Vulcan is produces aggregates, asphalt, and cement businesses. Aggregates (crushed stone, sand and gravel) are 65% of revenues, asphalt and concrete is 32%, with 88% of GP coming from aggregates. Generally a local market - high costs of shipping. 13.5B tons of reserves. Private non-residential is 41%, residential is 17%, highway is 26% of revenues and other public is another 13%. Energy costs are important (10-15% of COGS), with diesel declining, it should provide a nice boost to Gross Margin, but there will be a negative impact from volume decline. Company has a fair debt burden after Florida Rock acquisition in 2007 ($3B).
The stock has run up due to the excitement over the stimulus bill. The jump in spending will be one time increase in U.S. highway expenditures from by $28B from the ARRA (american recovery and reinvestment act), as the spending on highways will increase from annual $40B. Additional hope is the increase in highway spending from $286B allocated over 6 years by previous bill to up to $450-500B in the next 6 years. CBO is only expecting a moderate increase though, and with giant deficits it's hard to see how the larger number would fly. In record year (2006) Vulcan shipped 290M tons of aggregates, while for 2009 only ~150M. For 2009, EBITDA was only 450M, while the current TEV is 8B. At the very top of the cycle in 2006, earnings were 1B.
Need to understand - why has the pricing been strong?
Recent results: shipments down 23%, pricing up 5%. Expect 2010 numbers to be up 0-5 on volume, 2-3% price.
Total revenues for the year were $2.5B, with operating earnings at $150M.
In 2010, management projects public works + highway to be ~50% of the business.
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