Machinery, E&C and Waste: Day 1 Conf Takeaways: Cost Inflation? Manageable, Demand Destruction? Not Yet

研报英文原文证据摘录

Machinery, E&C and Waste: Day 1 Conf Takeaways: Cost Inflation? Manageable, Demand Destruction? Not Yet

C remains constructive on public infrastructure demand,

emphasizing that its core markets are materially outperforming national trends, with

highway awards in its footprint up +12% vs down -12% for the rest of the US.

While certain states (e.g., Texas) have seen declining award activity, VMC cautioned

that these figures are volatile and lag actual construction, as projects are multi-year

in nature and continue to support current volumes. Around 50% of IIJA funding

remains unspent, providing meaningful visibility into future activity. Importantly, the

upcoming expiration of the highway bill is not viewed as a material risk, as VMC

largely expects a continuing resolution (CR), consistent with historical precedent

where demand has continued to grow LSD even without a new bill (excl. periods like

the GFC). As a result, VMC does not see infrastructure demand falling off a cliff,

with spending expected to continue at elevated levels supported by existing funding

and backlog. VMC also highlighted that the House Transportation & Infrastructure

(T&I) Committee is likely expected to mark up the reauthorization bill this month.

Construction Partners

Note that the following gives our interpretation of the key points highlighted in our investor

meetings. These conversations featured Greg Hoffman (Chief Financial Officer and Chief

Accounting Officer) and Rick Black (Investor Relations).

• Energy costs: ROAD emphasized that liquid asphalt is the primary energy-related

input, representing roughly ~7x the cost of diesel, and is structurally de-risked by

contract design, with most exposure effectively transferred to the states through

index-based pass-through mechanisms.