Vulcan Materials Company (NYSE: VMC) Q2 2025 Earnings Call dated Jul. 31, 2025
Corporate Participants:
Mark D. Warren — Vice President, Investor Relations
J. Thomas Hill — Chairma and Chief Executive Officer
Mary Andrews Carlisle — Senior Vice President and Chief Financial Officer
Analysts:
Trey Grooms — Analyst
Anthony Pettinari — Analyst
Kathryn Thompson — Analyst
Andrew F. Maser — Analyst
Steven Fisher — Analyst
Keith Hughes — Analyst
Ivan Yi — Analyst
Angel Castillo — Analyst
Philip Ng — Analyst
Garik Shmois — Analyst
Michael Dudas — Analyst
David MacGregor — Analyst
Michael J. Feniger — Analyst
Presentation:
Operator
Good Morning. Welcome everyone to the Vulcan Materials Company Second Quarter 2025 Earnings Call. My name is David, and I will be your conference call coordinator today. Please be reminded, that today’s call is being recorded and will be available for replay later today on the Company’s website. All lines have been placed in a listen-only mode. After the Company’s prepared remarks, there will be a question-and-answer session.
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, Investor Relations
Thank you, operator. With me today are Tom Hill, Chairman and CEO; and Mary Andrews Carlisle, 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.
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 non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation and other SEC filings.
During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available.
And with that, I’ll turn the call over to Tom.
J. Thomas Hill — Chairma and Chief Executive Officer
Thank you, Mark, and thank all of you for your interest in Vulcan Materials Company. I’m very proud of how our talented teams are delivering results that exhibit their commitment to continuous improvement through consistent execution of our strategic disciplines. Most importantly, they are doing so while keeping one another safe. Both our safety and financial performance through the first half of the year has been outstanding, despite a challenging operating environment.
Extreme temperatures early in the year and excessive rainfall in the second quarter have all contributed to lower same store to date shipments across all product lines. Nonetheless, our Adjusted EBITDA has improved 16%. Margins have expanded 260 basis points and aggregates cash gross profit per ton has grown 13%.
Our two-pronged growth strategy to improve earnings through compounding profitability in our organic business and adding strategic assets to our portfolio is clearly working. In the quarter, we generated $660 million of Adjusted EBITDA, a 9% improvement over the prior year despite lower aggregate shipments.
Rainfall in the Southeast notched 10 year records in many key Balkan states namely Georgia, Tennessee, Alabama and the Carolinas, disrupting both our aggregates and asphalt businesses in these markets. Aggregates shipments were impacted by an estimate 2 million to 3 million tons in our most profitable markets. Still, our reported cash gross profit per ton expanded an impressive 9%.
Our teams executed particularly well on our Vulcan Way operating disciplines to navigate the challenging operating environment, drive plant efficiencies and tightly control operating costs. Freight adjusted unit cash cost of sales increased only 1.5%, while remaining lower on a year-to-date basis. Price improvements was geographically widespread and freight adjusted average selling prices improved 5%.
On a mixed adjusted basis, average selling prices improved 8%. The difference was the anticipated impact of recent acquisitions and unfavorable geographic mix due to weather impacted shipments in our attractive Southeast markets. Consistent pricing discipline coupled with operating execution are yielding attractive unit profitability growth as we move into the back half of the year. Let me share a few other thoughts about the second half.
Residential construction activity, which accounts for about 20% of our shipments, remains weak with persistent affordability challenges across most of the U.S. market. Starts in permits for single-family housing continue to accelerate. However, multi-family starts are showing signs of improvement with over half of our markets having turned positive on a trailing three month basis. This improvement should begin to help offset the weakness in single-family activity.
In private nonresidential construction higher rates for longer and macro uncertainty have been weighing on construction activity, but we are beginning to see several signs of recovery. With growth in data center activity and moderating declines in warehouse and other private nonresidential categories, trailing fleet months starts have turned positive. This is an encouraging sign that private nonresidential demand will soon begin to grow.
Data centers remain a bright spot. We are currently serving a number of data center projects and actively discussing green lit projects totaling over $35 billion. We’re beginning to hear discussions of supporting power generation projects in areas with a heavy exposure to data centers. Nearly 80% of data center activity in the planning stage is within 30 miles of Vulcan operation.
On the public side. Trailing-twelve months highway contract awards in Vulcan markets have accelerated meaningfully. They were modestly down a year ago and were up over 20% at the end of June. IIJA funding is continuing to benefit both highways and other public infrastructure activity, and we still have over 60% of the dollars yet to be spent.
Importantly, the improvements we’re beginning to see in both private and public demand environment are translating into accelerating bookings and growing backlogs to support volume growth in the back half of this year and into 2026. Therefore, we continue to expect to deliver between $2.35 billion and and $2.55 billion of Adjusted EBITDA.
Now I’ll turn the call over to Mary Andrews for some additional commentary on our results and revised outlook. Mary Andrews.
Mary Andrews Carlisle — Senior Vice President and Chief Financial Officer
Thanks, Tom, and good morning. Over the last six months, our year-over-year trailing-twelve months aggregate rate adjusted unit cash cost of sales has improved nearly 600 basis points from 10% to 4%. The focus of our operating teams on utilizing our Process Intelligence System and other Vulcan Way of operating tools to drive plant efficiencies is contributing to the attractive expansion in our aggregates cash gross profit per ton even in a lower volume environment.
The solid operating performance through the first six months of this year drove a 58% improvement in operating cash flow and free cash flow on a trailing-twelve months basis surpassed $1 billion. This attractive cash generation coupled with our consistent disciplined capital allocation will enable us to continue to drive long-term value creation for shareholders. Through the first six months we reinvested $207 million in maintenance and growth capital expenditures, returned $169 million to shareholders through dividends and share repurchases, and retired $400 million of debt. Our return on invested capital at June 30 was 15.9%.
At quarter end, we reclassified $550 million of commercial paper borrowing from long-term to short-term debt, reflecting the likelihood that we will use some of the discretionary cash generation in the second half to repay those balances. Doing so will reduce our interest expense while maintaining the flexibility to reissue at any time to opportunistically capitalize on growth opportunities. At June 30, net debt to trailing-twelve months Adjusted EBITDA leverage was 2.1 times.
Given the cold and wet start to the year that slowed spending timelines on some projects, we now expect full year maintenance and gross capital expenditures of approximately $700 million with an acceleration of spending in the second half of the year. Our trailing-twelve months SAG expenses of $550 million were flat to the prior year and 10 basis points lower as a percentage of revenue. Year-to-date, expenses of $283 million were in line with our expectations.
As Tom said, we are reaffirming our full year Adjusted EBITDA guidance of $2.35 billion to $2.55 billion double digit year-over-year shipments thus far in July, the exceptional execution of our teams in the first half of the year and the improving private and public demand backdrop, all give us confidence in an accelerating second half of the year.
I’ll now turn the call back over to Tom to provide a few closing remarks.
J. Thomas Hill — Chairma and Chief Executive Officer
Thank you, Mary Andrews, and thank you to my Vulcan teammates, who delivered a strong first half of 2025. Our trailing-twelve months aggregate cash gross profit of $11.25 per ton is now over 50% higher than just three years ago, when we communicated a goal of $11 to $12 per ton. This clearly depicts the durability of our aggregates-led business and our commitment to controlling what we can control to deliver consistent earnings growth for our shareholders, regardless of the demand backdrop.
And now Mary Andrews and I will be happy to take your questions.
Questions and Answers:
Operator
[Operator Instructions] We’ll take our first question from Trey Grooms with Stephens. Please go ahead. Your line is open.
Trey Grooms
Hey. Good morning everyone. Thanks for taking my question. So, clearly you all faced a heavily weather impacted first half of the year, which clearly impacted your volume and I’m sure had to hurt profitability as well to some degree. So I guess, what are you seeing or what gives you the confidence going into the second half to reaffirm your EBITDA guide for the year despite this kind of tough first half that we’ve been having to deal with, especially due to weather?
J. Thomas Hill
Well, thanks for the question, Trey. I think Trey, ex rain I was very pleased with the quarter and the first half of the year. Volumes were down 1% in Q2 and in the first half without acquisitions down 5%, as we been talking about, of course saw significant rainfall in the Southeast, and with our outsized performance in the Southeast, we were probably impacted more than most.
Now that’s the tough news. For me the good news is that even with the wet weather in Q2, cold weather in Q1 volumes down, and the most impacted region being at Southeast, which houses probably our highest prices and margins, we still saw first half prices up 6% and unit margins up 13%.
And for me that’s really quality earnings and some tough conditions. And one, I think our people should be very proud of their performance in the first half. It gives us a lot of confidence for the second half, because a bit of good weather in the Southeast like we saw in July will really help improve what I thought was already a really good performance. When it’s dry, we’re shipping strong, July had what I call normal weather patterns and we saw very strong shipments. They were, as Mary Andrew said, they were up double digit in July.
And that’s a little bit of catch up probably and probably some easy comps. But importantly, what we know is, there are backlogs and a booking pace, and a shipping pace are all up, and would support our full year guidance of that 3% to 5% which will have significant catch up in the second half. And we always said this will be second half loaded from a volume perspective. I think the other thing that gives me confidence in it is that the underlying demand is there and it is improving, and so I think that we’ll start on edge of return for the private side.
Trey Grooms
Perfect. Okay, thanks, Tom. That’s encouraging. I’ll keep it to one question and pass it on. Thank you very much.
J. Thomas Hill
Thanks, Trey. Talk to you later.
Operator
We’ll take our next question from Anthony Pettinari with Citigroup. Please go ahead. Your line is open.
J. Thomas Hill
Hi, Anthony.
Anthony Pettinari
Good morning.
J. Thomas Hill
Hey.
Anthony Pettinari
Last quarter I think you mentioned, maybe delays in bids translating to bookings as something that maybe you were seeing a little bit more. We’ve seen some of that in national data. I’m just curious if that’s accurate. Are you seeing project timelines stretch out or customer confidence improved or I’m just kind of curious, how that kind of bid to booking timeline has trended.
J. Thomas Hill
Yeah, good question and an important one, because it’s turned. We are seeing them, seeing them get green lit, they’re going. That’s what’s also building our booking pace and our backlogs. So I think we’ve seen the turn in that.
Anthony Pettinari
Okay, is that specific to private, commercial or public or are you seeing it across end markets or.
J. Thomas Hill
I think you’re sitting across all end markets. The one I would call out that we’re not sitting across would be single-family, but as we talked about the backlogs and booking pace, and starts on the public side is very strong, and it continues to improve on the private side in all sectors except for single-family.
Anthony Pettinari
Okay, that’s very helpful. I’ll turn it over.
J. Thomas Hill
Thank you.
Operator
We’ll take our next question from Kathryn Thompson with Thompson Research Group. Please go ahead.
J. Thomas Hill
Hi, Kathryn.
Kathryn Thompson
Good morning, and thank you for taking my question this morning. Just tagging on, on the infrastructure question, you talked about the acceleration of dollars slowing out. How much of this, when you look, there are certain key states like Florida with the moving floor Florida initiative, which is $4 billion, and then Tennessee’s Modernization Act, which added another $3.3 billion to DOT funding. Is it these types of states that have these big initiatives and you’re starting to see dollars flow through, or is it other types of projects are more related to IIJA and, and just seeing a more delay from those? Or is it a combination of all the above?
J. Thomas Hill
Yeah, it’s all of the above. And, the capital spending to you, as you pointed out, in all of our Southeastern states, in fact, all of our biggest states are up and up considerably. That is coupled with IIJA funding. I think you’re seeing, you’re seeing both of them come together along with some local funding that’s been increasing over the last three or four years. So I think what we’re seeing in the highway work is, demand is very strong and getting better. We’re seeing this in lettings, we’re seeing booking bookings, we’re seeing backlogs.
Remember a year ago, the contract awards were down 2%, now contract awards are up 22%, and so we’re also seeing this in our shipments. We saw it in July, we really feel the impact in 2026. And this kind of growth in public demand should be a strong catalyst for ’26 pricing because it’s so visible and so that gives you that visibility of future work, which really helps pricing.
Kathryn Thompson
Okay, and we said that contract awards are up 22%. Is that for bulk and served states or is that more a national number?
Mary Andrews Carlisle
Just put it perspective from us.
J. Thomas Hill
Yeah, that is highway for both conserved states. And Kathryn, I think one of the, things we’re pleased to see is that, that shift from, as Tom commented, down a year ago to significantly up is distinctly different in Balkan states versus other states where, the awards have actually, decelerated some.
Kathryn Thompson
Great. Thank you so much. I appreciate it.
J. Thomas Hill
Thank you.
Kathryn Thompson
Best of luck.
J. Thomas Hill
Thanks.
Operator
We’ll take our next question from Brian Brophy with Stifel. Please go ahead.
Andrew F. Maser
Hello, this is Andrew on for Brian. Thank you for taking my question. I just had a question on CapEx. It looks like it took a step down in the quarter. I’m wondering if there’s any particular drivers of that and then are there any changes to how you’re thinking about CapEx for the full year?
Mary Andrews Carlisle
Yes. So the CapEx in the first half, being lighter than what we anticipate for the full year was really due to the slow start with the weather, just harder to get project timelines going. We do expect now that CapEx for the full year will be about $700 million, which is a bit lower than our original guide of $750 million to $800 million.
Andrew F. Maser
Thank you.
Operator
We’ll take our next question from Steven Fisher with UBS. Please go ahead.
J. Thomas Hill
Hi, Steve.
Steven Fisher
Hi. Thanks for taking the question. So obviously good cost performance in the quarter and I’m just curious, what your visibility is to the increases in the second half of the year and maybe what you experienced in July with the real kind of question around, do you think you’ll be able to be back growing cash gross profit per ton by double digits in Q3?
J. Thomas Hill
Yeah. So I look at cost, we would call it towards trending towards or guided towards the low end of our guidance. The cost in the first half was down 1%, up 1% in Q2. I thought that was a really excellent operating performance. That’s really hard to do when you have that kind of rain. So great performance by my operators. Their safety record was also record setting. So, thanks and congratulations to all of them. Really, what they’re really doing is to your point is helping us take that price to the bottom line.
Our — to that point our gross margins for aggregates was up 200 basis points and it was up to 42.7% in Q2. So again, in spite of rain, reduced volumes in the Southeast and extremely wet quarter, I thought our folks should be very proud of but not only the cost performance, but the unit margin performance. What it’s telling me is the Vulcan Way of operating is making a difference. We got a long ways to go on that, but we should, we should see that improving. And also to your point, we’re just able to take all the price to the bottom line.
Mary Andrews Carlisle
Yeah, I mean if you look at the quarter, with our price being up over a dollar per ton, $1.11 and being able to take 95 cents of that to the bottom line and cash gross profit per ton was just a great performance and we think that will carry that momentum into the back half.
J. Thomas Hill
Yeah. And remember, this is in reduced volumes. The volume leverage that we’re, as the volumes go up will really help us with that, and really push, help push those unit margins up.
Steven Fisher
Terrific. Thank you.
J. Thomas Hill
Thank you.
Operator
We’ll take our next question from Keith Hughes with Truist. Please go ahead. Your line is open.
J. Thomas Hill
Hi, Keith.
Keith Hughes
Thank you. Thanks for taking the questions. I guess on the nonresidential comments, some of the more bullish that I’ve heard. When do you think that would turn into volumes for you? Is that a ’26 story or what’s the view?
J. Thomas Hill
We’ll feel a little bit of it in the sec — in the second half. I think it is probably more of a ’26 volume just, because you got a delay in those projects. But we, I mean I think we’re starting to see that, we have definitely seen our backlogs and we’re starting to see a little bit of it in shipments but I think it’s more of a ’26 play, ’27 play. We’ve been anticipating a recovery in nonres. Now I think we’re starting to see signs of the turn.
The data centers are accelerating quickly. We’re seeing some green shoots in warehouses and we’re seeing some green shoots traditional like nonres, which we think is at the bottom. Our backlogs in nonres are up and support that are encouraging comments. So I think we’re encouraged about it. So let’s hope that momentum continues, but it sure appears to be going to.
Keith Hughes
And final question in the guide, what are you thinking about second half for aggregate pricing?
J. Thomas Hill
I think that, we keep it, we keep on with the momentum. I think we’ll be impacted soon some, because the highway sector is so strong right now, which has a larger portion of base, which is a cheaper product, but it’s also a cheaper product to make. So I would point you to. I feel good about the unit margins and I feel good about a momentum and pricing, but that sequential will be a little bit less than prior year, because of product mix because of the heavy highway sector.
Keith Hughes
Thank you.
J. Thomas Hill
Yeah. One of the things I would tell you add to that was, I thought when it came to pricing we were really strong in the acquisitions both on the east coast and the west coast. We got all we had planned in January and I think we got all we had planned in mid year, which will help us because as you can see the mix has been of drag on us.
Keith Hughes
Yeah. Right. Okay, thanks very much.
J. Thomas Hill
Thanks.
Operator
We’ll take our next question from Ivan Yi with Wolfe Research. Please go ahead.
Ivan Yi
Yes, hi. Good morning. Thanks for taking my question. First, roughly what percent of your aggregates move on the rails? And I guess I just want to get your initial thoughts on the proposed Union Pacific, Norfolk Southern merger. What impact would this have? Would you support or oppose the transaction? Thank you.
J. Thomas Hill
I don’t know that it has any impact on us. We, we’re customers of both those railroads, but the way aggregate shipments move, you’re not going to commingle those. So I don’t, I don’t see much of an impact for us. In other words what we ship now, we’re not a long hauler so, we’re shipping to a market which is within each one of those railroads, not changing carriers.
Ivan Yi
Great. Thank you.
J. Thomas Hill
Sure.
Operator
We’ll take our next question from Angel Castillo with Morgan Stanley. Please go ahead. Your line is open.
J. Thomas Hill
Hi, Angel.
Angel Castillo
Hi, good morning. Hi. How’s it going? Thank you for taking my question. Just this is a bit of a multi part one but just wanted to get a better sense of, you mentioned the bid to bookings conversions starting to improve here and sounds like some of that is just again an inflection point. But curious, what are you seeing change here? Is it just market confidence? Is it the tax bill and then, as you kind of respond to that, I guess just curious, it sounds like you’re also still seeing some deferrals and delays. So are those also still at maybe a little bit elevated levels or are you seeing inflection there where those are no longer kind of occurring?
J. Thomas Hill
I missed the second half of your question. I’m sorry.
Angel Castillo
Yeah, just curious, you know as we think about that change in the bit kind of bookings, it sounds like you are still seeing some deferrals and delays of projects that maybe make the volume inflection more of a ’26 story. So just curious, is that also improving in terms of the number of kind of deferrals or delays and just as we think about kind of the speed at which we can see these awards start to turn to real volumes.
J. Thomas Hill
Yeah. So I don’t think we’re seeing, I think the deferrals and delays have, have come to pass. We’re seeing those, boots, those jobs start. And so, I think while that will build for ’26 just because our backlogs are building, I think we’re going to feel that in the second half. Now where is that as a pretty broad spread the highway and infrastructure work is very good. That is that, is that all that money, the IIJA and state funding and local funding going to work, and so that we will definitely feel in the second half of the of ’25 and into ’26. Data centers are good and growing.
We’re shipping a number of them right now and have said there’s $35 billion of green lit projects that haven’t, they’re going to go but we’re not feeling them at this point. Those are heavily in our markets on, as I said on nonres warehouses are we think are turning. So that will help us like res we think is bottom. That’ll help us and then interesting we haven’t talked about but on multifamily residential we’ve gone into growth mode until three months starts. I think we’re up 17%.So the only one we’re struggling right now is single-family, not overbuilt.
So at some point in time it’ll turn but we haven’t seen signs of that at this point.
Mary Andrews Carlisle
Yeah. And I think Angel, overall there was just a bit of a, post Liberation Day, lull that we seem to really be passed now and trailing three months contract awards and private nonres, have turned positive. So that to us is encouraging that we’ve moved past some of that uncertainty.
Angel Castillo
That’s very helpful. Thank you.
J. Thomas Hill
Thank you.
Operator
We’ll take our next question from Phil Ng with Jefferies. Please go ahead. Your line is open.
Philip Ng
Hey, guys. Tom, you sounded pretty bullish on the pace of the infrastructure side of things. I think coming to the year, there was probably an expectation for infrastructure to call be up mid single digits. Now given what you’re seeing, is the — is that still a good way to think about it and does that rate of growth perhaps even accelerate more in ’26 and beyond?
J. Thomas Hill
I would tell you what, as I said, what we’re seeing is just that money going to work and the dot’s ability to get more work out, I think is maturing. I do think that, as I said, we see the upswing in ’25, I think we see it grow even more to ’26 and it wouldn’t surprise me to see it go more into ’27.
Philip Ng
Okay, that’s helpful. And in your downstream business, appreciating it’s a smaller part of your business. It was a little softer than I would have thought. How much of that is weather related dynamic and, Ready Mix I would imagine is more tied to housing to a perspective. Has your outlook in terms of your profitability in your downstream business changed from the start of the year?
Mary Andrews Carlisle
So you’re right, the first half was impacted really bad. The weather in our asphalt business in Tennessee and Alabama, and the softer, private demand did weigh on Ready Mix. I think, overall in asphalt, we still saw price improvement and the lower liquid helped, offset the lower volume in the quarter. So I think a pretty, solid performance there.
The good news is we’ve seen a good recovery already in July shipments where, we were weather impacted and I think the accelerating public demand, and a little bit lower liquid level versus what we’d initially anticipated, all bode well for, for the back half and asphalt.
And then in Ready Mix, we certainly have some ground to make up. But, we saw price improvement, unit margin improvement even with the lower volumes. Some of that, in part to the quality of that recent Southern California acquisition. But we’re encouraged and Ready Mix by some of the positive, signs on the private side that Tom was, was just talking about, and still think we have a shot at some improvement in the back half.
Philip Ng
Okay, helpful color. Thank you.
J. Thomas Hill
Thank you.
Operator
We’ll take our next question from Garik Shmois with Loop Capital. Please go ahead. Your line is open.
Garik Shmois
Great, thanks. Had a question on aggregates pricing. How should we think about mid year increases this year? Tom just spoke a little bit to traction on acquired markets. Just wondering, how widespread the mid years were. And then also on the mix side, appreciate the product mix headwinds with more base. But I’m wondering about geographic mix, especially with the Southeast snaps back here as it has in July, how does that impact pricing in the second half of the year?
J. Thomas Hill
Yeah, so on midyears I’d call it, some products in some markets, which is not that unusual. Everybody wants it to have an impact on same year as we’ll say it have a little bit of impact on ’25, but it’s really a ’26 play and it’s really trying to set you up for ’26 price increases. So, it’s more tailwind for ’26. As I said, I was very pleased with the pricing we got on both in North Carolina and in California on acquisitions, they’re behind and we’ll quickly get them up to bulking standards, but that’s going to take a little while.
And as you saw in the mix, that was a big part of, the difference in reported in mix. The other part, to your point, was the Southeast where our volumes were hit hard with record rainfall in a number of our key states. I think that, the fact that we performed as well as we did in the first half based on mix and based on, challenging conditions gives me a lot of confidence with the second half where I think we’ll see better volumes, and that we can continue that momentum and we carry a lot of that into ’26.So I think while we’ve had a challenge from outside forces, I thought our internal performance was quite disciplined and done quite well.
Mary Andrews Carlisle
Yeah, and Garik, I think we will see some modest sequential growth, but it really will just come down to geographic mix and product mix, and where those land. What’s important to us mostly is just the underlying pricing momentum with the 8% mix adjusted in the quarter and how strong that remains.
J. Thomas Hill
Yeah. The one thing you brought up, base that I would point out, while people tend to, I guess, kind of look down on base, it is a really important product for us, and it has great margins and it balances our plants, and will help our costs. So while it may be while flexible bases, lower price is still really good margins and really important. So I’m, for me as an operator, I think the base volumes look fantastic.
Garik Shmois
That’s encouraging. Thank you.
J. Thomas Hill
Thank you.
Operator
We’ll take our next question from Michael Dudas with Vertical Research Partners. Please go ahead. Your line is open.
Michael Dudas
Morning, Mary Andrews, Mark, Tom.
J. Thomas Hill
Hey.
Mary Andrews Carlisle
Good morning.
Michael Dudas
Tom, first, share your thoughts on Big Beautiful Bill legislation and how that may be from your clients or how you assess it from a Vulcan standpoint, and may need to follow on to that. What are you hearing? Your thoughts on IIJA 2.0?
Mary Andrews Carlisle
Yeah, I’ll start, first maybe with the recent tax legislation. There are certainly some benefits in there for us. Those will mainly come from 100% bonus depreciation and the expensing of domestic research costs. So, we currently estimate a cash tax benefit of over $40 million for June year-to-date activity. And we would expect, the full year benefit could approach $100 million. We don’t expect any, material impacts to our effective tax rate, but definitely a cash tax benefit for 2025 and going forward.
J. Thomas Hill
Yeah. On a New Highway Bill. I think the good news, what I’m encouraged about is that Congress are already working on one. They’re already trying to pin it. They are aggressively pursuing it. I think, to tell you what the magnitude is versus IIJA is probably too early to call. It will be bigger. Now, whether that’s 5% or 20%, I don’t we don’t know yet. We’re voting for 20%, but I’d take 5%.
The I think importantly, remember IIJA funding is a comment. We’ve only spent spent 60% of that funding. So and, we’re a year and a half away from the bill expiring, so there will be a tail to this and we’ll have substantial highway work based on IIJA dollars that will go past the expiration of IIJA.So we got kind of what I call an insurance policy or a timeline that will protect us on trying to get that new bill, but we’ll get one. It’ll be at higher funding.
Michael Dudas
Let’s settle the 12.5% time. We’ll call it a day. Thank you.
J. Thomas Hill
Okay.
Operator
We’ll take our next question from David MacGregor with Longbow Research. Please go ahead. Your line is open.
David MacGregor
Thanks and good morning, everyone. Thanks for taking the questions. Tom, you talk about 2 million to 3 million tons that were lost in the quarter. How much incremental tonnage do you think you’ll ship in 3Q, that was of that 2 million to 3 million. How much can you recover? And I guess also on that question, I appreciate all the conversation and discussion around the backlogs, and I know normally you don’t open that up and get into a lot of detail, but given we seem to be at a fairly important inflection point in terms of what you’re seeing there, I wonder if you can maybe just dig in a little further on the backlog and share with us a little more detail. Maybe growth numbers year-over-year versus last quarter. Can you table pricing growth backlog? I think anything there would be helpful. Thanks.
J. Thomas Hill
Yeah. So on the weather related it will be spread out in the second half. I mean you just don’t get a big slug of that. We saw price saw this. The slug we saw was probably in July. That probably helped that double digit number. But most of it will be spread out over the quarter. So, I think we catch that up and do fine with it and move ahead.
If I look at our backlogs, the — I would call them up in all sectors except for single-family and they’re kind of what I call flat, maybe down a little bit single-family. But the one that’s, nonres is up and highways is up substantially. So I think that gives us a lot of confidence in continuing our guide to the 3 or 5, but also gives us confidence that we start, we’re going to start ’26 off on the right foot.
David MacGregor
Thanks very much.
J. Thomas Hill
Thank you.
Operator
And we’ll take our last question today from Michael Feniger with Bank of America. Please go ahead.
J. Thomas Hill
Hi, Michael.
Mary Andrews Carlisle
Morning.
Michael J. Feniger
Morning guys. Thanks for squeezing me in. Tom, you mentioned with the second half, the product mix with highways kind of weighs on the sequential pricing. Sounds like a mix impact. Is there anything we should keep in mind for 2026. The growth is led more by highways and data centers. Does, does that that headline pricing number look a little bit more modest? But the price versus cost spread is still the same in terms of, 60% incrementals, kind of double digit gross profit per ton. Just kind of wondering, as the mix and your end markets kind of evolve, do we have to think about differently if it impacts the pricing or the profitability markets at all?
J. Thomas Hill
Well, over the last couple of years we’ve got a lot of headwinds on the private side and we’ve been slow getting growth on the highway about where we thought. But what’s encouraging me about pricing ’26 is two things. Number one, the highways is so strong and you got a lot of visibility to come and work in highways. It’s not just what we have in our backlogs, but what’s the funding and the capital spending levels for, for our states. Couple that with the IIJA money maturing and the dots being able to get that, that work out, all those are really impactors.
But remember, how we work. Once they say it’s going to go, it’s going to go. It does. It’s not going to get paused, it’s not going to get pushed back unless you have a permitting issue. So it’s, there’s a lot of clarity to what’s going on that, if you layer on top of that, if we’re making the turn on the private side, then that gives us a lot of tailwinds for people having confidence in more work to come and taking risk on pricing going forward. So that’s what’s given me a better feeling than maybe what I had six, three or four, six months ago, when we were a little bit of a lull on the private side and the public side did not kick in as strong.
Michael J. Feniger
Great. Thanks, Tom. Just lastly, from a second question, you guys are looking, we’re looking like a billion dollars of free cash flow. Is that the new baseline for you guys going forward? Rebasing the free cash of this billion number and moving it higher? And if that is the case, this is your new baseline. Should be a record for the company. Does that change at all how you’re thinking of capital allocation? I appreciate that, I think you’re at two times leverage, but I’m just kind of curious. That new baseline, does that kind of change or how aggressive you’ll be on the capital allocation side? Thank you.
Mary Andrews Carlisle
Yeah. I would tell you our capital allocation priorities don’t change, but I think the level to which we can allocate capital to each of those priorities does change. And even as you think about the back half of the year, given the current balance sheet profile and, the strong cash generation, I think returning cash, to shareholders is likely. And that level will, be dependent upon, how the M&A discussions that we’ve been having continue to develop.
J. Thomas Hill
Yeah, I thought we were, we were very pleased with the two acquisitions we got. We closed on the end of ’25. We’re pleased with our integration, particularly on the pricing side. M&A was a bit slow in the first months of the year. We’re starting to have some conversations now that hopefully will be meaningful to us. So I’m encouraged. I’m more encouraged about the M&A than maybe I was four or five months ago. But also, like I said, once you. Once you buy one, you better execute. And I’m pleased with the execution of what we’ve done with the two we closed on the end of last year.
Michael J. Feniger
Thank you.
J. Thomas Hill
Thank you.
Operator
There are no further questions on the line at this time. I’ll turn the program back to Tom Hill, Chairman and CEO, for any closing or remaining remarks.
J. Thomas Hill
Again, thank you for your interest in Vulcan Materials. We appreciate your time. We look forward to talking to you throughout the quarter. And we hope you stay safe and your family stay safe. Thank you.
Operator
[Operator Closing Remarks]