Martin Marietta Materials remains optimistic about the company’s long-term outlook given its continued ability to successfully execute its strategic business plans and the largely positive trends in the markets it serves. Given the skilled labor shortage, project delays and government uncertainty that has limited growth throughout the year, management has revised its guidance for full year 2017 as follows:
Aggregates product line end-use markets compared with 2016 levels are predicted as follows:
- Infrastructure market to decrease in the mid-single digits.
- Nonresidential market to remain relatively flat.
- Residential market to increase in the high-single digits.
- ChemRock/Rail market to decrease in the low-double digits.
The fundamental drivers for the company’s expected growth remain intact as the current broad-based recovery continues on a steady and extended basis, Martin Marietta said. “Even with a construction-centric phase of the economic expansion, given the shortage of skilled labor and project delays, the pace of construction activity has been slower.
The company noted:
As state DOTs and contractors address labor constraints and regulatory reform emerges, infrastructure construction should begin to see benefits from the funding provided by the FAST Act. Additionally, state and local initiatives that support infrastructure funding, including gas tax increases and other ballot initiatives passed over the previous 24 months, are expected to grow and continue to play an expanded role in public-sector activity.
Nonresidential construction is expected to modestly increase in both the heavy industrial and commercial sectors; Dodge forecasts continued nonresidential growth for the next several years. Additional energy-related economic activity, including follow-on public and private construction, will be mixed. While the pace of permitting and final investment decisions has slowed, management expects new energy-related projects should enter the bid phase in 2018 with construction activity in 2019 and beyond.
Residential construction is expected to continue growing, particularly in key Martin Marietta markets, driven by employment gains, historically low levels of construction activity over the previous years, low mortgage rates, higher lot development, and higher multi-family rental rates. Notably, six of Martin Marietta’s key states – Texas, Florida, North Carolina, Georgia, South Carolina and Colorado – rank in the top 10 for single-family housing unit permits.
Management’s preliminary view of 2018 anticipates aggregates shipments to increase in the mid-single digits as long as the forces that have limited growth (i.e., labor constraints, governmental/legislative uncertainty) remain in place. Further, management expects faster expansion in the West and Southeast groups and comparatively slower growth in the Mid-America Group, which historically has generated the company’s highest margins. This preliminary outlook excludes any impact from the pending acquisition of Bluegrass Materials and any benefit from a potential increase in federal infrastructure spending.
“Looking ahead, our leading positions in many of the nation’s most attractive and otherwise vibrant markets should allow Martin Marietta to capitalize on the durable, multi-year construction recovery,” said Ward Nye, chairman, president and CEO. “Our customers maintain positive near- and medium-term outlooks, as supported by their reported strong backlogs. We stand to benefit from the expected increased demand for infrastructure projects and private-sector construction activity as regulatory reform emerges and state DOTs and customers address labor constraints. We are committed to further enhancing long-term shareholder value, with a relentless focus on world-class safety standards, diligent cost discipline, operational excellence and strategic growth initiatives.”