Good morning, everyone, and welcome to Vulcan Materials Company's Fourth Quarter Earnings Call. My name is Catherine, and I will be your coordinator for the call today. Now I will hand it over to Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, the floor is yours.

Good morning, and thank you for your interest in Vulcan Materials. With me today are Tom Hill, Chairman and CEO; and Suzanne Wood, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, vulcanmaterials.com. A recording of this call will be available for replay later today at our website. Please be reminded that today's discussion may include forward-looking statements, which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Reconciliations of any non-GAAP financial measures are defined and reconciled in our earnings release, our supplemental presentation and other SEC filings. With that, I'll turn the call over to Tom.

Thank you, Mark, and thanks to everyone for joining the call this morning. We appreciate your interest in Vulcan Materials Company and hope that you and your families continue to be safe and healthy. As you will have seen from the press release this morning, Suzanne has decided to retire in September to spend some well-deserved time with her family. I'll have more to say on this at the conclusion of our prepared remarks. Now let's move to our fourth quarter performance and Suzanne will cover the full year performance later on. I want to thank our team for its strong execution during the fourth quarter. Our financial results were ahead of expectations despite ongoing challenges from inflationary pressures, particularly in energy and labor constraints. Focusing on our operating disciplines and proactive pricing actions, we once again saw expansion in our industry-leading unit profitability. At the same time, we made excellent progress on integrating U.S. Concrete into our business. This overall strong finish to the year allows us to carry considerable momentum into 2022. We generated $383 million of adjusted EBITDA this quarter, an increase of 23% over 2021. Energy-related inflation was the most significant impact on our business with $36 million worth of higher costs, of which $17 million related to diesel fuel, while the remainder related to liquid asphalt and natural gas. Labor pressures caused higher labor costs due to overtime. In the face of these challenges, we were still able to manage our controllable costs well. Aggregates cash unit cost of sales increased less than 1% as compared to the prior year's fourth quarter. This was an excellent operating performance, and I'd like to thank all of our operators and congratulate them on a job well done in 2021, all while delivering a world-class safety performance. Our operating performance helped us improve Aggregates' cash gross profit per ton by 6% to $7.41. This result includes an $8 million acquisition-related impact for selling acquired material after its markup to fair value. Importantly, this progress on cash unit margin expansion represents the 14th consecutive quarter of improvement. We achieved this by consistently executing on our four strategic disciplines which helped to drive volume growth, higher pricing, and improved operating efficiencies. These strategic disciplines will help us take advantage of the favorable demand and pricing environment in 2022. Total Aggregates volume, including U.S. Concrete, increased by 13% versus last year's quarter. On a same-store basis, volume was up 7%. This reflects not only continued improvement in demand across all the markets, but also favorable weather in November and December. The Aggregates pricing environment continues to strengthen across our footprint. Same-store prices were up 3.7% in the quarter as compared to the prior year and mix-adjusted prices increased by 4.2%. Year-over-year, mix-adjusted pricing sequentially improved throughout the year, having started at 1.3% in the first quarter. The pricing actions taken to date, along with better demand visibility, set the stage for a favorable pricing environment in 2022. Asphalt gross profit was $4 million in the quarter compared to $17 million last year, as a 35% increase in liquid asphalt costs created a $17 million headwind for us. As we discussed before, liquid asphalt costs were at three-year lows in 2020 and the significant fluctuation of these costs have made for a more difficult comparison year-over-year. The good news is that our selling price for asphalt mix increased 5% from the prior year quarter. Through 2022, as pricing catches up, we will work to get back to the Asphalt segment's long-term averages in terms of margins. Concrete's gross profit grew from $9 million to $22 million in the fourth quarter. This increase was due to the acquisition, combined with higher shipments and price growth in our legacy business. Results were negatively impacted by higher diesel prices and the availability of drivers. Before we move on to the overall demand environment, I'll comment briefly on U.S. Concrete. We continue to be excited about this acquisition and how it expands our footprint. It naturally complements our existing Aggregates business in California, Texas, and Virginia, and gives us access to new platforms in the Northeast. We moved immediately following the acquisition to begin securing cost savings and synergy opportunities. As I mentioned previously, the integration is going well, and our progress accelerated during the fourth quarter from both operational and back-office standpoints. I am pleased with how the business and management teams have blended seamlessly during the first four months of ownership. We remain confident in our ability to generate at least $50 million of initial cost synergies on a 12-month run basis beginning midyear. Now I'll touch briefly on the demand picture, which is increasingly positive. The key takeaway is that for the first time in many years, all four end uses are expected to grow. The residential end-use has continued to show growth in starts in both single-family and multifamily housing, and we expect starts to continue at these high levels. Nonresidential starts continue to strengthen over a broader range of categories; improving nonresidential demand will be positive and help drive growth in our Aggregates and Concrete businesses. On the public side, growth is expected in both highways and other infrastructure. The recently enacted Infrastructure Investment and Jobs Act will add to existing demand as well as elongate the cycle. Having said that, we do not expect it to have a significant impact in 2022. We are well positioned in the attractive growth markets we serve, and those markets are poised to benefit greatly from the legislation in the coming years. Before I turn the call over to Suzanne, I want to reiterate our confidence in our prospects for 2022, particularly with respect to demand visibility, pricing, and our ability to control what we can control. We will be mindful of potential pressures from both inflationary trends and tight labor markets. We will continue to focus on our operating excellence and our strategic sourcing disciplines to help offset some of these pressures. Now I'll turn the call over to Suzanne for further comments.

Thanks, Tom, and good morning to everyone. While we faced some challenges in 2021, it was a year of significant accomplishments, including the completion of our acquisition. Our most notable financial achievements were the growth in our unit profitability and adjusted EBITDA. Full-year Aggregates cash gross profit per ton rose by 5%, while adjusted EBITDA increased by 10%. The ability to generate numbers like this while incurring $93 million of higher energy-related costs across the segments demonstrates the strength, flexibility, and resiliency of our aggregates-focused business model. It also points to the contributions of our four strategic disciplines which help us make the most of any economic environment. Aggregates prices increased by 3% as compared to the prior year, and we held our cash unit cost growth to less than 2% through efficiency improvements and general cost controls. This allowed us to offset inflationary pressures and improve our unit profitability. With respect to the balance sheet, we quickly reduced our net leverage to the top end of our target range, ending the year at 2.5x. Given our ability to generate strong cash flows, there is capacity and liquidity to invest in other opportunities, whether organic or inorganic. But as always, we will be disciplined in doing so. Certainly, we'll continue to prioritize sensible leverage and financial flexibility in order to support our capital allocation priorities and maintain our investment-grade ratings. Our debt structure is sound with long maturities that make sense for our business. Our capital allocation priorities remain unchanged and have led to an improving return on investment profile. On a trailing 12-month basis, our ROIC was 14.2%. While investing in growth and overcoming inflation and the pandemic, we have improved our ROIC by 160 basis points over the past three years. Now turning to our outlook. Let me make a few comments before turning the call back over to Tom. Following a strong performance in 2021, we expect 2022 to be another good year of earnings growth. In terms of our guidance, it incorporates the full year contribution of U.S. Concrete. Given the level of integration and change going on in our business, we are providing guidance on a consolidated basis. We expect adjusted EBITDA of between $1.72 billion and $1.82 billion. The midpoint of this range represents a 22% increase over 2021. We've outlined the more detailed guidance in the press release, but let me touch on a couple of key items. First, we project a high single-digit growth in our Aggregates cash gross profit per ton, driven by an expected 6% to 8% increase in Aggregates pricing and a 5% to 7% increase in shipping volume. As mentioned on the third quarter call, volumes may be affected by labor constraints, and therefore, we've tried to be thoughtful about the volume guidance range. If labor constraints continue in 2022, it's important to remember that the work is still there. It may just proceed at a slower pace, effectively extending the recovery and allowing us the opportunity to compound our unit margins. With respect to costs, they are expected to rise by mid-single digits, but we will do all we can to control what we can control. In non-aggregates, we anticipate cash gross profit of $300 million to $325 million, with approximately 75% of that coming from Concrete. Most of the improvement will be driven by a full year of earnings from the acquisition of U.S. Concrete but also from improvement in our Asphalt and legacy Concrete businesses. SAG expenses will range from $485 million to $495 million, reflecting the inclusion of U.S. Concrete and anticipated synergies as described on our last call. And finally, we expect to invest between $600 million and $650 million in capital expenditures, including growth and capacity-adding projects. This compares to $465 million invested in 2021 and includes a full year of expenditures for U.S. Concrete. I'll turn the call back over to Tom now for closing remarks.

Thank you, Suzanne. Before we go to Q&A, I want to comment on a supply chain issue. For 30 years, Vulcan Materials has quarried limestone near Playa del Carmen, Mexico on land that we own. We are extremely proud of our history as a good corporate citizen, and I am particularly proud of the 450 operators at that facility. They operate safely and have contributed thousands of hours in service to the surrounding communities and the environment. Since late 2018, we have been engaged in a NAFTA arbitration with Mexico in order to secure our rights to quarry future reserves. A hearing took place in 2021 and we expect a ruling in the second half of 2022. We have continued to engage with government officials to pursue an amiable resolution of that dispute. However, recently, Mexico has taken additional actions that adversely affected our operations in Mexico. We are focused on taking care of our customers affected by these actions and we will continue to work with the Mexican authorities to reach a mutually agreeable and beneficial solution. Now looking at Vulcan in total. I want to again thank the entire Vulcan team for their hard work and dedication to servicing our customers. Our people are what makes Vulcan better every day. We have and will always operate Vulcan for the long term. This includes keeping our people safe and improving on our already world-class safety record. The three key elements of our near-term strategy that will deliver value for our shareholders are the following: one, execute at a local level; two, drive unit margin expansion by focusing on our four strategic disciplines; and three, maximize synergies with U.S. Concrete. I'm looking forward to working with our teams this year to accomplish our goals. Before I close, let me comment on the leadership changes I mentioned at the beginning of my comments. Effective March 1, Darren Hicks will serve as our Chief Human Resources Officer. Our culture and our people are key to our success, and Darren brings a wealth of experience to the new role. We are confident he is the right person to continue to help drive Vulcan forward into the future. And of course, as I said, Suzanne is planning to retire later this year. Mary Andrews Carlisle will be replacing Suzanne effective September 1. She is the ideal person to step into Suzanne's shoes, having worked closely with both Suzanne and me in the planning and execution of our strategy for a number of years now. Although we hate to see Suzanne go, we fully support her decision, and we are grateful for her commitment to ensure a smooth transition. And now Suzanne and I will be happy to take your questions.

We'll go first to Noah Merkousko with Stephens.

Congrats on a nice finish to the year.

Thank you.

So Tom and Suzanne, thanks for all that detail on the guide. Could you talk about how you're thinking about the puts and takes around the cadence of how this year is expected to unfold in '22?

Sure. As we reflect on 2022, it's important to consider the previous year as it sets the tone. I'm really proud of our team's performance over the past two years. Despite the challenges from the pandemic, labor shortages, and inflation, we managed to grow unit margins in the mid-single digits. This indicates that our strategic practices are effective. Our teams achieved 10% EBITDA growth last year despite facing $93 million in ex-synergy costs, which is commendable. Looking ahead to 2022, it seems to be an exciting year with growth anticipated across all four end uses. The fundamentals for increased demand are strong, though we may still encounter challenges from labor and supply chain issues. If these issues improve, we could see an increase in volume, but we need to be careful there. We established pricing momentum throughout 2021, which has carried into 2022. I expect to see continued disciplined cost management like we experienced last year even amidst inflation, allowing us to grow overall unit margins by high single digits in 2022. Additionally, we should see growth in both volume and unit margins in our Concrete and Asphalt segments as we progress through the year. However, we should remember that the fourth quarter may pose some challenges, particularly with energy comparisons similar to those we faced in the third and fourth quarters of last year, leading to an estimated $35 million challenge related to energy costs. The weather has been difficult in January and February, along with some COVID spikes that impacted our crews and labor in January. Nevertheless, I believe we will quickly overcome these hurdles and have a strong and exciting 2022.

The next question comes from Stanley Elliott with Stifel.

Suzanne, best of luck. I know we still have plenty of time to hear you on these calls. But can you talk a little bit more about the confidence that you're seeing on the residential market? I mean some of the mortgage rates, some of those sorts of numbers seem to be maybe not quite as positive as we've seen. But on the put side, certainly, I think there's an argument, there's a lot of markets that are structurally underbuilt in part of your footprint. But curious, what sort of conversations you're hearing and having with some of these builders on longer-term land issues and things like that, that would give us a little more confidence even beyond '22?

Yes. First of all, I think we saw strong growth in 2022. This growth appears to be widespread across nearly all of our markets, with some weakness noted in Chicago and Baltimore. New subdivision construction is ongoing, which is very aggregate-intensive and beneficial for us. However, I would mention that it will grow at a somewhat slower rate than what we experienced in 2021, which was exceptionally high. As you pointed out, this slowdown is influenced by supply constraints, inflation, interest rates, and land issues. Overall, we have a solid outlook. When considering interest rates, the Freddie Mac rate for 30-year mortgages is at 3.7%, which is still very low. While the growth may not match the pace of 2021, we do anticipate expansion.

The next question comes from Kathryn Thompson with Thompson Research.

And Suzanne, best of luck with your new chapter.

Thank you.

I would like to seek guidance for 2022 by reflecting on the past, particularly regarding USCR. First, could you discuss the Concrete business and how operations in New York and California were affected by Omicron shutdowns? What implications does this have for 2022? Additionally, on the Aggregates side, please address the difference between same-store sales volumes and those from USCR in the fourth quarter, and how this difference should be factored into the 2022 guidance.

Yes. Thank you. Let's start with Aggregates. Looking back, we finished last year very strongly. In the third quarter, we were up 8%, with a 5% increase in same-store sales. The fourth quarter saw a 13% increase, with a 7% rise in same-store sales. It's important to analyze these quarters carefully. The comparison for Q3 was against 2020 when we experienced strict shelter-in-place orders, making it an easier comparison. In Q4, we benefited from unexpectedly favorable weather in November and December. As we move into 2022, the positive aspect is that the fundamentals are strong, with growth observed in all four end uses. However, we are facing challenges related to supply chain and labor for our customers, especially for carriers. Transportation is likely to be a challenge in 2022. Therefore, we're projecting a volume growth of 5 to 7 percent. Predicting same-store sales is difficult because those businesses are now highly integrated, leading to a lot of mixing and matching. If I had to estimate that, I would suggest a range of 2 to 4 percent. We are cautious with this guidance due to the various challenges stemming from labor and supply constraints. If the supply chain and labor issues improve, there could be potential for increased volume in Aggregates. Regarding Concrete, remember that volumes were affected in 2021 in California and New York due to stringent shelter-in-place orders, which hindered our customers from obtaining building permits. As we look ahead, there were also issues with diesel and efficiency because traffic had returned. However, I'm optimistic about how 2022 is progressing for Concrete. Volumes should see significant improvement as we've moved past the shelter-in-place restrictions in Northern California and New York. Non-residential demand is now showing growth in 2022, which positively impacts Concrete. The Dallas-Fort Worth area continues to perform well. We expect volume growth in 2022, and we'll likely see margin expansion as prices overcome previous challenges. Coupled with the operations of Vulcan and USC in California, Texas, and Virginia now functioning together, I believe Concrete will be a significantly better business in 2022.

The next question comes from Jerry Revich with Goldman Sachs.

Suzanne, congratulations.

Thank you.

I'm wondering if we could just expand on the situation in Mexico. Sorry to hear you have to go through that after all the years of safe operations there. Can you talk about what the contingency plans are for serving customers? Is it via rail from the Georgia area? And obviously, that comes at a higher cost. So I'm wondering are we able to push through the higher cost in real time as we face this disruption?

Yes. First of all, we are not facing any immediate issues. Let’s take a moment to consider the situation in Mexico. It’s important to highlight that we have all the necessary legal rights to operate in Mexico, along with the appropriate permits. We are currently in negotiations to reach a resolution that will be beneficial for all involved parties. Mexico is interested in our properties for tourism, which we believe can coexist alongside our existing operations. In fact, we think that maintaining our operations there will ultimately enhance tourism volume, and we are confident this will occur. To put it into perspective, in 2021, we shipped a little over 7 million tons to the U.S. from Mexico. Those shipments are included in our guidance, and we are continuing to ship while concurrently resuming shipments from Mexico to the U.S. So, we believe this will be resolved. We will be fine if we can supplement some of the shipments by rail. For now, we are actively shipping and servicing our customers. If you take a broader view of the overall situation and the opportunities for 2022, we see significant potential in terms of volume and pricing. Overall, this looks to be a promising year, and we will address the situation in Mexico.

We'll go now to Anthony Pettinari with Citibank.

Congratulations to Suzanne on the next chapter.

Thank you.

Tom, could you please remind us when you expect the demand for infrastructure spending to begin in 2022 or possibly in 2023? Additionally, regarding the appropriations bill, which appears to be stalled, could the delay have a significant impact on the timing of this infrastructure spending and the resulting Aggregates sales? I would appreciate any insights you can provide on this.

Yes. Regarding highway demand in 2022, we expect to see growth that will likely increase throughout the year. States are well-funded due to higher tax receipts, and they still have COVID relief funds available. This funding is being utilized for lettings and bids, so we anticipate a sequential growth in demand for 2022. However, we do not expect to see any IIJA funds in 2022, maybe a slight amount towards the end of the year, but it's primarily a 2023 and 2024 situation. Looking at how IIJA funding will flow, it will come in two ways. First, funds from regular federal programs prior to IIJA, like those from the FAST Act, will be available to states once appropriations occur. Second, new discretionary programs will take longer to flow because they need to be incorporated into active programs. This is why we project that significant funding will start to materialize in 2023 and 2024. It's also important to note that 76% of IIJA funds will be distributed to states based on a formula, with two-thirds of those funds going to Vulcan-served states, which represents a significant opportunity for those states.

The next question comes from Garik Shmois with Loop Capital.

On the pricing guidance, obviously, it seems like the increases here at the beginning of the year and throughout the first quarter are being well accepted. But if you could provide any color on how those discussions are going? And does the guidance that all rely on additional pricing beyond what you've already announced? And of course, let me throw my congratulations to Suzanne there as well.

Thank you, Garik.

Yes, pricing has been a strong aspect since early last year. We gained significant momentum in 2021, and that has continued into 2022. We often mention that inflation and the visibility of increasing demand are strong drivers for price increases. We are confident in our guidance of a 6% to 8% price range, which is well-established across all markets. However, our current guidance does not account for any potential price increases in the second half of the year, although there is a possibility for some upside. It's still too early to predict that, but we will begin discussions in the coming months and will have a clearer understanding as we move into the second quarter. For now, we feel good about the 6% to 8% range, and as demand continues to rise, there will be opportunities for further pricing adjustments. We're optimistic about reaching the midpoint of 7%, which aligns with our operating capabilities and should result in strong high single-digit margin growth for 2022.

Next question comes from Michael Feniger with Bank of America.

I reckon that '22, you're still contending with these inflationary costs. I think you said you're embedding mid-single digits. I'm just curious if that is peaking in where diesel and liquid asphalt are today? Or any relief there? And then when we think of 2023, is there any chance that we see some relief that incrementals on the aggregate side could be in that 60% target range?

Let's start with our performance. In 2021, we were just under 60%. For 2022, we're targeting around 60%, which has been our consistent guidance. Achieving this during a time of significant diesel cost increases is a commendable operating performance, and I'm very proud of what we accomplished in 2021. I am confident we can reach that 60% target for incrementals in 2022. Looking at our operating costs, I couldn't be prouder of our Vulcan operators and their efforts in 2020 and 2021 as we move into 2022. They always prioritize the health and safety of our people. They excel at crushing rock, and when you consider that our total cost of sales only increased by 1.5% last year despite diesel rising over $40 million, it's quite an achievement, particularly with significant increases in goods, services, and labor. This reflects our operational strategic discipline, and I'm proud of our team. We're carrying this momentum into 2022 with expectations of possibly higher cost increases in the mid-single digits, primarily driven by fuel, labor, and inflation across the board. Despite these challenges, we still anticipate high single-digit unit margins, which is a strong performance in this inflationary environment. That's the essence of Vulcan—our ability to mitigate challenges and leverage opportunities for greater volume and pricing. We did this in 2020 and 2021, and I am fully confident our team will achieve this in 2022 as well.

We'll go now to Mike Dahl with RBC Capital Markets.

This is Chris Kalata standing in for Mike. I wanted to ask about your perspective on the supply chain outlook for this year, as it clearly affects both volumes and pricing. You mentioned there could be potential improvement if conditions get better. Can you provide any insights on how to quantify that potential upside? Additionally, if supply conditions do not improve, what potential is there for pricing as a compensatory factor? I'm interested in your thoughts on how this may develop over the year.

Yes, when I consider our operations compared to our customers, I have to commend our procurement team for their excellent work. Internally, we’ve faced very few issues. However, delivering to our customers was challenging in 2021 and will also be a challenge in 2022, particularly regarding labor for both rail and truck transportation. The railroads are experiencing difficulties, and while I believe they will improve, it remains a challenge. Additionally, when you assess the various projects and communicate with our customers, the issues span everything from switch gear to different types of piping, door knobs, windows, and plumbing parts. The challenges are widespread, and I think it’s premature to suggest anything better than what we've projected in our guidance. Our guidance was carefully considered. If conditions begin to improve, that could present opportunities. Regarding pricing, I would characterize last year’s pricing trend as a steep curve. This year, I anticipate that the curve will be less steep, with more consistent pricing in the range of 6 to 8 starting from the first quarter and continuing throughout the year. Should opportunities for higher prices arise in the second half, though it's too early to predict, there could be a slight increase in that curve. We will keep working on this and keep you informed.

The next question comes from Phil Ng with Jefferies.

Suzanne, thanks for all the help through the years and Mary, congrats. I'm looking forward to working with you.

Thanks.

At this point, we have guided for a 6% to 8% range. It's February now, and we're just starting discussions with fixed plants about midyear. It's still early in the process, and the same goes for bid work; it's too early to make any predictions. While I feel confident about the 6% to 8%, we will see how things unfold. The pricing in California aligns with our overall model, and there are opportunities available. Our customers are aware of the inflationary pressures we face, and they are experiencing them as well. They are also considering adjusting their pricing. The entire sector is on the rise. The visibility of growing demand instills confidence in raising prices, and with inflationary pressures at play, these discussions become somewhat easier. However, while we are starting to talk about second half pricing and there may be opportunities, it remains too early to make any definitive statements.

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

Congrats on the strong Q4. Hey, on the asphalt side, Tom, real quickly, can you comment on the outlook for volumes in California and Arizona this year?

Yes, both states have shown improvement. Arizona faced challenges last year that impacted our volume in 2021 due to project timing and supply chain issues. Our customers were delayed by significant piping and other utility parts that held up projects. However, I believe there is potential for increased volume in both states. Similar to the rest of our product line, we anticipate sequential growth throughout the year, and as prices rise in the second half, we expect margin expansion. The first half will be tough due to a significant negative comparison and an approximate $15 million impact from liquid AC in Q1, but we will overcome that. We noted price increases in Q4 of around 5%, and they are continuing to rise. As always, there may be some delays, but they are temporary, and we will catch up.

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

Mark, Tom, congrats, Suzanne and a shout out to Mary and Darren as well.

Yes. Thank you.

Thank you. Tom, you mentioned in your prepared remarks that you're seeing some growth in nonres. Maybe share some views on is light starting to catch up to the visibility on heavy? And is that something that can continue to gain strength throughout the year, given the supply chain issues? Is there any difference in supply chain issues on nonres, also maybe? A little bit. But for nonres, the last couple of years has been pretty volatile. We spent 2020 falling. We spent '21 recovering, and we'll see growth in '22. Heavy nonres is still strong in '22. I think we're seeing growth in traditional nonres, which as we predicted is following subdivision growth, and that's coming on. That will come on in '22. And we're starting to see green shoots and high-rise projects. Importantly, remember, nonres is very important and very good for our Concrete business. So our timing is good with that with the purchase of U.S. Concrete. It's a sector we're excited about. They too have supply chain issues. Yes, they're different from res; I think they're probably a little less challenged, but it's a volatile situation and we'll have to watch it as we go through the year.

The next question comes from David MacGregor with Longbow Research.

And Suzanne, good luck on what comes next.

Thank you.

Tom, you mentioned that you don't anticipate the IIJA business to contribute significantly until 2023. Meanwhile, in 2022, all four of your primary sectors are performing well, creating a price range of 6% to 8%. If those sectors continue to thrive into 2023 and you also factor in the additional business from the IIJA, how does that look? Will prices soar, or will you need to increase your channel capacity? I understand you may have adequate rock-crushing capacity, but it seems that channel capacity is more of a concern. How should I consider the resolution of this situation heading into 2023?

I believe we're seeing ongoing improvements in unit margins. What we mentioned is that the IIJA provides us greater stability for extending our economic cycle. In case the private sector faces challenges, the IIJA can help mitigate that impact. We remain committed to our strategic disciplines, which are crucial for consistently serving our customers and justifying our pricing through our commercial efforts. We ensure that our pricing contributes to our bottom line by maintaining operational discipline, cost control, and efficiency. We also focus on procurement to secure the necessary goods and services, especially during supply chain and labor difficulties. Logistics has become increasingly important due to labor shortages in both rail and trucking, making our efficiency vital for maximizing profitability. If the private sector continues to thrive, it should positively influence our outlook, and even if we face some setbacks, the overall impact of the IIJA will likely extend the cycle and support margin growth.

The next question comes from Courtney Yakavonis with Morgan Stanley.

Congrats, Suzanne.

Thank you, Courtney.

I just wanted to follow up on some of the discussion about the Infrastructure Investment and Jobs Act. So I think you had mentioned you think it might take a little bit longer to hit in '23 and '24. At this point, are you thinking it's a relatively even impact between the two years? Do you see it more weighted to '23 and then just incremental follow-through in '24? Or is it the other way around? And then how are you thinking about it from a volume perspective versus a pricing perspective? Do you have more confidence that we'll see a significant increase in volumes? Or do you anticipate more of it coming through on the pricing side? And I think someone had asked here about hyperbolic pricing, but are we setting up for a situation where we could have two to three years of sustained double-digit pricing growth?

Yes. From a volume perspective and the timing of the new funding, we are indicating that the new discretionary programs will take time to implement due to the need to write regulations and act on programs. This is why we expect growth in 2022 from increased state funding, while the new federal funding will start to take effect in 2023 as those programs are enacted. Then we will see more project lettings and job creation, leading to increased shipments. I anticipate a gradual ramp-up in demand as we progress through 2023, 2024, and 2025 as these programs mature and funds are put to use. This will provide clear visibility for state Departments of Transportation regarding upcoming work, leading to growing demand. This visibility encourages everyone to take risks on jobs and pricing, which will benefit both volume and price. However, I expect a gradual increase in volume over 2023, 2024, and 2025, with pricing adjustments following.

This does conclude our question-and-answer session. I would now like to turn the call back over to Tom Hill for any closing remarks.

Thank you for your time today. We appreciate your interest in Vulcan and hope you and your families stay safe and happy. Suzanne, Mary Andrews, Mark, and I will be visiting you in the coming days and weeks. Have a great rest of the day. Thank you.

Thanks a bunch.

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