• Martin Marietta Materials Revises Revenue and Earnings Forecast
Martin Marietta Materials, Inc. revised its revenue and earnings forecast for 2001, based on lower volume and higher costs, primarily as a result of the significant impact of tropical storm Allison, unexpected delays on certain plant construction projects, and certain other nonrecurring costs. However, full year 2001 revenues are still expected to increase by 12% to 15% and earnings are expected to grow 3% to 9%.Given current forecasts of economic activity, the company expects a continuing ramp up in infrastructure demand and a continuing slowdown in building construction during 2001 and into 2002. Based on these estimates for the year 2001, the Corporation expects aggregates shipments to increase 9% to 12%, with virtually all growth coming from acquisitions. As a result of sales of an increased proportion of lower-priced products during the first and second quarters, pricing at heritage locations is expected to increase approximately 3% for the year, with total revenue increasing 12% to 15%. Consolidated net earnings are expected to increase 3% to 9%. The earnings increase is expected to be at a lower rate than revenue growth, due to goodwill charges associated with acquisitions prior to July 1, 2001, interest costs primarily associated with financing the Meridian acquisition, and other costs described below. Expected earnings include the benefit from the sale of the refractories business and the potential sale of certain non-strategic assets.
Commenting on the revised outlook, Stephen P. Zelnak, Jr., Chairman and CEO of Martin Marietta Materials, stated, "We continue to be affected by unusual weather events in key markets. Certain plant project delays, which average 60 to 90 days, affect planned reductions in costs, as well as marketing opportunities with the new capacity.
"We continue to focus on our long-term strategy of maximizing value to shareholders through continued growth of our Company and improvements in operating efficiency. During the first half of 2001, we have completed nine acquisitions, including Meridian, all of which strengthen our strategic position in our areas of interest. We expect to complete additional complementary acquisitions during the second half of the year. Further, we anticipate bringing significant new efficient capacity on line at our Bahamas location and our Chico quarry, serving Dallas - Ft. Worth, in the third and fourth quarters, which will boost our profits from these operations starting in late 2001. In addition, we anticipate some selected divestitures where redeployment of capital enhances our financial returns. Reduction of debt also continues to be a focus of the company."
The Houston area, which is the Company's largest metropolitan sales area with over $100 million in revenue in 2000, experienced heavy rainfall - over 30 inches in some areas - from Tropical Storm Allison. The subsequent flooding has extensively disrupted the Corporation's aggregates and asphalt business in that area. The timing for restoration of full business levels is not known at this point. However, it is expected that, with the current focus on cleanup and repair, the majority of the Texas Department of Transportation's Road Program in that area will be pushed into 2002. The two-week journey of the storm across the Gulf Coast, the southeastern United States and the Atlantic Coast affected areas where the Corporation is typically a leading aggregates supplier. The Corporation was also affected in Ohio where heavy, persistent rainfall, for 20 days in May, reduced shipments and impaired production rates. One of the Corporation's largest quarries, located in the Columbus, Ohio, area, was shut down for two weeks by flooding from the Scotia River, resulting in project construction delays, high operating costs, and expensive backup hauling from other quarries to meet customers' commitments. The modernization and expansion project at this location is expected to be on line in late July, and is expected to improve cost and product availability substantially.
The Corporation's production costs have increased, as a result of the lower-than-expected production rates and other nonrecurring costs, including strike-related costs at two of the Corporation's Indiana operations, which increased production costs during the latest quarter. In addition, the Corporation has incurred unexpected construction delays at the Bahamas plant and the new Burning Springs underground mine in Parkersburg, West Virginia. All of the plant projects are expected to be fully on line late in the year, with full operation in 2002.
Management expects the production costs to moderate for the second half of 2001, however, first half 2001 costs are not recoverable.
New projects at the Bahamas location and Chico quarry are expected to reduce costs on the over 6 million tons currently produced from these quarries and will allow the Corporation to supply an additional 6 million tons annually as demand for these products continues to grow. However, as described above, the unanticipated construction delays at the Bahamas location and the Burning Springs mine in West Virginia have moved their expected mid-year 2001 completion dates to later in the second half. The Columbus limestone plant is expected to contribute lower cost and higher earnings in the second half of 2001. These projects are expected to contribute to earnings late in 2001 and should provide a boost to the Corporation's earnings potential in 2002.
