Martin Marietta Materials Inc. reported its results for the fourth quarter and year ended Dec. 31, 2014. The company announced total fourth-quarter revenues of $856.3 million, aggregates revenues of $621 million and total 2014 revenues of $2,958 million.
Consolidated net sales in the fourth quarter totaled $779.5 million compared with $491.4 million year-over-year, an increase of 59 percent. Aggregates product line volume increased 18.8 percent while aggregates product lines saw price increases of 6.7 percent. Consolidated net sales in 2014 totaled $2.68 billion compared with $1.94 billion the year before, an increase of 38 percent.
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| WARD NYE |
Ward Nye, chairman, president and CEO of Martin Marietta, stated: “2014 was a transformational year for Martin Marietta, and we are proud of the results we delivered, including a 77 percent increase in fourth-quarter net earnings over the prior-year quarter. Further, TXI-related synergy realization accelerated in the fourth quarter, making the transaction accretive for the year. These results further validate the successful execution of our strategic initiatives and the benefit of continuous focus on our core principles, including operational excellence and cost discipline. Our strong foundation, bolstered by the acquisition of Texas Industries Inc. (TXI) in July, has us well positioned to continue delivering increased shareholder value as we serve the rising demand for building materials.
“Employment growth in the United States, a stimulus for construction activity, is at its highest rate since 2006,” Nye continued. “Texas leads the nation in job growth, with widespread gains across many industry sectors, including trade, professional business services, leisure and hospitality, education and health services. Additionally, the Texas Department of Transportation is operating with a robust budget and project backlog. Further, voters in Texas recently approved Proposition 1, a constitutional amendment authorizing annual disbursements from the state’s existing oil and gas production tax collections to the State Highway Fund, including an additional $1.7 billion in 2015. We believe growth in Texas is sustainable, supported by a favorable business climate, diversity of economic drivers, state construction activity and recent commitments to major, multiyear projects, notwithstanding the moderation in the oil and gas industry. Our enhanced position in Texas has created a platform to capitalize on these opportunities.
“The aggregates business’ gross profit increased $34 million over the prior-year quarter, demonstrating the powerful combination of volume and pricing growth from the heritage business and the contribution from the acquired TXI operations,” Nye said. “Notably, we achieved this improvement in gross profit despite recovery in the eastern United States lagging the western half of the country. However, momentum is increasing in the Southeast, where North Carolina, Georgia and Florida all rank in the top five states in the nation for employment growth.
“We continue to focus on maximizing the synergistic value of the TXI transaction. To that end, we now expect to achieve annual synergies of $100 million by the end of 2016, an increase of more than 40 percent compared with our previously announced target. Our 2015 plan assumes achievement of our targeted general and administrative synergies. As we continue the integration process, we remain committed to achieving world-class safety standards and increasing shareholder value,” Nye concluded.
Heritage aggregates product line shipments reflect growth in all end-use markets. Shipments to the infrastructure market comprised 44 percent of quarterly volumes and increased 12 percent, with each reportable group achieving double-digit improvement. The growth reflects projects funded by the Transportation Infrastructure Financing and Innovation Act, or TIFIA, and public-private partnerships, which are having a positive impact in Texas, Colorado and Florida. Federal funding under the provisions of the Moving Ahead for Progress in the 21st Century, or MAP-21, have been extended through May 31, 2015.
The nonresidential market represented 32 percent of quarterly heritage aggregates product line shipments and increased 4 percent. Energy-related shipments remain strong as momentum and the backlog of committed projects, notably in south Texas, have offset any impact from declining oil prices. The company believes this trend will continue, driven by $100 billion of anticipated energy projects along the Gulf Coast, including a significant portion in Texas, as well as anticipated Proposition 1-funded infrastructure repairs in South Texas. The residential end-use market accounted for 15 percent of quarterly heritage aggregates product line shipments, and volumes to this market increased 5 percent.
The overall rate of residential growth has slowed, in part due to a reduction in available lot inventory in the company’s markets. However, the West Group continues to experience significant growth. The ChemRock/Rail market accounted for the remaining 9 percent of heritage aggregates product line volumes and increased 5 percent, reflecting growth in ballast partially offset by a reduction in agricultural lime shipments, principally in the West Group and Mid-America Group, respectively.
Geographically, heritage aggregates product line shipments increased in each reportable group, led by an adjusted 15.5 percent increase in the West Group. The West Group’s prior-year quarter included shipments from an Oklahoma quarry and two Dallas, Texas rail yards divested in the third quarter of 2014 as required by the Department of Justice in the TXI acquisition. This divestiture did not meet the accounting requirements for classification as discontinued operations.
Reported West Group shipments increased 8.6 percent in the fourth quarter. Aggregates product line shipments in the Mid-America Group increased 7.7 percent, led by North Carolina. The Southeast Group reported a volume increase of 4.1 percent. In addition to the metro-Atlanta area, Florida is also showing signs of further recovery, as the I-4 Ultimate project is under way and the housing market is improving. Recovery in the southeastern United States is also being aided by lower oil prices, which is leading to increased discretionary consumer spending.
Heritage aggregates product line pricing remains strong and increased in each reportable group, led by a 9.3 percent improvement in the West Group. The Mid-America Group and Southeast Group achieved pricing increases of 3.9 percent and 7.2 percent, respectively.
The acquired aggregates product line operations continue to be integrated into the heritage business as part of capturing the synergies of the TXI acquisition. While not reflecting the full contribution of these operations, acquired aggregates product line locations reported $31 million of net sales and $3 million of gross profit.
The heritage ready mixed concrete product line reported pricing and volume improvements of 11 percent and 2 percent, respectively, leading to an 840-basis-point improvement in the heritage product line’s gross margin (excluding freight and delivery revenues). The acquired ready mix concrete operations contributed $107 million of net sales and $4 million of gross profit. The hot mixed asphalt product line reported a 16 percent increase in net sales.
Consistent with the company’s expectations, total production cost per ton for the heritage aggregates product line declined 2 percent, reflecting increased leverage and lower energy costs.
Incremental margin for the heritage aggregates business approached targeted objectives, despite the southeastern United States businesses producing at less than 60 percent of the prior cyclical peak. The heritage aggregates business gross margin (excluding freight and delivery revenues) was 21.7 percent, an increase of 370 basis points.
The cement business is benefitting from continued strength in the Texas markets, where current demand exceeds local supply, and the Portland Cement Association (PCA) forecasts continued supply/demand imbalance over the next several years.
Effective Oct. 1, 2014, the company announced a price increase of $10 per ton of cement in the Texas and California markets. The cement group leadership, in collaboration with the company’s aggregates and ready mixed management, developed strategic plans regarding interplant efficiencies, as well as tactical plans addressing plant utilization and efficiency, providing a road map for significantly improved profitability for 2015 and beyond. During the quarter, the company incurred $9.6 million in planned cement kiln maintenance costs.