Martin Marietta Materials Inc. announced its results for the second quarter and six months ended June 30, 2013. Ward Nye, president and CEO of Martin Marietta Materials, stated: “We are pleased to report higher second-quarter net sales and gross margin compared with the prior-year quarter, which is particularly rewarding in light of excessive rainfall in most of our key markets.”
The company reported a net sales increase of 4 percent, driven by pricing growth in all aggregates business product lines and a new quarterly net sales record achieved by the specialty products business. Net earnings increased 12 percent, despite being constrained by the impact of wet weather, particularly in the Midwest and Southeast.
For example, Iowa had the wettest second quarter in over a century, and many Georgia markets had rainfall during the quarter equivalent to more than double the average levels, including Augusta, which reported its wettest month in weather history in June. While it's difficult to isolate all of the quarter’s weather impact, the company knows the effect was at least three-fold. First, with respect to potential lost sales, the company estimates that the precipitation reduced shipment volumes between 1.5 million and 1.7 million tons, lowering net earnings by up to $0.11 per diluted share. Second, though more difficult to estimate than the sales component, throughput challenges created by wet weather significantly reduced operational productivity. Finally, lower production volumes led to an underabsorption of fixed costs.
“While weather conditions will always have an impact on our short-term results, we have demonstrated that over the long term, the focused execution of our strategic plan enables us to outperform our peers and deliver shareholder value,” Nye said. “The second quarter results also show our ability to manage through weather-related disruptions, which did not prevent us from performing well. More importantly and for the longer term, we are well positioned to leverage a strengthening business environment for our products. To that end, we continue to see positive indicators of construction activity, including double-digit growth on a year-to-date basis in the private-sector construction market. Historically, increases in private-sector construction have led to growth in public-sector construction. We anticipate this trend will continue and remain well-positioned to serve these opportunities.”
Other highlights include:
- Earnings per diluted share of $0.89 compared with $0.80 (prior-year quarter includes a $0.12 per diluted share charge for business development costs).
- Consolidated net sales of $508.7 million compared with $491.2 million.
- Aggregates product line pricing up 1.7 percent; aggregates product line volume down 1.6 percent.
- Consolidated gross profit margin of 21.0 percent, up 20 basis points.
- Specialty products record net sales of $56.6 million, generating earnings from operations of $18.7 million.
- Consolidated selling, general and administrative (SG&A) expenses of $37.8 million, up 20 basis points as a percentage of net sales.
- Consolidated earnings from operations of $69.4 million compared with $59.2 million (prior-year quarter includes $9.2 million of business development costs).
Nye continued, “During the quarter, pricing momentum in the aggregates product line continued with each of our reportable groups achieving increases. The West Group reported a 2.8 percent improvement, reflecting price increases implemented over the past year. The Mid-America and Southeast groups reported average selling price increases of 1.9 percent and 0.4 percent, respectively, in the aggregates product line. Based on results through the first half of the year, we reaffirm our full-year pricing guidance of up 2 percent to 4 percent for the aggregates product line. Mid-year pricing increases that were recently implemented provide further support for continued pricing momentum. Our vertically integrated businesses also achieved pricing growth, with the ready mixed concrete and asphalt product lines reporting increases of 8.3 percent and 4.3 percent, respectively.
“Through the first half of the year, growth in construction activity has been concentrated in the private sector, which, on a year-to-date basis through May, reported a 12 percent increase in the value of construction put in place,” Nye said. “Consistent with this trend, our private-sector markets reported volume growth over the prior-year quarter. The nonresidential market, which represented approximately 30 percent of second-quarter aggregates shipments, increased 7 percent. This growth was attributable to commercial construction, namely office and retail, and was partially offset by a decline in shipments to the energy sector due to a modest slowdown in shale oil field activity. The residential construction market continues to recover; housing starts are up more than 10 percent over the prior year and housing completions are up 20 percent. Shipments to the residential market increased 4 percent and accounted for 13 percent of second-quarter aggregates shipments, representing a more normalized and balanced percentage of our overall product sales. Our expectation is for further increases in residential volumes as the housing market continues to move toward a more sustainable equilibrium. Finally, the ChemRock/Rail end use market, approximately 10 percent of second-quarter aggregates shipments, increased 2 percent.
“The infrastructure market comprised the remaining 47 percent of second-quarter aggregates shipments,” Nye continued. “Lower government spending and wet weather contributed to an 8 percent decline in quarterly volumes to this end use market and a 1.6 percent overall shipment decline for the aggregates business. However, given the ongoing recovery of the U.S. economy that is reflected by the current employment growth, we remain optimistic for increased future public-sector construction activity.”