Vulcan has 344 sites that produce construction aggregates, and over 100 facilities that produce asphalt and/or concrete, which also consume aggregates. All of these are located in the U.S. except for their large quarry and marine terminal on Mexico’s Yucatán Peninsula. The products from this facility are primarily exported by ship to the U.S. Gulf Coast, where quality stone cannot be mined locally.
The products the company produces are used in nearly every form of construction. In particular, large quantities of aggregates are used to build and repair valuable infrastructure such as roads, bridges, waterworks and ports, and to construct buildings both residential and nonresidential, such as manufacturing facilities, office buildings, schools, hospitals and churches.
Vulcan Materials Company produces and sells construction aggregates, asphalt mix, and ready-mixed concrete primarily in the United States. It operates through four segments: Aggregates, Asphalt Mix, Concrete, and Calcium. The Aggregates segment offers crushed stone, sand and gravel, sand, and other aggregates, as well as related products and services. This segment's aggregates are used in publicly funded construction, such as highways, airports, and government buildings; and sold to federal, state, county, or municipal governments/agencies. The Asphalt Mix segment offers asphalt mix in Arizona, California, New Mexico, and Texas. The Concrete segment produces and sells ready-mixed concrete in Arizona, Georgia, Maryland, New Mexico, Texas, Virginia, Washington D.C., and the Bahamas. The Calcium segment mines, produces, and sells calcium products for the animal feed, paint, plastics, water treatment, and joint compound industries. The company was formerly known as Virginia Holdco, Inc. Vulcan Materials Company was founded in 1909 and is headquartered in Birmingham, Alabama.
(Summary) (Company) (Chart)
1 March 2017
1yr Target $138.08
Payout Ratio 32.05%
1yr Cap Gain 11.01%
1yr Tot Return 11.81%
EPS (ttm) $3.12
EPS next yr $5.40
Forward P/E 23.05
EPS next 5yr 21.70%
1yr Price Support $117.18
Market Cap $16.49 Bil
Revenues $3.59 Bil
Earnings $422.40 Mil
Profit Margin 11.75%
Quick Ratio 2.10
Current Ratio 3.10
1yr RevGR 4.96%
3yr RevGR 8.95%
5yr RevGR 6.97%
1yr EarnGR 88.41%
3yr EarnGR 151.01%
5yr EarnGR ---
1yr DivGR 100.00%
3yr DivGR 168.74%
5yr DivGR 1.03%
Vulcan provides the basic materials for the infrastructure needed to maintain and expand the U.S. economy. The company's strategies and competitive advantages are based on their strength in aggregates. Aggregates are used in most types of construction and in the production of asphalt mix and ready-mixed concrete. These materials are used to build the roads, tunnels, bridges, railroads and airports that connect all of us, and to build the hospitals, churches, schools, shopping centers, and factories that are essential to our lives and the economy.
Our business strategies include: 1) aggregates focus, 2) coast-to-coast footprint, 3) profitable growth, 4) managing volume, product mix and price to grow profitability, and 5) effective land management.
1. Aggregates Focus
Aggregates are used in virtually all types of public and private construction and practically no substitutes for quality aggregates exist. Vulcan Material's focus on aggregates allows them to:
- Build and Hold Substantial Reserves: The locations of our reserves are critical to our long-term success because of barriers to entry created in many metropolitan markets by zoning and permitting regulations and high costs associated with transporting aggregates. Our reserves are strategically located throughout the United States in high-growth areas that will require large amounts of aggregates to meet future construction demand. Aggregates operations have flexible production capabilities and, other than energy inputs required to process the materials, require virtually no other raw material. Our downstream businesses (asphalt mix and concrete) use Vulcan-produced aggregates almost exclusively.
- Take Advantage of Being the Largest Producer: Each aggregates operation is unique because of its location within a local market with particular geological characteristics. Every operation, however, uses a similar group of assets to produce saleable aggregates and provide customer service. Vulcan is the largest aggregates company in the U.S., measured by shipments. Their 344 active aggregates facilities provide opportunities to standardize operating practices and procure equipment (fixed and mobile), parts, supplies and services in an efficient and cost-effective manner, both regionally and nationally. Additionally, the company is able to share best practices across their organization and leverage their size for administrative support, customer service, accounting, procurement, technical support and engineering.
2. Coast-to-Coast Footprint
Demand for construction aggregates correlates positively with changes in population growth, household formation and employment. We have pursued a strategy to increase our presence in U.S. metropolitan areas that are expected to grow the most rapidly. Our strategic locations serve nineteen of the top 25 highest-growth U.S. metropolitan areas and as shown below, we serve twenty states plus the District of Columbia.
3. Profitable Growth
The company's long-term growth is a result of strategic acquisitions and investments in key operations.
- Strategic Acquisitions and Dispositions: Since becoming a public company in 1956, Vulcan has principally grown by mergers and acquisitions. In 1999 Vulcan acquired CalMat Co. expanding their aggregates operations into California and Arizona and making them one of the nation’s leading producers of asphalt mix. In 2007 they acquired Florida Rock Industries, Inc. That acquisition expanded their aggregates business in Florida and their aggregates and ready-mixed concrete businesses in other southeastern and mid-Atlantic states. In 2014 they completed eight transactions that expanded the company's aggregates business in Arizona, California, New Mexico, Texas, Virginia and Washington D.C., the asphalt mix business in Arizona and New Mexico, and the ready-mixed concrete business in New Mexico. In January 2015, Vulcan completed an asset exchange transaction in which the company exited the ready-mixed concrete business in California and added thirteen asphalt plant locations, primarily in Arizona.
- Reinvestment Opportunities with High Returns: During the next decade, Moody's Analytics projects that 77% of the U.S. population growth, 72% of household formation and 64% of new jobs will occur in Vulcan-served states. The close proximity of Vulcan's production facilities and their aggregates reserves to this projected population growth create many opportunities to invest capital in high-return projects — projects that will add reserves, increase production capacity and improve costs.
4. Managing Volume, Product Mix, and Price to Grow Profitability
Vulcan focuses on three major profit drivers that must be managed in combination.
- Price for Service — We seek to receive full and fair value for the quality of products and service we provide. We should be paid appropriately for helping our customers be successful.
- Operating Efficiency and Leverage — We focus on rigorous cost management throughout the economic cycle. Small savings per ton add up to significant cost reductions.
- Sales and Production Mix — We adjust production levels to meet varying market conditions. Managing inventories responsibly results in improved cost performance and an improved return on capital.
We manage these factors locally, and align our talent and incentives accordingly. Our knowledgeable and experienced workforce and our flexible production capabilities allow us to manage operational and overhead costs aggressively. Recovery in demand serves as a tailwind for all three major profit drivers.
While the aggregates segment's gross profit has grown at a significantly greater rate than volume over the past couple of years, the company expects continuing improvement in unit profitability.
- On Price for Service — Our expanding margins have just begun to benefit from the mid-to-high single digit price gains associated with cyclical recoveries.
- On Operating Efficiency and Leverage — We are operating a capital-intensive business at 55-60% capacity and are extremely well positioned to further leverage fixed costs to sales as we move forward.
- On Sales and Production Mix — As the recovery continues and as we see a larger portion of new construction activity in the end-use mix, we will sell the entire production mix much more efficiently and at fuller value.
5. Effective Land Management
Vulcan believes that effective land management is both a business strategy and a social responsibility that contributes to the company's success. Good stewardship requires the careful use of existing resources as well as long-term planning because mining, ultimately, is an interim use of the land. Therefore, Vulcan strives to achieve a balance between the value they create through their mining activities and the value they create through effective post-mining land management.
Business Product Lines
Vulcan Materials has four distinct operating (and reportable) segments organized around the company's principal product lines: 1. Aggregates, 2. Asphalt Mix, 3. Concrete and 4. Calcium.
The company's construction aggregates are used in a number of ways:
- as a base material underneath highways, walkways, airport runways, parking lots and railroads
- to aid in water filtration, purification and erosion control
- as a raw material used in combination with other resources to construct many of the items we rely on to sustain our quality of life including:
- houses and apartments
- roads, bridges and parking lots
- schools and hospitals
- commercial buildings and retail space sewer systems
- airports and runways
Vulcan focuses on the U.S. markets with above-average long-term expected population growth and where construction is expected to expand. Because transportation is a significant part of the delivered cost of aggregates, the company's facilities are typically located in the markets they serve or have access to economical transportation via rail, barge or ship to a particular end market. Vulcan serves both the public and the private sectors.
Public sector construction activity has historically been more stable and less cyclical than privately-funded construction, and generally requires more aggregates per dollar of construction spending. Private sector construction (primarily residential and nonresidential buildings) typically is more affected by general economic cycles than publicly funded projects (particularly highways, roads and bridges), which tend to receive more consistent levels of funding throughout economic cycles.
Public Sector Construction includes spending by federal, state, and local governments for highways, bridges, buildings and airports as well as other infrastructure construction for sewer and waste disposal systems, water supply systems, dams, reservoirs and other public construction projects. Construction for power plants and other utilities is funded from both public and private sources. In 2015, publicly funded construction accounted for approximately 49% of our total aggregates shipments.
The private sector construction markets include both nonresidential building construction and residential construction and are considerably more cyclical than public construction. In 2015, privately-funded construction accounted for approximately 51% of our total aggregates shipments.
Additional Aggregates Products and Markets. Vulcan Materials sells aggregates that are used as ballast for construction and maintenance of railroad tracks. The company also sells riprap and jetty stone for erosion control along roads and waterways. In addition, stone can be used as a feedstock for cement and lime plants and for making a variety of adhesives, fillers and extenders. Coal-burning power plants use limestone in scrubbers to reduce harmful emissions. Limestone that is crushed to a fine powder can be sold as agricultural lime. Vulcan also sells a relatively small amount of construction aggregates outside of the United States, principally in the areas surrounding our large quarry on the Yucatan Peninsula in Mexico.
2. Asphalt Mix
Vulcan Materials produces and sells asphalt mix in Arizona, California, New Mexico and Texas. This segment relies on the company's reserves of aggregates, functioning essentially as a customer to the aggregates operations. Aggregates are a major component in asphalt mix, comprising approximately 95% by weight of this product. Vulcan meets the aggregates requirements for their Asphalt Mix segment primarily through their Aggregates segment. These product transfers are made at local market prices for the particular grade and quality of material required.
Because asphalt mix hardens rapidly, delivery typically is within close proximity to the producing facility. The asphalt mix production process requires liquid asphalt cement, which the company purchases from third-party producers.
Vulcan produces and sells ready-mixed concrete in Arizona, Georgia, Maryland, New Mexico, Texas, Virginia, Washington D.C. and the Bahamas. In May 2015 the company entered the Arizona ready-mixed concrete market through the acquisition of ready-mixed concrete operations in conjunction with the acquisition of aggregates operations in Arizona and New Mexico. In January 2015, the company swapped their ready-mixed concrete operations in California for asphalt mix operations, primarily in Arizona. In March 2014, the company sold our cement and concrete businesses in the Florida area.
This segment relies on the company's reserves of aggregates, functioning essentially as a customer to the aggregates operations. Aggregates are a major component in ready-mixed concrete, comprising approximately 80% by weight of this product. Vulcan meets the aggregates requirements of the Concrete segment primarily through the Aggregates segment. Because ready-mixed concrete hardens rapidly, delivery typically is within close proximity to the producing facility. Ready-mixed concrete production also requires cement which the company purchases from third-party producers.
In March 2014 the company sold their cement and concrete businesses in the Florida area and retained the Cement segment’s calcium operation in Brooksville, Florida. This facility produces calcium products for the animal feed, paint, plastics, water treatment and joint compound industries with high quality calcium carbonate material mined at the Brooksville quarry.