Vulcan Materials and Martin Marietta Materials, in their respective third-quarter reports, looked ahead to the end of the year and into next year, and both companies like what they see.
“We believe economic and construction-related fundamentals that drive demand for our products will continue to improve from the historically low levels created by the economic downturn,” said Don James, chairman and CEO. “Leading indicators of private construction activity, specifically residential housing starts and contract awards for nonresidential buildings, continue to improve in our markets. Consequently, aggregates demand into private construction, particularly residential, is beginning to grow.”
James notes evidence of growth in several key states, including Florida, Texas and Arizona. However, the positive effect of these indicators will take time to materialize and impact shipments given the low point from which the recovery began.
“For public construction, the passage of the new federal highway bill back in July will provide stability and predictability to future highway funding, although it had no material impact on third-quarter shipments, which reflected softness in highway construction and the ending of stimulus-related construction activity,” James said. “The large increase in Transportation Infrastructure Finance and Innovation Act (TIFIA) funding contained in the new highway bill should positively impact demand in the future. The uncertain timing of larger projects, including TIFIA funded projects, continues to make forecasting quarterly volume growth difficult. We now expect full year same-store shipments in 2012 to approximate 2011 and total aggregates shipments to decrease approximately 1 percent. In keeping with our successful efforts to offset the earnings effect of lower volumes in recent quarters, we will continue our efforts to reduce controllable costs and achieve improved pricing. The geographic breadth of pricing gains achieved in the third quarter reinforces our expectations for full year freight-adjusted price growth of 1 to 3 percent in 2012.”
Martin Marietta sees positive trends looking ahead.
“As discussed, we are encouraged by various positive trends in our markets,” said Ward Nye, president and CEO. “For full year 2012, we anticipate high-single-digit volume growth in our nonresidential end-use market, driven primarily by increased energy shipments; some energy-sector activity will continue to be affected by natural gas prices, the timing of lease commitments for oil and natural gas companies, geographic transitions and weather conditions. We expect the rate of improvement in our residential end-use market to accelerate over the rate of improvement in 2011. Our infrastructure end-use market volume is expected to be down slightly.”
Nye anticipates that heritage aggregates product-line shipments for the full year will increase 1 percent to 2 percent, and pricing will increase 2 percent to 4 percent, subject to a variety of factors beyond the company’s direct control. Heritage aggregates product line direct production costs per ton, for instance, are expected to be up slightly compared with 2011.
“We have started framing a preliminary 2013 outlook for our end-use markets,” Nye said. “We currently expect shipments to the infrastructure end-use market to increase in the mid-single digits, driven by the impact of MAP-21, TIFIA and state-sponsored programs. We anticipate our nonresidential end-use market to increase in the high-single digits. We believe the recent positive trend in housing starts will continue and our residential end-use market will experience double-digit volume growth.”