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Vulcan Materials Company (NYSE:VMC)
Q3 2021 Earnings Call
Nov 4, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Vulcan Materials Companys Third Quarter Earnings Call. My name is Emma, and I will be your conference call coordinator today. [Operator Instructions] Now I will turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Mark D. Warren -- Vice President of Investor Relations

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. Todays call is accompanied by a press release and the 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 todays 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 companys 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. [Operator Instructions] With that, Ill now turn the call over to Tom.

James Thomas Hill -- Chairman, President & Chief Executive Officer

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. This is our first earnings call since closing the U.S. Concrete acquisition in late August. Therefore, Id like to begin by welcoming the former U.S. Concrete employees and customers to our Vulcan family. Also want to thank our team for its continued solid execution during a quarter that was challenging due to inflationary pressures and labor constraints. Despite these challenges, our team managed our controllable costs, move pricing higher in all segments and importantly, expanded our aggregates unit profitability for the 13th consecutive quarter. We generated $418 million of adjusted EBITDA this quarter, an increase of 4% as compared to last year. Profitability for the quarter was held back by factors I mentioned earlier, energy inflation was a significant $30 million headwind. Unit diesel prices were up over 50%, leading to $14 million of additional expense. The cost of liquid asphalt was over $100 per ton higher than last year. This sharp increase impacted our results by $16 million. And finally, labor constraints, especially for truck drivers, have caused delays and inefficiencies in our operations as well as those of our customers.

Even with these headwinds, we improved our aggregate cash gross profit per ton by 3% and to $7.74. This was achieved through consistent execution of our four strategic disciplines which helped to drive volume growth, higher pricing and improved operating efficiencies. This strong performance and the momentum it provides sets us up well for 22, especially with respect to pricing. Total aggregate volume, including U.S. Concrete, increased by 8% versus last years quarter. On a same-store basis, volume was up 5%. This reflects continued improvement in demand across all end markets. The pricing environment in aggregates continues to be very positive across our footprint. Same-store prices were up 3.1% in the quarter and mix adjusted prices increased by 3.5%. We saw our early price increases gain traction and as a result, year-over-year average selling prices improved sequentially each quarter this year. Although inflationary pressures can create short- to medium-term headwinds, the combination of inflation and improving visibility to demand has and will continue to create a favorable environment for price increases. Operating efficiencies and disciplined cost control helped to offset some of the higher input costs we experienced. On a same-store basis, our aggregates unit cost of sales in the quarter increased by only 1.7% as compared to last year.

Now excluding the diesel effect, unit cost of sales actually decreased by 1%. While costs will be lumpy, we have delivered comparable results for the trailing 12-month period. This solid performance in aggregates helped to more than offset reduced profitability in non-aggregates segment. Our Asphalt business was notably affected by both higher energy costs and wet weather. Quarterly gross profit in the segment fell from $30 million to $7 million. Higher liquid asphalt costs accounted for $16 million of this difference. We also experienced a rise in natural gas prices, which in turn impacted our plant production costs. Asphalt volume declined by 8% as volume growth in California was more than offset by lower Arizona volumes due to extremely wet weather. Average selling prices improved by almost 2% year-over-year and better than 2% sequentially, evidence that pricing actions are beginning to ease some of the illiquid asphalt inflation. I would expect continued price improvement as we pass along higher costs. In the Concrete segment, gross profit increased by 18%, reflecting our ownership of U.S. Concrete for one month. Same-store volumes declined by 7% due to the completion of large projects in Virginia and the availability of drivers to make up for any lost shipping days. For the quarter, same-store prices increased by 2%. Turning now to the demand picture. The story is relatively unchanged from the second quarter.

Demand has improved across all of our major end markets as well as geographies. The residential end-use has shown continued strength with solid starts in single-family housing. Multifamily starts have also performed well. With respect to the nonresidential end market, improvement continues at a number of leading indicators we track. From its low point early this year, starts have consistently improved, returning to growth in recent months. The level of highway starts are up as states have moved back to more normal funding levels with Vulcan markets outpacing other markets. We look forward to the enactment of the bipartisan infrastructure bill and the significant impact on volumes for years to come. Now looking forward, I want to briefly touch on our growth strategy and give a very preliminary view of 2022. As we shared on past calls, we have three paths to growth. These three are organic growth, M&A and greenfields. Earnings growth in the underlying business is at the core of our growth strategy because it provides the most attractive and compelling value proposition on a risk-adjusted basis. The benefits of this focus are clear as we expand our industry-leading unit profitability despite the macro challenges we may face from time to time. Next is M&A. We look for strategic opportunities that naturally complement our principal aggregates business. Given our leading market position, we have visibility to all deals that come to the market.

The key is for us to be disciplined as we consider which deals to pursue. All opportunities are not created equal, and we want to do the deals that create the most value over time. And as the final pillar to our growth strategy is the development of greenfield sites. There are times when an acquisition target is not available in a particular growth quarter. If that is the case, we turn to new greenfield sites, and we have a long successful history of developing them. During this quarter, we completed the U.S. Concrete acquisition and were excited about the strategic fit and how it naturally complements our principal aggregates business in California, Texas and Virginia and gives us access to new platforms in New York and New Jersey. Already, our teams are working together to identify strategic opportunities. As you would expect, we are taking a thoughtful approach to integration to ensure that we capture all available synergies. Its still early days on the integration. We intend to give you a more detailed briefing in February, but were pleased with the wins weve seen so far. We are confident in our ability to generate at least $50 million of synergies on a 12-month run basis beginning midyear next year, when most of the integration is complete, but more to come. Suzanne will cover some additional highlights of the quarter and share our latest financial view on how we expect to finish 2021.

But before I turn the call over to her, I want to reiterate our confidence in our prospects for 2022, particularly with respect to pricing and our ability to control what we can control. The 2021 demand and inflationary environment sets us up well as we head into 2022. A key to our pricing strategy, were starting early in the spring with announced price increases. In certain markets, we launched further increases. These increases are evident in our sequential quarterly pricing growth. Already, we are discussing 2022 pricing expectations with customers. Clearly, we need to see where those conversations lead. But at this stage, I would be surprised if next years price increases are not at least 5%. The demand picture also looks good leaning into 2022, although we are watching the labor situation closely. If labor constraints do continue, its 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 price, control costs and still grow earnings. Now Ill turn the call over to Suzanne for further comments.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Thanks, Tom, and good morning to everyone. Weve covered the key financial and operational highlights already. So Id like to speak to the following topics: First, our balance sheet strength and capital allocation priorities; second, our return on invested capital; and finally, our financial guidance for 2021. With respect to the balance sheet, we will continue to prioritize sensible leverage and financial flexibility in order to support our capital allocation strategy and maintain our investment-grade rating. The structure of our debt is sound with long maturities that make sense for our business. Due to our strong cash generation, we were able to reduce our net debt-to-EBITDA leverage ratio to 2.7 times following the U.S. Concrete acquisition. This is just above our stated range of two to 2.5 times and we will be focused on getting back within that range in the near term. Our capital allocation priorities remain unchanged and the consistent application of those while maintaining a sensible leverage range has allowed us to improve our return on investment over the past three years.

For Legacy Vulcan, the return was 14.7%, up 240 basis points from three years ago, with the inclusion of one month of U.S. Concrete earnings, and a 1-quarter impact of the acquisition on average invested capital, our return was 14.2%. Well continue to focus on the sequential improvement of returns. The final topic I want to share this morning is our updated view on 2021 guidance. Our guidance incorporates U.S. Concretes expected EBITDA contribution since acquisition as well as recent trends in demand, price and costs. Our adjusted EBITDA guidance range for the full year is now $1.43 billion to $1.46 billion. This includes $50 million to $60 million of EBITDA from the acquisition, but excludes $115 million gain on a land sale completed in the first quarter. Im sure there will be a number of questions on business trends and the outlook in the Q&A section. So Ill turn the call back over to Tom for closing remarks.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thanks, Suzanne. Before we go to Q&A, I want to again thank the entire Vulcan team, including our newest team members from U.S. Concrete for their hard work and their dedication to serving our customers. Our people are what makes Vulcan better every day. We have and will always operate Vulcan for the long term. This means a strong emphasis on keeping our people safe and continuously improving our already strong culture. Local execution is key to driving improvements in our business, particularly around our strategic disciplines. As we move forward, we will seek to maximize synergies with U.S. Concrete. As always, for Vulcan, we will maximize unit margin expansion through our four strategic disciplines. And remember, improving financial returns is of paramount importance. And now well be happy to take your questions.

Questions and Answers:

Operator

[Operator Instructions] We will take our first question from Stanley Elliott, Stifel.

Stanley Elliott -- Stifel -- Analyst

Good morning, everyone. Thank you all for taking the question. Tom, I wonder if you guys can start off talking a little bit more about the pricing expectations for 22, very positive commentary about conversations and then the comments about at least 5%.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. Thanks, Stanley. As I look forward, I think this is one of the most important themes. As weve said over the past couple of quarters, the combination of visibility to growing demand. You couple that with inflationary pressures. This all bodes really good -- bodes well for aggregate prices. And our teams recognized this early on and started trying to move price in Q2. And as we predicted, our third quarter price increases were 3.1%, mix-adjusted 3.5%, which was up sequentially from 2.6% in Q2 and 1.3% in Q1. And that sequential improvement is really important because it illustrates the improving pricing environment. So looking forward, Id expect that trend to continue in Q4. And then looking past that to 2022, I think well see bigger jumps in pricing in January and in April as the 2022 fixed prices go into effect. So as we said before, based on trends, backlogs and customer conversations, Id be very surprised if our 2022 price increases dont eclipse 5%.

Stanley Elliott -- Stifel -- Analyst

Thats pretty encouraging. Thanks guys. Best of luck.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Trey Grooms with Stephens Inc.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Hi, Trey.

Trey Grooms -- Stephens Inc -- Analyst

Hey, good morning. Thank you.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

Trey Grooms -- Stephens Inc -- Analyst

And well done in the quarter given the headwinds, especially on the unit profitability. Well done.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thanks.

Trey Grooms -- Stephens Inc -- Analyst

Tom and Suzanne, my question is looking into next year as well. You mentioned solid fundamentals, positive demand trends. But you also noted labor constraints, which have obviously been a challenge for everyone. But kind of taking all those things into consideration and as you look at the geographies and the end markets that you serve, could you dive in a little bit more around how youre thinking about the volume outlook for 22 and maybe some of the key drivers there? Thank you.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. Lets look kind of present and then well look backwards into the quarter and then well look forward. So on a same-store basis, the volume was up north of 5%, which was strong. The vast majority of our markets experienced volume growth which speaks to the markets underlying growing demand and how broad-based it is. We had a little bit of weather in Alabama, parts of Texas, Arizona really got washed out and a little bit of weather in Northern California. Now this -- but this was more than offset with really strong shipments in the Southeast and the Eastern Seaboard. As we look to 2022, 2022 may be the first year in well over a decade, where well see growth in all four end uses. So its just broad-based. Residence construction should continue to grow. Nonres is very important because it continued to come through the pandemic and moves into growth into 2022.

Non-highway infrastructure, we think grows following the big residential growth weve seen this year and highway demand in 2022 will also see growth supported by improvements in state funding and some COVID relief funds. So all thats really good news for 22 demand. However, as we talked about, there are some headwinds. And youve got supply chain issues, labor shortages and theyre beginning to have some impact on shipments. Now those headwinds dont make demand go away. They only push it out and extend -- so it really extends the cycle if that happens. So the fundamentals for volume growth in 2022 are in place with some headwinds. And while its kind of early in our planning stages, under the conditions, Id be surprised if we saw our growth above 4%. At the same time, that demand, if we did have those headwinds, the demand gets drawn out and extends the cycle. And with our ability to compound margins over time, that could be very helpful. So fundamentals, really strong, some dampening effect with supply chain and labor, but the underlying fundamentals are really good.

Trey Grooms -- Stephens Inc -- Analyst

Understood. Thanks for the color there and thanks for taking my question.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Sure.

Operator

Well go next to Garik Scmois of Loop Capital.

Jeff Stevenson -- Loop Capital -- Analyst

This is Jeff Stevenson on for Garik. Thanks for taking my questions.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

Jeff Stevenson -- Loop Capital -- Analyst

Yes. In the press release, you mentioned that concrete same-store sales volumes were negatively impacted by a fewer larger projects. Im just wondering if you could provide any more color on this? And how does U.S. Concrete look from a comp standpoint? Are they running the risk of fewer larger projects and less lumpy volumes? Any more color would be helpful.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Sure. The large projects we had finished up were in Northern Virginia, really in the D.C. area. And its just a little bit of a lull in our backlog as we move into 2022 I think the underlying piece of concrete improvement was the nonres piece. We see non-grid growing in 2022. Thats very important for ready-mix. The other thing I was encouraged with in the quarter on the same-store basis and also with U.S. Concrete, youre starting to see unit margin expansion. And earlier in the year, both our concrete business and U.S. Concrete business got dinged from diesel, and a combination of diesel and what Id call traffic inefficiencies. Last year, you just didnt have any traffic on the road. So you were able to deliver concrete very effectively and efficiently. This year, not so much. And so it added some cost. While those were headwinds for 21, pricing at this point has jumped past that, has jumped past raw materials, and were seeing margin growth. So as we move into 22 with the combined businesses, I would predict you will see volume growth really driven by nonresidential construction growth, but also unit margin growth because prices have caught up and bypassed cost changes from 20 to 21. So Im very encouraged for our outlook in 2022 in this product line.

Jeff Stevenson -- Loop Capital -- Analyst

Great. Thank you.

Operator

Well go next to Jerry Revich with Goldman Sachs.

Jerry Revich -- Goldman Sachs -- Analyst

Good morning everyone.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Good morning.

Jerry Revich -- Goldman Sachs -- Analyst

Tom, Im wondering if youd be willing to expand on the M&A pipeline, how significant is it in terms of number of opportunities or magnitude of opportunities? And is there a time frame by which if we dont have meaningful M&A, wed be looking to step up stock buyback? How are you, Suzanne and the Board thinking about that?

James Thomas Hill -- Chairman, President & Chief Executive Officer

Sure. So the pipeline, as you would expect, is a lot out there. Its not all created equal and well be, as we always are, disciplined about our M&A opportunities, well be disciplined about the markets we want to be in. What synergies are unique to Vulcan and then we have to be disciplined on the multiple or the amount youre willing to pay. And then once you get it, integrate it fast and accurately. We got the question earlier, do we have capacity? Yes, I would expect us to do some the size of U.S. Concrete, but more traditional bolt-on size deals wed be interested in and are working on a number of them.

Jerry Revich -- Goldman Sachs -- Analyst

Perfect. Thanks.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Anthony Pettinari, Citigroup.

Anthony Pettinari -- Citigroup -- Analyst

Hi, good morning.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Good morning.

Anthony Pettinari -- Citigroup -- Analyst

Im just wondering how the margin profile of the U.S. concrete aggregates assets compares company average as well as maybe same question on concrete. And then is there a possibility or a time line for normalizing that difference, if any, if you can just talk about margin profile?

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. So their -- if you look at their aggregate unit margins, theyre very respectable. Theyre probably a quarter less than ours. And so comparable, I think that theyve done a good job with that. Their position in the markets are good. Their structure of their markets is good and its very attractive. While theyve done a really good job with that, I think that our -- and this is one of the important pieces of synergies, I think that our four strategic disciplines are very applicable to their business, to their aggregates business. Weve already started on that. The teams have met and thats working. So I think that as we work into 2022, the same applies both from a pricing and a demand and a unit margin growth perspective looking to 2022. And we think that we can help them take steps and just like they can in concrete, moving to ready-mix, I think that their operating disciplines and efficiencies are better than ours. They have some really impressive technology in WheresMyConcrete. The teams have always started applying that to our ready-mix operations. And so I think this is very helpful for both product lines. Their technology and disciplines help us, ours helps theirs in aggregates. And so that was one of the strengths of the deal.

Anthony Pettinari -- Citigroup -- Analyst

Okay. Thats very helpful. Ill turn it over.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Courtney Yakavonis with Morgan Stanley.

Courtney Yakavonis -- Morgan Stanley -- Analyst

Thanks for the questions guys. If we could just maybe follow up on the comments on U.S. Concrete. I think you have laid out a $50 million run rate synergies by midyear next year with more detail to come in February. But can you just help us understand, are you thinking about that being primarily revenue driven from additional aggregate sales? Or is this more going to come from some of these operational cost focused measures that you talked about, but just when were thinking about integrating that in help us think about that if thats more on the top line or the cost.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. I think the short answer is all of the above. You clipped them off pretty good. But remember, its only been 70 days. That said, Im very impressed at how fast our line leaders are putting the businesses together. The teams in California, Texas and Virginia were together before the end of the first week when we closed and have already made marked progress on market, sales, operating procurement strategies and tactics, which will really pay off for us.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Yes. I mean its still early days, as Tom said, and some of these synergies take time to develop and realize. But as we said in the prepared remarks, we are very confident in our ability to generate at least $50 million of synergies, and that is on the 12-month run rate basis beginning midyear next year, when most of the integration efforts will be complete. I think its important to note that this $50 million that were referring to are identifiable cost synergies and efficiency synergies. And again, I mean, we believe that there are more synergies, as Tom has talked about, and were in the process of working on those.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. Well be back in February with more details, but the symbiosis between the two companies from my perspective, is appearing better than we originally thought. Ive had -- Ill give you some concrete examples. I had the opportunity a couple or three weeks ago to sit down with the combined Texas team and was really impressed and very pleased with their focused, creative and insightful combination of business, combined business plans to leverage commercial opportunities so that it can improve price and volume. And their detailed plans of improving their operational execution, and were seeing the same thing with the California and Virginia teams. So in all markets, stronger market presence, pricing and logistics capabilities. And youve got a big -- a much better opportunity to leverage procurement opportunities. And as I said earlier, we have the ability now to use our technology and theirs to improve both the ready-mix concrete and the aggregate product lines and for the for the two companies. So its -- for me, its just exciting to watch.

Courtney Yakavonis -- Morgan Stanley -- Analyst

Great. Thank you.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Kathryn Thompson with Thompson Research.

Brian Biros -- Thompson Research -- Analyst

Good morning. This is actually Brian Biros on for Kathryn. Thank you for taking my question.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Sure.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

Brian Biros -- Thompson Research -- Analyst

Good morning. On aggregates, it seems youre starting good cost controls. At least on the cost you can manage yourself, so kind of ignoring diesel there. Could you just clarify the puts and takes for cost controls in the quarter around that? Thank you.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. I think this is one of the things in the quarter that Im most proud of. It was an excellent performance by our operators. First and foremost, they kept their people safe. Cash cost was up 2.6% in the quarter. Without diesel, it was down 1%. And so the increase was all of diesel, partially offset with some efficiency savings. And year-to-date -- so this is a trend. So year-to-date, that cash cost was up only 1.2% and without diesel, again, down 1%. This is a really strong performance because while diesel is the most dramatic change, all of our inputs are up, like the steel is up almost 65%. And what that tells me is that our Vulcan way of operating strategic discipline is working, and operators are making those efficiencies and those disciplines pay off. And so while this is hard to do particularly in inflationary pressures, its working. And as youve seen over the last two years with our performance, its sticky. I mean its just there. And that kind of cost performance allows us to capture price to maximize unit margin growth, which is -- our cash unit margin now is at $7.74 a ton. And if you look back this is a compounded annual growth rate of 7% in unit margin growth over eight years including diesel. So I would tell you, I am very proud of my operators and they and I both know, theyre not done.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Yes, I just want to add one point of clarification on the unit cost of sales increase. On the same-store basis, they were up 1.7% as compared to last years third quarter. But excluding diesel, they decreased almost 1%. And thats -- those numbers are in the press release.

Brian Biros -- Thompson Research -- Analyst

Thank you.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Adam Thalhimer, Thompson Davis.

Adam Thalhimer -- Thompson Davis -- Analyst

Hey. Good morning guys. Nice quarter.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Thanks.

Adam Thalhimer -- Thompson Davis -- Analyst

Comment a little bit on the outlook for downstream margins.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Im sorry, I didnt hear you.

Adam Thalhimer -- Thompson Davis -- Analyst

Can you comment a little bit on the outlook for downstream margins?

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. So if you look at asphalt first, we took a big hit this year with liquid, and its kind of -- youre a little bit comparing the perfect storm because last year, liquid prices plummeted and the margins went up. This year, they spiked and took a bite out of margins. As we said in the prepared remarks, 2022 should see strong demand from improved highway work. And asphalt prices are moving to catch liquid, and you saw that start to move in the quarter but there is a lag. So we should see gross profit improvements in asphalt in 2022, but I would not expect them to get back to 2020 levels. I mean the reason why is you had that big decrease in liquid in 2022. But I would expect profitability in the product line to improve based on volume improvements and unit margin improvements because prices are going up to catch liquid cost.

Moving to ready-mix. I think 2022 is set up very nicely for the combined Vulcan U.S. concrete ready-mix businesses. And again, that nonresidential demand turning to growth in 2022 is very healthy for concrete demand. Northern California saw some headwinds in 21, so its really a hangover from the pandemic. It was the most severe shelter in place. And the government offices shut down so nobody could get building permits. And that air pocket is whats hit us in 2021. Were past that. The permits that are out there. Our backlogs are very good and growing. The same can be applied to New York. Exactly the same thing. And then Texas was good and will continue to grow. But the -- you couple all that with healthy price increases, which has now gotten into margin growth, I really look forward to the 2022 Concrete business.

Adam Thalhimer -- Thompson Davis -- Analyst

Great. Thank you, Tom.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Keith Hughes with Truist.

Keith Hughes -- Truist -- Analyst

Thank you. Just a quick question on asphalt. Youve highlighted some of the issues in the quarter. I guess my question is on pricing. It seems like it would have been slated more, just given the whole market isnt. But if you could talk about the pass-through in asphalt and any hindrances there. And any details would be very helpful.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. Its just always a lag. I mean you do have -- when you have spikes in asphalt, you take a hit for a little bit of time until prices catch up. Again, like we saw in last year when it falls, the opposite happens and youre able to put those margins in your pocket for a while. So liquid, I think, will settle down. With that, well be able to catch it with price, you sell that go up $2 in the quarter and will continue to accelerate, but it just takes time to catch up. And I dont think well catch it all from 20 to 2022, but 20 to 2022 will be improved.

Keith Hughes -- Truist -- Analyst

Okay. Thank you.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to David MacGregor with Longbow Research.

David MacGregor -- Longbow Research -- Analyst

Good morning, everyone. Congrats on a good quarter.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

David MacGregor -- Longbow Research -- Analyst

Good morning. I guess you made repeated reference here to the same-store freight adjusted unit cost of sales, excluding diesel being down 1%. Im guessing most of that would be volume leverage. So just how should we think about the margin benefit of the improved legacy operating efficiencies and productivity achieved through the pandemic period. And do you expect to cover next years cost inflation with pricing? Or are you expecting productivity to play a more significant role in the 22 margin progression story? Thank you.

James Thomas Hill -- Chairman, President & Chief Executive Officer

I think as we look forward to 2022, obviously, price is north of 5%. Thats really good, and well definitely improve unit margins. Our goal every year is through efficiencies and disciplines to offset any kind of headwinds we have in price. Weve done a really good -- our operators have done a really good job with that this year. Obviously, we couldnt overcome diesel, but price did. I dont think that you see the big spikes like we had with cost in diesel going forward. So for sure, price -- well see margin growth in 2022. But its going to be the combination of price and operating efficiencies because you just got to continue to improve those to offset it. I would tell you, if I looked at things like tons per man hour or throughput through a plant or plant availability. Across our footprint, particularly our top 50 plants, which is the most production. Its not just volume thats covered up costs. Its also those efficiencies are improving, and thats just good smart hard work by our operators.

David MacGregor -- Longbow Research -- Analyst

Thanks very much

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Timna Tamas with Wolfe Research.

Timna Tamas -- Wolfe Research -- Analyst

Hey. Good morning everyone.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Good morning.

Timna Tamas -- Wolfe Research -- Analyst

Wanted to just follow up on the Q4 guidance, in particular, if we could. So if I take the midpoint of the new guidance versus the old guidance, its effectively a $25 million increase, as I understood it. But you also talked about a $50 million contribution, I think, from USCR. So if I understood that wrong, please clarify. But wanted to just make sure I understood like whats driving that change? What is happening in the fourth quarter with regard to maybe picking up some of that volume that you highlighted losing because of the weather? And if anything you can share with us on the trend in October, that would be great. Thanks

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Yes. With respect to your question on the guidance, I mean youre spot on. There was a $25 million net change midpoint to previous midpoint to current midpoint. If you just take the middle of the U.S. Concrete guidance range we gave, thats $55 million. So that implies a $30 million reduction otherwise. And what youre seeing there is just the rollover of the energy cost, the energy headwinds into the fourth quarter, thats our current expectation.

Timna Tamas -- Wolfe Research -- Analyst

Okay. Anything on October you can share?

Mark D. Warren -- Vice President of Investor Relations

I mean we typically dont comment on October on the call. I mean, its pretty early days here in terms of closing. But I would say, as we normally would at this point, if we had anything materially different to say, wed say that in a press release or otherwise. So really no commentary.

Timna Tamas -- Wolfe Research -- Analyst

Okay. Thanks guys.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Okay. Thanks guys.

Operator

Well go next Phil Ng with Jefferies.

Phil Ng -- Jefferies -- Analyst

Hey, guys. Tom, the bottlenecks you alluded to limiting volume growth in 2022 to 4%. How much of that is tied to external dynamics versus how youre set up from a labor and production standpoint? And I guess, bigger picture, do you see these issues getting cleared out by 2023? And do you see a more pronounced acceleration of volumes?

James Thomas Hill -- Chairman, President & Chief Executive Officer

I think that way to early call for 2023, I think, its not us. I think weve got the capacity and the firepower to produce a lot more than 4%. And I think its really ability for, number one, to get product to market through truck drivers and truckers. Second is our customers ability to get more employees, and its more to catch up as opposed to get work done. I think they get work done, but the ability, if you have a week of rain and to catch that back up. Now you dont have the crews to take out their -- the next two weekends to do it because youre just working people too many hours, you just dont have enough people in the crews. And then the last thing is with particularly in res, youre seeing supply chain issues, windows or door knobs or all kinds of different things that -- and theres a whole -- you read about this whole list, but if you talk to the big residential customers, theyre having supply chain issues. And you have to put that mix in there, that is nonres also.

So I think that while the underlying demand structure is very good. As I said earlier, whats really important is its widespread geographically, but its also across all four end uses. And up until this year -- actually up until 2022, weve always had one of those as a drag, and I dont think we do in 2022. So the fundamentals are there. I think you just have a little bit of a damping effect with labor and supply chain. But if that clears up, we could do better at this point with work to be done, and well come back in February with very clear guidance and the thought process behind that. But at this point, I would govern it to 4%. Or I wont be over 4. I dont -- were not trying to give guidance at 4% this point, but I dont think youll get over 4%.

Operator

Well go next to Josh Wilson of Raymond James.

Josh Wilson -- Raymond James -- Analyst

Thanks for taking my questions.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning.

Josh Wilson -- Raymond James -- Analyst

Just a few clarifications on the modeling side. When you first announced the U.S. Concrete acquisition, you expected it to add $990 million in EBITDA prior to synergies. Has there been any revision to what the baseline is, given recent trends?

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Well, when we talked about that, we were basing that really on trailing 12 months through the end of March. And I would say that since that time, U.S. Concrete has experienced some of the same energy headwinds that weve experienced and others in the industry have experienced. So well see where that leads. Weve given you guidance for the period of time since weve owned them through the end of the year, and well comment further on what we expect them to contribute in February.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes. I think they experienced headwinds we talked about with the recovery from the pandemic in Northern California and New York. Obviously, they had the inefficiency cost headwinds with traffic get back on the road and the energy cost, as Suzanne mentioned. As I said earlier, I think the market and demand headwinds are behind us. The permitting is strong. The backlogs are strong. Work is happening in the two coastal markets that we had concerns about in 21. And really importantly, at this point, price has moved past cost and showing growth in unit margin. And obviously, like the rest of the construction material sector, they will have price increases in all these markets, well have price increases in ready-mix between January and April. So I think 22 sets up really well for the concrete business on the aggregate piece of it, much like ours. The same comments we said about 2022 with price and volume and cost would apply to the previous U.S. Concrete aggregates businesses.

Josh Wilson -- Raymond James -- Analyst

Thanks so much.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Well go next to Brent Thielman with D.A. Davidson.

Brent Thielman -- D.A. Davidson -- Analyst

Hey, great. Thank you. Tom, I know its been a short period of time since ownership in USTR, but any change to your sort of collective go-to-market or overall strategy in the markets that you already overlap the business? Im thinking particularly California. And if it is too early, maybe you can just talk about what gets you excited about controlling the upstream capacity and, in fact, with the downstream capacity you now have in that region because that all seems pretty attractive.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Yes, it fits very well. Its a little too early to call the detail and wed like to do that in February, and well do that in February. But I think what -- as I said earlier, what really gets me excited is those teams in California, Texas and Virginia were together within days of the closing. They knew each other well. They were a big customer of ours. So they had relationships and they had their strategies and their tactics to improve volume, price and leverage operating efficiencies and share information and assets and equipment before -- they had them together before we could go back and review them and were executing. So its happened really fast. More to come. Well put a lot of detail on that. But I am very pleased with what those combined line managers have already put in place and what -- how quickly and smoothly thats gone. I think the culture is being so much like each other, and our previous relationship has helped this. And I think I underestimated the speed at which that would impact the line businesses. So congrats to them and great work.

Brent Thielman -- D.A. Davidson -- Analyst

Thank you.

Operator

Well go next to Michael Dudas with Vertical Research. Good morning, James and Suzzane.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Good morning

James Thomas Hill -- Chairman, President & Chief Executive Officer

Good morning

Michael Dudas -- Vertical Research -- Analyst

When youre -- looking at your -- I know you have your capex budget for this year, but just as a preliminary thought for 22. And talking about your maintenance and your growth side, how does it look just preliminarily? And looking at the USCs assets, the capitalization of those assets, do they need to be caught up? Is there any special opportunities that youre seeing early on there? And Im assuming youre probably going to budget a little bit more for inflationary contractor issues that probably we havent seen in the last several years. Thank you.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Yes, youre right. I mean, clearly, the prices of everything is going up across the board, and we also there as well have some supply chain issues to manage. But Ill just touch on this year first and then comment on next year. Youll note we kept our capex guidance for 2021 the same. And thats really as a result of reviewing U.S. concrete needs for the period of ownership, we were able to fold that within the guidance range that we had. So really no big issues there. As we look forward to next year, typically, we will spend somewhere between $450 million, $475 million, give or take. I wouldnt expect that to be vastly different. Were obviously still in the early days in terms of putting together the two capital plans and the two budgets and having a really good look at that. But havent seen anything so far that makes me or us believe that we need to significantly pick up that capex guide.

Michael Dudas -- Vertical Research -- Analyst

Thank you, Suzanne.

Operator

That concludes the Q&A portion of todays call. I will now turn the call over to Tom for closing remarks.

James Thomas Hill -- Chairman, President & Chief Executive Officer

Thank you for your interest in Vulcan. We look forward to talking to you throughout the quarter. Obviously, were looking forward to 2022. In the meantime, please stay safe and healthy and keep your families safe and healthy. Thank you.

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Thanks.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Mark D. Warren -- Vice President of Investor Relations

James Thomas Hill -- Chairman, President & Chief Executive Officer

Suzanne H. Wood -- Senior Vice President & Chief Financial Officer

Stanley Elliott -- Stifel -- Analyst

Trey Grooms -- Stephens Inc -- Analyst

Jeff Stevenson -- Loop Capital -- Analyst

Jerry Revich -- Goldman Sachs -- Analyst

Anthony Pettinari -- Citigroup -- Analyst

Courtney Yakavonis -- Morgan Stanley -- Analyst

Brian Biros -- Thompson Research -- Analyst

Adam Thalhimer -- Thompson Davis -- Analyst

Keith Hughes -- Truist -- Analyst

David MacGregor -- Longbow Research -- Analyst

Timna Tamas -- Wolfe Research -- Analyst

Phil Ng -- Jefferies -- Analyst

Josh Wilson -- Raymond James -- Analyst

Brent Thielman -- D.A. Davidson -- Analyst

Michael Dudas -- Vertical Research -- Analyst

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