Martin Marietta Materials Inc. reported results for the second quarter ended June 30. Revenues were $1.271 billion for the quarter, down from $1.279 billion in the second quarter of 2019; however, gross profit was a record $380 million versus $357 in the second quarter of 2019.
Second-quarter operating results demonstrated the health and resiliency of the company’s markets and the disciplined execution of its locally driven pricing strategy, the company stated. Despite limited impacts from COVID-19, product demand trends remained strong in key Martin Marietta geographies, most notably in North Texas, Colorado and Indiana, as well as Georgia and Florida, the latter two being key states that experienced significant precipitation during the quarter.
Second-quarter aggregates shipments declined 3.7% compared with the prior-year quarter, which benefited from carryover work due to the extraordinarily wet 2018. Pricing improved 3.3% due to strong performance across all divisions.
Mid-America Group shipments decreased 7.2%, driven by near-record rainfall across much of its footprint and anticipated lower infrastructure shipments in portions of North Carolina. Geographic mix limited pricing growth to 2.3% as the Central Division, which has lower selling prices relative to the consolidated average, contributed a higher percentage of second-quarter shipments to the group.
Shipments for the Southeast Group increased 3.0%, as the Florida Department of Transportation (DOT) accelerated certain transportation projects to leverage construction efficiencies driven by lower vehicle traffic during the COVID-19 shelter-in-place orders, along with continued strength in warehouse, data center and distribution facility construction. These favorable trends were partially offset by weather-impacted construction delays. Product mix, reflecting a higher percentage of lower-priced base and fines shipments, limited pricing growth to 0.7%.
West Group shipments decreased 1.0%, with double-digit growth in North Texas and Colorado offset by the completion of certain Gulf Coast liquefied natural gas (LNG) projects and reduced energy-sector shipments. Pricing improved 5.5%,reflecting favorable product mix.
Martin Marietta’s second-quarter aggregates shipments by end use are as follows (all comparisons are versus the prior-year quarter):
Aggregates shipments to the infrastructure market increased modestly. The company benefited from large transportation projects in Texas, Colorado and Florida, as most state DOTs continued to advance transportation projects during the COVID-19 shelter-in-place orders. However, consistent with expectations prior to COVID-19, North Carolina DOT temporarily suspended awards for certain transportation projects in response to funding issues specific to weather-related disaster spending and Map Act settlements. The infrastructure market accounted for 38% of second-quarter aggregates shipments, which is below the company’s most recent 10-year annual average of 45%.
Aggregates shipments to the nonresidential market declined following double-digit growth in commercial and heavy industrial construction activity in the prior-year quarter. Precipitation and temporary project delays hindered otherwise robust distribution center, warehouse and data center construction activity. The company also experienced reduced energy-related shipments due to the completion of certain windfarm and Gulf Coast LNG projects, as well as lower overall demand to the shale sector. The nonresidential market represented 32% of second-quarter aggregates shipments.
Aggregates shipments to the residential market increased, with notable growth throughout Texas, as well as in Denver and Charlotte. Following a brief COVID-19-related pause in activity by national homebuilders, housing construction returned to pre-COVID levels, reflective of pent-up demand, low available inventories and favorable interest rates. The residential market accounted for 24% of second-quarter aggregates shipments.
The ChemRock/Rail market accounted for the remaining 6% of second-quarter aggregates shipments. Volumes to this end use increased, driven by improved ballast shipments to the Class I western railroads.
Aggregates product gross margin expanded 230 basis points to 35.5%, an all-time record, largely driven by improved pricing, production efficiencies and lower diesel fuel costs.
Ward Nye, chairman and CEO of Martin Marietta, stated, “We are proud to have concluded the first half of 2020 with the highest profitability and best safety performance in Martin Marietta’s history. Our record performance underscores Martin Marietta’s collective commitment to operational excellence and the disciplined execution of our strategic plan as we navigate the uncertainties and economic hardships presented by COVID-19.
“The company expanded consolidated gross margin by 200 basis points and delivered Adjusted EBITDA of $407 million in the second quarter, driven by pricing momentum and improved cost management across the Building Materials business. We remain confident that our favorable pricing trends will continue, aided in part by the continued success of our locally driven pricing strategy. We expect our full-year 2020 aggregates pricing to increase 3% to 4%, slightly below our pre-COVID-19 forecast, largely due to year-over-year geographic and product mix fluctuations.
“Though Martin Marietta, along with many of our customers, has operated as a designated ‘essential business’ through the COVID-19 shutdowns and subsequent phased re-openings, we still experienced impacts from the macroeconomic slowdown. Despite these challenges, product demand trends remained strong across our key geographies, including North Texas and the Front Range of Colorado, two of our leading vertically integrated markets, driven by attractive customer backlogs and continued construction activity. Customer backlogs are expected to support the company’s near-term shipment levels, though we currently anticipate an industry-wide decline in product demand over the next few quarters, particularly with the uncertainty of additional U.S. federal economic stimulus actions, as businesses and governments address budget shortfalls. Volume impacts from reduced demand will likely be temporary, gradual and varied by end use and geography. In the medium- and long-term, we remain confident that the underlying demand drivers and fundamental strength of our Top 10 states position the company to outperform through typical economic cycles.”
Nye concluded, “Moving forward, we remain focused on the world-class attributes of our business – including, safety, operational excellence and cost management – as well as our proven strategic plan. Martin Marietta is well-positioned geographically and financially and has the benefit of an experienced management team to responsibly navigate through challenging times and drive sustainable long-term growth and shareholder value.”