RALEIGH, N.C., July 30, 2019 (GLOBE NEWSWIRE) -- Martin Marietta Materials, Inc. (NYSE:MLM) today reported results for the second quarter ended June 30, 2019.

Ward Nye, Chairman, President and CEO of Martin Marietta, stated, “We are proud to have established new quarterly records for revenues, gross profit and adjusted EBITDA, driven by increased aggregates shipments, continued pricing momentum across the Building Materials business and improved cost management. These record-setting second-quarter results demonstrate Martin Marietta’s strong execution as we capitalized on the robust underlying demand across our geographic footprint. Notably, aggregates shipments increased 10 percent, led by our Mid-America and Southeast Groups which achieved double-digit-growth as these markets benefited from improving strength in public- and private-sector spending and contributions from acquired operations. Based on these current trends and our strong first-half performance, we are raising our full-year outlook and believe 2019 will be another record year for Martin Marietta.

“Construction activity in our Top 10 states is outpacing the nation as a whole, as evidenced by recent trends in total construction starts. Importantly, aggregates shipments to our three primary end-use markets increased for a second consecutive quarter, demonstrating the breadth of overall demand in our key regions. Attractive underlying market fundamentals, including notable employment gains, population growth and superior state fiscal health, across our geographic footprint should continue to bolster private-sector construction demand. We expect infrastructure projects to accelerate during the second half of the year, supported by meaningful increases in public lettings and contract awards in our key states, notably Texas and Colorado.”

Mr. Nye concluded, “Throughout our 25-year history as a public company, Martin Marietta has established a proven record of responsibly managing and growing our business to create long-term shareholder value. Going forward, we will continue to build upon our successful approach of price discipline, strategic geographic positioning and prudent capital allocation. We remain committed to the disciplined execution of our strategic plan and the world-class attributes of our business – including safety, ethics, cost oversight and operational excellence – to drive continued profitability growth in 2019 and beyond.”

Building Materials Business

Second-quarter operating results reflect strong underlying product demand, most notably in North Carolina, Georgia, Iowa and Maryland, as customers continued to address weather-deferred projects from 2018 and growing backlogs. Texas and Colorado, the Company’s two largest states by revenues, experienced near-record precipitation and unseasonable snow accumulation, respectively. This extreme weather temporarily hindered construction activity and negatively impacted the aggregates, cement and downstream operations in these regions.

Aggregates

Second-quarter aggregates volume and pricing improved 9.9 percent and 3.4 percent, respectively. Same-store aggregates volume and pricing improved 6.1 percent and 4.1 percent, respectively.

• Shipments for the Mid-America Group operations increased 15.9 percent, or 10.2 percent on a same-store basis, supported by infrastructure and commercial projects. Additionally, the Midwest Division benefited from shipments related to emergency flood repairs. Pricing improved 1.6 percent, or 3.0 percent on a same-store basis.
• Shipments for the Southeast Group operations increased 12.7 percent, or 5.4 percent on a same-store basis, reflecting the strength of the North Georgia and Florida markets. Pricing improved 7.3 percent, or 8.3 percent on a same-store basis, driven by solid gains in North Georgia and a higher percentage of long-haul shipments.
• West Group shipments increased 1.1 percent despite unfavorable weather that contributed to project delays. West Group pricing increased 3.4 percent.

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

Infrastructure Market

• Aggregates shipments to the infrastructure market increased 2 percent as contractors continued to advance transportation-related projects. Following more than a decade of underinvestment, management believes infrastructure demand is poised for meaningful growth. Funding provided by the Fixing America’s Surface Transportation Act (FAST Act), combined with numerous state and local transportation initiatives, has recently accelerated lettings and contract awards in key states, including Texas, Colorado, Iowa and Maryland. For the quarter, the infrastructure market represented 37 percent of aggregates shipments, which is below the Company’s most recent ten-year average of 46 percent.

Nonresidential Market

• Aggregates shipments to the nonresidential market increased 25 percent, driven by gains in commercial and heavy industrial construction activity. The Company continued to benefit from robust distribution center, warehouse, data center and wind energy projects in key geographies, including Texas, the Carolinas, Georgia and Iowa, as well as the early phases of several large energy-sector projects along the Gulf Coast. The nonresidential market represented 37 percent of second-quarter aggregates shipments.

Residential Market

• Aggregates shipments to the residential market increased modestly, as ongoing homebuilding activity in the Carolinas, Georgia and Florida was offset by weather-related delays in Texas. 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, low interest rates and efficient permitting. On a national level, housing starts remain below the 50-year annual average of 1.5 million despite notable population gains. The residential market accounted for 21 percent of second-quarter aggregates shipments.

ChemRock/Rail Market

• The ChemRock/Rail market accounted for the remaining 5 percent of second-quarter aggregates shipments. Volumes to this end use increased 11 percent, driven by improved ballast shipments to the western Class I railroads for emergency flood repairs.

Aggregates product gross margin increased 340 basis points to 33.2 percent, reflecting improved operating leverage from increased shipment and production levels and the absence of the $10.2 million impact of selling acquired inventory after its markup to fair value as part of acquisition accounting incurred in 2018.

Cement

Second-quarter cement product revenues decreased slightly, as pricing growth of 4.6 percent was offset by a 4.9 percent volume decline resulting from extreme Texas precipitation, most significantly in Dallas/Fort Worth. Production efficiencies and lower maintenance costs contributed to the 110-basis-point expansion in product gross margin to 37.6 percent.

Downstream businesses

Ready mixed concrete shipments decreased 15.5 percent, driven by unfavorable weather conditions in Texas and Colorado. Ready mixed concrete selling prices improved 2.5 percent. Colorado asphalt shipments declined 8.2 percent while pricing improved 5.2 percent.

Magnesia Specialties Business

Magnesia Specialties product revenues increased 3.3 percent to a record $70.4 million as the business continued to benefit from solid global demand for magnesia chemical products. Product gross margin improved 500 basis points to 41.5 percent driven by favorable product mix, production efficiencies and lower energy costs.

Consolidated

During the second quarter ended June 30, 2019, the Company identified a prior-period error that overstated its equity earnings from a nonconsolidated affiliate. The overstatement was not deemed material to any previously-reported periods and was therefore corrected as an out-of-period expense of $15.7 million ($12.0 million net of tax) during second-quarter 2019. The pretax noncash adjustment is recorded in other nonoperating expenses, net, consistent with the recurring classification of equity earnings from the affiliate.

For the quarter ended June 30, 2018, other operating income, net, included $16.9 million of gains on the sale of surplus land and $7.7 million, net, of litigation and related settlements.

Liquidity and Capital Resources

Cash provided by operating activities for the six months ended June 30 was $333.7 million in 2019 compared with $238.0 million in 2018.

Cash paid for property, plant and equipment additions for the six months ended June 30, 2019 was $207.5 million. Capital expenditures for the full year are expected to range from $350 million to $400 million as the Company continues to prudently deploy capital into the business.

At June 30, 2019, the Company’s ratio of consolidated net debt-to-consolidated EBITDA, as defined in the applicable credit agreement, for the trailing twelve months was 2.7 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 $1.5 billion to shareholders in the form of dividend payments and share repurchases since announcing a 20 million share repurchase authorization in February 2015. In May 2019, the Company declared its 100^thconsecutive quarterly cash dividend. Additionally, during second-quarter 2019, the Company repurchased 232,400 shares of common stock pursuant to its share repurchase authorization. As of June 30, 2019, 13.9 million shares remained under the current repurchase authorization and 62.4 million shares of Martin Marietta common stock were outstanding.

Full-Year Outlook

Martin Marietta’s geographic footprint has attractive underlying market fundamentals, including notable employment gains, population growth and superior state fiscal health – all attributes promoting steady and sustainable construction growth. Supported by robust underlying demand and third-party forecasts, Martin Marietta is raising its full-year guidance based on its belief that the current construction cycle will continue for the foreseeable future and expand further this year for each of the Company’s three primary construction end-use markets. Notably:

• Infrastructure construction, 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 that allows for reduced permitting time for large projects. Importantly, states will continue to play an expanded role in infrastructure investment. Incremental funding at the state and local levels, through bond issuances, toll roads and tax initiatives, should grow at faster near-term rates than federal funding. Martin Marietta’s top ten states – Texas, Colorado, North Carolina, Georgia, Iowa, Florida, South Carolina, Indiana, Maryland and Nebraska – accounted for 85 percent of total Building Materials’ revenues in 2018 and have all introduced incremental transportation funding measures within the last five years. Third-party forecasts also predict increased infrastructure investment this year and beyond.
• Nonresidential construction 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 indicate healthy commercial construction activity throughout the year. Continued federal regulatory approvals should notably contribute to increased heavy building materials consumption from the next wave of large energy-sector projects, particularly along the Gulf Coast. Construction activity for these projects has begun in earnest and is expected to continue for several years.
• Residential construction should continue to grow within Martin Marietta’s geographic footprint, particularly as mortgage rates remain attractive and homebuilders are beginning to address the need for more affordable homes. The Company’s leading positions in southeastern and southwestern states offer superior opportunities for gains in both multi- and single-family housing, driven by a multitude of factors, such as available land, an overall business-friendly environment and fewer regulatory barriers. The Company believes that permits represent the best indicator of future housing construction. Martin Marietta’s top ten states outpaced the nation in housing unit permit growth for the trailing twelve months ended May 2019 for all three residential categories: total, multi-family and single-family. Continued strength in residential construction supports future infrastructure and nonresidential activity.

Based on current trends and expectations, management has raised its full-year guidance as follows:

• Aggregates shipments by end-use market compared with 2018 levels are as follows:
  - Infrastructure shipments to increase in the high-single digits.
  - Nonresidential shipments to experience a double-digit increase.
  - Residential shipments to increase in the mid-single digits.
  - ChemRock/Rail shipments to be up slightly.

Same-Store Information

This earnings release contains certain information on a same-store basis. When providing certain results in comparison with prior periods, the Company may exclude the operating results of recently acquired businesses that do not have comparable results in the periods being discussed. This approach allows management and investors to evaluate the performance of the Company’s operations on a comparable basis without the effects of acquisition activity. The Company’s same-store information may not be comparable with similar measures used by other companies.

Non-GAAP Financial Information

This earnings release contains financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the accompanying Appendix to this earnings release.

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