Vulcan Materials is the leading producer of aggregates in the U.S. with ~10% market share in 2021. The company has the #1 or #2 position in ~90% of its markets and its facilities are strategically located in 35 of the top 50 MSAs in the U.S. across 22 states. Vulcan also provides asphalt and ready-mix concrete in certain states, which are vertically integrated with its aggregates production facilities. The company has over 22k customers.
Excellent primer on a wonderful company - I had been talking to a few friends about it and reviewing a few older write ups the week prior! It's funny how either someone is immediately drawn to rock pits or the idea doesn't click.
Hi. Great writeup. Thanks for these insights and helpful details. Very interesting. A few questions - if they have the best locations (closest to customers) and thus the lowest transportation costs, how are they able to charge a premium price. Are they leveraging their location power and that there are few alternatives? Does Vulcan thus have the highest margins given its pricing power and lower costs.
Why no acquisitions recently?
What's the valuation and why more attractive than MLM?
What's the current leverage and do they buyback stock?
Great analysis! I really like the limited cyclicality/stability of the public customer base. Question remains, though, if the upside is already baked into their current share price. Trading at a trailing EV/EBITFDA of 16.4x and P/E >40x, it isn't exactly cheap by historical measures.
Thanks! Fair point on valuation. I guess my answer to valuation questions will be that (1) I generally don't make stock recommendations or valuation based analyses, and (2) you should set your own hurdle rates depending on what you think an acceptable rate of return is going forward. With my write-ups, I just hope to shed some light on the strength and positive attributes of some of these business models.
"In 2021, 42% Vulcan’s aggregate revenues were for publicly funded construction, of which 22% were for highway construction." Do you mean ~half of Vulcan's aggregate revenue for publicly funded construction is from highway construction? Or do you mean 22% of publicly funded construction revenue is from highway construction?
Thank you YH! Really great article that you have written!
Forgive me for another quick question -- 0.15-0.30 mile/ton in terms of transportation cost with a price of $10/ton. If the company transports 50 miles, and the cost is 0.10 mile/ton, then the company does not make any money on the aggregates that it sold ha?
"Labor is roughly 1/3 of Vulcan’s cost structure, parts and supplies 20%, diesel 8%-10%, and electricity another 8%. For the asphalt segment, the increase in liquid asphalt has put pressure on the segment’s margins."
Also trying to reconcile the "transportation cost" part of the equation with the cost structure delineated here -- seems to me that transportation should be a greater component of its cost structure?
Excellent primer on a wonderful company - I had been talking to a few friends about it and reviewing a few older write ups the week prior! It's funny how either someone is immediately drawn to rock pits or the idea doesn't click.
Thanks Devin! When I read your piece on rock pits, I was hoping you would be writing a longer piece on VMC or MLM.
All in time! No rush though - they aren't going away anytime soon.
Hi. Great writeup. Thanks for these insights and helpful details. Very interesting. A few questions - if they have the best locations (closest to customers) and thus the lowest transportation costs, how are they able to charge a premium price. Are they leveraging their location power and that there are few alternatives? Does Vulcan thus have the highest margins given its pricing power and lower costs.
Why no acquisitions recently?
What's the valuation and why more attractive than MLM?
What's the current leverage and do they buyback stock?
Ty!
Great analysis! I really like the limited cyclicality/stability of the public customer base. Question remains, though, if the upside is already baked into their current share price. Trading at a trailing EV/EBITFDA of 16.4x and P/E >40x, it isn't exactly cheap by historical measures.
Thanks! Fair point on valuation. I guess my answer to valuation questions will be that (1) I generally don't make stock recommendations or valuation based analyses, and (2) you should set your own hurdle rates depending on what you think an acceptable rate of return is going forward. With my write-ups, I just hope to shed some light on the strength and positive attributes of some of these business models.
Thanks for the write-up! Quick question:
"In 2021, 42% Vulcan’s aggregate revenues were for publicly funded construction, of which 22% were for highway construction." Do you mean ~half of Vulcan's aggregate revenue for publicly funded construction is from highway construction? Or do you mean 22% of publicly funded construction revenue is from highway construction?
Sorry, I probably could have worded that better. It's 22% of total revenues. So highway is a little more than half of publicly funded construction.
Thank you YH! Really great article that you have written!
Forgive me for another quick question -- 0.15-0.30 mile/ton in terms of transportation cost with a price of $10/ton. If the company transports 50 miles, and the cost is 0.10 mile/ton, then the company does not make any money on the aggregates that it sold ha?
"Labor is roughly 1/3 of Vulcan’s cost structure, parts and supplies 20%, diesel 8%-10%, and electricity another 8%. For the asphalt segment, the increase in liquid asphalt has put pressure on the segment’s margins."
Also trying to reconcile the "transportation cost" part of the equation with the cost structure delineated here -- seems to me that transportation should be a greater component of its cost structure?
Thanks again for the great article!
Ah, I should have added that customers pay for transportation.
Oh I see! that makes a lot of sense. thank you!
Are you sharing portfolio on jika.io or etoro by any chance? I like your analysis and I'd follow you if you are.