Vulcan, Martin Marietta Execs Look to Future
- Published: Monday, 12 August 2013 17:24
The top executives at Vulcan Materials Co. and Martin Marietta Materials are looking ahead to the rest of 2013, and they like what they see.
“We are encouraged by the continued improvement in the economic and construction-related fundamentals that drive demand for our products, said Don James, chairman and chief executive officer. “Housing starts in the U.S. are up sharply from a year ago and contract awards for private nonresidential buildings, measured in square feet, have increased double-digits as well. Importantly, we are seeing significant growth in housing starts in several key states, including Arizona, California, Florida, Georgia and Texas. Growth in residential construction leads to growth in demand for private non-residential investment as well as new sources of tax revenue, all of which drive increased construction activity. Consequently, aggregates demand in private construction is growing.
“As we look at the projects that could impact our 2013 aggregates volumes, we continue to see a disproportionately greater number of large highway and industrial projects,” James continued. “The timing and quantity of shipments to these projects remains difficult to predict. Our current expectation is for aggregates demand from public construction, including highways and other infrastructure, to approximate 2012. However, recent growth, albeit modest, in new highway contract awards has resulted from a more stable and predictable funding environment. New highway projects, as measured by trailing 12-month contract awards, increased 1 percent versus the prior year’s level, the second consecutive quarter with an increase. The large increase in TIFIA funding contained in last year's highway bill will positively impact future demand.
“As we look to the remainder of 2013, we expect second half aggregates shipments to increase 2 to 4 percent versus the prior year,” James said. “This volume outlook assumes more normal weather patterns throughout the remainder of the year. Additionally, the timing of aggregates shipments to several large projects remains outside our control and as a result can cause some variability in our year-over-year growth. Additionally, we added aggregates reserves and operations in attractive markets in Texas and Georgia through acquisitions totaling approximately $90 million. Going forward, we will continue to look for opportunities to further enhance our strategic coast-to-coast footprint.”
“We are encouraged by various positive trends in our business and markets – especially in private sector employment and construction,” said Ward Nye, president and CEO of Martin Marietta Materials. “We anticipate volumes to the nonresidential end-use market to increase in the mid-single digits given that the Architecture Billings Index, or ABI, a leading economic indicator for nonresidential construction spending activity, remains at a strong level.
“Residential construction is experiencing a level of growth not seen since late 2005 with seasonally adjusted starts ahead of any period since 2008,” Nye said. “We believe this trend in housing starts will continue and our residential end-use market will experience double-digit volume growth. By contrast, the weather-related slowdown in aggregates shipments experienced in the first half of the year, coupled with a delay in large infrastructure projects moving through the public letting cycle, leads us to expect aggregates shipments to the infrastructure end-use market to be down in the mid-single digits for the full year.
“We currently expect aggregates product line pricing will increase 2 percent to 4 percent for the full year,” Nye said. “A variety of factors beyond our direct control may continue to exert pressure on our volumes, and our forecasted pricing increase is not expected to be uniform across the company. Aggregates product line direct production costs per ton should be flat with 2012. SG&A expenses, excluding costs in 2013 and 2012 related to the information systems upgrade, as a percentage of net sales are expected to decline slightly.”