Martin Marietta Materials Inc. announced results for the third quarter and nine months ended September 30, 2011. Ward Nye, president and CEO of the company, said during the third quarter the company continued to build on a foundation that has enabled it to outperform others in the industry as all aggregates operations work through the prolonged economic downturn.
The company reported earnings per diluted share of $1.07 and adjusted EPS of $1.11 (that excluded a $0.04 per diluted share to reflect a non-recurring early retirement benefit) compared with $1.13. The company also reported:
- Consolidated net sales of $464.0 million, up 4.6 percent.
- Heritage aggregates product line pricing up 2.8 percent.
- Heritage aggregates product line volume down 2.2 percent.
- Heritage aggregates product line direct production costs down slightly, despite a 16 percent increase in energy costs.
- Specialty Products net sales of $50.4 million and earnings from operations of $15.6 million, resulting in a 240-basis-point improvement in operating margin (excluding freight and delivery revenues).
- Consolidated selling, general and administrative expenses up $2.3 million, resulting from a $2.8 million nonrecurring early retirement benefit.
- Consolidated earnings from operations of $79.0 million compared with $83.9 million.
“We are pleased to report pricing growth in each of our aggregates segments,” Nye said. “Last year, we predicted aggregates-product-line pricing recovery once a certain degree of volume stability was achieved. Driven by growth in aggregates shipments in 2010, our 2.8 percent increase in heritage aggregates product line average selling price represents our third consecutive quarter of pricing improvement. Further, pricing momentum has been achieved despite a modest decline in our heritage aggregates product line shipments. Even more compelling, most geographic markets with declines in quarterly shipments still reported an increase in average selling price, demonstrating the continued pricing power of the aggregates business.
It has long been the cornerstone of our culture to put cost control as a critical component of our business model and strategies,” Nye continued. “To that effect, direct production costs in our heritage aggregates product line were down slightly, despite a 16 percent increase in noncontrollable energy costs. Diesel fuel, which continues to be the single largest component of our energy expenses, averaged $3.00 per gallon compared with $2.05 in the prior-year quarter. This increase in diesel for the quarter lowered earnings per diluted share by $0.08. Cost reductions, primarily in personnel, repairs and depreciation, more than offset the energy increase in our heritage operations. However, our consolidated cost of sales increased 6.9 percent due to higher raw material costs for liquid asphalt and an increase in embedded freight costs, both directly attributable to the increase in diesel.
“We also remain focused on business development,” Nye continued, “evidenced by our recently announced definitive agreement for an asset exchange with Lafarge North America Inc. to acquire its Front Range business in and around metropolitan Denver. This transaction will provide us with significant aggregates sites, as well as vertically integrated asphalt and ready mixed concrete plants and a road-paving business. Denver, based on strong demographic trends, a per capita income well above the national average and its ability to attract both national and multinational businesses, is an attractive market to expand our geographic footprint. Subject to regulatory approval, we expect to close the transaction this year. This asset exchange, as well as our second-quarter acquisition in San Antonio, represent two strategic transactions that should enhance long-term shareholder value.
“As previously noted, there was a 2.2 percent decline in our heritage aggregates product line shipments,” Nye said. “The infrastructure market continues to represent more than half of our aggregates business. Although Congress recently extended federal highway funding through March 31, 2012, states remain hesitant to initiate long-term projects. Additionally, the impact of the American Recovery and Reinvestment Act (“ARRA”), or Stimulus, continues to wane as the December 31, 2012, deadline to complete all such projects approaches. These factors directly resulted in a 3 percent decline in our infrastructure shipments for the quarter. We nonetheless remain optimistic that the underlying demand and need for state infrastructure projects are compelling and anticipate consistent growth will follow once long-term federal funding is resolved.
“Aggregates shipments to the commercial component of our nonresidential end-use market increased over the prior-year quarter,” Nye concluded. “Growth in this sector is encouraging, although the commercial recovery is limited and often now found in geographies with distinct characteristics, such as areas with a strong military presence. This commercial growth, however, was offset by a reduction in shipments to the heavy industrial component, namely the energy sector. This decline in energy-related sales reflects reduced shipments to the nuclear power and wind energy components of this sector. Cumulatively, we experienced a slight decline in nonresidential shipments. Shipments to the residential market grew 9 percent, while our ChemRock/Rail end-use market was flat. Overall, our heritage aggregates product line shipments were down 2.2 percent from the third quarter of 2010.”