Martin Marietta Materials Inc. reported results for the third quarter ended Sept. 30. The company achieved third-quarter gross profit of $405 million; record year-to-date gross profit of $927 million; and established new quarterly records for consolidated and aggregates gross margin.
Third-quarter aggregates shipments declined 8.7% compared with the relatively robust prior-year quarter. Aggregates shipments to the infrastructure and nonresidential end-use markets declined, while shipments to the residential market increased slightly.
Aggregates pricing improved 2.7%, or 4.0% on a mix-adjusted basis. Full-year 2020 pricing is expected to increase 3% to 4%.
East Group shipments decreased 8.8%, reflecting weather-delayed projects in the Mid-Atlantic and Southeast, anticipated lower infrastructure shipments in portions of North Carolina and reduced wind energy construction activity in the Midwest. Pricing increased 4.4% with solid improvements in both the East and Central divisions.
West Group shipments decreased 8.4%, primarily due to wet weather in Texas and reduced energy-sector shipments. Pricing decreased 0.6%, as a lower percentage of higher-priced commercial rail-shipped volumes in Houston offset price increases in the company’s other Texas markets and Colorado. On a mix-adjusted basis, West Group pricing increased 3.9%.
Despite lower shipments, third-quarter aggregates gross profit per ton shipped improved 6.5% and product gross margin expanded 130 basis points to 36.4%, an all-time record, driven by increased pricing and lower production costs, including diesel fuel.
While underlying Texas demand remains resilient, third-quarter cement shipments decreased 3.9%, driven primarily by the decline in energy-sector activity resulting from low oil prices. Pricing improved 0.9% with strength in North Texas, Houston and portions of Central Texas offset by lower sales of higher-priced oil-well specialty cement products into West Texas.
On a mix-adjusted basis, cement pricing increased 3.4%. The cement business reported product gross margin of 40.2%, as improved kiln reliability from prior-period investments and lower fuel costs limited the decline to 40 basis points.
Ready-mixed concrete shipments decreased 4.0%, excluding the impact of acquired operations and third-quarter 2019 shipments from the Southwest Division’s concrete business in the Arkansas, Louisiana and Eastern Texas, generally known as ArkLaTex, areas that was divested in January 2020. Pricing improved 2.2%. Product gross margin declined 90 basis points to 9.7%, driven primarily by higher raw material costs.
Colorado asphalt shipments decreased 2.8%. Asphalt pricing increased 6.2% due to favorable product mix. Asphalt and paving gross profit of $32.6 million was an all-time record.
Ward Nye, chairman and CEO of Martin Marietta, stated, “Building on our strong business execution in the first half of the year, Martin Marietta again delivered outstanding financial and operational performance. The company expanded consolidated gross margin 100 basis points to 30.6%, a new record, and generated Adjusted EBITDA of $501.7 million (inclusive of nonrecurring gains) in the third quarter. Increased pricing across all product lines and disciplined cost management helped offset the anticipated decrease in shipment volumes driven by the COVID-19 pandemic. As part of our stated aim and strategy to capture value from excess, nonoperating properties, we sold certain non-core land and assets, generating a record $69.9 million in gains. We also achieved record year-to-date profitability, as measured by both gross profit and Adjusted EBITDA, and the best safety performance in Martin Marietta’s history. These results demonstrate the resiliency of our business and our team’s commitment to operational and financial excellence. We expect our full-year 2020 Adjusted EBITDA to range from $1.35 billion to $1.37 billion (inclusive of nonrecurring gains).”
Nye concluded, “We are confident that favorable pricing trends will continue, supported by our locally-driven pricing strategy, and that the attractive underlying fundamentals and long-term secular growth trends across our three primary end use markets and key geographies will remain intact. However, we anticipate product demand to remain modest through the first half of 2021 due to COVID-19 and related governmental actions. Importantly, as we continue to navigate today’s challenging environment, Martin Marietta remains well-positioned geographically, financially and otherwise to drive long-term sustainable growth and shareholder value. With Martin Marietta’s collective commitment to our strategic priorities, disciplined pricing and operational excellence, we are confident in the fundamental strength and underlying drivers of our business to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long term.”