Martin Marietta Materials Inc. reported record results for the first quarter ended March 31, 2016. Consolidated net sales totaled $734 million, up from $631.9 million in the first quarter of 2015. Aggregates volume was 32,665 tons, up from 28,836 tons in the first quarter of 2015.
Ward Nye, chairman, president and CEO of Martin Marietta, stated: “We are especially pleased to report a record first quarter even as we are only in the early-stage of recovery in broadly-based construction activity. Our ability to perform so well without the benefit of consistent macroeconomic support reflects positively on Martin Marietta’s disciplined execution against our strategic priorities. Our results also are indicative of our strict adherence to maintaining a relentless strategic and tactical focus on our leading operating positions in economically-diverse, high-growth geographies, and improving market conditions throughout the vast majority of our business. First-quarter results were supported by several years of slow, but steady job growth, and evident in the double-digit aggregates product line volume growth, strong price increases and improved profitability of both our aggregates-related downstream businesses and Cement business. Our year-over-year comparisons further underscore the continued steady economic recovery in our business, much of which was masked in 2015 by historic levels of rainfall.
“In the first quarter of 2016, our aggregates product line volume grew over 13 percent and pricing increased over 8 percent,” Nye said. “The Mid-America Group led with a 28 percent increase in aggregates product line shipments, resulting from the start of several large, principally state-funded highway projects across North Carolina and South Carolina, and increased residential and non-residential construction activity, across a broad spectrum of end-use demand. The West Group reported a 5 percent increase in volumes and an 11 percent increase in pricing. Of particular note, North Texas aggregates product line volumes and pricing increased 28 percent and 12 percent, respectively, for the quarter. The Dallas-Fort Worth Metroplex is the fastest growing area in Texas, and one of the top nationally for both job growth and residential construction. Further, the Texas Department of Transportation forecasts an $8 billion fiscal year infrastructure construction plan, which, together with the North Texas Tollway Authority and the Harris County Tollway Authority, should lead to further growth in customer backlogs. Our leading Texas market positions will allow us to capitalize on these opportunities for the balance of the year, and, indeed, for years to come.”
Nye concluded, “On the strength of both the quarter and our customers’ backlogs, we have also increased our aggregate product line volume growth to six percent to eight percent, as we expect continued positive employment growth in our key markets and normal weather patterns. We further anticipate an environment where our operations can safely run more efficiently and the benefits of strategic and operational excellence initiatives, including acquisition integration, all coalesce to deliver increasing shareholder value.”
Aggregates product line shipments reflected growth in all end-use markets. Shipments to the infrastructure market comprised 39 percent of quarterly volumes and increased 13 percent. Growth was driven by large projects in North Carolina and the southeast, two areas that passed legislation in 2015 increasing near and long-term state infrastructure spending.
The nonresidential market represented 33 percent of quarterly aggregates product line shipments and increased 14 percent. The Mid-America Group led with a 50 percent increase in heavy nonresidential and 25 percent increase in light nonresidential. Notably, an improving economy is driving business investment in, for example, industrial warehouse and distribution facilities, which have been dormant in much of the Mid-America Group’s markets over the past several years. The West Group saw a slight increase in nonresidential activity as the diversified Texas economy generated a broad range of projects replacing energy-related shale shipments currently displaced by volatile oil prices.
The residential market accounted for 18 percent of quarterly aggregates product line shipments. Volumes to this segment increased 20 percent as the housing recovery continues and expands, particularly in the southeastern portion of the country. Housing activity in the United States generally remains well below historic averages. That said, housing permits, starts and completions are all up more than ten percent for the trailing-twelve months ended March 2016. Notably, during the first quarter, North Carolina, Iowa, Florida and South Carolina all reported double-digit growth in housing starts. The ChemRock/Rail market accounted for the remaining 10 percent of aggregates product line volumes and increased slightly.
Overall, aggregates product line shipments increased 13.3 percent. Geographically, growth was led by the Mid-America Group, which increased 27.8 percent. The Southeast and West Groups achieved an increase of 5.6 percent and 5.4 percent, respectively.
Aggregates product line pricing improvement of 8.1 percent reflects growth in all reportable groups, led by the 11.3 percent increase in the West Group. In addition to North Texas, double-digit pricing growth was also achieved in Central Texas, South Texas and Colorado markets. The Southeast Group and Mid-America Group reported increases of 7.3 percent and 4.3 percent, respectively.
The Ready Mixed Concrete product line benefitted from strong demand and much improved operating conditions driving a reported 31.0 percent increase in shipments and an 11.7 percent increase in average selling price, resulting in a 46.4 percent increase in net sales and an 810-basis-point improvement in gross margin (excluding freight and delivery.
The Cement business benefitted from strong demand and better weather in Texas and, for the quarter, generated $69.9 million of net sales and $32.6 million of gross profit. Cement shipments increased 13.8 percent coupled with a 3.6 percent improvement in pricing (excluding the impact of the California cement operations sold in 2015). The Cement business is benefitting from broad based strength in Texas markets, where demand exceeds local supply.