In their respective fourth-quarter and full-year 2012 financial reports, both Vulcan Materials and Martin Marietta Materials look ahead to the future. They like what they see.
"We expect that in 2013, there will be significantly stronger new construction activity across the country, and we are well positioned to capitalize on this opportunity,” said Ward Nye, president and CEO of Martin Marietta Materials. “We are encouraged by various positive trends in our business and markets, especially as MAP-21 and other programs are implemented. For 2013, 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 the nonresidential end-use market to increase in the high-single digits given that the Architecture Billings Index, a leading economic indicator for nonresidential construction spending activity, is reflecting the strongest growth in billings at architecture firms since the end of 2007.
“Residential construction is experiencing a level of growth not seen since late 2005 with seasonally adjusted starts ahead of any period since 2008,” Nye continued. “We believe this trend in housing starts will continue and our residential end-use market will experience double-digit volume growth. Finally, we expect our ChemRock/Rail end-use market to be flat compared with 2012. Cumulatively, we anticipate heritage aggregates product line shipments will increase 4 percent to 6 percent. As a reminder, we experienced moderate weather in the first five months of 2012, which allowed an earlier-than-normal start to the construction season in many of our markets. If we experience more typical winter weather in 2013, the quarterly pattern of aggregates shipments and earnings will differ versus 2012. In particular, 2013 first-quarter results will be compared with a strong quarter in 2012.”
Martin Marietta expects heritage aggregates product line pricing to increase 2 percent to 4 percent in 2013. A variety of factors beyond its direct control may continue to exert pressure on volumes and forecasted pricing increases are not expected to be uniform across the company, according to the report.
"We expect our vertically integrated businesses to generate between $350 million and $375 million of net sales and $20 million to $22 million of gross profit,” Nye said. "Increased production should lead to a slight reduction in aggregates product line direct production costs per ton compared with 2012. SG&A expenses as a percentage of net sales are expected to decline slightly.
According to Don James, chairman and chief executive officer of Vulcan Materials, "Demand for aggregates in our markets is expected to grow by mid-single digits in 2013. Aggregates demand from residential construction is expected to increase double-digits while demand from private non-residential buildings is expected to increase high single-digits versus 2012. Our current expectation for growth in aggregates demand into public construction, including highways and other infrastructure, is limited given the lead time required from award of contract to the start of construction. As we look at the projects that could impact our 2013 aggregates volumes, we see a disproportionately greater number of large, discrete highway and industrial projects. The timing of these projects is difficult to predict at this point in the year. As a result, our full year shipments in 2013 are expected to increase 1 to 5 percent with most of the expected year-over-year growth to occur in the second half of the year, due in part to favorable weather in the first quarter of 2012.
"In keeping with our successful efforts to offset the earnings effect of lower volumes in recent quarters, we will continue our focus on reducing controllable costs and achieving improved pricing, James said. “In 2012, we achieved a 2 percent decrease in aggregates unit cost of sales despite the effects of lower volumes. The geographic breadth of pricing gains achieved in 2012 reinforces our expectations for continued growth in pricing in 2013. We expect full year freight-adjusted price growth of approximately 4 percent in 2013.”