RALEIGH, N.C., July 28, 2020 (GLOBE NEWSWIRE) -- Martin Marietta Materials, Inc. (NYSE:MLM) today reported results for the second quarter ended June 30, 2020.

Ward Nye, Chairman and CEO of Martin Marietta, stated, “We are proud to have concluded the first half of 2020 with the highest profitability and best safety performance in Martin Marietta’s history. Our record performance underscores Martin Marietta’s collective commitment to operational excellence and the disciplined execution of our strategic plan as we navigate the uncertainties and economic hardships presented by COVID-19.

“The Company expanded consolidated gross margin by 200 basis points and delivered Adjusted EBITDA of $407 million in the second quarter, driven by pricing momentum and improved cost management across the Building Materials business. We remain confident that our favorable pricing trends will continue, aided in part by the continued success of our locally-driven pricing strategy. We expect our full-year 2020 aggregates pricing to increase 3 percent to 4 percent, slightly below our pre-COVID-19 forecast, largely due to year-over-year geographic and product mix fluctuations.

“Though Martin Marietta, along with many of our customers, has operated as a designated “essential business” through the COVID-19 shutdowns and subsequent phased re-openings, we still experienced impacts from the macroeconomic slowdown. Despite these challenges, product demand trends remained strong across our key geographies, including North Texas and the Front Range of Colorado, two of our leading vertically-integrated markets, driven by attractive customer backlogs and continued construction activity. Customer backlogs are expected to support the Company’s near-term shipment levels, though we currently anticipate an industry-wide decline in product demand over the next few quarters, particularly with the uncertainty of additional U.S. federal economic stimulus actions, as businesses and governments address budget shortfalls. Volume impacts from reduced demand will likely be temporary, gradual and varied by end use and geography. In the medium- and long-term, we remain confident that the underlying demand drivers and fundamental strength of our Top 10 states position the Company to outperform through typical economic cycles.”

Mr. Nye concluded, “Moving forward, we remain focused on the world-class attributes of our business--including, safety, operational excellence and cost management--as well as our proven strategic plan. Martin Marietta is well-positioned geographically and financially and has the benefit of an experienced management team to responsibly navigate through challenging times and drive sustainable long-term growth and shareholder value.”

Mr. Nye’s CEO Commentary and Market Perspective may be found on the Investor Relations section of the Company’s website.

Building Materials Business

Second-quarter operating results demonstrated the health and resiliency of the Company’s markets and the disciplined execution of its locally-driven pricing strategy. Despite limited impacts from COVID-19, product demand trends remained strong in key Martin Marietta geographies, most notably in North Texas, Colorado and Indiana, as well as Georgia and Florida, the latter two being key states that experienced significant precipitation during the quarter.

Aggregates

Second-quarter aggregates shipments declined 3.7 percent compared with the prior-year quarter, which benefited from carryover work due to the extraordinarily wet 2018. Pricing improved 3.3 percent due to strong performance across all divisions.

• Mid-America Group shipments decreased 7.2 percent, driven by near-record rainfall across much of its footprint and anticipated lower infrastructure shipments in portions of North Carolina. Geographic mix limited pricing growth to 2.3 percent as the Central Division, which has lower selling prices relative to the consolidated average, contributed a higher percentage of second-quarter shipments to the Group.
• Shipments for the Southeast Group increased 3.0 percent, as the Florida Department of Transportation (DOT) accelerated certain transportation projects to leverage construction efficiencies driven by lower vehicle traffic during the COVID-19 shelter-in-place orders, along with continued strength in warehouse, data center and distribution facility construction. These favorable trends were partially offset by weather-impacted construction delays. Product mix, reflecting a higher percentage of lower-priced base and fines shipments, limited pricing growth to 0.7 percent.
• West Group shipments decreased 1.0 percent, with double-digit growth in North Texas and Colorado offset by the completion of certain Gulf Coast liquefied natural gas (LNG) projects and reduced energy-sector shipments. Pricing improved 5.5 percent, reflecting favorable product mix.

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

• Aggregates shipments to the infrastructure market increased modestly. The Company benefited from large transportation projects in Texas, Colorado and Florida, as most state DOTs continued to advance transportation projects during the COVID-19 shelter-in-place orders. However, consistent with expectations prior to COVID-19, North Carolina DOT temporarily suspended awards for certain transportation projects in response to funding issues specific to weather-related disaster spending and Map Act settlements. The infrastructure market accounted for 38 percent of second-quarter aggregates shipments, which is below the Company’s most recent ten-year annual average of 45 percent.
• Aggregates shipments to the nonresidential market declined following double-digit growth in commercial and heavy industrial construction activity in the prior-year quarter. Precipitation and temporary project delays hindered otherwise robust distribution center, warehouse and data center construction activity. The Company also experienced reduced energy-related shipments due to the completion of certain windfarm and Gulf Coast LNG projects, as well as lower overall demand to the shale sector. The nonresidential market represented 32 percent of second-quarter aggregates shipments.

• Aggregates shipments to the residential market increased, with notable growth throughout Texas, as well as in Denver and Charlotte. Following a brief COVID-19-related pause in activity by national homebuilders, housing construction returned to pre-COVID levels, reflective of pent-up demand, low available inventories and favorable interest rates. The residential market accounted for 24 percent of second-quarter aggregates shipments.
• The ChemRock/Rail market accounted for the remaining 6 percent of second-quarter aggregates shipments. Volumes to this end use increased, driven by improved ballast shipments to the Class I western railroads.

Aggregates product gross margin expanded 230 basis points to 35.5 percent, an all-time record, largely driven by improved pricing, production efficiencies and lower diesel fuel costs.

Cement

Second-quarter cement shipments decreased 2.7 percent, driven by reduced demand for West Texas oil-well specialty cement products caused by historically low oil prices. While cement pricing increased attractively in North Texas, Houston, and portions of Central Texas, notably lower sales of higher-priced oil-well specialty cement products limited overall pricing growth to 0.1 percent. Cement product gross margin expanded 210 basis points to 39.7 percent driven by improved kiln reliability and lower fuel costs.

Downstream businesses

Ready mixed concrete shipments increased 8.7 percent, excluding second-quarter 2019 shipments from the Southwest Ready Mix Division’s business in the Arkansas, Louisiana and eastern Texas (ArkLaTex) areas that was divested in January 2020. Pricing improved modestly, with increased shipments and pricing contributing to the 270-basis-point product gross margin improvement.

Colorado asphalt shipments increased 34.6 percent versus an extremely weather-challenged prior-year quarter. Asphalt pricing declined 1.4 percent due to unfavorable product mix from a higher percentage of shipments to lower-priced municipal projects. Products and services gross profit of $21.9 million was a second-quarter record.

Magnesia Specialties Business

Magnesia Specialties product revenues decreased 30.6 percent to $48.9 million. Lime and periclase shipments to the steel industry declined in response to the COVID-19-induced shutdown of domestic auto manufacturers. Additionally, domestic and international demand for chemicals products slowed due to COVID-19. Lower revenues led to a 420-basis-point decline in product gross margin to 37.3 percent.

Consolidated

During second-quarter 2020, the Company incurred $3.4 million in COVID-19-related expenses for enhanced cleaning and sanitizing protocols across the Company’s operations, which were recorded in selling, general and administrative expenses.

As previously reported, during the quarter ended June 30, 2019, the Company identified a prior-period error that overstated its equity earnings from a nonconsolidated affiliate. The overstatement was deemed immaterial 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 was recorded in other nonoperating expenses, net, consistent with the recurring classification of equity earnings from the affiliate.

Liquidity and Capital Resources

Cash provided by operating activities for the first six months ended June 30 was $373.2 million in 2020 compared with $333.7 million for the same period in 2019.

Cash paid for property, plant and equipment additions for the six months ended June 30, 2020 was $175.7 million. For the full year, capital expenditures are expected to range from $350 million to $375 million.

The Company repaid $300 million of floating rate notes that matured in May 2020.

The Company had $70.1 million of cash on hand, along with $967.7 million of unused borrowing capacity on its existing credit facilities as of June 30, 2020.

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 meaningful and sustainable dividends and share repurchases.

The Company has returned nearly $1.8 billion to shareholders in the form of dividend payments and share repurchases since announcing a 20 million share repurchase authorization in February 2015. The Company temporarily paused share repurchases in March 2020 in light of the COVID-19 pandemic. The potential resumption of repurchase activity remains subject to management’s discretion. As of June 30, 2020, 13.5 million shares remained under the current repurchase authorization and 62.3 million shares of Martin Marietta common stock were outstanding.

Full-Year Outlook

Martin Marietta will reinstate full-year earnings guidance when it has sufficient visibility. At this time, the Company cannot reliably forecast the disruptions to the U.S. economy, the timing and benefits of related governmental stimulus actions and, more specifically, demand for its products and services resulting from the COVID-19 pandemic and multiple measures put in place to minimize the spread of the virus. While it has not seen significant disruption thus far, Martin Marietta believes its industry will likely experience lower overall product demand over the next few quarters due to the COVID-19 pandemic. However, the magnitude of declines and the speed and rate of recovery will vary by construction end-use market and geography and will be influenced by the timing and scope of near-term federal stimulus measures, a longer-term reauthorized infrastructure bill and other governmental actions.

Martin Marietta remains confident that the attractive underlying fundamentals and long-term secular growth trends in our key geographies, both of which underpinned the Company’s record 2019 performance, remain intact and will be evident once again when the U.S. economy stabilizes and recovers.

Non-GAAP Financial Information

This earnings release contains financial measures that have not been prepared in accordance with generally accepted accounting principles (GAAP). Reconciliations of non-GAAP financial measures to the closest GAAP measures are included in the accompanying Appendix to this earnings release. Management believes these non-GAAP measures are commonly used financial measures for investors to evaluate the Company’s operating performance, and when read in conjunction with the Company’s consolidated financial statements, present a useful tool to evaluate the Company’s ongoing operations, performance from period to period and anticipated performance. In addition, these are some of the factors the Company uses in internal evaluations of the overall performance of its businesses. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

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