Martin Marietta: Aggregates Deep Dive

Oct. 30, 2020 – Martin Marietta’s third-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. Martin Marietta anticipates continued industry-wide fluctuations in product demand over the next few quarters due to the COVID-19 pandemic and related governmental actions. The company remains confident that its favorable pricing trends are sustainable and durable, aided in part by the continued success of its locally-driven pricing strategy. Martin Marietta believes that the attractive underlying fundamentals and long-term secular growth trends in its key geographies, both of which underpinned the company’s record 2019 and year-to-date 2020 performance, remain intact and will again be evident as the U.S. economy stabilizes and recovers.