RALEIGH, N.C., Feb. 12, 2019 (GLOBE NEWSWIRE) -- Martin Marietta Materials, Inc. (NYSE:MLM) today reported results for the fourth quarter and year ended December 31, 2018.

Ward Nye, Chairman, President and CEO of Martin Marietta, stated, “Our industry-leading safety and record financial performance in 2018 can be best summarized as challenges faced and challenges met. We produced record results for the seventh consecutive year and concluded 2018 with the best heritage safety performance in our Company’s history. These accomplishments demonstrate our commitment to operational excellence and the successful execution of our strategic plan. Full-year revenues increased 7 percent to a record $4.2 billion and adjusted EBITDA (Earnings Before Interest, Taxes, and Depreciation and Amortization) increased 9 percent to an all-time high of $1.1 billion, driven by a modest improvement in heritage Building Materials shipments, solid pricing gains and value-enhancing acquisitions. We also delivered record net earnings and earnings per diluted share (after adjusting for the one-time benefit in 2017 of the 2017 Tax Act on earnings metrics) for the full year.

“Even more noteworthy, we extended our lengthy history of record performance without meaningful shipment growth from our heritage Building Materials business. Weather, contractor capacity and logistics disruptions challenged both our Company and the industry throughout the year, resulting in aggregates volumes, on a comparable basis, that remained only modestly above 2010 trough levels. Our proven ability to successfully manage short-term external disruptions makes us highly optimistic about our business and ability to achieve both continued profitability growth and shareholder value creation in 2019 and beyond.

“Looking ahead, we expect 2019 to be another record year for Martin Marietta. The fundamentals of our business and underlying demand trends remain strong across our geographic footprint. We believe the combination of continued private-sector strength and the long-awaited arrival of increased public-sector activity in our key geographies will drive shipment, pricing and profitability growth in 2019. Leading employment and population growth across the Sunbelt should continue to bolster private-sector construction activity. Further, after a decade of underinvestment, infrastructure activity is poised for meaningful growth as evidenced by an acceleration in public lettings and contract awards in our key states of Texas, Colorado, North Carolina, Georgia and Florida. These trends, combined with an improved pricing outlook, underscore the strength of our markets and the near-term growth trajectory of our business.”

Mr. Nye concluded, “We are confident in Martin Marietta’s outlook given our leading market positions, disciplined pricing strategy and proven execution of our strategic plan. For 2019, we anticipate construction growth in our key regions to outpace the nation as a whole, driven by attractive employment growth, population trends and favorable momentum from state Departments of Transportation. Additionally, widespread customer optimism and growing contractor backlogs support increased demand for our construction materials. With both the ability and capacity to meet future market demand, Martin Marietta remains committed to world-class attributes across our business - including safety, efficiency and operational excellence – and is well-positioned to deliver enhanced long-term value for our shareholders.”

Building Materials Business

Unfavorable weather persisted across the Company’s geographic footprint and dampened construction activity during an already seasonally-restricted quarter. Texas, the Company’s largest state by revenues, experienced its wettest October in history, while several southeastern states endured extreme precipitation in the form of both rainfall and snow as well as cold temperatures. These temporary disruptions adversely impacted the Company’s shipping and production levels, as well as its cost structure. Extreme weather conditions, particularly during periods of robust demand, led to days of low production followed by days of high production as customers accelerate work when weather permits, all of which results in downward pressure on the Company’s operating leverage.

Aggregates

Fourth-quarter heritage aggregates pricing improved 2.3 percent and shipments declined slightly. Excluding the fourth-quarter 2017 shipments from the Company’s Forsyth, Georgia quarry that was divested in April 2018, fourth-quarter 2018 heritage aggregates volume improved 0.5 percent.

• Shipments for the Mid-America Group heritage operations increased 1.6 percent, driven by heavy industrial projects in the Mideast Division. These gains were offset by weather-related delays in several large public and private construction projects in the Carolinas. Heritage pricing improved 2.1 percent.
• Shipments for the Southeast Group heritage operations, as reported, decreased 3.2 percent; excluding fourth-quarter 2017 shipments from the Forsyth, Georgia quarry, these shipments increased 1.9 percent. Weather hindered construction activity in Georgia and Florida. Heritage pricing improved 7.4 percent, driven by strong gains in North Georgia and a higher percentage of long-haul shipments.
• West Group shipments declined 1.2 percent, driven by Texas’ record October rainfall, as well as project delays in Colorado. West Group pricing improved 0.5 percent, reflecting robust pricing in Colorado that was partially offset by product mix in Texas.

Martin Marietta’s fourth-quarter heritage aggregates shipments by end use are as follows (all comparisons are versus the prior-year quarter):

Infrastructure Market

• Aggregates shipments to the infrastructure market decreased 5 percent, as large public projects in North Carolina, South Carolina and Texas were delayed by weather. Public construction projects, once awarded, are seen through to completion. Thus, delays from weather or other factors typically serve to extend the duration of the construction cycle for the Company’s single largest end-use market. The Company is encouraged by the acceleration of state lettings and contract awards in key states, including Texas, Colorado, North Carolina, Georgia and Florida. As state Departments of Transportation (DOTs) and contractors continue to address labor constraints and the broader industry benefits from further regulatory reform, management remains confident that infrastructure demand will continue to improve, driven by funding provided by the Fixing America’s Surface Transportation Act (FAST Act) and numerous state and local transportation initiatives. Aggregates shipments to the infrastructure market comprised 36 percent of fourth-quarter aggregates volumes. For the full year, the infrastructure market represented 39 percent of aggregates shipments, remaining below the Company’s most recent ten-year average of 46 percent.

Nonresidential Market

• Aggregates shipments to the nonresidential market increased 18 percent, driven by both commercial and heavy industrial construction activity. The Company continues to benefit from robust distribution center, warehouse, data center and wind turbine projects in key geographies. Notably, the Mideast Division, which experienced favorable weather during the quarter, reported double-digit volume growth as it continued to ship to the Mountaineer Xpress Pipeline project in West Virginia. The nonresidential market represented 36 percent of fourth-quarter aggregates shipments.

Residential Market

• Aggregates shipments to the residential market declined 10 percent stemming from weather delays. Importantly, Florida, Texas, Colorado, North Carolina, South Carolina and Georgia, six of the Company’s key states, were ranked in the top ten nationally for growth in single-family housing unit starts for the trailing twelve months ended November 30, 2018. The residential construction outlook across the Company’s geographic footprint remains positive for both single- and multi-family housing, driven by favorable demographics, job growth, land availability, steady interest rates and efficient permitting. The residential market accounted for 21 percent of fourth-quarter aggregates shipments.

ChemRock/Rail Market

• The ChemRock/Rail market accounted for the remaining 7 percent of fourth-quarter aggregates shipments. Volumes to this sector decreased 17 percent, driven by reduced agricultural lime shipments from weather-delayed corn and soybean harvests and a depressed farm economy. Ballast shipments declined due to lower maintenance spending by Class I railroads.

Aggregates product gross margin decreased 590 basis points to 25.3 percent, reflecting higher costs for production personnel, diesel, rail freight and depreciation combined with a lower inventory build.

Acquired operations shipped 4.4 million tons at selling prices that are 10 percent to 15 percent below the Company’s average, but in line with management’s expectations. Synergy realization has exceeded the Company’s expectations.

Cement

Cement product revenues for the fourth quarter decreased 3.3 percent as pricing growth of 2.6 percent was offset by a 5.9 percent volume decline. Fourth-quarter shipments reflect record precipitation in Texas, particularly in Dallas/Fort Worth. Lower kiln outage costs and a higher inventory build offset increased costs for natural gas, freight and raw materials, resulting in a product gross margin of 32.8 percent, an improvement of 20 basis points.

Downstream businesses

Ready mixed concrete shipments decreased 10.9 percent, primarily driven by weather headwinds in Texas, and pricing improved 3.2 percent. Hot mixed asphalt shipments declined 12.7 percent, reflective of the prior-year quarter that benefited from unseasonably mild weather. Asphalt pricing improved 1.9 percent.

Magnesia Specialties Business

Magnesia Specialties product revenues increased 7.1 percent to a fourth-quarter record of $67.2 million, reflecting growth in both the chemicals and lime businesses. Higher costs for energy and repairs contributed to a 30-basis-point reduction in fourth-quarter product gross margin to 38.9 percent.

Consolidated

Other operating expenses, net, included an $11.7 million non-cash, pretax charge for asset and portfolio rationalization costs related to the Company’s Southwest ready mixed concrete business.

Liquidity and Capital Resources

Cash provided by operating activities was $705.1 million in 2018 compared with $657.6 million in 2017.

Cash paid for property, plant and equipment additions was $376.0 million, as the Company continues to prudently deploy capital into the business.

At December 31, 2018, the Company’s ratio of consolidated net debt-to-consolidated EBITDA, as defined in the applicable credit agreement, for the trailing twelve months was 2.76 times.

Commitment to Enhance Long-Term Shareholder Value

Martin Marietta is dedicated to disciplined capital allocation that preserves the Company’s financial flexibility and further enhances shareholder value. The Company’s capital allocation priorities remain unchanged and include value-enhancing 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 $1.4 billion to shareholders, in the form of dividend payments and share repurchases, since announcing a 20 million share repurchase authorization in February 2015. During the fourth quarter of 2018, the Company repurchased 217,000 shares of common stock pursuant to its share repurchase authorization. As of December 31, 2018, 14.1 million shares remained under the current repurchase authorization and 62.5 million shares of Martin Marietta common stock were outstanding.

Outlook for 2019

Martin Marietta is confident in its 2019 outlook. The Company’s geographic footprint has attractive underlying market fundamentals, including notable employment gains, population growth and superior state fiscal health – all attributes that promote steady and sustainable construction growth for the foreseeable future. Supported by third-party forecasts, Martin Marietta believes the current construction cycle will expand further in 2019 for each of the Company’s three primary construction end-use markets. Notably:

• Infrastructure construction activity, particularly for aggregates-intensive highways and streets, should benefit from recent accelerations in state lettings and contract awards in key Martin Marietta states, continued FAST Act funding and regulatory reform allowing for reduced permitting time for large projects. Importantly, the partial federal government shutdown did not meaningfully delay awarded contracts and construction spending as the FAST Act, and not the federal general fund, supports federal transportation programs. Additionally, state and local initiatives that support infrastructure funding, including gas tax increases, bond programs and other ballot initiatives, will continue to play an expanded role in public-sector activity as they garner voter approval at historically high levels. Further, third-party forecasts also support increased infrastructure investment in 2019 and beyond.
• Nonresidential construction activity should increase in both the commercial and heavy industrial sectors for the next several years across many of the Company’s key markets. Both the Architectural Billings Index and Dodge Momentum Index suggest commercial and institutional construction activity will remain healthy throughout 2019. Continued federal regulatory approvals should notably contribute to increased aggregates consumption from the next wave of large energy-sector projects, particularly along the Gulf Coast. To date, management has not seen a slowdown in the regulatory permitting and investing decisions for these projects despite the recent pullback in oil prices. Construction activity for these projects is expected to begin in earnest in 2019 and continue for several years thereafter.
• Residential construction should continue to grow. While mortgage rate increases temporarily paused new residential construction, now stabilized, the residential market is expected to adapt and further strengthen. Housing starts remain below the 50-year average of 1.5 million annual starts despite notable population gains. Further, management believes a shortage of single-family housing units exists, particularly for entry-level homes; a need the homebuilding industry is now beginning to address. Martin Marietta’s leading positions in southeastern and southwestern states offer superior opportunities for gains in single-family housing driven by a multitude of factors, such as affordable land, lower taxes and fewer regulatory barriers. Continued strength in residential construction supports future infrastructure and nonresidential activity.

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.