Martin Marietta Third Quarter Stymied by Hurricanes

Martin Marietta Materials Inc. reported results for the third quarter ended Sept. 30, 2017. The company is reporting versus the prior-year period:

  • Consolidated total revenues of $1.088 billion compared with $1.104 billion.
  • Consolidated net sales of $1.022 billion compared with $1.038 billion.
  • Building Materials business net sales of $963.6 million compared with $978.1 million.
  • Magnesia Specialties net sales of $58.5 million compared with $60.2 million.
  • Consolidated gross profit of $291.7 million compared with $293.3 million.
  • Consolidated earnings from operations of $227.0 million compared with $242.7 million.
  • Net earnings attributable to Martin Marietta of $151.5 million compared with $159.5 million.

Third-quarter 2017 total revenues for the Building Materials business, which includes the aggregates, cement, ready mixed concrete and asphalt and paving product lines, were $1.024 billion, down slightly from $1.039 billion.

Average selling prices improved across all product lines and segments despite lower shipment volumes. The aggregates product line average selling price improvement of 5.1 percent was led by a 9.6 percent increase in the Southeast Group.

The Mid-America Group and West Group reported increases of 6.2 percent and 1.1 percent, respectively. The cement product line generated pricing growth of 3.9 percent, driven by ongoing construction activity in the Dallas/Fort Worth area. Ready mixed concrete and asphalt pricing increased 4.9 percent and 11.8 percent, respectively.

Aggregates product line shipments decreased 3.2 percent compared with the third quarter of 2016, driven by ongoing project delays, customer- and DOT-related labor constraints, government uncertainty and near-record precipitation compounded by major hurricane and tropical storm activity.

The West Group’s shipments decreased 6.8 percent and were most negatively affected by wet weather, notably in Texas where third quarter 2017 marked the fourth wettest third quarter in the last 123 years.

The Southeast Group overcame the impact of Hurricane Irma and other storms, reporting aggregates volume growth of 4.7 percent, driven by strong residential and nonresidential construction activity. Total cement shipments decreased 9.7 percent. Ready mixed concrete and asphalt shipments decreased 13.1 percent and 10.7 percent, respectively.

Ward Nye, chairman, president and CEO of Martin Marietta, stated, “Our third-quarter results reflect our ability to adapt to external challenges and deliver solid operating results. While Hurricanes Harvey and Irma unquestionably impacted our business, negatively affecting revenues and profitability, weather-related events are short-term in nature and dislocations or delays are subsequently resolved. Furthermore, the attractive markets in which Martin Marietta operates are experiencing record employment levels. As a result, many contractors are facing a skilled labor shortage, requiring them to accept a slower, yet steadier, pace of project work often with multi-year backlogs. State Departments of Transportation (DOT) in several of our key states are also understaffed relative to the influx of new projects and, as a result, projects have been delayed.

“Notably, we achieved solid pricing growth across all product lines and segments and a 180-basis-point expansion in aggregates product line gross margin despite these externally-driven volume headwinds,” Nye said. “Notwithstanding weather, the company achieved record quarterly earnings per diluted share, excluding nonrecurring repair costs related to certain of the company’s leased railcars. These results underscore the importance of attractive market fundamentals, the pricing power of our business and our continued focus on operational excellence.

“We remain confident in Martin Marietta’s long-term outlook, with the fundamental drivers for broad-based construction activity supporting a steady and extended, yet somewhat slower than anticipated, cyclical recovery across our geographic footprint,” Nye said. “The United States is experiencing the third longest construction recovery since the Great Depression, and we see this recovery continuing for the next several years. The building blocks to address the undeniable need for significant investment exist; however, we have yet to see meaningful growth in heavy construction activity, particularly in the public arena. Positive momentum in residential and nonresidential construction has been offset by lackluster infrastructure activity, which continues to be significantly hindered by project delays and uncertainty concerning regulatory and other related reform. As a result, we expect aggregates shipments will continue its steady growth through the extended recovery.”

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