Martin Marietta Materials reported results for the third quarter ended Sept. 30, noting products and services revenues of $1.680 billion versus $1.463 billion over the same period last year, an increase of 14.9%.
Building Materials generated record products and services revenues of $1.61 billion for the third quarter, a 15.9% increase, driven primarily by acquisitions and double-digit pricing growth across all product lines. Products and services gross profit increased 13.1%, or 10.9% on an adjusted basis, to a record $467.2 million. Elevated energy, internal freight, contract services as well as repairs and maintenance costs contributed to a products and services gross margin decline of 70 basis points, or 130 basis points on an adjusted basis, to 29.0%.
Aggregates
Third-quarter organic aggregates shipments were flat, largely due to logistical constraints, cement shortages and inclement weather in certain key markets. Importantly, organic pricing increased 11.9%, or 11.3% on a mix-adjusted basis, due to the cumulative effect of price increases throughout the year. Including acquired operations, total aggregates shipments and pricing increased 5.6% and 11.6%, respectively.
By segment:
• East Group total shipments were flat, as solid underlying demand was negatively impacted by supply chain challenges as well as weather-related disruptions. Pricing increased 11.5%, or 10.3% on a mix-adjusted basis.
• West Group total shipments improved 15.6%, driven primarily by contributions from acquired operations as well as strong Texas demand, partially offset by a historically wet August in North Texas. Organic pricing increased 12.4%, or 13.2% on a mix-adjusted basis.
Third-quarter aggregates product gross profit improved 12.8%, or 10.5% on an adjusted basis, to a record $330.3 million, while product gross margin declined 170 basis points, or 240 basis points on an adjusted basis, to 32.5%, primarily due to increased energy, internal freight and repairs and maintenance costs.
Cement
Cement shipments increased 2.3% to 1.1 million tons, a third-quarter record. Additionally, pricing increased 21.4%, or 20.6% on a mix-adjusted basis, driven by continued strong demand and the impact of multiple price increases during the year. Cement product gross profit grew to a record $67.7 million, an increase of 35.7%, while product gross margins expanded 380 basis points to 41.5%, as pricing gains more than offset higher energy costs in the period.
Ward Nye, chairman and CEO of Martin Marietta stated, “Our third-quarter results highlight our commitment to execution of our value-over-volume strategy as double-digit pricing growth drove record profitability despite relatively flat organic aggregates shipments. Importantly, we expect a return to expanding margins in the fourth quarter as the compounding effect of multiple pricing actions throughout the year offsets continued inflationary pressure and a slowdown in single-family residential construction.
“Martin Marietta’s strategic coast-to-coast footprint is well-positioned for long-term growth, driven by favorable population migration trends, housing shortages in our markets and a long-term federal highway bill complemented by healthy Department of Transportation (DOT) budgets in the company’s key states. Near-term, we expect affordability driven headwinds in the single-family residential end market will be offset by a significant acceleration in public infrastructure investment and continued strength in large-scale energy, domestic manufacturing and multi-family residential projects.
Nye concluded, “While the company’s 2022 year-to-date safety performance continues to be at world-class levels as measured by both Total Injury and Lost Time Incidence Rates, our work in this vital dimension is never done. Our commitment to continuous improvement in employee health and well-being, world-class safety, commercial and operational excellence, sustainable business practices and execution of our strategic plan reinforces our confidence in Martin Marietta’s ability to provide compelling results for the foreseeable future. Moreover, Martin Marietta’s track record of success throughout various business cycles proves the resiliency and durability of our aggregates-led business model, chosen geographies, and our ability to adapt to the challenges inherent in a dynamic macroeconomic environment. Importantly, we expect that the carryover effects of our 2022 pricing momentum, coupled with our broad-based January 1, 2023 announced price increases, will drive accelerated aggregates unit margin expansion next year.”
Downstream Businesses
On an organic basis, ready mixed concrete shipments were down 16.8% primarily due to record rainfall in portions of Texas during August as well as the completion of certain large projects. However, pricing increased 20.3% due to the positive impact of multiple price increases implemented during the year.
Ready mixed concrete product revenues and gross profit from continuing operations declined 29.1% and 40.3%, respectively, driven largely by the April 1 divestiture of our Colorado and Central Texas ready mixed concrete businesses, which was partially offset by contributions from acquired ready mixed concrete operations in Arizona. Increased raw materials costs weighed on gross margin.
On an organic basis, total asphalt shipments and pricing increased 4.3% and 22.0%, respectively. Notably, prior year volumes were constrained by the shortage in liquid asphalt, or bitumen.
Including contributions from the acquired West Coast operations, total asphalt shipments and pricing increased 31.3% and 26.1%, respectively. Total asphalt and paving product gross profit increased to a record $50.5 million. However, continued acceleration of liquid asphalt costs contributed to the gross margin compression of 360 basis points, or 470 basis points on an adjusted basis, in the third quarter.
Magnesia Specialties product revenues decreased 4.0% to $69.0 million, driven largely by lower demand from domestic steel industry customers for dolomitic lime products. Product gross profit declined 22.9% to $21.6 million as higher energy costs, particularly natural gas, depressed gross margin in the quarter.