Martin Marietta Reports Strong Fourth Quarter

Martin Marietta Materials Inc. reported results for the fourth quarter and year ended Dec. 31, 2013.

Ward Nye, president and CEO of Martin Marietta Materials, stated: “We are pleased to finish a successful 2013 with a solid fourth quarter. Strong performance by our Aggregates and Specialty Products businesses contributed to quarterly earnings per diluted share of $0.77, a 67 percent increase over the prior-year quarter. Our nonresidential and residential aggregates product line shipments experienced double-digit volume growth as a result of focused execution and our efforts to position the Company to benefit from the continued recovery in private-sector construction. The Aggregates business also achieved pricing growth in each reportable segment. When coupled with disciplined management of our cost profile and record performance by our Specialty Products business, this led to an incremental consolidated gross margin (excluding freight and delivery revenues) for the quarter of 69 percent. Notably, our consolidated gross margin (excluding freight and delivery revenues) expanded 380 basis points.

“The aggregates business reported a 3.4 percent quarterly increase in aggregates product line pricing and notable growth in both pricing and volume in the ready mixed concrete product line, which led to a 7 percent increase in net sales and a 250-basis-point improvement in gross margin (excluding freight and delivery revenues). Aggregates product line shipments were down slightly compared with the prior-year quarter, as volume growth in the private-sector was offset by decreased shipments to the public-sector. Net sales for the Specialty Products business increased 15 percent, reflecting the Woodville, Ohio, kiln expansion in the dolomitic lime business, marketing initiatives in the chemicals business and sound pricing gains in key product lines.

“As we begin 2014, we are encouraged by numerous macro-economic indicators, including employment growth, which suggest increased construction activity going forward. We expect private-sector construction to benefit from significant shale energy projects, improvements in general nonresidential construction and further recovery in the housing market. Additionally, we also foresee some modest growth in public sector projects. Following years of underinvestment at the federal level, growth in state-level infrastructure funding initiatives should stimulate public-sector activity. In summary, we believe we are well positioned to capture these opportunities across our markets and build on the momentum created throughout 2013,” Nye said.

Versus last year’s fourth quarter, the company is reporting:

  • Earnings per diluted share of $0.77 compared with $0.46.
  • Consolidated net sales of $491.4 million compared with $456.0 million.
  • Aggregates product line pricing increase of 3.4 percent; volume decline of 0.4 percent.
  • Specialty Products record net sales of $58.1 million and record earnings from operations of $20.4 million.
  • Consolidated gross margin (excluding freight and delivery revenues) of 20.6 percent, up 380 basis points.
  • Consolidated selling, general and administrative expenses (SG&A) decreased 70 basis points as a percentage of net sales.
  • Consolidated earnings from operations of $62.8 million compared with $40.2 million.

For 2013 versus 2012, the company is reporting:

  • Earnings per diluted share of $2.61 compared with $1.83 (2012 includes business development expenses of $0.46 per diluted share).
  • Net sales of $1.943 billion compared with $1.833 billion.
  • Aggregates product line pricing up 3.0 percent; volume flat.
  • Specialty Products record net sales of $225.6 million and record earnings from operations of $73.5 million.
  • Consolidated gross margin (excluding freight and delivery revenues) of 18.7 percent, up 90 basis points.
  • Consolidated SG&A up 10 basis points as a percentage of net sales.
  • Consolidated earnings from operations of $218.0 million compared with $156.2 million.

Nye continued, “The private sector continues to drive construction growth. Looking closely at our fourth-quarter results, the nonresidential market, which comprised 33 percent of fourth-quarter aggregates product line shipments and increased 11 percent, was a major contributor. We saw notable growth in both commercial construction and the energy sector as we continue to benefit from the investment in shale energy. Looking forward, we anticipate additional opportunities as developmental activity moves into downstream projects.

“The residential market achieved volume growth of 21 percent and accounted for 15 percent of our quarterly shipments, in line with historical levels. Housing permits and starts, key indicators for residential construction activity, continue to meaningfully improve on a year-over-year basis. Housing starts for the year were up 18 percent over 2012, and the rate of starts significantly exceeded completions. The ChemRock/Rail market, which represented 10 percent of aggregates volumes, decreased 12 percent, partially as a result of a reduction in agricultural lime shipments due to wetter and colder weather and lower ballast volumes. Shipments to the infrastructure end-use market, which represented the remaining 42 percent of our aggregates product line, decreased 10 percent, driven by the completion of several large road projects in Indiana and Iowa and poor weather in Texas.

“The Federal government shutdown in October, as well as questions concerning future government spending policy negatively affected public-sector demand. There is continued uncertainty in long-term funding beyond the September 2014 expiration of the Moving Ahead for Progress in the 21st Century Act, or MAP-21. However, we remain encouraged by the anticipated impact of the Transportation Infrastructure Finance and Innovation Act (TIFIA) component of MAP-21 which has the ability to leverage up to $50 billion in financing for transportation projects of either national or regional significance. While awards continue to move at a slower pace versus earlier expectations, we still expect TIFIA to benefit several of our major markets – namely Texas, North Carolina and Florida – in 2014 and likely more notably in 2015.

“Not surprisingly, we are seeing growth in state-level funding initiatives as states and municipalities are taking actions to address their infrastructure needs in this period of federal funding uncertainty. For example, Texas, in addition to filing applications for nearly $7 billion in funding assistance under TIFIA, has a November ballot initiative that, if passed, would provide an additional $1 billion in funding for highway projects. Additionally, San Antonio recently announced an $825 million highway initiative that will include the area’s first toll-road project. Colorado passed legislation to allocate $450 million for emergency road repairs following flood damage incurred in September, of which $110 million will be provided by the U.S. Department of Transportation. In Georgia, three regions within the state are collecting a special-purpose local option sales tax earmarked for transportation improvements. We expect projects funded by this tax to accelerate during 2014. Anecdotally, these examples demonstrate why we believe infrastructure spending on local levels will continue to grow.

“We were successful in extending our pricing momentum in the Aggregates business with each of our reportable segments reporting growth. Pricing improvement was strongest in the Mid-America Group, where a 5.2 percent increase was led by our North Carolina operations. Importantly, for each quarter of 2013, all reportable segments achieved aggregates product line pricing improvement, enabling us to achieve an overall annual increase of 3.0 percent. For the quarter, the ready mixed concrete business achieved pricing growth of 9.8 percent while the asphalt product line reported a decrease of 4.8 percent,” Nye said.

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