Fitch Ratings has affirmed the ratings of Martin Marietta Materials, Inc. as follows:
--Issuer Default Rating (IDR) at ’BBB’;
--Short-term IDR at ’F2’;
--Senior unsecured debt rating at ’BBB’;
--Revolving bank credit facility at ’BBB’;
--Commercial Paper rating at ’F2’.
The Rating Outlook has been revised to Stable from Negative.
The ratings affirmation reflects the still relatively substantial demand for construction products prompted by federal and state government funding of transportation projects, consistent free cash flow generation, and solid liquidity. The ratings also take into account the operating leverage of the company and the high level of fixed costs. Fitch’s concerns also include weather-related risks, the potential volatility of state and federal spending on highway construction, the cyclical nature of the construction industry and exposure to environmental issues.
The revision of the Outlook to Stable from Negative reflects Fitch’s macro view of Martin Marietta’s various end-markets for 2010. Martin Marietta’s aggregates volume fell 21.1% during the first quarter of 2009 and dropped 25.6% during the second quarter. The company expects its aggregates volume to fall approximately 15%-18% for all of 2009. Fitch currently expects Martin Marietta’s volume to be flat to slightly higher in 2010, with volume gains in public infrastructure and residential construction offset by declines in non-residential construction.
The expected volume gains in infrastructure are due to increased spending from the stimulus package passed this past February, and in particular from the $27.5 billion in additional highway and bridge funding.
Spending under the stimulus bill has had a slow start, with only $2.1 billion spent so far on 4,088 projects currently under construction. However, 72% of the total funds have been obligated and 7,965 transportation projects have been authorised.
Fitch currently expects a majority of the stimulus funds to be spent in 2010, offsetting the projected lower state spending on infrastructure projects resulting from budget deficits. Fitch expects aggregates pricing to increase roughly 2%-3% next year, which is in line with long-term averages.