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Martin Marietta reports strong first quarter 2020

By |  May 5, 2020
Headshot: Ward Nye, Martin Marietta

Nye

Martin Marietta reported a strong first-quarter performance, including a quarterly record for consolidated revenues. But upon releasing its quarterly results, the company recognized that the road ahead will likely be rockier because of the coronavirus (COVID-19) pandemic.

“We anticipate product demand will soften in the coming months, as businesses and governments prioritize actions in response to COVID-19,” says Ward Nye, chairman and CEO of Martin Marietta. “Our team has plans for a variety of scenarios and will react appropriately to changing conditions. We will continue to closely monitor the situation and focus on safeguarding our stakeholders’ health and well-being, operating safely and efficiently, preserving liquidity and aligning costs with customer demand.”

According to Martin Marietta, the first-quarter operating results of its building materials business demonstrated the strength of overall demand – particularly in Colorado, Indiana, Iowa and Maryland.

Aggregate, cement and downstream operations in Texas experienced project delays, the company says, as the Dallas-Fort Worth area experienced record first-quarter precipitation, Martin Marietta adds. Additionally, Georgia experienced its sixth-wettest first quarter in 125 years, Martin Marietta says.

Texas and Georgia are two of Martin Marietta’s top four states by revenue.

Aggregate

More broadly, Martin Marietta says first-quarter aggregate shipments and pricing improved 2.3 percent and 2.7 percent, respectively, compared with the first quarter of 2019.

Aggregate shipments to the infrastructure market increased, driven by large projects in Texas, Colorado, Iowa and Indiana. The infrastructure market accounted for 32 percent of first-quarter aggregate shipments, which is below the company’s most recent 10-year annual average of 45 percent but consistent with historical first-quarter trends, Martin Marietta says.

Aggregate shipments to the nonresidential market, meanwhile, increased modestly following double-digit growth in commercial and heavy industrial construction activity in the prior-year quarter. The company continued to benefit from distribution center, warehouse and data center projects in states such as Texas, Colorado, Georgia, Florida and Iowa. Martin Marietta says it also benefitted from the early phases of several large energy-sector projects along the Gulf Coast.

In all, the nonresidential market represented 36 percent of Martin Marietta’s first-quarter aggregate shipments.

Aggregate shipments to the residential market declined slightly when compared with the robust growth in homebuilding activity in the prior-year quarter, Martin Marietta adds. Ongoing homebuilding activity in Texas and Georgia was hindered by significant rainfall.

The residential market accounted for 25 percent of Martin Marietta’s first-quarter aggregate shipments.

Looking ahead

While most jurisdictions deemed the supply of construction materials essential, Martin Marietta believes the industry will likely experience lower overall demand during the coronavirus crisis. The magnitude of decline and speed and rate of recovery are likely to vary by construction end-use market and geography, though.

Of the company’s three primary end uses, the outlook for infrastructure construction – particularly for aggregate-intensive highways and streets – is expected to be the most near-term resilient., Martin Marietta says. While the majority of the United States is currently ordered to shelter in place, most state Departments of Transportation (DOTs) are currently operational and continue to advance transportation projects, capitalizing on the reduction of vehicles on the road and related traffic congestion.

Florida, for example, recently announced plans to accelerate $2.1 billion of critical transportation projects, Martin Marietta says. Still, state DOTs are experiencing lower revenue collections, and states may have other short-term funding needs relating to the coronavirus impact that may decrease the scale and postpone the timing of future construction, the company adds.

Nonresidential construction activity on existing projects continues in most regions, Martin Mariertta says. The company, however, cites an April 2020 survey published by the Associated General Contractors of America that reveals an overwhelming number of respondents indicate that commercial projects in the design or planning stages are being delayed or canceled.

According to Martin Marietta, industrial construction is not expected to experience significant near-term disruption from the coronavirus. Warehouses, distribution centers and data centers are expected to perform relatively well in the current environment, the company adds, as businesses increase e-commerce activity, secure regional supply chains and become more reliant on cloud and network services.

Similarly, large energy-sector projects along the Gulf Coast of Texas that are actively underway are expected to continue, Martin Marietta says.

Martin Marietta also points to residential construction activity, which is expected to decline in 2020 as homebuilders and homebuyers delay plans in the wake of unprecedented economic uncertainty. Martin Marietta’s management believes the residential decline will be widespread but not as persistent as the period of low activity seen during the Great Recession, as Freddie Mac estimates that 2.5 million housing units are needed to address the current nationwide housing shortage.

“Consistent with our values of safety, integrity, excellence, community, and stewardship, Martin Marietta is committed to providing the products and services our communities need,” Nye says. “I am enormously proud of the determination, professionalism and devotion of our Martin Marietta employees who are working each and every day. Their dedication supports our communities and business partners who are persevering through the impacts of the current crisis. We remain appropriately focused on our tactical day-to-day responsibilities and ever mindful of the values and strategies that have driven our long track-record of success.”


For additional P&Q coverage related to the coronavirus, visit our dedicated webpage.

Kevin Yanik

About the Author:

Kevin Yanik is the editor-in-chief of Pit & Quarry magazine. Yanik can be reached at 216-706-3724 or kyanik@northcoastmedia.net.

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