RALEIGH, N.C., May 08, 2018 (GLOBE NEWSWIRE) -- Martin Marietta Materials, Inc. (NYSE:MLM) today reported results for the first quarter ended March 31, 2018.

Highlights Include the Following Results:

1. Total revenues include the sales of products and services to customers (net of any discounts or allowances) and freight revenues.
2. Products and services revenues include the sales of aggregates, cement, ready mixed concrete, asphalt and Magnesia Specialties products and paving services to customers and exclude related freight revenues.
3. See appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.

Ward Nye, Chairman, President and CEO of Martin Marietta, stated, “As we start the year, we are encouraged by ongoing customer optimism and our first-quarter results, both of which are consistent with our expectations. Additionally, while we remain on track to achieve our original 2018 guidance, we are updating and increasing that outlook to reflect the contribution we expect from our acquisition of Bluegrass Materials Company.

“We remain confident that underlying market fundamentals, including positive employment and population trends across our geographic footprint, will stimulate continued growth in private construction activity and provide an impetus for additional infrastructure demand as the current broad-based recovery continues. Underlying demand trends, coupled with continued pricing growth for all products and segments, reinforce our full-year 2018 outlook as construction activity accelerates during the balance of the year. Importantly, throughout the quarter, we saw strong shipment volumes on days not impacted by typical winter weather.

“Our confidence is bolstered by the recent completion of our acquisition of Bluegrass and the addition of a talented group of new employees to the Martin Marietta team. The acquisition, the second largest in our history, strengthens our aggregates-led position in high-growth southeastern and Mid-Atlantic regions, particularly in Georgia and Maryland, and is consistent with our long-term strategic growth plan. We worked collaboratively with the U.S. Department of Justice (DOJ) as it completed its review of the transaction and, as expected, the two quarries required to be divested do not impact the overall value or strategic rationale for the transaction. I want to thank our collective employees for their contributions to successfully completing this acquisition. Working together, we will expeditiously deliver significant value from our enhanced business profile. As we integrate the Bluegrass operations and realize synergies, we remain committed to world-class safety standards, diligent cost discipline, operational excellence, customer service and prudent capital allocation. ”

Mr. Nye concluded, “We believe the United States is in the midst of a steady, multi-year construction recovery. Our leading positions in attractive, high-growth markets allow us to benefit from anticipated increased demand for both public and private construction activity in 2018 and beyond. Long term, we remain focused on elevating Martin Marietta from an aggregates industry leader to a globally recognized world-class organization, allowing us to further enhance shareholder value.”

Building Materials Business

Aggregates

As contemplated in the Company’s guidance entering the year, first-quarter aggregates shipments returned to levels more in-line with historical trends and patterns. Winter weather traditionally limits the ability of outdoor contractors to perform work during the winter months. Accordingly, first-quarter operating results compare unfavorably to the first quarters of 2017 and 2016, when the Company benefitted from back-to-back unseasonably favorable weather conditions. For the quarter, aggregates product revenues decreased 5.8 percent, reflecting a 7.9 percent decline in shipments. Aggregates pricing improved 2.3 percent.

The Mid-America Group generated aggregates pricing growth of 4.9 percent, driven by continued price discipline and favorable product mix. Pricing improved 2.2 percent for the Southeast Group as winter weather and poor railroad performance constrained long-haul shipments to distribution yards in Florida and Georgia. Product mix, reduced commercial rail-shipped volumes and various competitive dynamics in portions of Texas offset robust pricing growth in Colorado, resulting in a modest price increase for the West Group. Traditional cold and wet conditions, coupled with railroad inefficiencies, also contributed to the 12.4 percent shipment decline for the Southeast Group and the 4.7 percent decline for the West Group. Mid-America Group shipments decreased 9.9 percent.

First-quarter aggregates shipments by end use are as follows:

Infrastructure Market

• Aggregates shipments to the infrastructure market decreased 11 percent as precipitation and cold temperatures delayed the start to the construction season compared with the past few years. As state Departments of Transportation (DOTs) and contractors continue to address labor constraints and the construction industry benefits from further regulatory reform, management remains confident that infrastructure demand will improve from the funding provided by the Fixing America’s Surface Transportation Act (FAST Act) and numerous state and local transportation initiatives. Overall, aggregates shipments to the infrastructure market comprised 36 percent of first-quarter aggregates volumes, well below the Company’s most recent five-year average of 43 percent.

Nonresidential Market

• Aggregates shipments to the nonresidential market decreased 10 percent overall, driven by weather-impacted challenges in office and retail construction activity. Notably, the Mideast Division, and more specifically, the Ohio District, reported strong heavy industrial growth, as a large pipeline project commenced construction after obtaining long-awaited federal clearance. Continued project approvals, coupled with higher oil prices, underpin management’s expectation that the next wave of large energy-sector projects, particularly along the Gulf Coast, should notably contribute to increased aggregates consumption. The nonresidential market represented 31 percent of first-quarter aggregates shipments.

Residential Market

• Aggregates shipments to the residential market, which tends to be the least weather-constrained end use, were flat for the first quarter. The outlook for residential construction remains robust across the Company’s geographic footprint, driven by favorable demographics, job growth, land availability and efficient permitting. Texas, Florida, North Carolina, Georgia, Colorado and South Carolina, key geographies for the Building Materials business, comprised six of the top ten states for growth in single-family housing unit starts for the trailing twelve months ended March 2018. The residential market accounted for 24 percent of first-quarter aggregates shipments.

ChemRock/Rail Market

• Aggregates shipments to the ChemRock/Rail market declined 11 percent. Reduced ballast shipments reflect weather constraints and the timing of certain purchases by East Coast railroads in the prior-year quarter. Additionally, in line with expectations, agricultural lime shipments declined 8 percent, driven by more typical winter precipitation. The ChemRock/Rail market accounted for the remaining 9 percent of first-quarter aggregates shipments.

Aggregates product gross margin was 12.5 percent, consistent with expectations, reflecting reduced operating leverage and increased diesel costs.

Cement

Cement product revenues for the first quarter decreased 4.7 percent as pricing growth of 4.2 percent was offset by an 8.8 percent volume decline. First-quarter shipments reflect abnormal precipitation in February, particularly in Dallas/Fort Worth, and extended maintenance outages at the Midlothian plant. These factors adversely impacted shipment and production levels and contributed to the 630-basis-point reduction in product gross margin to 26.6 percent.

Downstream businesses

Ready mixed concrete shipments decreased 2.3 percent, driven primarily by more typical winter weather in Colorado. Overall, ready mixed concrete prices increased 0.5 percent for the quarter. Average selling prices in Colorado improved 4.3 percent; however, seasonality, lower energy-sector shipments and geographic mix limited Texas ready mixed concrete pricing opportunities. A return to more normal winter weather in Colorado contributed to the 30.7 percent decrease in asphalt shipments, while, rising raw material costs allowed for favorable pricing during the quarter.

Magnesia Specialties Business

Magnesia Specialties first-quarter products and services revenues increased slightly to a record $64.9 million. Lower contract services and maintenance costs contributed to a 230-basis-point expansion of product gross margin to 38.6 percent for the first quarter.

Consolidated

The estimated effective income tax rate of 19.7 percent for first quarter 2018 reflects the permanent reduction in the federal corporate tax rate provided for by the Tax Cuts and Jobs Act of 2017 (2017 Tax Act).

Liquidity and Capital Resources

Cash provided by operating activities was $105.0 million in 2018 compared with $73.9 million in 2017.

Cash paid for property, plant and equipment additions during the first quarter was $96.3 million. The Company expects capital expenditures for full-year 2018 to range from $450 million to $500 million as it continues to prudently deploy capital into the business.

At March 31, 2018, the Company’s ratio of consolidated net debt-to-consolidated EBITDA, as defined in the applicable credit agreement, for the trailing-12 months was 1.62 times. The ratio excludes the debt obtained to fund, in part, the Bluegrass Materials acquisition.

In April 2018, the Company repaid $300 million of maturing bonds and amended its trade receivable facility to increase the facility limit to $400 million.

Bluegrass Acquisition

As previously announced, the Company completed its acquisition of Bluegrass, the largest privately-held, pure-play aggregates business in the United States, on April 27, 2018. Furthermore, the Company reached an agreement with the DOJ, which was submitted to the United States District Court for the District of Columbia as a proposed court order. The agreement, embodied in the proposed order, resolves all competition issues with respect to the acquisition. Under the terms of the agreement with the DOJ, Martin Marietta divested its Forsyth aggregates quarry north of Atlanta, Georgia, and will divest Bluegrass’ Beaver Creek aggregates quarry in western Maryland.

Martin Marietta expects to realize annual synergies of approximately $15 million within twelve months of the transaction’s close date. Excluding acquisition-related expenses, the acquisition is also expected to be accretive to earnings per share and cash flow within the first full year of ownership.

Commitment to Enhance Long-Term Shareholder Value

Martin Marietta is dedicated to disciplined capital allocation that preserves its financial flexibility and further enhances shareholder value. The Company’s capital allocation priorities remain unchanged and include the right acquisitions that promote the successful execution of the Company’s strategic growth plan, organic capital investment, and the return of cash to shareholders through a meaningful and sustainable dividend and share repurchases.

The Company has returned $1.2 billion to shareholders, in the form of dividend payments and share repurchases, since announcing a repurchase authorization in February 2015 to acquire up to 20 million shares of its outstanding common stock. At March 31, 2018, 14.7 million shares remain under the current repurchase authorization and 62.9 million shares of Martin Marietta common stock were outstanding.

Outlook for 2018

Martin Marietta remains optimistic about its near-term and long-term outlooks given its continued ability to successfully execute its strategic business plan and the largely positive trends in the markets it serves. The Company expects growth in all three primary construction end-use markets as the current broad-based recovery continues on a steady and extended basis. Notably:

• Infrastructure construction activity should benefit from the funding provided by the FAST Act as state DOTs and contractors address labor constraints and further regulatory reform emerges. Additionally, state and local initiatives that support infrastructure funding, including gas tax increases and other ballot initiatives, continue to gain overwhelming voter support and will play an expanded role in public-sector activity. Third-party forecasts support increased infrastructure spending in 2018, particularly for aggregates-intensive highways and streets.

• Nonresidential construction is expected to increase in both the heavy industrial and commercial sectors for the next several years as supported by third-party forecasts. Management expects new energy-related projects, particularly along the Gulf Coast, will continue to bid in 2018 with broader construction activity beginning in earnest in 2019 and beyond as permitting and final investment decisions are either made and/or approved.

• Residential construction is expected to continue to grow, particularly in key Martin Marietta markets, driven by employment gains, historically low levels of construction activity over the previous years, low mortgage rates and higher lot development. Residential construction provides an impetus for future infrastructure and nonresidential activity.

2018 Guidance

Management has updated its full-year 2018 guidance to reflect the completion of the Bluegrass acquisition. Absent the impact of the acquired Bluegrass operations, the Company’s full-year 2018 guidance remains unchanged from the guidance provided in February 2018. Additionally, Martin Marietta’s 2018 outlook excludes any benefit from a potential increase in federal infrastructure funding.

Specifically:

• Heritage aggregates average selling price is expected to increase in a range of 3 percent to 5 percent and shipments by end-use market compared with 2017 levels are as follows:
  • Infrastructure shipments to increase in the mid-single digits.
  • Nonresidential shipments to increase in the low- to mid-single digits.
  • Residential shipments to increase in the high-single digits.
  • ChemRock/Rail shipments to remain stable.

About Martin Marietta

Martin Marietta, a member of the S&P 500 Index, is an American-based company and a leading supplier of building materials, including aggregates, cement, ready mixed concrete, and asphalt. Through a network of operations spanning 27 states, Canada and The Bahamas, dedicated Martin Marietta teams supply the resources necessary for building the solid foundations on which our communities thrive. Martin Marietta's Magnesia Specialties business provides a full range of magnesium oxide, magnesium hydroxide and dolomitic lime products. For more information, visit www.martinmarietta.com or www.magnesiaspecialties.com.