive Officer)
Thanks, Mark, and thank you all for joining our Vulcan Materials third quarter earnings call this morning. During the quarter we continued to successfully execute on our two-pronged growth strategy by improving the profitability of our organic business and expanding our aggregates franchise through disciplined bolt-on acquisitions. Absent energy cost headwinds of approximately 40 million and adjusting for the prior year divestitures of some more cyclical downstream businesses, adjusted EBITDA for our underlying business grew 5% in the quarter, demonstrating the resilience of our aggregates-led strategy.
Our operating and sales teams are aligned with our Vulcan Way of Operating and Vulcan Way of Selling disciplines. I am pleased with the execution we are seeing across our footprint, and I’m confident that there is significant value to create by staying focused on the fundamentals. Aggregate cash gross profit per ton continued to compound higher even with the inflationary pressures from higher energy costs. During the quarter we closed on two attractive bolt-on aggregate acquisitions and have since completed another acquisition earlier this month. This year we have added strategic aggregate assets in two key Vulcan states, Texas and Tennessee, in addition to expanding our reach into the southeastern Colorado and southern Ohio markets. These acquisitions add long-term quality aggregate reserves to our portfolio, carry minimal risk, are easy to integrate, and are synergistic with our existing assets.
The pipeline for future growth opportunities is healthy, and I expect we will complete several more transactions before the end of the year. Thoughtful portfolio actions and solid execution delivered adjusted EBITDA of $707 million and 20 basis points of year-over-year margin expansion in the quarter. On a seasonally adjusted basis, aggregate shipments momentum in the third quarter was similar to the second quarter and consistent with the current demand environment. On a year-over-year basis, shipments decreased 3%. The prior year benefited from favorable weather and outsized seasonally adjusted shipments in the third quarter following a slow start to the construction season due to severe winter weather and rainfall throughout the first half of last year.
Aggregates cash gross profit per ton expanded modestly over the prior year with higher freight-adjusted selling prices more than offsetting sharply higher diesel input costs. Our teams are executing well on the fundamentals they control. On a mix-adjusted basis, average selling prices in the quarter improved 5% compared to the prior year, with improvement widespread across geographies. Excluding diesel, aggregates freight-adjusted unit cash cost of sales increased 3% compared to the prior year.
Now let’s shift to the demand backdrop against which our teams are delivering these solid results. The demand environment remains mixed across end uses, with growth opportunities in some categories and challenges in others. Our Vulcan Way of Selling disciplines allow us to navigate complex market dynamics and maximize value in any environment. On the public side, activity remains at healthy levels. There’s still a long tail from IIJA, with approximately 35% of funds yet to be spent.
There is a current extension of the Federal Highway Authorization bill that maintains funding at current levels and is expected to be extended again until a bill is passed. These dynamics provide an environment in which states are continuing to let work and execute projects. Importantly, the opportunities in Vulcan markets continue to outpace the U.S. overall. For example, trailing 12-month contract awards are up 2% in Vulcan markets versus 1% at a U.S. level.
The need for continued investment in infrastructure is significant and something our elected officials are working to address. On the private side, large project opportunities continue to drive nonresidential activity. Our footprint is well aligned with the ongoing data center development and increase in energy and other manufacturing opportunities. We are currently shipping on a variety of solar, wind, LNG, power plant, and refinery projects, in addition to large-scale manufacturing projects like SpaceX and Toyota in South Texas and Scout Motors in South Carolina. Our scale, quality, and customer service make us a supplier of choice on large complex projects.
The continued lack of housing affordability and a challenging rate environment are limiting residential construction activity in Vulcan markets. Demographics are favorable to the rest of the U.S. and create a fundamental need for additional housing, but timing of a recovery is still unclear given affordability dynamics. With solid year-to-date execution from our operating teams, we expect to deliver another year of earnings growth and approximately $2.4 billion of adjusted EBITDA, even with a muted demand environment and over 100 million of energy headwinds now expected for the year. With that, I’ll turn the call over to Mary Andrews to provide some additional commentary on our third quarter performance, after which I will share some initial thoughts on 2027 before we take your questions.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
Thanks, Ronnie, and good morning. Ronnie highlighted the consistent execution of our two-pronged growth strategy. The same is true for capital allocation. We continue to prioritize reinvesting in our franchise, identifying disciplined opportunities for growth that align with our aggregates-led strategy, supporting our steadily growing dividend, and returning excess capital to shareholders through share repurchases. Through the first nine months of this year, we have generated nearly $1 billion of operating cash flow and received cash proceeds of $572 million for downstream and non-core divestitures. We have reinvested approximately $550 million into maintenance and growth capital expenditures, thoughtfully redeployed approximately $300 million of proceeds, primarily from the California Concrete sale, into strategic aggregates acquisitions, and returned approximately $950 million to shareholders through a combination of dividends and $750 million of share repurchases.
Importantly, we have moved our trailing 12 months’ return on invested capital 20 basis points higher since year end. At September 30, net debt to adjusted EBITDA leverage stood at 1.9 times, providing plenty of capacity to continue to support an active acquisition pipeline. Up and down the P&L, we are focused on controlling what we can control. SG&A expenses year to date are 3% lower than the prior year, even as we make incremental investments in technology and talent to support our strategic discipline. Closely managing our human capital, aligning compensation costs with results, and driving efficiencies across the enterprise are all contributing to lower SG&A year over year on both a percentage of revenue and absolute basis.
Now, before we take your questions, I’ll pass back to Ronnie to share some initial thoughts on what lies ahead in 2027.
Ronnie Pruitt (Chief Executive Officer)
Thanks, Mary Andrews. As I look to 2027, I am confident we have the right strategy, the right team, and the right focus to continue delivering earnings growth and value creation for shareholders. I expect the demand backdrop will largely be a continuation of the current environment, with opportunities for growth varying across, and even within, end markets. Our backlogs and quote activity also support this outlook. With stable Federal Highway funding in place through the continuing resolution and steady growth in awards over the past several years, the public pipeline remains at healthy levels as we move into 2027.
And we are hearing that there is a real focus in D.C. on getting the bill passed, which we expect to be a priority after the midterm elections. This bodes well for future public demand. On the private side, we expect that large project opportunities will continue to drive nonresidential activity and that residential will remain challenged until affordability is addressed. Against a similar demand backdrop to 2026, we anticipate 2027 aggregate pricing to benefit from pricing actions taken this year as the inflationary environment set in and from announced increases for January 1st. As a result, we expect aggregates prices to grow mid- to high-single digits in 2027, creating a strong opportunity for attractive unit profitability expansion as we continue to control cost and leverage our Vulcan Way of Operating disciplines.
We are in the midst of our annual planning cycle now and will provide more detail in February on any shifts in the demand environment, our shipments outlook inclusive of 2026 acquisitions, and our profitability expectations. Now Mary Andrews and I will be happy to take your questions.
OPERATOR
Thank you very much, Mr. Pruitt. Ladies and gentlemen, at this time, if you do have any questions, please press star 1. If you would like to remove yourself from the queue, you may do so by pressing star 2. Additionally, to get to as many questions as possible, we do ask that you please limit yourself this morning to one question. Our first question comes from Trey Grooms with Stevens.
Trey Grooms (Analyst)
Hey, good morning everyone. Thanks for taking the question. So, if it weren’t for the oil-related headwinds, it looks like you guys could be at the midpoint of the guidance range. So if you could maybe talk about some of the things you’re doing to offset inflation and grow EBITDA in what, as you guys said, is a fairly muted demand environment. And then, from a high level, how are you thinking about the inflationary environment and how you plan to navigate that as you look into ’27?
Thank you.
Ronnie Pruitt (Chief Executive Officer)
Good morning, Trey. Thank you. You are correct. Our adjusted EBITDA performance, you know, it would be directly in line with the expectations we set coming into the year, if not for that cumulative oil-related headwind that we currently expect to be over $100 million by the end of the year. Our results really underscore the fundamental durability and the resilience of our pure-play aggregates business model. And I would remind you, our focus really combines two things: our strategic commercial discipline, Vulcan Way Selling, and our operational agility through Vulcan Way Operating.
And both of those things have really paid off. We’ve expanded our year-to-date gross profit margin by 30 basis points, and we’ve grown our cash gross profit per ton by 2%. Price still remains our most effective lever to mitigate oil-related cost headwinds. And so, you know, that’s about timing. The oil-related stuff hit us coming into the year. I mean, if you recall back, it hit us in the first quarter into the second quarter. We thought there were some talks around things may start to be muted with some, you know, end to the war, and then they really set in and we saw that in the third quarter. So, you know, what did we continue to do?
Our pricing is up in the third quarter on a mix-adjusted basis, 5% year over year. And so our commercial teams are executing. And I’ll remind you that about half of our products are sold through our daily bidding process, and half of them are through the fixed-plant stuff. So we’ve talked about what we’re doing and what we expect for next year. On the operational side, again excluding that direct impact, our unit cash cost of sales is only up 3%. And I would tell you that’s just discipline and really demonstrating those strong operational things we can control across our footprint. Our advanced analytics, which we call process intelligence, continues to drive and really enable us to optimize our critical product throughput. It eliminates unnecessary downtime and maximizes our efficiencies throughout our network.
So I’m really pleased with our operators and the efforts they continue to give. And as Mary Andrews said in her prepared remarks, our focus is on execution up and down the P&L. So I’ll turn it over to Mary Andrews to talk about some of the other puts and takes on what we’ve done to battle some of these headwinds.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
Yeah, thanks, Ronnie. I would just reiterate that our cost discipline does extend well beyond our operating facilities. Our SG&A expenses were $137 million in the third quarter, down from $145 million in the prior-year period. And that cost discipline, alongside the consistent execution in each of our lines of business, and also just the benefits of an aggregates-led portfolio, allowed us to expand our adjusted EBITDA margin by 20 basis points in the quarter to 32.3%, which was a really solid performance.
Trey Grooms (Analyst)
Well, thank you. Thank you for all the color, Ronnie and Mary Andrews, and I’ll pass it on. Take care.
OPERATOR
Thanks, Drew. Thanks. Thank you. We’ll go next now to Phil Ng with Jefferies.
Phil Ng (Analyst)
Hey, guys. Team’s executing in a tough environment, right? I think about, you know, mid-year being a little more flattish and I think what your outlook for ’27 is, is more of a flattish backdrop. What gives you confidence that getting mid- to high-single-digit average pricing in 2027 is achievable? Any early feedback you’ve heard from your customers, just given it’s a noticeable step up? And one follow-up question: on the mid- to high-single-digit framework you’re calling for on pricing mix here, is that on a reported basis, just because mix has been a drag this year?
Thank you.
Ronnie Pruitt (Chief Executive Officer)
Yeah, so let me—let’s talk about the first expectation, then I’ll talk about the mix impact on that. Yes, we fully expect 2027 to be another year of healthy price growth. And as we’ve said, mid- to high-single-digit in a flattish environment, like you said. I would tell you really three things that give us that confidence. First, our commercial execution and those conversations that you talk about. Remember, half fixed-plant, half of our work is on a bid basis.
On the fixed-plant side, one of the things we did this year—we pulled those announcements earlier. So we sent out our announcements early to give our customers an opportunity to prepare for that. And those conversations are going as expected in this kind of environment. I’m pleased with where those conversations are. And I’ll remind you that, you know, diesel cost—no one’s immune to that. It’s not something that is unexpected from anyone; they understand the impact of diesel.
It’s impacting them as well. And our customers are looking for opportunities to continue to get better value for their products as well. And so we’re going to be one of the good excuses for them to go talk to their customers about. And so that’s going as expected. I still think we have a stable demand environment. You know, we’ve said flat, but it is stable. And I really look at—let’s talk about public. If you recall back, you know, four to five years ago when IIJA really kicked in, everyone was waiting on—well, we started to see contract award levels go up, but where were the tons? And we kept getting asked, when are the tons going to come? We said there’s always that delay: the contracts get awarded, and typically that’s six to eight months after those contracts get awarded the shipments start.
Well, that same thing is going to happen now that the bill is expiring. So, you know, there’s some concern out there—well, the bill’s expired, you’re in this form of continuing resolution—but that’s where we’ve said 35% of the dollars have yet to be spent and there’ll be a tail to that, and so we’ll benefit the same way. It took us time to get started on the front end; we’ll continue shipping on the back end. I believe public continues to remain steady.
On the private side, we’ve got really healthy bookings, backlog, quoting activity—and it is around large non-res projects. But it’s not just data centers. Data centers have been a really, really good benefit to us, but we also see heavy infrastructure and some of the other projects that I called out in my prepared remarks on SpaceX and the Toyota factory in South Texas. I mean, those are other kinds of manufacturing that we’re seeing kick in, and I think the energy side will continue to see solar opportunities as well.
So there are a lot of other things that are happening to support that stable demand environment. And then structurally, our advantaged footprint—and I would tell you that most of these large heavy non-residential projects are located within our advantaged zone of a Vulcan facility—which, again, when you think about the proximity that gives us to these projects, reinforces our position as a supplier of choice with those logistical moats that we have.
I continue to have a lot of confidence in our pricing ability. And I think that’s the story of aggregates over time. The historical side of it is that’s what aggregates does—and it’s just timing. So we’ll catch it this year and we’ll continue to move forward. As far as the mix side, I would tell you that’s inclusive. When we give that kind of guidance, we’re saying that we believe that’s all-in. And then we’ll talk about within each quarter as we talk about, okay, where’s the geographic impact of that? Where’s the product mix impact of that? So as we sit today, that mid- to high-single-digit range is inclusive of mix impact.
Phil Ng (Analyst)
Okay. Really appreciate the color, Ronnie.
Ronnie Pruitt (Chief Executive Officer)
Thank you.
OPERATOR
Thank you. Thank you. We’ll go next now to Garrick Schmoize with DA Davidson.
Garrick Schmoize (Analyst)
Great, thanks for having me on. Just want to follow up on some of the demand observations you were just making in response to the last question. I was hoping you could unpack your demand outlook for ’27 a little bit more. Could it be up just given the visibility that you have both on large projects and on infrastructure? And just, you know, maybe a little bit more color on what you’re seeing on the light private side as well?
Ronnie Pruitt (Chief Executive Officer)
Yeah, no, thank you. You know, I said similar to 2026, but I would say there’s opportunities for growth varying across markets and even within some of our individual end markets. And again, with the change we’ve seen on these large projects, location matters—and that’s why we love our footprint. That’s why we say we have an advantaged footprint, and we believe our footprint will continue to outperform the rest of the country when it comes to those growth opportunities.
That applies to single-family as well as these large non-res projects. And it also applies to public. On the public side, like I said, I think we’re seeing the back end of IIJA, and we’ll continue to see those dollars flow. I also believe the states are in a really good position. As we think about our states and the state funding levels, we’re getting really good insight into what their letting schedules are going to be. Those numbers are out there, and we don’t see any pullback on that. And then we’re also seeing increasingly more innovation around P3 projects, toll authorities.
I mean, there are some really large projects—Atlanta has two of them—really large P3 projects that are in addition to the typical state lettings. So we’re seeing different ways of funding. And again, as I step back and look at that side of it today, I’m not really concerned on the public side. I think, you know, we have midterms coming up. Obviously we believe shortly after that that the House and the Senate are both aligned on, we need an infrastructure bill, and we believe they’ll be hard at work at getting that done.
So I just don’t anticipate much disruption today on the public side. On the private side, again, I think it’s really the primary engine for where some of that other growth could come from. If it was going to look different than what we see today, it would probably be on that private side. It’s really the timing of some of these large projects we’re seeing. On the data center side, these projects are really fast, and so from the time we quote to the time we book to the time we start shipping, those things accelerate really quick.
The other things—when it comes to manufacturing, the energy-related projects and other manufacturing—are still in that typical six to nine months: you quote it, you book it, and then the shipments come later. But we’re starting to see those things that we were talking about at the beginning of ’26. We talked about manufacturing was going to start kicking back in. We’re starting to see a lot of those things finally start to come out of the ground, and I think those are opportunities ahead of us.
I think the energy side is another one. We’ve got transmission lines being built. The energy one’s a little more difficult because some of it is tied to a data center project, and some of those are hard to split out when you see the capital dollars of the data centers. That’s why they’re so great—because some of those include the energy with them. So I just see a lot of different dynamics here under the backdrop of what we’re seeing today. Could be similar to ’26, but to your point, there could be some opportunities for growth.
OPERATOR
Thank you. We’ll go next now to Anthony Petinari with Citi.
Anthony Petinari (Analyst)
Good morning, Ronnie. In the ’27 outlook slide, you talk about portfolio management, and I’m just wondering if you could talk a little bit about the M&A landscape, what that looks like, and then with the cost inflation that’s kind of rolling through the industry, does that maybe change the calculus for maybe some of the smaller players?
Ronnie Pruitt (Chief Executive Officer)
In terms of maybe opening up some opportunities on the acquisition side, I was just kind of curious what it looks like. Yeah, I would say it’s been a very active year thus far. And as I said in my prepared remarks, I think we’ve got the opportunity to close on several more before the end of the year. But for us, for Vulcan Materials’ strategy, it’s going to continue to be aggregate-led. It is a very simple story. We like to keep it simple. I talked about the ease of integration, the ease of execution, the ease of capturing those synergies.
And these are in the form of bolt-ons. And so where we’re focused today is going to continue to be on those type of bolt-on acquisitions. They’re very easy for our employees, and bringing in those new employees to the Vulcan tent is a lot easier to predict and a lot easier to execute for our shareholders. It’s a lot easier to predict. We’re not going to surprise our shareholders with any of these deals that might not make sense for us. And I would tell you that pipeline is very healthy.
To your point, diesel has affected everyone. And I would tell you that we’re having a lot of conversations with potential sellers, and they’re feeling the impact of it. Now, that timing is still, you know, it’s their call. We’re always actively looking, but the things we’re already seeing us do range between, you know, half a million to a million tons each. Some of those can be smaller or bigger, but nothing transformational for us. This is our discipline.
I mean, we really, really love executing the way we do, and they’re very much within our control.
OPERATOR
We’ll go next now to Katherine Thompson with Thompson Research Group.
Katherine Thompson (Analyst)
Hi. Thank you for taking my question today. On the policy side, and it can tie a little bit into the private. But the bigger picture, Ronnie, when you and I first met each other in the industry, states could account for maybe 50% and the Fed the other half, give or take, for funding. But for many of your states, 75% of funding is coming from states and not the Fed. And so, you know, Texas is a really good example. Then you have P3s, which you talked about earlier in the Q&A. And in our backyard of Middle Tennessee, one of the biggest P3 projects is potentially on the site to be the startup in the next year or two, which would clearly benefit you guys.
As you think about the pie of funding for public that also has to trickle down to private, how do you think that pie looks three to five years from now? In other words, how important will the Fed really be as you see going forward? And what’s the balance of state and private funding for overall infrastructure funding in the U.S. as we think of the broad trend of reshoring? Thank you.
Ronnie Pruitt (Chief Executive Officer)
Yeah, thanks. That was a… that was a lot. I appreciate you taking me back to the days we first met.
Katherine Thompson (Analyst)
I know, I know. Way too long.
Ronnie Pruitt (Chief Executive Officer)
I mean, you’re absolutely right, Katherine. And, you know, what we see today is that the Fed piece of it is still very important from an underlying reliable planning aspect. And so, again, I think as we get a bill, it gives the states at least that surety of where the dollars are going to come from. I like, you know, part of the BA250 was going back to the matching program, which is way more predictable for the states than the grant program was. And so I like the characteristics of what BA250 did.
But you’re absolutely right. We see a lot of different forms of funding both at the state and the local, and the public toll roads and public-private partnerships and those things. But I think where you’re going with this is, you’ve seen the inflationary environment and we’ve talked about it; inflation has eaten up some of the tons out there. And so where are those dollars? And you and I both know that road out there doesn’t care—that road in any market you go to, Atlanta, Louisiana, Dallas–Fort Worth, Nashville—what do you do?
You go sit in traffic. And fuel prices have not—I haven’t been anywhere to date where fuel prices have stopped traffic. Everywhere I go we still sit in traffic. And so the roads are still deteriorating, the bridges still need built, the infrastructure of the country still has to be taken care of, and things are more expensive. So what are we going to have to do? We’re going to have to get creative on funding, and I think that’s what the states, the local municipalities, as well as the federal, are really addressing. And so I think, to your point, things are going to look different in the future because it’s going to have to be more creative.
And then you have the phenomenon of electric cars and hybrids and, you know, the fuel tax—is that going to cover it? So I think there are a lot of things that both the federal and the state are working on and looking toward, to your point, the future of how these things get paid for. But I’m excited about the opportunity that it’s still in demand. I mean the roads are still going to be in demand, the bridges are going to still be needed, and everyone loves driving their own cars. And so I think public’s in a really good spot. And to your point, I think we’re going to get creative in the future on different ways of funding it as well.
Katherine Thompson (Analyst)
Thanks so much.
Ronnie Pruitt (Chief Executive Officer)
Thank you.
OPERATOR
And we’ll go next now to Michael Dudis with Vertical Research.
Michael Dudis (Analyst)
Good morning, Ronnie, Mary Andrews. Hi Margo. Maybe for Mary, or for both of you guys. So I was encouraged to see the aggressiveness you showed in share repurchases, certainly with the share prices being down and valuation much more attractive than it had been. Maybe as we go forward—I’m sure there’s a balance to it—but given where you’re targeting your acquisition opportunities on bolt-ons and ease of assimilation, et cetera, and given where some of your capex might be on the growth side, maybe you could balance on where is there going to be more opportunity for funding to support growth capex and maybe continue reasonable share repurchases as we look forward to the plan over the next couple of years?
Ronnie Pruitt (Chief Executive Officer)
Yes. I’ll let Mary Andrews talk about our capital allocation and then I’ll follow up with some comments. Go ahead, Mary.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
Yeah, Mike. You know, as we’ve consistently communicated, including at the Investor Day back in March, our cash generation really has reset higher over the last several years, and that positions us really well to be able to continue to both fund M&A and other internal growth opportunities, and to more consistently return capital to shareholders. And that’s what you’ve seen the last 12 months and I think that’s what you can expect to see going forward.
Ronnie Pruitt (Chief Executive Officer)
Yeah, and I’ll add to Mary’s point: we have reset at that level, which is a great place to be. Our balance sheet’s in a really good spot. But even when it comes to those buckets of our typical maintenance capex, when we look at maintenance capex today with the tools that we’ve invested in with Vulcan Operating, we’re really looking at how do we drive more efficiencies. We don’t want to just replace like-for-like; we want to drive more efficiencies with every dollar we spend.
And so those dollars are getting put to work. And that’s where you see truly our ability to outperform the market when it comes to how we control our cost. I mean, these are really good investments we’ve made even in the form of maintenance capex. So every dollar we spend, we want to get a return on it. And, you know, this is a tough business. We break a lot of stuff. Crushing rock is hard, but it also gives us an opportunity that when we’re going to replace it, how do we do that in a better way? And Mary’s other point of we’ve got lots of opportunities out there to grow this company—we’re just going to be very disciplined, and it makes sense for us and our shareholders that we’re really good at what we do in the aggregates business, and we’re going to stay focused on that.
Michael Dudis (Analyst)
You guys are crushing it for sure. Thanks, guys.
Ronnie Pruitt (Chief Executive Officer)
Thank you.
OPERATOR
Thank you. Go next now to Rohit Seth with B. Riley Securities.
Rohit Seth (Analyst)
Thanks for taking my question. Just back on the guidance on pricing—the mid- to high-single digit—pretty wide range there. Can you just talk through what gets us to the low end? What’s with the high end? And have you left room there to go back out mid-year? Is this guide to pricing what you expect coming out of January 1st? And maybe if you can touch on your cost expectations, that’s due for 2027.
Ronnie Pruitt (Chief Executive Officer)
Yeah. So you always like to pin us down, don’t you? I would tell you that we’re in the middle of putting those plans together. We’re going to give you a lot more insight into that as we get into the beginning of next year. And I would say that the range right now, as it sits, is really a function of the two sides of our business: the stuff we’re bidding every day—and we see a lot of momentum on that. Our quoting and booking activity looks really good.
We’re continuing to really push and using our Vulcan Web Selling and our proprietary pricing tool to make great decisions as it looks at the value of our products and the commercial expertise of that. Our advantaged footprint plays into that, so the geographical position that we’re in and where those projects are matters. There are still large value swings between some of our markets and we have those disciplines to move price throughout our markets, but there are still some big swings between one market to the other.
And then on the fixed plant side—remember our fixed plant business—people think about fixed plant and they jump right to concrete, but fixed plant also represents asphalt. The asphalt business is really good. The asphalt business really plays into the public side and they have good demand structure. And so as I sit here today, I think the range we’ve given is a very achievable range. And I think as that plays out, as we continue to develop those plans, we’ll get a really good sense of what happens in January, and then in February we’ll come back and give you a lot more detail around that.
But I’m excited about the opportunities we have. And just as we did coming out of the inflationary environment when COVID hit, we delivered. And my expectation is we’re going to deliver again.
Rohit Seth (Analyst)
Fair enough. Can you compare and contrast how this cycle compares to 2022?
Ronnie Pruitt (Chief Executive Officer)
Yeah. From an inflationary standpoint, it’s more tied to just oil-related and the diesel side. We haven’t seen a lot of trickle out into other things. The inflationary environment in 2022 was more broad. And so there is that piece of it that we understand exactly what it is, but no one in our industry is immune to it. It’s affecting everyone. It’s affecting our customers, it’s affecting our competitors. Everyone has to buy diesel. That’s just part of it.
And the other piece of it is the mix between, you know, coming out of that last inflationary period, RESI was doing good but non-res wasn’t as strong. Now we’ve got non-res stronger. So you’ve got the phenomenon of large projects versus smaller RESI projects. So there are a lot of differences. But I think the underlying piece of it is we’re seeing inflationary pressures. And again, historically, what do we do? We’re going to price through that. And so that’s the similarity of it, and that’s what we’re expecting to do.
Rohit Seth (Analyst)
Thanks, that’s all great detail. Thank you.
OPERATOR
Thank you. Go next now to Angel Castillo with Morgan Stanley.
Angel Castillo (Analyst)
Hi, good morning. Thanks for taking my question, Ronnie. A lot of great detail and really helpful. Just wanted to continue, I guess, down the line of the price-cost discussion. You know, I think the way that this was described, or the way I understood it, is thinking back to the 2020–2023 time frame, in the subsequent year you get a little bit of kind of catch-up and incremental, you know, gross profit per ton growth. So just can you help me understand, I guess, or reconcile, rather, the 7% type of inflation that it seems like we’re kind of experiencing right now with a mid- to high-single-digits type of price increase target for next year and just, you know, as we think about effectively like are we going to get more catch-up and incremental price gross profit per ton growth next year or is it more of just a returning to kind of the algorithm? Just help us understand kind of the puts and takes there.
Ronnie Pruitt (Chief Executive Officer)
Yeah, no, I would tell you as we sit here today and we think about the range we’ve given on pricing and where we think the cost side is going to be. I mean, right now we’re sitting here and our expectation is diesel is going to stay up. I mean, and if it comes down it’s probably going to be mid to late half of ’27. And that’s a guess. So we’re going into the year planning on diesel to be high. And so that’s where, you know, you look at our pricing, we talk about those percentages.
Obviously you’re talking about 5 to 10% on an average selling price of 24-plus, and then you’re talking about cost side of $10 to $11. And so, yes, I mean, when we talk about those percentages, we will be back to growth. We will grow our cash gross profit per ton. The percentages sound similar, but you’re talking about two relatively different numbers when it comes to our already very good price-cost spread. And so we’re going to continue to grow that. And I would tell you that the initial outlook that we’ve given you puts us back in an opportunity to grow our cash gross profit per ton and continue to really keep the momentum towards the goal that we set of $20 a ton.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
And also, Angela, just on the, you know, on the cost side, remind you, inflation is, you know, one side of it. The other side is the way that we execute. And we fully believe that there are still opportunities ahead of us from investments we’ve been making in Vulcan way of operating. And that’s why it’s really important for us to finish our, you know, planning here in the latter part of the year to be able to give you a good indication in February of the level of unit cost performance we think we can deliver in 2027.
Angel Castillo (Analyst)
That’s very helpful, thank you. And then maybe just one last one on price. Can you talk about it a little bit in terms of what the expectation or the timing of it is? Like how much of this have you already gone and gotten in terms of your bid work versus how much incremental you need to get kind of early next year and then especially if you kind of split up the fixed business, just how much of that is kind of January pricing versus I believe ready-mix had already kind of moved back to one price increase in April.
So trying to understand, as we think about the mid- to high-single digits, you know, how should we think about the January/April versus July, like kind of achieving or realizing that price?
Ronnie Pruitt (Chief Executive Officer)
We already discussed it. Yeah, no, I mean, you go back to the nature of our business. It’s about half and half. Half of our business is the things we’re bidding every day, and so those prices continue to move and we’ve got good insight into what they’re doing, which is baked into our confidence in what we will see in ’27. And the other half is the fixed price. Our letters went out early and we’ve seen support in the markets for January 1st. Our expectation is it will be January 1st. And we also will always have the discipline of our midyear increases. And so we have two shots at that. We will continue to always have the ability to do that, and we’re going to be very disciplined around that.
And so I look at it, I mean, I think it’s all within that mid- to high-single-digit guidance that we put out. It’s a combination of the two. And I believe that the Vulcan way of selling, the tools we have and the insight that we have, the market intel that our people get, and our disciplines around that are fully baked into that. And I’ve got all the confidence in the world we’ll be able to achieve it.
Angel Castillo (Analyst)
Very helpful.
Ronnie Pruitt (Chief Executive Officer)
Thank you.
OPERATOR
Thank you. We’ll go next now to Keith Hughes with Truist.
Keith Hughes (Analyst at Truist)
Thank you, Ronnie. Sounds like, as you said several times, you are talking to your customers. Is there at least a good chance that you’re going to get faster realization than what we’ve seen in other price increases? You know, more in the first quarter as opposed to this elongated push into the spring that happens in so many years?
Ronnie Pruitt (Chief Executive Officer)
I mean, that’s what history would tell us, Keith. I mean, in these inflationary environments, it’s not like these letters came as a surprise to anyone. And they’re feeling it as well. And like I said earlier, I think they’re looking for the opportunity to also go to their customers and get increases for their products that they’re making with our products. And so they’re going to use us as an excuse, which I love to be used as an excuse. And so I do think in these types of environments you see more discipline around that, and I do think that realization comes quicker.
And that’s something that I believe we will see in 2027. Okay, thank you. Thank you.
OPERATOR
We’ll go next now to Ivan Yee with Wolfe Research.
Ivan Yee (Analyst at Wolfe Research)
Hey guys, good morning. More broadly speaking, as you look to next year, do you see more of an opportunity to improve gross margins through aggregate price increases or more through cost-cutting initiatives? A good mix of both, I guess. Which is the bigger lever in terms of driving the margin improvement next year? Thank you.
Ronnie Pruitt (Chief Executive Officer)
Yeah, no, it’s a good question. And you know, as I said in one of my first comments, I mean, price continues to be our biggest lever and it’s our quickest lever to overcome. I would tell you the things we do operationally are critically important. And so when you look at Vulcan’s performance and why we are the leaders in our markets is because it is two-pronged. It is because we do Vulcan way of selling and Vulcan way of operating. So both are critically important.
But I would tell you the price side is where we’re going to see these jumps around how do you get to this mid- to high-single digit is going to be around price because of the inflationary environment we see. But I would say our operators are out there every day trying to control costs and they’re doing an excellent job of that. And so both are important, but price continues to be our biggest lever. Thank you so much. Thank you.
OPERATOR
And we’ll go next now to Steven Fisher with UBS.
Steven Fisher (Analyst)
Thanks, good morning, and congrats on the cost management. Wondering if you could just break down for us maybe that $100 million in terms of how that’s falling over the course of the year. Kind of what was Q2, Q3 and what you think in Q4. I think you said it might be $100 million plus. And then just related to this, the change in guidance, was it only for the $100 million of energy? Were there other offsetting puts and takes? Just because it looked like on the volume side you were, I think, originally at 1 to 3% and now it looks like 1%.
So just want to clarify those couple of things, please. Thank you. And then I’ll circle back on the demand side. Go ahead.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
Yeah. So as it relates to energy, Steve, we’ve had about $80 million year to date. That was about $40 million in the third quarter. We would expect something similar in the fourth quarter. So when it’s all said and done, probably $120 million. That is a combination of diesel headwinds and also the increases in liquid asphalt in the asphalt business. As it relates to the guidance, you know, I think Ronnie put it well earlier that very simply, you know, our full-year outlook, we would be near the midpoint but for those energy headwinds. Now there are some puts and takes up and down the P&L. I think for the full year you’ll now see volume, you know, grow very modestly. This would assume continuation of current shipping momentum and, you know, fourth quarter pretty consistent with year-to-date results on a year-over-year basis.
And very importantly, in this environment, we expect aggregates unit margin expansion even with those diesel price headwinds to yield probably 4% for the full year, which would mean low double digits in the fourth quarter on a year-over-year basis, given last year’s comps. If you think about price and cost, mix-adjusted price has been at 5%, which is the expectation coming into the year of what underlying pricing momentum was. Expect that to be similar as we move through the fourth quarter.
And, you know, I think Ronnie just talked a lot about our cost execution, which we do think has been really good, and our operators have really delivered on those low single-digit cost increases we expected coming into the year, but for, you know, the fuel. And so now with the diesel impact, you know, we will be closer to mid-single digits for the full year. And just a reminder, you know, that does imply, and we do expect, you know, that costs will look very different on a year-over-year basis in the fourth quarter — you know, flattish to, you know, even potentially down, given what last year’s fourth quarter looks like.
And, you know, two other things maybe on guidance: outside of aggregate, the SIG, as I talked about earlier, has been a good story this year. We think that it’ll be about $30 million lower than the range that we initially provided. That’s an important contributing factor to offsetting lower downstream earnings from the energy that we started with. And also we do expect that our CapEx expenditures for the year will likely be at the lower end of that $750 to $800 million that we provided.
So there’s a few details on kind of the puts and takes of guidance, and Ronnie may want to add in.
Ronnie Pruitt (Chief Executive Officer)
No, I think that was great. I mean, Steve, the other thing I would say is, to Mary’s point, I mean, when we look and we tried to give you some color year over year, kind of the difference between the third quarter of this year versus last year, if you recall, we started off this year much stronger. And then we look at this and really a demand environment that we say has been, you know, flat to muted for three years in a row. Nothing about these shipments is surprising to us at all because, I mean, if you think about where our customers are today, they’re looking at the same headwinds with fuel, they’re looking at the same headwinds with demand environments in their local markets. And so we just don’t see a lot of people getting in a hurry going, adding another crew, trying to run really fast. And I think everyone is just being patient with that.
And so our shipments momentum is basically what we expected, and I think it carries through the fourth quarter. And then we’ll give you more insight into what we believe ’27 looks like more granularly as we continue to put our budgets together. But I think we’ve given you pretty good insight into what we see the underlying demand environment is, and our shipments reflect that.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
Yeah, you know, I think the ultimately important part is that even with that $120 million, call it, of energy headwinds for the year, we expect to deliver adjusted EBITDA growth of approximately 3%, or closer to 5% on a same-store basis. So our business is one that’s meant for times like these and that can perform well even with the macro challenges.
Steven Fisher (Analyst)
That’s all really helpful.
Mary Andrews Carlile (Senior Vice President and Chief Financial Officer)
Thank you so much.
Ronnie Pruitt (Chief Executive Officer)
Thanks, Steve.
OPERATOR
And we’ll go next now to David McGregor with Longbow Research.
David McGregor (Analyst)
Morning everyone. Ronnie, late in the call here. You provided a lot of detail in our call today, so thanks for all that. I guess I’d be interested in, you know, maybe the high level, what you learned from the mid-years this year in terms of the current state of the markets and how maybe they were received versus your experience with mid-years a year ago, and just any kind of observations that would extrapolate to, you know, how that shapes how you go to market in ’27 with your price ask.
Ronnie Pruitt (Chief Executive Officer)
Yeah, I think what we learned in mid-years is what we already knew: where are things going to be challenging at? They’re going to be challenging in those smaller fixed-plant guys that are really heavily tied to residential. Everything else went through as expected. The other part of our business, when we talk about our bid work and our bookings, we continue to see really good momentum there. And we’ve talked in the past, what mid-years do is set you up for success for the next year. And we’re seeing that. We’re seeing that in the conversations we’re having today about our January increases. And so, look, our pricing is going to always be a campaign. It’s not like we sit around and go, okay, mid-year hits, now call that; and now January, it’s now call that; then mid-year set again. We’re always focused on how do we continue to move price through this campaign.
And so our customers understand that. We’re very, very transparent when it comes to our pricing strategy and what we’re going to be looking at, giving them lots of opportunities to do that. So the mid-years didn’t surprise me. I think what we see in this environment is a lot of support out there in the market for pricing to be very disciplined when it comes to January 1st increases. And so I think we’re in a great position, and I think our mid-years helped us set up to where we’re at today to get our January increases. And that’s what we’ve said in the past; that’s what they’re there for. They give us an opportunity to catch up with something we didn’t expect, and they give us a chance to set up the following year, and so that’s what we’ll continue to use them for.
David McGregor (Analyst)
No, that’s very helpful, and I may have missed it, but did you quantify the carryover on ASP for ’27?
Ronnie Pruitt (Chief Executive Officer)
I did not, no. I just said. I give you a broad range on ’27 mid to high. And then we’ll give you more clarity on that as we get into next year. Thanks, David.
OPERATOR
Thank you, Mr. Pruitt. It appears we have no further questions this morning. I’d like to turn the conference back to you, sir, for any closing comments.
Ronnie Pruitt (Chief Executive Officer)
Yeah. Thank you. I’m really proud of what Vulcan Materials has accomplished year-to-date. We’re focused on finishing the year strong, both from a safety and business results standpoint. To my fellow Vulcan employees, keep each other safe and keep up the good work. To our customers, thank you for your partnership and the trust in Vulcan to provide value for your business. And to our shareholders, thank you for your investment. We are committed to continuing to deliver results and create shareholder value.
Have a great day.
OPERATOR
Thank you very much, Mr. Pruitt. And thank you, Ms. Carlile. Again, ladies and gentlemen, this brings us to the end of today’s meeting. We do appreciate your time and participation. You may now disconnect.
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