NYSE:MLM Martin Marietta Materials Q3 2022 Earnings Report $505.00 -4.25 (-0.83%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$474.50 -30.50 (-6.04%) As of 04/25/2025 06:13 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Martin Marietta Materials EPS ResultsActual EPS$4.69Consensus EPS $4.74Beat/MissMissed by -$0.05One Year Ago EPSN/AMartin Marietta Materials Revenue ResultsActual Revenue$1.68 billionExpected Revenue$1.67 billionBeat/MissBeat by +$10.54 millionYoY Revenue GrowthN/AMartin Marietta Materials Announcement DetailsQuarterQ3 2022Date11/2/2022TimeN/AConference Call DateWednesday, November 2, 2022Conference Call Time11:00AM ETUpcoming EarningsMartin Marietta Materials' Q1 2025 earnings is scheduled for Tuesday, April 29, 2025, with a conference call scheduled on Wednesday, April 30, 2025 at 11:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Martin Marietta Materials Q3 2022 Earnings Call TranscriptProvided by QuartrNovember 2, 2022 ShareLink copied to clipboard.There are 15 speakers on the call. Operator00:00:00Welcome to Martin Marietta's Third Quarter 2022 Earnings Conference Call. All participants are now in a listen only mode. A question and answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for Replay on the company's website. I will now turn the call over to your host, Ms. Operator00:00:22Jennifer Park, Martin Marietta's Vice President of Investor Relations. Jennifer, you may begin. Speaker 100:00:32Good morning. It's my pleasure to welcome you to Martin Marietta's 3rd Quarter 2022 Earnings Call. Joining me today are Ward Nye, Chairman and Chief Executive Officer and Jim Nicklas, Senior Vice President and Chief Financial Officer. Today's discussion may include forward looking statements as defined by United States securities laws in connection with future events, Like other businesses, Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially. We undertake no obligation, except as legally required, to publicly update or revise any forward looking statements, whether resulting from new information, Please refer to the legal disclaimers contained in today's earnings release and other public filings, which are available on both our own and the Securities Exchange Commission's websites. Speaker 100:01:24We will be made available during this webcast and on the Investors section of our website, Q3 2022 supplemental information that summarizes our financial results and trends. As a reminder, all financial and operating results discussed today or for continuing operations. In addition, non GAAP measures are defined and reconciled to the most directly comparable GAAP measure In the appendix to the supplemental information as well as our filings with the SEC and are also available on our website. Ward and I will begin today's earnings call with a discussion of our Q3 operating performance and portfolio optimization efforts. Jim Nicholas will then review our financial results Capital allocation, after which, Ward will conclude with end market trends and our preliminary outlook for 2023. Speaker 100:02:10A question and answer session will follow. Please limit your Q and A participation to one question. I will now turn the call over to Ward. Speaker 200:02:18Thank you, Jenny. Good morning, everyone, and thank you for joining today's teleconference. I'm pleased to report that Martin Marietta delivered record results in the 3rd quarter. This is despite current macroeconomic challenges that include persistent inflationary pressure across multiple cost categories, tighter monetary policies And heightened geopolitical tensions. Our quarterly performance is a testament to our team's commitment to commercial excellence and execution of our strategic business plan. Speaker 200:02:48The results also reflect our successful implementation of double digit Pricing growth across all Building Materials product lines. That combined with acquisition contributions drove record quarterly consolidated total revenues, Gross profit, adjusted EBITDA and adjusted earnings per diluted share. Importantly too, our year to date safety and health performance, Inclusive of acquired operations remains at world class levels as measured by both total injury and lost time incident rates. While we acknowledge and celebrate our continuous safety and health improvement, our work in this final dimension is never done. In addition, on August 9, we entered into a definitive agreement to sell our Tehachapi, California cement plant and related distribution terminals to Calporta and Company for $350,000,000 subject to regulatory approval and customary closing conditions. Speaker 200:03:45This transaction aligns with our commitment to an aggregates led business complemented by strategic cement assets in certain markets, improves the durability of our business through cycles and provides balance sheet flexibility to continue driving shareholder value. Our capital allocation priorities remain focused on prudent investment and attractive acquisitions, organic growth initiatives and returning capital to shareholders while reducing net leverage to within the company's targeted range. As highlighted in today's release, we achieved a number of significant financial and operating records in the 3rd quarter, including Consolidated total revenues increased 16 percent to $1,810,000,000 Consolidated adjusted gross profit increased 8% to $488,000,000 Adjusted EBITDA increased 9% to $533,000,000 and adjusted earnings per diluted share from continuing operations increased 10% to $4.69 These results on flat organic aggregate shipments underscore the success of our value over volume commercial strategy through which multiple pricing actions were successfully implemented this year. However, inflationary trends also impacted our operating costs And affected our adjusted consolidated gross margin, which declined 200 basis points to 26.9 percent for the quarter. Notably, This is both a moderated pace and sequentially higher as compared with the Q2 of 2022. Speaker 200:05:26As a result of the current demand environment and persistently high inflation, we have advised customers of the 4th quarter price increase in a number of our markets as well as broad based January 1, 2023 increases. We believe these commercial initiatives, Together with other inflation containment actions position Martin Marietta well to expand margins in the Q4 and deliver another year of strong profitability in 2023. For our company, it passed as prologue and we believe that it is. Inflation supports a constructive pricing environment for upstream materials, The benefits of which endure long after inflationary pressures abate. Let's now turn to our 3rd quarter operating performance, Starting with aggregates. Speaker 200:06:14We continue to experience healthy aggregates demand across the company with total aggregate shipments inclusive of acquisitions, increasing 5.6 percent to a quarterly record of 60,200,000 tons. Organic aggregate shipments were largely flat As otherwise, strong demand was offset by supply chain disruptions, inclement weather in certain key markets, and most notably, logistics constraints and cement shortages, the latter curbing the immediate need for aggregates in the manufacture of ready mix concrete. Aggregates pricing fundamentals remain very attractive and organic aggregates pricing increased 11.9% or 11.3% on a mix adjusted basis. The cumulative effect of multiple pricing actions continued to build in the 3rd quarter. These disciplined actions combined with overall customer confidence and demand visibility bode well for meaningful price acceleration in the 4th quarter and in 2023. Speaker 200:07:16The Texas cement market continues to experience robust demand and tight supply, resulting in effectively sold out conditions. Against that backdrop and combined with our Smith team's focused execution on commercial and operational excellence, We delivered record 3rd quarter shipments of 1,100,000 tons and pricing growth of 21.4% as our second $12 per ton increase this year went into effect on July 1. We expect favorable Texas cement commercial dynamics will continue For the foreseeable future, supportive of our recently announced $20 per ton price increase effective January 1, 2023. Shifting to our targeted downstream businesses, organic ready mix concrete shipments decreased 16.8%, largely due to a historically wet August in North Texas as well as the completion of certain large projects in the quarter. Organic pricing increased 20.3%, reflecting multiple pricing actions, including fuel surcharges Organic asphalt shipments increased 4.3%, driven primarily by strong demand in Colorado, while organic pricing improved 22% to help offset the increase in raw materials costs, principally liquid asphalt or bitumen. Speaker 200:08:44Notably for comparative purposes, Prior year asphalt volumes were constrained by a bitumen shortage in Colorado. Including contributions from our acquired operations in California and Arizona, Asphalt shipments and pricing increased 31.3% and 26.1%, respectively. Before discussing our preliminary 2023 outlook, I'll turn the call over to Jim to conclude our Q3 discussion with a review of our financial results. Jim? Speaker 300:09:15Thank you, Ward, and good morning to everyone. The Building Materials business Posted an all time record this quarter with products and services revenues of $1,610,000,000 a 15.9% increase over last year and an adjusted product gross profit record of $467,000,000 an increase of 10.9%. Adjusted aggregates product gross profit improved 10.5% relative to the prior year's quarter to a record $330,000,000 Adjusted aggregate product gross margin declined 240 basis points to 32.5 percent as robust pricing growth had not yet offset the continued inflationary impacts of higher energy, internal freight, repairs and maintenance costs. Our Texas Cement business delivered all time quarterly records for top and bottom line results. Revenues increased 23.4 percent to $163,000,000 while gross profit increased 35.7 percent to $68,000,000 Importantly, execution of a disciplined commercial strategy drove a gross margin expansion of 380 basis points to 41.5%. Speaker 300:10:35That was despite notable energy cost headwinds, primarily related to natural gas and electricity. Domestic production capacity constraints and strong demand Contributes to extremely tight supply in the North and Central Texas markets. As a reminder, We are taking 2 notable near term steps to increase cement production capacity in Texas. First, we are in the midst of conversions at our Midlothian and Hunter plants To manufacture a less carbon intensive Portland Limestone Cement, also known as Type 1L. This eco friendly product has been approved by the Texas Department of Transportation and we believe our customers will view it as providing significant Stakeholder benefits. Speaker 300:11:21Once we have completed our transition to Type 1L, our cement production capacity will increase by approximately 10%. 2nd, we are installing a new finish mill at our Midlothian plant, which is expected to be completed by the end of 2023. This new finish mill will provide 450,000 tons of much needed incremental production capacity to the Texas marketplace. Our 3rd quarter ready mix concrete results exclude the Colorado and Central Texas operations that were divested on April 1st and include the acquired Arizona operations impacting the comparability with the prior year quarter. On an as reported basis, Ready Mix Concrete product revenues declined 29.1 percent to $227,000,000 and gross profit declined 40.3 percent to $19,000,000 driven primarily by the divestiture, which was partially offset by contributions from the acquired operations. Speaker 300:12:22The increased raw material costs further weighed on the gross margin for the quarter. Our asphalt and paving results include the operations acquired on the West Coast, impacting comparability with the prior year quarter. On an as reported basis, stable demand, improved pricing and acquisition contributions led to record revenues of $310,000,000 A 58.1% increase and record adjusted gross profit of $50,000,000 a 22.9% increase. However, continued liquid asphalt inflation contributed to the adjusted product gross margin decline of 4 70 basis points to 16.3%. Magnesia Specialties generated product revenues of $69,000,000 a 4% decrease driven largely by lower demand from domestic steel industry customers for dolomitic line products. Speaker 300:13:18Product gross profit declined 22.9 percent to $22,000,000 as higher energy costs resulted in gross margin compression of 7 70 basis points to 31.3 percent. On a consolidated basis, other operating income net included $15,000,000 and non recurring gains from the sale of surplus land and other assets. We saw sequential moderation in diesel costs in the Q3. During the month of October, diesel prices have trended back up. While we anticipate additional volatility in diesel prices, we are forecasting that 4th quarter prices approximate current levels. Speaker 300:13:59As a result, with diesel costs no longer increasing sequentially, coupled with our disciplined pricing initiatives, We expect to return to expanding gross margins in the Q4 as compared with the prior year period. We remain focused on the disciplined execution of our strategic plan to responsibly grow through acquisitions and reinvest in the business, while also returning capital to shareholders. During the quarter, we returned $141,000,000 to shareholders through both dividend payments and share repurchases. We repurchased nearly 288,000 shares of common stock at an average price of approximately $3.47 per share in the 3rd quarter. We also reduced gross leverage this past quarter. Speaker 300:14:47On September 29, the company utilized cash on the balance sheet to satisfy and discharge A $700,000,000 tranche of senior notes due July 2023. Our net debt to EBITDA ratio continued to trend down and ended the quarter at 2.6 times. We continue to anticipate a return to the top end of our target net leverage ratio of 2 to 2.5 times by year end. Additionally, the company's Board of Directors approved an 8% increase in their quarterly cash dividend Paid in September, underscoring its confidence in our future performance and free cash flow generation. Our annualized cash dividend is now $2.64 per share. Speaker 300:15:31Since our repurchase authorization announcement in February 2015, we have returned $2,300,000,000 to shareholders through a combination of meaningful and sustainable dividends as well as share repurchases. As detailed in today's release, we have updated our full year 2022 guidance to reflect our year to date results as well as the impact of lower expected aggregate volumes and continued inflationary pressure. As a result, we now expect full year adjusted EBITDA to range from $1,610,000,000 to $1,675,000,000 which excludes the non recurring gain on the divestiture in the 2nd quarter. With that, I will turn the call back to Ward. Speaker 200:16:17Thanks, Jim. Looking ahead to the remainder of the year and into 2023, demand from expanded federal and state level infrastructure investment, coupled with heavy industrial projects of scale are expected to offset near term affordability driven headwinds in the historically under built residential sector. Importantly, we have both the ability and capacity to supply these needed products and supported by our locally led pricing strategy We'll do so in a manner that emphasizes value over volume. As we enter the Q4, Aggregates customer backlogs are ahead of prior year levels with supply chain challenges continuing to serve as the primary governor to the growth of product shipments. In the Q3, infrastructure shipments accounted for 36% of total volumes. Speaker 200:17:07In the current period of broader economic uncertainty, One constant theme across our footprint is that infrastructure, our single largest end use market is poised for accelerated growth As already healthy State Department of Transportation or DOT budgets receive incremental funding from the Infrastructure Investment and Jobs Act or IJA through the allocation for the 2023 fiscal year, most of which began on July 1. Notably, for the 1st 8 months of the year, federal aid highway construction obligations for the company's top 10 states are up 28% relative to the prior year period. As a result, we expect a step change in the public sector investment in 2023 to provide a stable base level of demand for years to come. Aggregate shipments to non residential end market accounted for 35% of total third quarter volumes. Non residential construction project backlogs remain strong in our markets, led in large measure by heavyside energy, Critical product manufacturing and data center projects of scale. Speaker 200:18:16The announcements of these projects are accelerating driven by a post pandemic shift In Global Energy and Manufacturing Supply Chains as well as data usage from adoption of digital and cloud based services. Illustrative projects in our markets include Golden Pass LNG and CP Chem's plastics facility along the Texas Gulf Coast. Samsung's Semiconductor Operation in Austin the Taiwan Semiconductor Campus near Phoenix The Stellantis Samsung Joint Venture Lithium Ion Battery Plant near Indianapolis both Ventas Electric Vehicle and Wolfspeed's planned chip manufacturing site near Raleigh Durham and Meta Data Centers in Kansas City and Des Moines. While we continue to see recovery in pandemic impacted light commercial, retail and hospitality sectors, we expect this recovery will moderate as these categories generally follow single family residential development. Not surprisingly, The residential end market, which accounts for 23% of our total 3rd quarter shipments, began to slow down in the 3rd quarter As organic shipments to the sector decreased 3% following the decline in single family housing starts, which was partially offset by continued strength in multifamily construction. Speaker 200:19:41That said, housing across our Sunbelt footprint remains underbuilt Amid significant population inflows with demand far exceeding supply. As shown in our supplemental slides, Single family housing starts per capita in our key metro areas remains significantly and to varying degrees below peak 2,005 levels. As such, we continue to expect the current affordability driven single family housing slowdown to be moderate in our key metropolitan areas as home prices and borrowing rates find equilibrium. As we look to 2023, our preliminary view anticipates aggregate shipments to be effectively flat as we expect increased infrastructure investment Coupled with robust activity from heavy non residential projects of scale will largely insulate product shipments from a slowdown in the single family residential sector. We remain confident that favorable commercial dynamics underpinned by our value over volume pricing strategy We'll continue to be supported by attractive 2022 exit rates as well as realization of our announced January 1, 2023 price increases. Speaker 200:20:55Together, we expect this will drive low double digit growth in aggregates pricing in 2023. To conclude, we're proud of our record setting performance against a challenging backdrop. We expect our current momentum to accelerate in the 4th quarter and in 2023 resulting in a return to margin expansion. We remain committed to employee health and safety, commercial and operational excellence, sustainable business practices and the execution of our strategic plan. In doing so, we're confident in our ability to successfully navigate the current macroeconomic challenges, while demonstrating the resiliency of our proven Aggregates led business model. Speaker 200:21:39If the operator will now provide the required instructions, we'll turn our attention to addressing your questions. Operator00:21:48Thank you. Please standby, we can follow the Q and A roster. Our first question comes from Stanley Elliott with Stifel. You may proceed. Speaker 400:22:10Good morning, everyone. Thank you all for taking the question. Ward, you mentioned the infrastructure piece is critical into next year. Can you talk a little bit more about the state budgets, kind of what you're seeing, how it looks right now and their ability to get projects and lettings out the door for you? Speaker 200:22:27Good morning, Stanley. Thank you for the question. I guess several things. 1, not all states are going to be created equal and What we've been focused on is building our business in the right states. So if we look at our top 10 states overall, we're seeing basically budgets for next that are up around 10% and that can move around a lot. Speaker 200:22:46So for example, North Carolina, our home state here, up 11%, Florida, up 27%, South Carolina, important state for us, up 28%. Part of what we're seeing too is not just increased funding, But in many respects, Stanley, the way that states are looking at funding. So for example, in North Carolina, 2% of sales tax in FY2023 We'll find their way to infrastructure that's going to work its way up to 4% then 6% over a multi year period. At the same time, even reflecting on Florida, Florida recently passed in their FY 2023 budget basically A historic high and they're looking at $4,400,000,000 for highway construction and another $1,200,000,000 just for resurfacing. And then if we're looking at Texas, which is our largest state by revenue, their 10 year unified transportation program It's $85,000,000,000 worth of projects to try to contextualize that. Speaker 200:23:44That's a 13% increase From the 'twenty two plan. So the nice thing is when you sit back and look at what we're going to have from a baseline from IIJA, Which is going to be the single largest POP we've seen since the Interstate Highway Act went into law in 1956. And then you feather on top of that very healthy state budgets. It's a pretty attractive backdrop. It's important to see too, Stanley, I think to your question, if we're looking at those same top 10 states in contract awards year to date, They're up around 13%. Speaker 200:24:20But importantly too, as we're looking at federal aid highway construction obligations year to date, Those are also up 28%. So as we think about what public is going to look like for us next year On the federal side, plus to your question on the state piece of it, we think that's attractive and it starts leading us back Towards volume on public that looks more like history in the low 40% of our volume as opposed to what you heard me speak to just moments ago, which In the high 30s. So Stanley, I hope that helps. Speaker 400:24:55Sure does. Thank you very much. Best of luck. Speaker 200:24:57Thank you, Stanley. Operator00:25:01Thank you. One moment for questions. Our next question comes from Kathryn Thompson with Thompson Research Group. You may proceed. Speaker 500:25:15Hi. Thank you for taking my question today. This is great color on the public end market and you've also given some good color into early pricing actions for 2023 with a 20% per ton increase for cement and low teens for aggregates. But when we look at the private side, what Gives you confidence, particularly focusing on customer backlogs about what to expect for 2023 and in particular More color on backlogs that you're seeing right now that gives a view for next year? Thank you. Speaker 200:25:51Catherine, thank you for the question. Look, as we look at customer backlogs compared to where we were last year this time, in aggregates, They're actually nicely up, up about 7%. If we look in ready mix, they're also up. If we look in cement, It's broadly flat and we're expecting actually to pick up some nice work in Q4. And keep in mind, in cement, we're dealing with the market in Texas That is uniquely, largely sold out. Speaker 200:26:19So we're looking at backlogs today for customers versus where we were a year ago. It's actually pretty attractive. I think the other piece of your question that's so important, Catherine, as we think about 2023, Our view is clearly public is going to be healthier. As we think about 2023, the heavy side of non res and we look at that through projects They're in the process of being led. We also look at projects and square footage that's out there in particular. Speaker 200:26:48We're seeing the heavy side of non res Manufacturing, energy, etcetera, being very attractive in the markets in which we're operating. Do we think we're likely to See some degree of moderation in the light side of non res? Probably so. Do I think the U. S. Speaker 200:27:05Is going to see A degree of cooling in single family housing, we already have, I think that persists. But I think if we look at multi Residential housing, that's going to be really resilient. We're probably going to see a nice pop in that. So as we step back and look at backlogs And think about end uses. Public appears to be quite healthy. Speaker 200:27:29Non res on the heavy side is quite healthy. Multifamily res is healthy and we think single family residential and the light side of non is where we're likely to see varying degrees of weakness. Now one of the things that we've been careful to do and you see it in our supplemental slides, we've tried to spell out what specificity certain key MSAs, 4 of them in the West, 4 of them in the East that we think are indicative of what's happened to population in our key MSAs And what's happened to housing? I think an analysis of that will reveal to the extent that the U. S. Speaker 200:28:07Feels some degree of headwinds on housing, Ours will not be as pronounced. So, Catherine, I've tried to deal with both the public and the private side to give you some Good data points on why we have the degree of resilience we do around relatively flat volumes going into 2023. Speaker 100:28:28Perfect. Thank you very much. Operator00:28:31Thank you. One moment for questions. Our next question comes from Trey Grooms with Stephens. You may proceed. Speaker 600:28:43Hey, good morning, everyone. Hi, Trey. Your cement pricing there in the quarter, very impressive performance. And Looking into 2023, how much of today's pricing will be carried over from this year into next year? And You mentioned having some widespread increases in January, and we've heard of some being announced for the Texas The met market in the January timeframe, but if you could comment on that and maybe around the magnitude you're expecting there? Speaker 200:29:16Look, it's been a thank you for the question, Trey. It's been a good year for pricing and excuse me, for Texas cement this year. We anticipate that's going to recur next year. I mean, if we look at ASP for the quarter, it was up 21.4% On a reported basis 20.6 percent on a mix adjusted basis, what that's done to your point in cement It's basically led to a new all time record for gross product and you can see gross margins that are above 40%. If we think about the Texas cement market, here are some things to remember. Speaker 200:29:51I think this gives you a good build on why we have resilience around the $20 Per ton increase effective January 1. That's a market that's going to consume around 20,000,000 tons of cement per annum, But it's a market that has the capacity to produce it in the state of Texas at about 16,000,000 tons. In other words, that goes back to my commentary in the prepared remarks that the markets effectively sold out. So keep in mind, we've got 2 plants, 1 in Midlothian, 1 at Hunter. So we're in Central and North Texas, frankly, where water imports Are not particularly meaningful to what we're doing. Speaker 200:30:30So I would say all of that underscores why we have resilience around the pricing. The other piece of it that I think is important and I think it likely recurs is I'm not going to lead you to believe that we have enormous amounts of material going to basically oil well cement, but there is some going to West Texas. Those are actually at Much higher ASPs than you would see ordinarily. And I think reflecting back on the geopolitical tensions that I mentioned in the prepared remarks, It's hard to imagine that that piece of our business is going to slow. The other things that I think are important to keep in mind, Trey. Speaker 200:31:101, we're also seeing a conversion as Jim said in his comments to the Type 1 L Cement. In that process, we'll actually get about 10% more capacity as we go into next year and then it won't be immediate next year, but you will see more capacity come online As we finish the finished mill that's underway at Midlothian right now, that's going to add another 450,000 tons to that marketplace that actually desperately needs it. So again, dollars 20 a ton is what we're looking for. I think that answers your question specifically. But again, I wanted to give you some other data to give you a sense of why we have a high degree of confidence in that number. Speaker 600:31:53That does answer my question. Thank you, Ward, for the color. I'll pass it on. Thanks, Trent. Operator00:31:59Thank you. One moment for questions. Our next question comes from Jerry Revich with Goldman Sachs. You may proceed. Speaker 700:32:12Yes. Hi. Good morning, everyone. Speaker 200:32:14Hi, Jerry. Speaker 700:32:14Ward, I'm wondering if you could talk about Ward, if we were to Assume a mild recession next year and volumes are down year over year versus the base case Flat, it feels like with the pricing gains over the course of this year, you folks would still be positioned to expand Aggregates margins by a couple of 100 basis points given the puts and takes in that scenario. I'm wondering if you might be willing to comment on that Just conceptually given the timing of permanent price increases over the course of this year versus The quicker diesel and other inflation that we saw in the beginning of the year and as a result the catch up we're going to see in 2023? Speaker 200:33:00Sure, Jerry. Thank you for the question. So a couple of things. Your question, which I think is a really good one, really focuses on margin and what we think happens with volumes. So several things that I would point out. Speaker 200:33:101, if you look at what we're seeing for the balance of the year, we're actually anticipating margin expansion returning in Q4. So what that means is multiple price increases in a big heavy industry are actually finally catching up and passing what have been the cost inputs. We also expect that to recur going into next year. Now to your point, what happens if you see volume more bearish than we anticipate volume being next year? What I would do is I'd take you back and it's been a while, Jerry. Speaker 200:33:38This might have been before you were actually following us, but if we go back to 2,005, 2,006 And 7, what you'll actually see if you look at history is the industry generally Martin Marietta specifically Was finding peak volumes back in 2,005, but we are actually seeing peak profitability in that last cycle in 2,006, which underscores in many respects why we speak to this volume this value over volume strategy because we recognize How valuable that is to our business. The other thing that I'll outline Jerry because you've seen it and I think it's probably echoed in some of your writings as well. The pricing in aggregates tends to be a very durable set of pricing. So as we go through cycles inevitably in the fullness And I'm not sure if next year is going to be a down cycle or not. We don't think it will be right now because of the strength in public. Speaker 200:34:33We have a lot of confidence around the resiliency The aggregate pricing, so as we think about what is likely to happen in margins in Q4, we think they expand. If we look at what we think is likely to Happened to margins in 2023. Again, we think they likely expand. So hopefully that answers your question and maybe 10% more, Jerry. Speaker 700:34:55It does. Thank you. Operator00:35:00Thank you. One moment for questions. Our next question comes from Phil Ng with Jefferies. You may proceed. Speaker 800:35:11Hey, guys. Appreciate the forward color for 2023. So maybe I have a question for Jim. Your flat volume guidance, appreciating a lot of Uncertainty on housing and maybe on the light side for commercial. Can you kind of help us unpack the percentage growth you're assuming for housing, non res And on the infrastructure side, we could appreciate the lettings and bidding activity has really dialed up. Speaker 800:35:37But Ward, help us understand kind of like the cadence of when that big inflection kind of comes through next year? Thanks a lot. Speaker 200:35:44Look, I think you're going to start to see the inflection as we get closer Toward half year next year in particular. Keep in mind, it's always interesting to me, people want to look at Q1 and try to divide some degree of Rhythm or cadence out of Q1. And remember, in our world, Q1 is January, February March. And what I've long said is, Oftentimes Q1 is made or broken by the last 2 weeks in March, which is no way to really judge the rest of the year. I think going back to the percentages that I spoke A little while ago in infrastructure gives you a good sense of what that rhythm and cadence can look like through the balance of the year. Speaker 200:36:20I think part of what we're going to be seeing, and I think this is important, Phil, In infrastructure, we're going to be seeing more capacity type projects, but then we've seen in the more recent past. That's important because you're going to send out a much wider array of volumes and more volumes over a period of years. So I would reflect on that. The other thing that I would say in particular and a lot of this is driven by energy and manufacturing. If we look on the non res side, What we're seeing and I mentioned before, the square footage on a number of these plants, not just in Texas, but beyond that, even on some of the new opportunities that we're seeing And the Carolinas and in the central part of the United States have considerable square footage. Speaker 200:37:04These tend to be almost Concrete Warehousing. And then the other thing that we are seeing is we're seeing estimated start dates now on all of the large LNG or energy plants that we've been looking at in South Texas, all with 2023 start dates. And we think that's important as well because when we look at those projects all by themselves, and again, I'm talking about 6 different projects in South Texas, The cumulative yardage and tons from those are 13,700,000 tons and about 1,300,000 cubic yards. So again, we feel like on those, It won't just be an aggregates or concrete play for us. In varying degrees, it can be a cement play as well. Speaker 200:37:48So I would certainly start looking To begin in Q2 to see those volumes ramp up, I think it will particularly be in public. I think you're going to see the heavy side of non res On manufacturing and in energy actually do quite well. I do think areas like hospitality and others Are likely going to slow. It will be curious to see how single family housing goes in our markets. As I said, I don't think those are going to go off a cliff. Speaker 200:38:16I don't think there's room for them to go off a cliff because we're looking at seasonally adjusted starts right now below 900,000 And using $1,000,000 is a good steady start. And keep in mind, in many of these markets, we are still it's not an affordability issue, it's an availability So I think in many respects, it will be curious to see what homebuilders are willing to do relative to their margins. But from a timing perspective, Phil, That's the way I would think about it and that's how I would handicap it via end uses. Operator00:38:49And Ward, the heavy side for Speaker 800:38:51us, Shane, a lot of Is that enough to like more than offset the light side at least when you think about 2023? Speaker 200:38:56I think the scope of some of those heavy projects are so large. I think the short answer is yes, it really can, particularly some of these large energy projects. So I think that's where you end up Potentially with that non res wash, I think that's probably a good word to use. Speaker 900:39:13Okay. Thank you. Speaker 200:39:15Thank you, Phil. Operator00:39:18Thank you. One moment for questions. Our next question comes from Timna Tanners with Wolfe Research. You may proceed. Speaker 1000:39:31Yes, thanks. I wanted to squeeze in 2 really Hopefully quick ones. One is, you talk about the constraints from cement availability and I was just wondering how we should think about that improving given some of the expansions you've talked about from existing capacity, yours and others. And then same idea, smaller market, but on the Magnesium Specialties side, your Guidance assumes a rebound. So is this just a short term blip you see in the demand side, or is this something that could perpetuate into next year? Speaker 1000:40:02Thanks. Speaker 200:40:03So, Kevin, thanks for the question. So a couple of things on Mag, I think we anticipate really more the same for Mag in Q4. I think we actually expect A better year for Mag next year. Couple of things are driving that right now. Steel is running at about 77% of capacity, which is lower than it's been for a while. Speaker 200:40:20The chemical side of that business is actually performing quite well. That business has a number of commercial contracts that are rolling off at the end of this year. So as we think about the rhythm and cadence of what that's going to look like from a pricing perspective, next year is actually going to be much more attractive for that business. So that's how I think of that. If I think about the ready mix market in particular back to your comment relative to cement shortages, part of what that has done This has put ready mix players in a position that as they get toward the end of a week, if they don't have significant powder in some markets, they're not buying Stone either. Speaker 200:41:00Look, I think the fact is cement in some markets could stay tight for a while. And I think that could have from a bit of a logistics perspective, a little bit of a headwind. That's certainly what we've seen this year. It's not a massive headwind to be fair, Timna. I think part of what's happening this year is cement tightness has been an issue, Trucking has been an issue, rail has been an issue. Speaker 200:41:24And I think some of the transportation and logistics issues, while still confronting the industry broadly, Are getting modestly better. So as we think about those issues going into next year, I would actually anticipate more logistics Tailwinds next year than we've seen this year and then we'll have to see how cement plays out. And keep in mind Timna, in our world, the only place we have cement and again it's very much by design is the strategic cement position that we have In Texas, we're the largest producer of aggregates, cement and ready mix concrete. So I hope that addresses the mag issue and your thoughts around powder for next year. Speaker 1000:42:08Okay. Now that's helpful color. Thanks again. Speaker 200:42:09Thank you, Tim. Operator00:42:11Thank you. One moment for questions. Our next question comes from Keith Hughes with Truist. You may proceed. Speaker 300:42:23Thank you. Looking Looking at Speaker 200:42:24the Q4 in aggregate volumes, the yearly numbers seem Speaker 300:42:27to indicate it's going to Speaker 200:42:28be negative. Is that correct in other than weather, is there anything going on within the Quarter in and accurate. Keith, thank you for the question. The primary thing that we're looking at as we look at Q4 is several fold. 1, What's the year to date look like? Speaker 200:42:452, last year, it's worth remembering that we actually had a winner That didn't roll in until very late in the year. So we had a Q4 that was unusually long. So what we're doing in large measure is assuming that a normal winter shows up. And if a normal winter shows up And then we go back and augment it to varying degrees on those items that we were just talking about with Timna saying, what happens with normal winter, what happens if Logistics constraints concur or recur and what happens is cement continues to be tight. We're just looking at those things and trying to sort out what we That could mean for the Q4 and really your swing factor as much as I hate to say it is going to end up being winter. Speaker 200:43:33There are a number of markets that can be really weather affected that are actually quite good markets today. Among them, for example, Indianapolis is a very attractive market. Minneapolis St. Paul, we're seeing asphalt volumes in that market where we're an FOB provider Last year, and by the way, we thought last year was a pretty good year. So if we end up with colder weather in some of these markets that are relatively high performing, it does have, no pun intended, A chilling effect on what the volumes can look like for the rest of the year, Keith. Speaker 200:44:45So that's how we're racking it up. Okay, great. Thank you. Thank you. Operator00:44:52Thank you. One moment for questions. Our next question comes from Michael Dudas with Vertical Research Partners. You may proceed. Speaker 900:45:06Good morning, gentlemen. Jennifer. Speaker 300:45:08Hi, Michael. Speaker 900:45:12Ward, Maybe you could remind us or what in your guidance for 2022, what was maybe overall headwind towards the higher energy and Materials, costs, constraints, labor, however you want to place it. And as you're looking into 2023, certainly it's going to stay at a Inflation has stayed at a high level, but what kind of moderation may we see and what are the parts that we could look for Speaker 200:45:42Sure. Let me bifurcate that a little bit. Let me tell you what we saw. Jim will come back and give you a sense of what we're expecting. And so I'll try to break it down just a bit. Speaker 200:45:51So again, if we look at diesel Cost per gallon and if we're looking at the aggregates business and the single largest energy input, that's what it is. So diesel cost per gallon It was up 69% and what that means is it was up from $2.44 a gallon in Q3 of 2021 To $4.12 a gallon in Q3 of 2022. Now in fairness, that did show and Jim commented to this in his prepared remarks, That did show some sequential moderation from what had been 4.60 a gallon in Q2. But still those are Pretty big numbers and they are big numbers in particular when you keep in mind that for full year, we are anticipating having about 53,500,000 gallons of diesel fuel that we will use. Similarly, if we look at electricity and natural gas, and of course, These will be involved in the aggregates business, but in fairness, there are going to be bigger issues in cement and in Mag Specialties. Speaker 200:46:51So again, if we're looking at those, the electricity costs were up 46%, net gas was up 106%, As we look at Q3, so those are pretty significant headwinds that we have during the quarter that I think we actually very successfully navigated. Now speaking a little bit of at least on what we look for the rest of the year and into next year, Jim, I'll turn that over to you if I may. Speaker 300:47:16Sure. So the energy cost For the full year, the headwind we're expecting in 2022 is about $190,000,000 or so, give or take. That's a full year view. At this point, we're not assuming those get better or worse next year. They stay elevated, but they don't improve, they don't get worse. Speaker 300:47:36So that's a big The price of most volatile of our cost components. Labor stays relatively well behaved. That's our biggest single biggest cost component At about 20 ish percent, that's going to be maybe a little bit above average, but not too bad. What is growing of late And I expect to continue into next year supplies, repairs expense, and contract services, those will Grow a little bit faster as they have this quarter into next year. But I think all that said, our ASP growth Speaker 900:48:14Those are some stunning numbers, Gord. Well done. Thank you. Speaker 200:48:18Thank you very much. Operator00:48:20Thank you. One moment for questions. Our next question comes from David MacGregor with Longbow Research. You may proceed. Speaker 200:48:34Yes. Good morning, everyone. Speaker 300:48:35Hi, David. Congratulations on all the progress, Ward. Thanks Speaker 200:48:39so much. Speaker 300:48:40I wanted I just want to ask you about Texas Cement. And you'd highlighted in response to your answer to an earlier question, just everything that's happened this year is kind of out of the ordinary. There's Unplanned maintenance outages and down the low water on the river, import constraints, solar capacity everywhere. It's been a very, very tight year and Extraordinary pricing environment, but you're kicking off with a 20% increase for 2023. In response to a different question, you indicated you expected Flexion in infrastructure to be mid year, which suggests, I guess, absent something changing on the capacity stand side There's another price increase coming mid year. Speaker 300:49:20It just seems like a phenomenal setup in somatin. So I'm just wondering what are the risks? What is it resi? And could resi potentially be enough of an issue to be disruptive to all of the growth in public and private non res or Just interested in how you're thinking about the downside, Suneet, right now. Speaker 200:49:38No, look, I appreciate the question very much, David. I think cement as a general rule and cement in Texas as a specific role are probably 2 different things. And I think part of what gives us such confidence in the Texas market overall is that has historically been the In place in which we've seen all the way through cycles, the single highest infrastructure percentage of our business. So when you're in Texas, you're riding on concrete roads and you're going across concrete bridges. And I think that's a really important component So remember when you think about what's happening in that marketplace. Speaker 200:50:17The other thing that we've spoken of David is really what the requirements are in that state, What the in state production is in that state and where our plants are located. So if housing slowed to a degree, Would that open up some powder? The answer is it probably would. Does that mean that people aren't going to be faced with tightness I think it probably does. So I do think Texas is in A very different and it's an overused word, David, but I do think cement in Texas It's relatively unique. Speaker 200:50:57The other thing that I'll point out that I think has been a big help for us as we've looked at our business over time The fact is, as we look at our reliability and as we look overall at the utilization of our plants in Texas, They continue on a year over year basis to get better. So we're finding ourselves in a position in a market that's very tight That making the shift to Type 1 L is going to add capacity, adding the new finished mill at Midlothian is going to add capacity. And the fact is, We're a better cement company now than we were last year and we're going to be better next year than we are this year. So I think there are a number of components to it, but I do think Commercial aspects of it will continue to be very attractive. And right now, we've got a lot of resilience around, but we're Operator00:51:55Thank you. One moment for questions. Our next question comes from Brent Thielman with D. A. Davidson, you may proceed. Speaker 1100:52:07Hey, great. Thanks. Hey, Ward, if you guys get back within your target Leverage range by year end. Maybe if you could speak to your business development pipeline, overall appetite for M and A next year and a lot of Internal focus here on margins in 2022 and obviously going into 'twenty three, a lot of economic certainty out there. So just wanted to get a sense of how you're thinking about You're kind of the business development side. Speaker 200:52:33Brent, thank you for the question. I think that's such an important one as we go through cycles because Our capital priorities are changing. And part of what I find really compelling about Martin Marietta is the ability of this Company after having done the most significant cash outlays in its history in M and A last year to be delevered Exactly the way that we anticipated we would be by the end of this year. Now if we think about M and A more broadly, here is what I will say. A lot of potential deals have come through our funnel in the last 18 months. Speaker 200:53:09And what we're trying to be is What you would expect and that is very disciplined in what we're looking at. We're looking at a number of different potential transactions today. They tend to be almost exclusively, it's not They are almost exclusively aggregates based deals and those are the types of transactions that we are most interested in. You hear the way that we speak of our business, aggregates led, strategic cement, targeted downstream. So to the We can continue to grow our aggregates led business. Speaker 200:53:40That's what we're going to want to do. Part of what's different now though as we think about it, Brent, Our footprint is different. So we have the ability to look in markets that we could not have looked in before to do bolt ons. And the reason that I call that out is bolt ons, if you think about them from a risk allocation perspective, are actually very low, Because you've got operating people in that market, you've got commercial people in that market, integration can broadly occur over the course of a weekend and the execution risk is really quite low. So do we continue to look at M and A? Speaker 200:54:19The answer is yes. Do I hope that we'll have some things to talk to you about late this year or early next year? I hope so. There are certainly no guarantees on that, But the aim is that we will continue to do that and you should look for it to continue to be aggregates led. So I hope that's responsive. Speaker 200:54:37Yes. Speaker 1100:54:37That's great, Ward. Appreciate the comments. You bet. Operator00:54:41Thank you. One moment for questions. Our next question comes from Garik Shmois with Loop Capital. You may proceed. Speaker 300:54:53Hi, thanks for taking my question. I wanted to follow-up on the non residential side. If you have an estimate of how much of your non res shipments is Going towards that heavy side of non res that's expected to hold off as opposed to the light non res. And just to be clear, on the non res, are you Any current delays or cancellations or is your outlook there just more indicative of how this end market has to follow The health and the cycle of a lag. Speaker 200:55:24Yes, good to hear your voice and thanks for the question. I'm going to take part 2 and ask Jim to come back and deal with part 1. So part 2, We're not seeing significant cancellations on non res projects. And frankly, that's not a big surprise to me. The only time In my career that I can remember that we saw that happen in notable ways was coming out of basically that 2,005, 2,006 We're building was so robust and the fall was so precipitous that we saw non res projects Actually stopping or being canceled. Speaker 200:56:00As a general rule, they don't. They tend to go through. So the short answer is we're not seeing that. The other part of your question is really the breakdown of what's heavy and non, etcetera. So I'll turn that over to Jim. Speaker 300:56:12Yes. So, hey, Garik. The heavy portion of non res is 55%. The light portion is 45%. Great. Speaker 300:56:22Helpful color. Appreciate it. Speaker 200:56:26Thanks, Garrett. Operator00:56:28Thank you. One moment for questions. Our next question comes from Michael Feniger with Bank of America. You may proceed. Speaker 1200:56:40Yes. Thanks for squeezing me in. On the public side, you mentioned an inflection in the second half of next year. So is it fair to say that the growth rate in 2024 for public It's likely to be higher than the growth rate in 2023. And just to follow-up on that, the industry has observed past cycles Well, you can get 3 consecutive years of double digit pricing. Speaker 1200:57:04You're doing it in 2022, next year will be number 2. So just if public accelerating in 2024, the heavy side of non res is okay, do we have underpinnings Get that 3rd year for 2024? Thank you. Speaker 200:57:22Those are great questions, Michael. So thank you for that. Do I think we're likely to see that type of a build on the public side? The short answer is yes, I think we probably are. Do I think we're in a position and again, look, this is really rank speculation, so I don't want to get out there too far. Speaker 200:57:42I think we've got a good sense of what pricing will be In 2023. And of course, we've tried to capture that in what we put out in our preliminary guidance. If we're right, I believe that we are, that we obviously have a multiyear highway bill. If we're right that the U. S. Speaker 200:58:01Is far from overbuilt, If we are right that anything relative to housing will not be deep and it will not be long. And if we're right that the U. S. Is going to have to look at higher degrees in particular manufacturing going forward. I think you could take a number of economic indicators in that vein and say that volumes should be relatively attractive on a broader base for an extended period of time. Speaker 200:58:30What we've seen relative to pricing, particularly in aggregates, is Aggregate pricing tends to be attractive even in a challenged volume environment. If we end up finding ourselves in a multiyear circumstance That you could have flat next year up year after or however you want to fashion it. I do think that you could continue to see a very constructive pricing environment. Now, Obviously, that's not guidance. That's looking out farther than we would typically look out. Speaker 200:59:04Obviously, what we've given you so far is a preliminary view of 2023. But if I'm just taking what has been more years around this industry than on occasion, I'd like to admit. I think what I've just outlined for you would be consistent with broader history. Speaker 1300:59:23Thank you. Operator00:59:26Thank you. One moment for questions. Our next question comes from Adam Thalhimer with Thompson Davis. You may proceed. Speaker 1400:59:38Hey guys, nice quarter. Just real quick, Ward, on the residential side, are you actually seeing weakness today? And I was just wondering if that had anything to do with the Volumes down a Speaker 300:59:48little bit in Q4. Speaker 200:59:50I'm sorry. Are we doing what today, Adam? I missed that. Speaker 1400:59:53Actually seeing weakness in residential today or is that Still something you just expect to see. Speaker 201:00:00In some markets, I wouldn't call it a weakness, I would see it a slowdown. And I know that's parsing things a little bit, but overall, the reason that I don't say Weakness is they're still in our market such an acute need. And I think that's the fundamental difference that we're seeing today. So are we seeing a slowdown in large measure because of logistics constraints and otherwise? Yes. Speaker 201:00:28Are most of our markets in my view more affected today by lack of availability As opposed to affordability, I think that is the bigger issue, Adam. I'm not going to Totally dismiss affordability in some circumstances. I mean, let's face it, it's a practical matter. We've got a lot more people in the United States and we have Interest rates trending up to things that would have looked relatively normal a decade plus So we're going to have to see where that goes. But the short answer is yes, we are seeing some degree of a slowdown, nothing that we think is Dramatic. Speaker 201:01:09In fact, we think it's actually quite expected in what we're seeing more broadly. But I do think this is going to be a circumstance where very specific geographies will respond very differently, in particular, on single family housing. Speaker 1401:01:26Okay. Good color. Thanks, Ward. Speaker 201:01:28Thank you, Adam. Operator01:01:30Thank you. One moment for questions. Our next question comes from Anthony Pettinari with Citi. You may proceed. Speaker 301:01:43Good morning. Speaker 901:01:45It looks like CapEx guidance for the year was trimmed a little bit, Maybe under $50,000,000 at the midpoint, if I Speaker 301:01:52got that right. Can you just Speaker 901:01:53talk about what's driving that? And then any kind of implications For CapEx in 2023 or maybe early thoughts on 2023 CapEx given you may be kind of Speaker 301:02:02flattish on volumes next year? Yes. Hey, it's Jim. Happy to take that question. The reduction in CapEx this year was simply Just taking longer to get the money deployed than we had expected early in the year. Speaker 301:02:19There's no other reasons in that frankly. So it's just a reflection of what we think we can get done this year. As for next year, I typically guide folks to about 9% of revenues. I think that holds true for next year. So, sort of steady as she goes for us And I would expect the same thing next year, about 9% of sales. Speaker 301:02:40Does that answer your question? Speaker 1201:02:43Yes. No, that's very helpful. I'll turn it over. Operator01:02:50Thank you. One moment for questions. Our next question comes from Dylan Cumming with Morgan Stanley. You may proceed. Speaker 1301:03:06Hey, guys. Thanks for squeezing me in. I just wanted to bring the discussion back to the supply chain logistics for a second. Ward, you were pretty clear that I think Elements of like trucking and rail still been kind of constraining aggregate volumes this year. I think you alluded to the fact that those should be kind of improving modestly next year. Speaker 1301:03:21We think about the volume assumptions that you have for the heavy side of non res and public and infrastructure. For the 2023 outlook of flattish volumes, are you still embedding those kind of pockets of the end market spectrum or still constrained by those issues, vis a vis trucking and rail or how should we kind of frame up potential upside to that or how conservative and maybe if you start to see more pronounced like release in those areas as the year progresses? Speaker 201:03:46Dylan, thank you for the question. The short answer is yes. We are assuming for purposes of next year that they continue to be constrained. We're assuming that degrees of constraint have been relieved, but not at all wholly relieved. And keep in mind, We're going to benefit and we're going to have a burden depending on how things work, particularly relative to rail. Speaker 201:04:10As rail gets better, we're the largest shipper of stone By rail in the United States. So we will be a disproportionate beneficiary as that circumstance is inevitably righted. At the same time, when it's struggling, we're going to feel it a bit more acutely and that's where we've been over the last several quarters. So Do we think it's going to be completely remedied next year? No. Speaker 201:04:33Do we think it's likely to be better? Yes. Do we see it getting better in the second half of this year than it was earlier? Yes. So that gives us a certain degree of resilience around our view on that next year. Speaker 201:04:45But that's how we're at least, Dylan, we're trying to frame that more broadly. Speaker 1301:04:50Great. That's helpful. Thank you. Speaker 201:04:52Thank you. Operator01:04:55Thank you. And I'm not showing any further questions at this Time, I would now like to turn the call back over to Ward Nye for any further remarks. Speaker 201:05:03Again, thank you all for joining today's earnings conference call. We continue to strive for safety, commercial and operational excellence and remain focused on executing our strategic plan. Martin Marietta's track record of success throughout various business cycles and our ability to adapt to the various challenges inherent in the current macroeconomic environment proves the resiliency and durability of our aggregates led business model. We're confident in Martin Marietta's prospects to continue driving We look forward to sharing our Q4 and full year 2022 results with you in February. As always, we're available for any follow-up questions. Speaker 201:05:43Thank you again for your time and your continued support of Martin Marietta. Bye bye.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallMartin Marietta Materials Q3 202200:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Martin Marietta Materials Earnings HeadlinesMartin Marietta Materials: Shares Haven't Dropped EnoughApril 26 at 4:55 AM | seekingalpha.comAnalysts Offer Insights on Materials Companies: Dow Inc (DOW) and Martin Marietta Materials (MLM)April 26 at 4:30 AM | markets.businessinsider.comSilicon Valley Gold RushA new technology has sparked a modern-day gold rush in Silicon Valley. OpenAI’s Sam Altman invested $375M. Bill Gates has backed four companies in this space. The World Economic Forum calls it “the most exciting human discovery since fire.” Whitney Tilson believes this trend could mint a new class of wealthy investors—and he’s sharing one stock to watch now, for free.April 26, 2025 | Stansberry Research (Ad)Martin Marietta Materials, Inc. (MLM): Among the Best Materials Stocks to Buy According to Hedge FundsApril 25 at 10:34 AM | msn.comMartin Marietta Materials outlook shifts to stable, Moody’s affirms Baa2 ratingApril 23 at 6:19 PM | investing.comMartin Marietta price target lowered to $545 from $575 at BofAApril 21, 2025 | markets.businessinsider.comSee More Martin Marietta Materials Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Martin Marietta Materials? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Martin Marietta Materials and other key companies, straight to your email. Email Address About Martin Marietta MaterialsMartin Marietta Materials (NYSE:MLM), a natural resource-based building materials company, supplies aggregates and heavy-side building materials to the construction industry in the United States and internationally. It offers crushed stone, sand, and gravel products; ready mixed concrete and asphalt; paving products and services; and Portland and specialty cement for use in the infrastructure projects, and nonresidential and residential construction markets, as well as in the railroad, agricultural, utility, and environmental industries. The company also produces magnesia-based chemicals products; dolomitic lime primarily to customers for steel production and soil stabilization; and cement treated materials. Its chemical products are used in flame retardants, wastewater treatment, pulp and paper production, and other environmental applications. 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There are 15 speakers on the call. Operator00:00:00Welcome to Martin Marietta's Third Quarter 2022 Earnings Conference Call. All participants are now in a listen only mode. A question and answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for Replay on the company's website. I will now turn the call over to your host, Ms. Operator00:00:22Jennifer Park, Martin Marietta's Vice President of Investor Relations. Jennifer, you may begin. Speaker 100:00:32Good morning. It's my pleasure to welcome you to Martin Marietta's 3rd Quarter 2022 Earnings Call. Joining me today are Ward Nye, Chairman and Chief Executive Officer and Jim Nicklas, Senior Vice President and Chief Financial Officer. Today's discussion may include forward looking statements as defined by United States securities laws in connection with future events, Like other businesses, Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially. We undertake no obligation, except as legally required, to publicly update or revise any forward looking statements, whether resulting from new information, Please refer to the legal disclaimers contained in today's earnings release and other public filings, which are available on both our own and the Securities Exchange Commission's websites. Speaker 100:01:24We will be made available during this webcast and on the Investors section of our website, Q3 2022 supplemental information that summarizes our financial results and trends. As a reminder, all financial and operating results discussed today or for continuing operations. In addition, non GAAP measures are defined and reconciled to the most directly comparable GAAP measure In the appendix to the supplemental information as well as our filings with the SEC and are also available on our website. Ward and I will begin today's earnings call with a discussion of our Q3 operating performance and portfolio optimization efforts. Jim Nicholas will then review our financial results Capital allocation, after which, Ward will conclude with end market trends and our preliminary outlook for 2023. Speaker 100:02:10A question and answer session will follow. Please limit your Q and A participation to one question. I will now turn the call over to Ward. Speaker 200:02:18Thank you, Jenny. Good morning, everyone, and thank you for joining today's teleconference. I'm pleased to report that Martin Marietta delivered record results in the 3rd quarter. This is despite current macroeconomic challenges that include persistent inflationary pressure across multiple cost categories, tighter monetary policies And heightened geopolitical tensions. Our quarterly performance is a testament to our team's commitment to commercial excellence and execution of our strategic business plan. Speaker 200:02:48The results also reflect our successful implementation of double digit Pricing growth across all Building Materials product lines. That combined with acquisition contributions drove record quarterly consolidated total revenues, Gross profit, adjusted EBITDA and adjusted earnings per diluted share. Importantly too, our year to date safety and health performance, Inclusive of acquired operations remains at world class levels as measured by both total injury and lost time incident rates. While we acknowledge and celebrate our continuous safety and health improvement, our work in this final dimension is never done. In addition, on August 9, we entered into a definitive agreement to sell our Tehachapi, California cement plant and related distribution terminals to Calporta and Company for $350,000,000 subject to regulatory approval and customary closing conditions. Speaker 200:03:45This transaction aligns with our commitment to an aggregates led business complemented by strategic cement assets in certain markets, improves the durability of our business through cycles and provides balance sheet flexibility to continue driving shareholder value. Our capital allocation priorities remain focused on prudent investment and attractive acquisitions, organic growth initiatives and returning capital to shareholders while reducing net leverage to within the company's targeted range. As highlighted in today's release, we achieved a number of significant financial and operating records in the 3rd quarter, including Consolidated total revenues increased 16 percent to $1,810,000,000 Consolidated adjusted gross profit increased 8% to $488,000,000 Adjusted EBITDA increased 9% to $533,000,000 and adjusted earnings per diluted share from continuing operations increased 10% to $4.69 These results on flat organic aggregate shipments underscore the success of our value over volume commercial strategy through which multiple pricing actions were successfully implemented this year. However, inflationary trends also impacted our operating costs And affected our adjusted consolidated gross margin, which declined 200 basis points to 26.9 percent for the quarter. Notably, This is both a moderated pace and sequentially higher as compared with the Q2 of 2022. Speaker 200:05:26As a result of the current demand environment and persistently high inflation, we have advised customers of the 4th quarter price increase in a number of our markets as well as broad based January 1, 2023 increases. We believe these commercial initiatives, Together with other inflation containment actions position Martin Marietta well to expand margins in the Q4 and deliver another year of strong profitability in 2023. For our company, it passed as prologue and we believe that it is. Inflation supports a constructive pricing environment for upstream materials, The benefits of which endure long after inflationary pressures abate. Let's now turn to our 3rd quarter operating performance, Starting with aggregates. Speaker 200:06:14We continue to experience healthy aggregates demand across the company with total aggregate shipments inclusive of acquisitions, increasing 5.6 percent to a quarterly record of 60,200,000 tons. Organic aggregate shipments were largely flat As otherwise, strong demand was offset by supply chain disruptions, inclement weather in certain key markets, and most notably, logistics constraints and cement shortages, the latter curbing the immediate need for aggregates in the manufacture of ready mix concrete. Aggregates pricing fundamentals remain very attractive and organic aggregates pricing increased 11.9% or 11.3% on a mix adjusted basis. The cumulative effect of multiple pricing actions continued to build in the 3rd quarter. These disciplined actions combined with overall customer confidence and demand visibility bode well for meaningful price acceleration in the 4th quarter and in 2023. Speaker 200:07:16The Texas cement market continues to experience robust demand and tight supply, resulting in effectively sold out conditions. Against that backdrop and combined with our Smith team's focused execution on commercial and operational excellence, We delivered record 3rd quarter shipments of 1,100,000 tons and pricing growth of 21.4% as our second $12 per ton increase this year went into effect on July 1. We expect favorable Texas cement commercial dynamics will continue For the foreseeable future, supportive of our recently announced $20 per ton price increase effective January 1, 2023. Shifting to our targeted downstream businesses, organic ready mix concrete shipments decreased 16.8%, largely due to a historically wet August in North Texas as well as the completion of certain large projects in the quarter. Organic pricing increased 20.3%, reflecting multiple pricing actions, including fuel surcharges Organic asphalt shipments increased 4.3%, driven primarily by strong demand in Colorado, while organic pricing improved 22% to help offset the increase in raw materials costs, principally liquid asphalt or bitumen. Speaker 200:08:44Notably for comparative purposes, Prior year asphalt volumes were constrained by a bitumen shortage in Colorado. Including contributions from our acquired operations in California and Arizona, Asphalt shipments and pricing increased 31.3% and 26.1%, respectively. Before discussing our preliminary 2023 outlook, I'll turn the call over to Jim to conclude our Q3 discussion with a review of our financial results. Jim? Speaker 300:09:15Thank you, Ward, and good morning to everyone. The Building Materials business Posted an all time record this quarter with products and services revenues of $1,610,000,000 a 15.9% increase over last year and an adjusted product gross profit record of $467,000,000 an increase of 10.9%. Adjusted aggregates product gross profit improved 10.5% relative to the prior year's quarter to a record $330,000,000 Adjusted aggregate product gross margin declined 240 basis points to 32.5 percent as robust pricing growth had not yet offset the continued inflationary impacts of higher energy, internal freight, repairs and maintenance costs. Our Texas Cement business delivered all time quarterly records for top and bottom line results. Revenues increased 23.4 percent to $163,000,000 while gross profit increased 35.7 percent to $68,000,000 Importantly, execution of a disciplined commercial strategy drove a gross margin expansion of 380 basis points to 41.5%. Speaker 300:10:35That was despite notable energy cost headwinds, primarily related to natural gas and electricity. Domestic production capacity constraints and strong demand Contributes to extremely tight supply in the North and Central Texas markets. As a reminder, We are taking 2 notable near term steps to increase cement production capacity in Texas. First, we are in the midst of conversions at our Midlothian and Hunter plants To manufacture a less carbon intensive Portland Limestone Cement, also known as Type 1L. This eco friendly product has been approved by the Texas Department of Transportation and we believe our customers will view it as providing significant Stakeholder benefits. Speaker 300:11:21Once we have completed our transition to Type 1L, our cement production capacity will increase by approximately 10%. 2nd, we are installing a new finish mill at our Midlothian plant, which is expected to be completed by the end of 2023. This new finish mill will provide 450,000 tons of much needed incremental production capacity to the Texas marketplace. Our 3rd quarter ready mix concrete results exclude the Colorado and Central Texas operations that were divested on April 1st and include the acquired Arizona operations impacting the comparability with the prior year quarter. On an as reported basis, Ready Mix Concrete product revenues declined 29.1 percent to $227,000,000 and gross profit declined 40.3 percent to $19,000,000 driven primarily by the divestiture, which was partially offset by contributions from the acquired operations. Speaker 300:12:22The increased raw material costs further weighed on the gross margin for the quarter. Our asphalt and paving results include the operations acquired on the West Coast, impacting comparability with the prior year quarter. On an as reported basis, stable demand, improved pricing and acquisition contributions led to record revenues of $310,000,000 A 58.1% increase and record adjusted gross profit of $50,000,000 a 22.9% increase. However, continued liquid asphalt inflation contributed to the adjusted product gross margin decline of 4 70 basis points to 16.3%. Magnesia Specialties generated product revenues of $69,000,000 a 4% decrease driven largely by lower demand from domestic steel industry customers for dolomitic line products. Speaker 300:13:18Product gross profit declined 22.9 percent to $22,000,000 as higher energy costs resulted in gross margin compression of 7 70 basis points to 31.3 percent. On a consolidated basis, other operating income net included $15,000,000 and non recurring gains from the sale of surplus land and other assets. We saw sequential moderation in diesel costs in the Q3. During the month of October, diesel prices have trended back up. While we anticipate additional volatility in diesel prices, we are forecasting that 4th quarter prices approximate current levels. Speaker 300:13:59As a result, with diesel costs no longer increasing sequentially, coupled with our disciplined pricing initiatives, We expect to return to expanding gross margins in the Q4 as compared with the prior year period. We remain focused on the disciplined execution of our strategic plan to responsibly grow through acquisitions and reinvest in the business, while also returning capital to shareholders. During the quarter, we returned $141,000,000 to shareholders through both dividend payments and share repurchases. We repurchased nearly 288,000 shares of common stock at an average price of approximately $3.47 per share in the 3rd quarter. We also reduced gross leverage this past quarter. Speaker 300:14:47On September 29, the company utilized cash on the balance sheet to satisfy and discharge A $700,000,000 tranche of senior notes due July 2023. Our net debt to EBITDA ratio continued to trend down and ended the quarter at 2.6 times. We continue to anticipate a return to the top end of our target net leverage ratio of 2 to 2.5 times by year end. Additionally, the company's Board of Directors approved an 8% increase in their quarterly cash dividend Paid in September, underscoring its confidence in our future performance and free cash flow generation. Our annualized cash dividend is now $2.64 per share. Speaker 300:15:31Since our repurchase authorization announcement in February 2015, we have returned $2,300,000,000 to shareholders through a combination of meaningful and sustainable dividends as well as share repurchases. As detailed in today's release, we have updated our full year 2022 guidance to reflect our year to date results as well as the impact of lower expected aggregate volumes and continued inflationary pressure. As a result, we now expect full year adjusted EBITDA to range from $1,610,000,000 to $1,675,000,000 which excludes the non recurring gain on the divestiture in the 2nd quarter. With that, I will turn the call back to Ward. Speaker 200:16:17Thanks, Jim. Looking ahead to the remainder of the year and into 2023, demand from expanded federal and state level infrastructure investment, coupled with heavy industrial projects of scale are expected to offset near term affordability driven headwinds in the historically under built residential sector. Importantly, we have both the ability and capacity to supply these needed products and supported by our locally led pricing strategy We'll do so in a manner that emphasizes value over volume. As we enter the Q4, Aggregates customer backlogs are ahead of prior year levels with supply chain challenges continuing to serve as the primary governor to the growth of product shipments. In the Q3, infrastructure shipments accounted for 36% of total volumes. Speaker 200:17:07In the current period of broader economic uncertainty, One constant theme across our footprint is that infrastructure, our single largest end use market is poised for accelerated growth As already healthy State Department of Transportation or DOT budgets receive incremental funding from the Infrastructure Investment and Jobs Act or IJA through the allocation for the 2023 fiscal year, most of which began on July 1. Notably, for the 1st 8 months of the year, federal aid highway construction obligations for the company's top 10 states are up 28% relative to the prior year period. As a result, we expect a step change in the public sector investment in 2023 to provide a stable base level of demand for years to come. Aggregate shipments to non residential end market accounted for 35% of total third quarter volumes. Non residential construction project backlogs remain strong in our markets, led in large measure by heavyside energy, Critical product manufacturing and data center projects of scale. Speaker 200:18:16The announcements of these projects are accelerating driven by a post pandemic shift In Global Energy and Manufacturing Supply Chains as well as data usage from adoption of digital and cloud based services. Illustrative projects in our markets include Golden Pass LNG and CP Chem's plastics facility along the Texas Gulf Coast. Samsung's Semiconductor Operation in Austin the Taiwan Semiconductor Campus near Phoenix The Stellantis Samsung Joint Venture Lithium Ion Battery Plant near Indianapolis both Ventas Electric Vehicle and Wolfspeed's planned chip manufacturing site near Raleigh Durham and Meta Data Centers in Kansas City and Des Moines. While we continue to see recovery in pandemic impacted light commercial, retail and hospitality sectors, we expect this recovery will moderate as these categories generally follow single family residential development. Not surprisingly, The residential end market, which accounts for 23% of our total 3rd quarter shipments, began to slow down in the 3rd quarter As organic shipments to the sector decreased 3% following the decline in single family housing starts, which was partially offset by continued strength in multifamily construction. Speaker 200:19:41That said, housing across our Sunbelt footprint remains underbuilt Amid significant population inflows with demand far exceeding supply. As shown in our supplemental slides, Single family housing starts per capita in our key metro areas remains significantly and to varying degrees below peak 2,005 levels. As such, we continue to expect the current affordability driven single family housing slowdown to be moderate in our key metropolitan areas as home prices and borrowing rates find equilibrium. As we look to 2023, our preliminary view anticipates aggregate shipments to be effectively flat as we expect increased infrastructure investment Coupled with robust activity from heavy non residential projects of scale will largely insulate product shipments from a slowdown in the single family residential sector. We remain confident that favorable commercial dynamics underpinned by our value over volume pricing strategy We'll continue to be supported by attractive 2022 exit rates as well as realization of our announced January 1, 2023 price increases. Speaker 200:20:55Together, we expect this will drive low double digit growth in aggregates pricing in 2023. To conclude, we're proud of our record setting performance against a challenging backdrop. We expect our current momentum to accelerate in the 4th quarter and in 2023 resulting in a return to margin expansion. We remain committed to employee health and safety, commercial and operational excellence, sustainable business practices and the execution of our strategic plan. In doing so, we're confident in our ability to successfully navigate the current macroeconomic challenges, while demonstrating the resiliency of our proven Aggregates led business model. Speaker 200:21:39If the operator will now provide the required instructions, we'll turn our attention to addressing your questions. Operator00:21:48Thank you. Please standby, we can follow the Q and A roster. Our first question comes from Stanley Elliott with Stifel. You may proceed. Speaker 400:22:10Good morning, everyone. Thank you all for taking the question. Ward, you mentioned the infrastructure piece is critical into next year. Can you talk a little bit more about the state budgets, kind of what you're seeing, how it looks right now and their ability to get projects and lettings out the door for you? Speaker 200:22:27Good morning, Stanley. Thank you for the question. I guess several things. 1, not all states are going to be created equal and What we've been focused on is building our business in the right states. So if we look at our top 10 states overall, we're seeing basically budgets for next that are up around 10% and that can move around a lot. Speaker 200:22:46So for example, North Carolina, our home state here, up 11%, Florida, up 27%, South Carolina, important state for us, up 28%. Part of what we're seeing too is not just increased funding, But in many respects, Stanley, the way that states are looking at funding. So for example, in North Carolina, 2% of sales tax in FY2023 We'll find their way to infrastructure that's going to work its way up to 4% then 6% over a multi year period. At the same time, even reflecting on Florida, Florida recently passed in their FY 2023 budget basically A historic high and they're looking at $4,400,000,000 for highway construction and another $1,200,000,000 just for resurfacing. And then if we're looking at Texas, which is our largest state by revenue, their 10 year unified transportation program It's $85,000,000,000 worth of projects to try to contextualize that. Speaker 200:23:44That's a 13% increase From the 'twenty two plan. So the nice thing is when you sit back and look at what we're going to have from a baseline from IIJA, Which is going to be the single largest POP we've seen since the Interstate Highway Act went into law in 1956. And then you feather on top of that very healthy state budgets. It's a pretty attractive backdrop. It's important to see too, Stanley, I think to your question, if we're looking at those same top 10 states in contract awards year to date, They're up around 13%. Speaker 200:24:20But importantly too, as we're looking at federal aid highway construction obligations year to date, Those are also up 28%. So as we think about what public is going to look like for us next year On the federal side, plus to your question on the state piece of it, we think that's attractive and it starts leading us back Towards volume on public that looks more like history in the low 40% of our volume as opposed to what you heard me speak to just moments ago, which In the high 30s. So Stanley, I hope that helps. Speaker 400:24:55Sure does. Thank you very much. Best of luck. Speaker 200:24:57Thank you, Stanley. Operator00:25:01Thank you. One moment for questions. Our next question comes from Kathryn Thompson with Thompson Research Group. You may proceed. Speaker 500:25:15Hi. Thank you for taking my question today. This is great color on the public end market and you've also given some good color into early pricing actions for 2023 with a 20% per ton increase for cement and low teens for aggregates. But when we look at the private side, what Gives you confidence, particularly focusing on customer backlogs about what to expect for 2023 and in particular More color on backlogs that you're seeing right now that gives a view for next year? Thank you. Speaker 200:25:51Catherine, thank you for the question. Look, as we look at customer backlogs compared to where we were last year this time, in aggregates, They're actually nicely up, up about 7%. If we look in ready mix, they're also up. If we look in cement, It's broadly flat and we're expecting actually to pick up some nice work in Q4. And keep in mind, in cement, we're dealing with the market in Texas That is uniquely, largely sold out. Speaker 200:26:19So we're looking at backlogs today for customers versus where we were a year ago. It's actually pretty attractive. I think the other piece of your question that's so important, Catherine, as we think about 2023, Our view is clearly public is going to be healthier. As we think about 2023, the heavy side of non res and we look at that through projects They're in the process of being led. We also look at projects and square footage that's out there in particular. Speaker 200:26:48We're seeing the heavy side of non res Manufacturing, energy, etcetera, being very attractive in the markets in which we're operating. Do we think we're likely to See some degree of moderation in the light side of non res? Probably so. Do I think the U. S. Speaker 200:27:05Is going to see A degree of cooling in single family housing, we already have, I think that persists. But I think if we look at multi Residential housing, that's going to be really resilient. We're probably going to see a nice pop in that. So as we step back and look at backlogs And think about end uses. Public appears to be quite healthy. Speaker 200:27:29Non res on the heavy side is quite healthy. Multifamily res is healthy and we think single family residential and the light side of non is where we're likely to see varying degrees of weakness. Now one of the things that we've been careful to do and you see it in our supplemental slides, we've tried to spell out what specificity certain key MSAs, 4 of them in the West, 4 of them in the East that we think are indicative of what's happened to population in our key MSAs And what's happened to housing? I think an analysis of that will reveal to the extent that the U. S. Speaker 200:28:07Feels some degree of headwinds on housing, Ours will not be as pronounced. So, Catherine, I've tried to deal with both the public and the private side to give you some Good data points on why we have the degree of resilience we do around relatively flat volumes going into 2023. Speaker 100:28:28Perfect. Thank you very much. Operator00:28:31Thank you. One moment for questions. Our next question comes from Trey Grooms with Stephens. You may proceed. Speaker 600:28:43Hey, good morning, everyone. Hi, Trey. Your cement pricing there in the quarter, very impressive performance. And Looking into 2023, how much of today's pricing will be carried over from this year into next year? And You mentioned having some widespread increases in January, and we've heard of some being announced for the Texas The met market in the January timeframe, but if you could comment on that and maybe around the magnitude you're expecting there? Speaker 200:29:16Look, it's been a thank you for the question, Trey. It's been a good year for pricing and excuse me, for Texas cement this year. We anticipate that's going to recur next year. I mean, if we look at ASP for the quarter, it was up 21.4% On a reported basis 20.6 percent on a mix adjusted basis, what that's done to your point in cement It's basically led to a new all time record for gross product and you can see gross margins that are above 40%. If we think about the Texas cement market, here are some things to remember. Speaker 200:29:51I think this gives you a good build on why we have resilience around the $20 Per ton increase effective January 1. That's a market that's going to consume around 20,000,000 tons of cement per annum, But it's a market that has the capacity to produce it in the state of Texas at about 16,000,000 tons. In other words, that goes back to my commentary in the prepared remarks that the markets effectively sold out. So keep in mind, we've got 2 plants, 1 in Midlothian, 1 at Hunter. So we're in Central and North Texas, frankly, where water imports Are not particularly meaningful to what we're doing. Speaker 200:30:30So I would say all of that underscores why we have resilience around the pricing. The other piece of it that I think is important and I think it likely recurs is I'm not going to lead you to believe that we have enormous amounts of material going to basically oil well cement, but there is some going to West Texas. Those are actually at Much higher ASPs than you would see ordinarily. And I think reflecting back on the geopolitical tensions that I mentioned in the prepared remarks, It's hard to imagine that that piece of our business is going to slow. The other things that I think are important to keep in mind, Trey. Speaker 200:31:101, we're also seeing a conversion as Jim said in his comments to the Type 1 L Cement. In that process, we'll actually get about 10% more capacity as we go into next year and then it won't be immediate next year, but you will see more capacity come online As we finish the finished mill that's underway at Midlothian right now, that's going to add another 450,000 tons to that marketplace that actually desperately needs it. So again, dollars 20 a ton is what we're looking for. I think that answers your question specifically. But again, I wanted to give you some other data to give you a sense of why we have a high degree of confidence in that number. Speaker 600:31:53That does answer my question. Thank you, Ward, for the color. I'll pass it on. Thanks, Trent. Operator00:31:59Thank you. One moment for questions. Our next question comes from Jerry Revich with Goldman Sachs. You may proceed. Speaker 700:32:12Yes. Hi. Good morning, everyone. Speaker 200:32:14Hi, Jerry. Speaker 700:32:14Ward, I'm wondering if you could talk about Ward, if we were to Assume a mild recession next year and volumes are down year over year versus the base case Flat, it feels like with the pricing gains over the course of this year, you folks would still be positioned to expand Aggregates margins by a couple of 100 basis points given the puts and takes in that scenario. I'm wondering if you might be willing to comment on that Just conceptually given the timing of permanent price increases over the course of this year versus The quicker diesel and other inflation that we saw in the beginning of the year and as a result the catch up we're going to see in 2023? Speaker 200:33:00Sure, Jerry. Thank you for the question. So a couple of things. Your question, which I think is a really good one, really focuses on margin and what we think happens with volumes. So several things that I would point out. Speaker 200:33:101, if you look at what we're seeing for the balance of the year, we're actually anticipating margin expansion returning in Q4. So what that means is multiple price increases in a big heavy industry are actually finally catching up and passing what have been the cost inputs. We also expect that to recur going into next year. Now to your point, what happens if you see volume more bearish than we anticipate volume being next year? What I would do is I'd take you back and it's been a while, Jerry. Speaker 200:33:38This might have been before you were actually following us, but if we go back to 2,005, 2,006 And 7, what you'll actually see if you look at history is the industry generally Martin Marietta specifically Was finding peak volumes back in 2,005, but we are actually seeing peak profitability in that last cycle in 2,006, which underscores in many respects why we speak to this volume this value over volume strategy because we recognize How valuable that is to our business. The other thing that I'll outline Jerry because you've seen it and I think it's probably echoed in some of your writings as well. The pricing in aggregates tends to be a very durable set of pricing. So as we go through cycles inevitably in the fullness And I'm not sure if next year is going to be a down cycle or not. We don't think it will be right now because of the strength in public. Speaker 200:34:33We have a lot of confidence around the resiliency The aggregate pricing, so as we think about what is likely to happen in margins in Q4, we think they expand. If we look at what we think is likely to Happened to margins in 2023. Again, we think they likely expand. So hopefully that answers your question and maybe 10% more, Jerry. Speaker 700:34:55It does. Thank you. Operator00:35:00Thank you. One moment for questions. Our next question comes from Phil Ng with Jefferies. You may proceed. Speaker 800:35:11Hey, guys. Appreciate the forward color for 2023. So maybe I have a question for Jim. Your flat volume guidance, appreciating a lot of Uncertainty on housing and maybe on the light side for commercial. Can you kind of help us unpack the percentage growth you're assuming for housing, non res And on the infrastructure side, we could appreciate the lettings and bidding activity has really dialed up. Speaker 800:35:37But Ward, help us understand kind of like the cadence of when that big inflection kind of comes through next year? Thanks a lot. Speaker 200:35:44Look, I think you're going to start to see the inflection as we get closer Toward half year next year in particular. Keep in mind, it's always interesting to me, people want to look at Q1 and try to divide some degree of Rhythm or cadence out of Q1. And remember, in our world, Q1 is January, February March. And what I've long said is, Oftentimes Q1 is made or broken by the last 2 weeks in March, which is no way to really judge the rest of the year. I think going back to the percentages that I spoke A little while ago in infrastructure gives you a good sense of what that rhythm and cadence can look like through the balance of the year. Speaker 200:36:20I think part of what we're going to be seeing, and I think this is important, Phil, In infrastructure, we're going to be seeing more capacity type projects, but then we've seen in the more recent past. That's important because you're going to send out a much wider array of volumes and more volumes over a period of years. So I would reflect on that. The other thing that I would say in particular and a lot of this is driven by energy and manufacturing. If we look on the non res side, What we're seeing and I mentioned before, the square footage on a number of these plants, not just in Texas, but beyond that, even on some of the new opportunities that we're seeing And the Carolinas and in the central part of the United States have considerable square footage. Speaker 200:37:04These tend to be almost Concrete Warehousing. And then the other thing that we are seeing is we're seeing estimated start dates now on all of the large LNG or energy plants that we've been looking at in South Texas, all with 2023 start dates. And we think that's important as well because when we look at those projects all by themselves, and again, I'm talking about 6 different projects in South Texas, The cumulative yardage and tons from those are 13,700,000 tons and about 1,300,000 cubic yards. So again, we feel like on those, It won't just be an aggregates or concrete play for us. In varying degrees, it can be a cement play as well. Speaker 200:37:48So I would certainly start looking To begin in Q2 to see those volumes ramp up, I think it will particularly be in public. I think you're going to see the heavy side of non res On manufacturing and in energy actually do quite well. I do think areas like hospitality and others Are likely going to slow. It will be curious to see how single family housing goes in our markets. As I said, I don't think those are going to go off a cliff. Speaker 200:38:16I don't think there's room for them to go off a cliff because we're looking at seasonally adjusted starts right now below 900,000 And using $1,000,000 is a good steady start. And keep in mind, in many of these markets, we are still it's not an affordability issue, it's an availability So I think in many respects, it will be curious to see what homebuilders are willing to do relative to their margins. But from a timing perspective, Phil, That's the way I would think about it and that's how I would handicap it via end uses. Operator00:38:49And Ward, the heavy side for Speaker 800:38:51us, Shane, a lot of Is that enough to like more than offset the light side at least when you think about 2023? Speaker 200:38:56I think the scope of some of those heavy projects are so large. I think the short answer is yes, it really can, particularly some of these large energy projects. So I think that's where you end up Potentially with that non res wash, I think that's probably a good word to use. Speaker 900:39:13Okay. Thank you. Speaker 200:39:15Thank you, Phil. Operator00:39:18Thank you. One moment for questions. Our next question comes from Timna Tanners with Wolfe Research. You may proceed. Speaker 1000:39:31Yes, thanks. I wanted to squeeze in 2 really Hopefully quick ones. One is, you talk about the constraints from cement availability and I was just wondering how we should think about that improving given some of the expansions you've talked about from existing capacity, yours and others. And then same idea, smaller market, but on the Magnesium Specialties side, your Guidance assumes a rebound. So is this just a short term blip you see in the demand side, or is this something that could perpetuate into next year? Speaker 1000:40:02Thanks. Speaker 200:40:03So, Kevin, thanks for the question. So a couple of things on Mag, I think we anticipate really more the same for Mag in Q4. I think we actually expect A better year for Mag next year. Couple of things are driving that right now. Steel is running at about 77% of capacity, which is lower than it's been for a while. Speaker 200:40:20The chemical side of that business is actually performing quite well. That business has a number of commercial contracts that are rolling off at the end of this year. So as we think about the rhythm and cadence of what that's going to look like from a pricing perspective, next year is actually going to be much more attractive for that business. So that's how I think of that. If I think about the ready mix market in particular back to your comment relative to cement shortages, part of what that has done This has put ready mix players in a position that as they get toward the end of a week, if they don't have significant powder in some markets, they're not buying Stone either. Speaker 200:41:00Look, I think the fact is cement in some markets could stay tight for a while. And I think that could have from a bit of a logistics perspective, a little bit of a headwind. That's certainly what we've seen this year. It's not a massive headwind to be fair, Timna. I think part of what's happening this year is cement tightness has been an issue, Trucking has been an issue, rail has been an issue. Speaker 200:41:24And I think some of the transportation and logistics issues, while still confronting the industry broadly, Are getting modestly better. So as we think about those issues going into next year, I would actually anticipate more logistics Tailwinds next year than we've seen this year and then we'll have to see how cement plays out. And keep in mind Timna, in our world, the only place we have cement and again it's very much by design is the strategic cement position that we have In Texas, we're the largest producer of aggregates, cement and ready mix concrete. So I hope that addresses the mag issue and your thoughts around powder for next year. Speaker 1000:42:08Okay. Now that's helpful color. Thanks again. Speaker 200:42:09Thank you, Tim. Operator00:42:11Thank you. One moment for questions. Our next question comes from Keith Hughes with Truist. You may proceed. Speaker 300:42:23Thank you. Looking Looking at Speaker 200:42:24the Q4 in aggregate volumes, the yearly numbers seem Speaker 300:42:27to indicate it's going to Speaker 200:42:28be negative. Is that correct in other than weather, is there anything going on within the Quarter in and accurate. Keith, thank you for the question. The primary thing that we're looking at as we look at Q4 is several fold. 1, What's the year to date look like? Speaker 200:42:452, last year, it's worth remembering that we actually had a winner That didn't roll in until very late in the year. So we had a Q4 that was unusually long. So what we're doing in large measure is assuming that a normal winter shows up. And if a normal winter shows up And then we go back and augment it to varying degrees on those items that we were just talking about with Timna saying, what happens with normal winter, what happens if Logistics constraints concur or recur and what happens is cement continues to be tight. We're just looking at those things and trying to sort out what we That could mean for the Q4 and really your swing factor as much as I hate to say it is going to end up being winter. Speaker 200:43:33There are a number of markets that can be really weather affected that are actually quite good markets today. Among them, for example, Indianapolis is a very attractive market. Minneapolis St. Paul, we're seeing asphalt volumes in that market where we're an FOB provider Last year, and by the way, we thought last year was a pretty good year. So if we end up with colder weather in some of these markets that are relatively high performing, it does have, no pun intended, A chilling effect on what the volumes can look like for the rest of the year, Keith. Speaker 200:44:45So that's how we're racking it up. Okay, great. Thank you. Thank you. Operator00:44:52Thank you. One moment for questions. Our next question comes from Michael Dudas with Vertical Research Partners. You may proceed. Speaker 900:45:06Good morning, gentlemen. Jennifer. Speaker 300:45:08Hi, Michael. Speaker 900:45:12Ward, Maybe you could remind us or what in your guidance for 2022, what was maybe overall headwind towards the higher energy and Materials, costs, constraints, labor, however you want to place it. And as you're looking into 2023, certainly it's going to stay at a Inflation has stayed at a high level, but what kind of moderation may we see and what are the parts that we could look for Speaker 200:45:42Sure. Let me bifurcate that a little bit. Let me tell you what we saw. Jim will come back and give you a sense of what we're expecting. And so I'll try to break it down just a bit. Speaker 200:45:51So again, if we look at diesel Cost per gallon and if we're looking at the aggregates business and the single largest energy input, that's what it is. So diesel cost per gallon It was up 69% and what that means is it was up from $2.44 a gallon in Q3 of 2021 To $4.12 a gallon in Q3 of 2022. Now in fairness, that did show and Jim commented to this in his prepared remarks, That did show some sequential moderation from what had been 4.60 a gallon in Q2. But still those are Pretty big numbers and they are big numbers in particular when you keep in mind that for full year, we are anticipating having about 53,500,000 gallons of diesel fuel that we will use. Similarly, if we look at electricity and natural gas, and of course, These will be involved in the aggregates business, but in fairness, there are going to be bigger issues in cement and in Mag Specialties. Speaker 200:46:51So again, if we're looking at those, the electricity costs were up 46%, net gas was up 106%, As we look at Q3, so those are pretty significant headwinds that we have during the quarter that I think we actually very successfully navigated. Now speaking a little bit of at least on what we look for the rest of the year and into next year, Jim, I'll turn that over to you if I may. Speaker 300:47:16Sure. So the energy cost For the full year, the headwind we're expecting in 2022 is about $190,000,000 or so, give or take. That's a full year view. At this point, we're not assuming those get better or worse next year. They stay elevated, but they don't improve, they don't get worse. Speaker 300:47:36So that's a big The price of most volatile of our cost components. Labor stays relatively well behaved. That's our biggest single biggest cost component At about 20 ish percent, that's going to be maybe a little bit above average, but not too bad. What is growing of late And I expect to continue into next year supplies, repairs expense, and contract services, those will Grow a little bit faster as they have this quarter into next year. But I think all that said, our ASP growth Speaker 900:48:14Those are some stunning numbers, Gord. Well done. Thank you. Speaker 200:48:18Thank you very much. Operator00:48:20Thank you. One moment for questions. Our next question comes from David MacGregor with Longbow Research. You may proceed. Speaker 200:48:34Yes. Good morning, everyone. Speaker 300:48:35Hi, David. Congratulations on all the progress, Ward. Thanks Speaker 200:48:39so much. Speaker 300:48:40I wanted I just want to ask you about Texas Cement. And you'd highlighted in response to your answer to an earlier question, just everything that's happened this year is kind of out of the ordinary. There's Unplanned maintenance outages and down the low water on the river, import constraints, solar capacity everywhere. It's been a very, very tight year and Extraordinary pricing environment, but you're kicking off with a 20% increase for 2023. In response to a different question, you indicated you expected Flexion in infrastructure to be mid year, which suggests, I guess, absent something changing on the capacity stand side There's another price increase coming mid year. Speaker 300:49:20It just seems like a phenomenal setup in somatin. So I'm just wondering what are the risks? What is it resi? And could resi potentially be enough of an issue to be disruptive to all of the growth in public and private non res or Just interested in how you're thinking about the downside, Suneet, right now. Speaker 200:49:38No, look, I appreciate the question very much, David. I think cement as a general rule and cement in Texas as a specific role are probably 2 different things. And I think part of what gives us such confidence in the Texas market overall is that has historically been the In place in which we've seen all the way through cycles, the single highest infrastructure percentage of our business. So when you're in Texas, you're riding on concrete roads and you're going across concrete bridges. And I think that's a really important component So remember when you think about what's happening in that marketplace. Speaker 200:50:17The other thing that we've spoken of David is really what the requirements are in that state, What the in state production is in that state and where our plants are located. So if housing slowed to a degree, Would that open up some powder? The answer is it probably would. Does that mean that people aren't going to be faced with tightness I think it probably does. So I do think Texas is in A very different and it's an overused word, David, but I do think cement in Texas It's relatively unique. Speaker 200:50:57The other thing that I'll point out that I think has been a big help for us as we've looked at our business over time The fact is, as we look at our reliability and as we look overall at the utilization of our plants in Texas, They continue on a year over year basis to get better. So we're finding ourselves in a position in a market that's very tight That making the shift to Type 1 L is going to add capacity, adding the new finished mill at Midlothian is going to add capacity. And the fact is, We're a better cement company now than we were last year and we're going to be better next year than we are this year. So I think there are a number of components to it, but I do think Commercial aspects of it will continue to be very attractive. And right now, we've got a lot of resilience around, but we're Operator00:51:55Thank you. One moment for questions. Our next question comes from Brent Thielman with D. A. Davidson, you may proceed. Speaker 1100:52:07Hey, great. Thanks. Hey, Ward, if you guys get back within your target Leverage range by year end. Maybe if you could speak to your business development pipeline, overall appetite for M and A next year and a lot of Internal focus here on margins in 2022 and obviously going into 'twenty three, a lot of economic certainty out there. So just wanted to get a sense of how you're thinking about You're kind of the business development side. Speaker 200:52:33Brent, thank you for the question. I think that's such an important one as we go through cycles because Our capital priorities are changing. And part of what I find really compelling about Martin Marietta is the ability of this Company after having done the most significant cash outlays in its history in M and A last year to be delevered Exactly the way that we anticipated we would be by the end of this year. Now if we think about M and A more broadly, here is what I will say. A lot of potential deals have come through our funnel in the last 18 months. Speaker 200:53:09And what we're trying to be is What you would expect and that is very disciplined in what we're looking at. We're looking at a number of different potential transactions today. They tend to be almost exclusively, it's not They are almost exclusively aggregates based deals and those are the types of transactions that we are most interested in. You hear the way that we speak of our business, aggregates led, strategic cement, targeted downstream. So to the We can continue to grow our aggregates led business. Speaker 200:53:40That's what we're going to want to do. Part of what's different now though as we think about it, Brent, Our footprint is different. So we have the ability to look in markets that we could not have looked in before to do bolt ons. And the reason that I call that out is bolt ons, if you think about them from a risk allocation perspective, are actually very low, Because you've got operating people in that market, you've got commercial people in that market, integration can broadly occur over the course of a weekend and the execution risk is really quite low. So do we continue to look at M and A? Speaker 200:54:19The answer is yes. Do I hope that we'll have some things to talk to you about late this year or early next year? I hope so. There are certainly no guarantees on that, But the aim is that we will continue to do that and you should look for it to continue to be aggregates led. So I hope that's responsive. Speaker 200:54:37Yes. Speaker 1100:54:37That's great, Ward. Appreciate the comments. You bet. Operator00:54:41Thank you. One moment for questions. Our next question comes from Garik Shmois with Loop Capital. You may proceed. Speaker 300:54:53Hi, thanks for taking my question. I wanted to follow-up on the non residential side. If you have an estimate of how much of your non res shipments is Going towards that heavy side of non res that's expected to hold off as opposed to the light non res. And just to be clear, on the non res, are you Any current delays or cancellations or is your outlook there just more indicative of how this end market has to follow The health and the cycle of a lag. Speaker 200:55:24Yes, good to hear your voice and thanks for the question. I'm going to take part 2 and ask Jim to come back and deal with part 1. So part 2, We're not seeing significant cancellations on non res projects. And frankly, that's not a big surprise to me. The only time In my career that I can remember that we saw that happen in notable ways was coming out of basically that 2,005, 2,006 We're building was so robust and the fall was so precipitous that we saw non res projects Actually stopping or being canceled. Speaker 200:56:00As a general rule, they don't. They tend to go through. So the short answer is we're not seeing that. The other part of your question is really the breakdown of what's heavy and non, etcetera. So I'll turn that over to Jim. Speaker 300:56:12Yes. So, hey, Garik. The heavy portion of non res is 55%. The light portion is 45%. Great. Speaker 300:56:22Helpful color. Appreciate it. Speaker 200:56:26Thanks, Garrett. Operator00:56:28Thank you. One moment for questions. Our next question comes from Michael Feniger with Bank of America. You may proceed. Speaker 1200:56:40Yes. Thanks for squeezing me in. On the public side, you mentioned an inflection in the second half of next year. So is it fair to say that the growth rate in 2024 for public It's likely to be higher than the growth rate in 2023. And just to follow-up on that, the industry has observed past cycles Well, you can get 3 consecutive years of double digit pricing. Speaker 1200:57:04You're doing it in 2022, next year will be number 2. So just if public accelerating in 2024, the heavy side of non res is okay, do we have underpinnings Get that 3rd year for 2024? Thank you. Speaker 200:57:22Those are great questions, Michael. So thank you for that. Do I think we're likely to see that type of a build on the public side? The short answer is yes, I think we probably are. Do I think we're in a position and again, look, this is really rank speculation, so I don't want to get out there too far. Speaker 200:57:42I think we've got a good sense of what pricing will be In 2023. And of course, we've tried to capture that in what we put out in our preliminary guidance. If we're right, I believe that we are, that we obviously have a multiyear highway bill. If we're right that the U. S. Speaker 200:58:01Is far from overbuilt, If we are right that anything relative to housing will not be deep and it will not be long. And if we're right that the U. S. Is going to have to look at higher degrees in particular manufacturing going forward. I think you could take a number of economic indicators in that vein and say that volumes should be relatively attractive on a broader base for an extended period of time. Speaker 200:58:30What we've seen relative to pricing, particularly in aggregates, is Aggregate pricing tends to be attractive even in a challenged volume environment. If we end up finding ourselves in a multiyear circumstance That you could have flat next year up year after or however you want to fashion it. I do think that you could continue to see a very constructive pricing environment. Now, Obviously, that's not guidance. That's looking out farther than we would typically look out. Speaker 200:59:04Obviously, what we've given you so far is a preliminary view of 2023. But if I'm just taking what has been more years around this industry than on occasion, I'd like to admit. I think what I've just outlined for you would be consistent with broader history. Speaker 1300:59:23Thank you. Operator00:59:26Thank you. One moment for questions. Our next question comes from Adam Thalhimer with Thompson Davis. You may proceed. Speaker 1400:59:38Hey guys, nice quarter. Just real quick, Ward, on the residential side, are you actually seeing weakness today? And I was just wondering if that had anything to do with the Volumes down a Speaker 300:59:48little bit in Q4. Speaker 200:59:50I'm sorry. Are we doing what today, Adam? I missed that. Speaker 1400:59:53Actually seeing weakness in residential today or is that Still something you just expect to see. Speaker 201:00:00In some markets, I wouldn't call it a weakness, I would see it a slowdown. And I know that's parsing things a little bit, but overall, the reason that I don't say Weakness is they're still in our market such an acute need. And I think that's the fundamental difference that we're seeing today. So are we seeing a slowdown in large measure because of logistics constraints and otherwise? Yes. Speaker 201:00:28Are most of our markets in my view more affected today by lack of availability As opposed to affordability, I think that is the bigger issue, Adam. I'm not going to Totally dismiss affordability in some circumstances. I mean, let's face it, it's a practical matter. We've got a lot more people in the United States and we have Interest rates trending up to things that would have looked relatively normal a decade plus So we're going to have to see where that goes. But the short answer is yes, we are seeing some degree of a slowdown, nothing that we think is Dramatic. Speaker 201:01:09In fact, we think it's actually quite expected in what we're seeing more broadly. But I do think this is going to be a circumstance where very specific geographies will respond very differently, in particular, on single family housing. Speaker 1401:01:26Okay. Good color. Thanks, Ward. Speaker 201:01:28Thank you, Adam. Operator01:01:30Thank you. One moment for questions. Our next question comes from Anthony Pettinari with Citi. You may proceed. Speaker 301:01:43Good morning. Speaker 901:01:45It looks like CapEx guidance for the year was trimmed a little bit, Maybe under $50,000,000 at the midpoint, if I Speaker 301:01:52got that right. Can you just Speaker 901:01:53talk about what's driving that? And then any kind of implications For CapEx in 2023 or maybe early thoughts on 2023 CapEx given you may be kind of Speaker 301:02:02flattish on volumes next year? Yes. Hey, it's Jim. Happy to take that question. The reduction in CapEx this year was simply Just taking longer to get the money deployed than we had expected early in the year. Speaker 301:02:19There's no other reasons in that frankly. So it's just a reflection of what we think we can get done this year. As for next year, I typically guide folks to about 9% of revenues. I think that holds true for next year. So, sort of steady as she goes for us And I would expect the same thing next year, about 9% of sales. Speaker 301:02:40Does that answer your question? Speaker 1201:02:43Yes. No, that's very helpful. I'll turn it over. Operator01:02:50Thank you. One moment for questions. Our next question comes from Dylan Cumming with Morgan Stanley. You may proceed. Speaker 1301:03:06Hey, guys. Thanks for squeezing me in. I just wanted to bring the discussion back to the supply chain logistics for a second. Ward, you were pretty clear that I think Elements of like trucking and rail still been kind of constraining aggregate volumes this year. I think you alluded to the fact that those should be kind of improving modestly next year. Speaker 1301:03:21We think about the volume assumptions that you have for the heavy side of non res and public and infrastructure. For the 2023 outlook of flattish volumes, are you still embedding those kind of pockets of the end market spectrum or still constrained by those issues, vis a vis trucking and rail or how should we kind of frame up potential upside to that or how conservative and maybe if you start to see more pronounced like release in those areas as the year progresses? Speaker 201:03:46Dylan, thank you for the question. The short answer is yes. We are assuming for purposes of next year that they continue to be constrained. We're assuming that degrees of constraint have been relieved, but not at all wholly relieved. And keep in mind, We're going to benefit and we're going to have a burden depending on how things work, particularly relative to rail. Speaker 201:04:10As rail gets better, we're the largest shipper of stone By rail in the United States. So we will be a disproportionate beneficiary as that circumstance is inevitably righted. At the same time, when it's struggling, we're going to feel it a bit more acutely and that's where we've been over the last several quarters. So Do we think it's going to be completely remedied next year? No. Speaker 201:04:33Do we think it's likely to be better? Yes. Do we see it getting better in the second half of this year than it was earlier? Yes. So that gives us a certain degree of resilience around our view on that next year. Speaker 201:04:45But that's how we're at least, Dylan, we're trying to frame that more broadly. Speaker 1301:04:50Great. That's helpful. Thank you. Speaker 201:04:52Thank you. Operator01:04:55Thank you. And I'm not showing any further questions at this Time, I would now like to turn the call back over to Ward Nye for any further remarks. Speaker 201:05:03Again, thank you all for joining today's earnings conference call. We continue to strive for safety, commercial and operational excellence and remain focused on executing our strategic plan. Martin Marietta's track record of success throughout various business cycles and our ability to adapt to the various challenges inherent in the current macroeconomic environment proves the resiliency and durability of our aggregates led business model. We're confident in Martin Marietta's prospects to continue driving We look forward to sharing our Q4 and full year 2022 results with you in February. As always, we're available for any follow-up questions. Speaker 201:05:43Thank you again for your time and your continued support of Martin Marietta. Bye bye.Read morePowered by