Vulcan Materials and Martin Marietta Materials, in their respective quarterly reports, looked ahead to the end of 2013 and into 2014.
Regarding the company’s outlook, Don James, chairman and chief executive officer, stated, “Through the first nine months of 2013, segment gross profit and margins improved in all major product lines, leading to 180 basis points of margin expansion overall. This improvement was driven by higher volumes and pricing in most major products. Despite a challenging first half of the year due to wet weather, aggregates shipments were up 3 percent through the first nine months of 2013, excluding the effects of the divestiture of our Wisconsin aggregates operations as well as acquisitions in Texas and Georgia completed earlier this year.
“This year-to-date growth in aggregates demand is in-line with our expectations at the beginning of the year and is driven by improved private construction activity, particularly in several of our key states, including Arizona, California, Florida, Georgia and Texas,” James said. “Through the first nine months of the year, aggregates shipments in these five states combined were up more than 16 percent. Looking ahead, these states have accounted for more than one-third of all U.S. housing starts in the trailing 12 months ending September and 80 percent of contract awards for all U.S. private nonresidential buildings, measured in square feet, during the same period. As a result, we believe the outlook for volume growth in these key states should continue and help offset the impact of several large highway and industrial projects that have now been deferred into the first half of 2014.”
James continued, “As we look at the projects that could impact our aggregates volumes for the remainder of the year and into 2014, we continue to see a disproportionately greater number of large highway and industrial projects. The timing of shipments to these projects remains difficult to predict. New highway projects, as measured by trailing 12 month contract awards, increased 7 percent versus the prior year's level – the third consecutive quarter with an increase. The large increase in TIFIA funding contained in last year's highway bill should also positively impact future demand. Year-to-date, aggregates volumes are up more than 2 percent and pricing has increased more than 3 percent with virtually all markets realizing price growth versus the prior year. Assuming normal weather patterns, we expect these year-over-year growth trends to continue in the fourth quarter.”
Ward Nye, president and CEO of Martin Marietta Materials, said, “We are encouraged by various positive trends in our business and markets – especially in private-sector employment and construction. We anticipate volumes in 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 and has shown consistent growth over the last year.
“Residential construction is experiencing a level of growth not seen since late 2005 with seasonally-adjusted starts ahead of any period since 2008. We believe this trend in housing starts will continue and our residential end-use market will experience high single-digit volume growth. By contrast, the weather-related slowdown in aggregates shipments experienced in the first half of the year, coupled with the hesitancy created by the uncertainty of future federal highway funding levels, leads us to expect aggregates shipments to the infrastructure end-use market to be down in the mid-single digits for the full year.
“Cumulatively, dependent on fourth-quarter weather, we anticipate aggregates product line shipments will be flat to slightly up as compared with 2012 levels. We currently expect aggregates product line pricing will increase 2 percent to 4 percent for the full year compared with 2012. A variety of factors beyond our direct control may continue to exert pressure on our volumes, and our forecasted pricing increase will not be uniform across the company.
“We have started framing a preliminary 2014 outlook for our end-use markets and, while the current environment in Washington, D.C., reduces clarity, we have formed an initial view based on our internal observations in conjunction with McGraw Hill Construction’s recent economic forecast. We currently expect shipments to the infrastructure end-use market to increase slightly. We anticipate our nonresidential end-use market to increase in the mid-to-high single digits, led by strength in the commercial component and energy sector. We believe the recent positive trend in housing starts will continue and our residential end-use market will experience double-digit volume growth,” Nye said.