Martin Marietta Materials Inc. reported its results for the first quarter ended March 31, 2014. Net sales increased 10 percent, resulting in gross margin expansion and improved profitability, according to the company. Aggregates product line volume was up 8 percent.
Ward Nye, President and CEO of Martin Marietta Materials, stated: "Our first-quarter 2014 results reflect the continued economic momentum from 2013's fourth quarter as well as successful execution of our strategic initiatives to improve performance and maintain a lean cost structure. This combination helped drive both revenue growth and improved profitability. While aggregates product line shipments increased 8 percent, more importantly, shipments in March 2014 increased 13 percent compared with March 2013, an indicator of accelerating demand as the annual construction season begins. The aggregates business' gross margin (excluding freight and delivery revenues) expanded 400 basis points, despite the impact of adverse winter weather conditions on production volume and costs.
"Private construction continues to be solid across all of our geographies," Nye said. "We also noted public-sector volume growth in Texas and Colorado, where robust state-funding programs are providing additional funds for transportation investment. Public construction in other areas, however, continues to be unsettled by uncertainty in long-term federal funding."
Nye continued, "We remain excited about our pending combination with Texas Industries, which we announced in January. The combination provides an expanded platform for growth and greater leverage to construction activity in Texas and California, thus creating long-term value for shareholders of both companies. We are cooperating with regulatory agencies; the process is advancing as planned."
Aggregates product line shipments reflected double-digit growth in three of four of the company's end-use markets.
- Volumes to the nonresidential market represented 34 percent of quarterly shipments and increased 13 percent, reflecting growth in the commercial and energy sectors.
- The residential end-use market accounted for 15 percent of quarterly shipments, and volumes to this market increased 16 percent, with notable growth in the Southeast and West Groups.
- The ChemRock/Rail market accounted for 12 percent of volumes, with higher ballast and agricultural lime shipments driving this market's 14 percent growth.
- Shipments to the infrastructure market were flat and comprised the remaining 39 percent of the aggregates product line.
Strength in infrastructure spending was apparent in the West Group, particularly in states with strong department of transportation programs and where alternative financing options, including special-purpose taxes, have been approved. Several states, including Colorado, Georgia and Iowa have stated their intentions to take a cautious approach with committing to major projects if federal highway funding is not stabilized by the expiration of MAP-21. While there is executive and legislative support for a successor bill, key provisions are still being deliberated, including duration of the bill, annual funding levels and revenue sources, the company said.
Geographically, the West Group reported a 21.5 percent increase in aggregates product line shipments while the Mid-America and Southeast Groups reported declines of 5.3 percent and 2.5 percent, respectively. In addition to the impact of weather, these variances continue to reveal, particularly in relation to the prior construction cycle peak, that many western states are operating in the growth mode of the cycle, while many eastern states are still transitioning from recovery to growth.
Aggregates product line pricing declined 1.3 percent, due to geographic and product mix. The West Group, in particular the Colorado operations, has lower average selling prices compared with the Mid-America and Southeast Groups. Shipments in the West Group comprised a larger percentage of quarterly shipments in 2014.
Additionally, shipments of clean stone, which have a higher average selling price compared with other products, represented a lower percentage of quarterly volumes in 2014. If geographic and product mix had been the same as the prior-year quarter, aggregates product line pricing would have increased approximately 1 percent.
The vertically integrated product lines each reported growth in net sales and gross profit. The ready mixed concrete product line achieved a 45 percent increase in net sales, which reflected volume and pricing improvement of 24 percent and 9 percent, respectively. The asphalt product line reported a 9 percent increase in net sales, due to increased shipments.
Aggregates product line production volumes decreased 2.4 percent, due to weather constraints. As expected, this led to an underabsorption of fixed costs and a higher cost per ton. Although adversely affected by weather, higher net sales more than offset cost challenges and led to a 400-basis-point expansion of the business' gross margin (excluding freight and delivery revenues).