Martin Marietta Materials reports record full-year net sales and profitability
Martin Marietta Materials Inc reported its results for the 12 months to the end of December 2015 with record full-year net sales and profitability.
Consolidated net sales in 2015 reached US$3.3bn from US$2.7bn a year earlier. Gross profit climbed to US$721.8m from US$522.4m in 2014.
Ward Nye, chairman, president and CEO of Martin Marietta, stated: "For the full-year 2015, we achieved record net sales and profitability, expanded consolidated gross profit margin (excluding freight and delivery revenues) by 260 basis points, and exceeded both incremental margin targets for the consolidated heritage businesses and acquisition synergy targets ahead of the expected timeline. In addition, we invested strategic capital in our business, completed several bolt-on acquisitions and returned nearly US$630m to shareholders through dividends and share repurchases.
As part of this strategy, in November 2015 and last week, Martin Marietta closed two acquisitions near Colorado Springs, Colorado, that complement its position in metro-Denver and northern Colorado, collectively the Front Range.These two businesses add nearly 1bnt of aggregates reserves and will serve as a high-quality source of construction aggregates to a market transitioning from rapidly-depleting alluvial reserves.
Aggregate business
For the full year, shipments to the infrastructure market increased five per cent in 2015. The growth reflects state-level funding initiatives positively impacting Texas, Iowa, Georgia and Florida. Major infrastructure activity is accelerating at the state-level and, when combined with the FAST Act, will likely increase the rate of infrastructure growth, the duration of the projects and the mix of aggregate-intensive new construction for 2016 and beyond.
The non-residential market represented 32 per cent of fourth-quarter and full-year aggregate product line shipments and increased three per cent for full-year 2015. Light non-residential construction increased approximately 27 per cent for the year, following growth in residential demand and driven by construction activity across all geographies, offsetting a reduction in direct energy shipments into the shale fields. For the year, Martin Marietta shipped 3.6Mt to the shale fields compared with 7.5Mt in 2014.
Shipments of residential end-use market aggregates increased 20 per cent for the full-year 2015, reflecting the continued steady recovery of residential investment. Florida, Colorado and North Carolina each rank in the top-10 states in housing starts. At the metro-level, particular strength is seen in Dallas/Fort Worth, Texas, illustrating the resilience and diversity of the Texas economy. In addition, strength is seen in Atlanta, Georgia, indicative of the continuing recovery in the southeastern United States. Aggregate product line shipments to the ChemRock/Rail market increased nine per cent in 2015.
Cement business
With the sale of the California cement business in September 2015, fourth-quarter results are not comparable with the prior-year period. Cement shipment volume and net sales declined 371,000t and US$32m, respectively, for the quarter related to the California divestiture.
While 2015 volumes are not comparable due to the California disposition, the company said it is encouraged by the continued resilience in the Texas markets, with increasing demand driven by solid population and employment growth. The Portland Cement Association (PCA) forecasts modest demand growth in Texas in 2016, followed by stronger growth in 2017, all underscoring a continued favourable supply/demand imbalance over the next several years.
Martin Marrietta added that the remaining cement business continues to benefit from significant pricing improvement throughout Texas, although fourth-quarter volumes were adversely affected by weather conditions.
Average selling prices were up 10 per cent, reflective of the impact from the expiration of legacy TXI cement contracts with below-market pricing in addition to the sale of the lower average-priced California cement operations. The business generated US$60m of net sales in the quarter and US$22m in EBITDA, a 37 per cent EBITDA margin.
For the year, the cement business generated US$368m in net sales and delivered a 28 per cent gross profit margin (excluding freight and delivery revenues), a 310-basis-point improvement over the prior year. For the full year, EBITDA for the business increased to US$101m.
Outlook
"Based on current forecasts and indications of market activity, we remain positive about the outlook of our business in 2016. Aggregates product line pricing is expected to increase from six to eight per cent. Volume growth is expected to continue with an increase of five to seven per cent. These gains in aggregates, coupled with pricing improvements across the downstream and cement businesses together with our cost discipline and strategic growth initiatives, are expected to drive increased earnings for the year," said Mr Nye.
