C. Howard Nye
Chairman of the Board, President and Chief Executive Officer at Martin Marietta Materials
Thank you, Jacklyn, and thank you, all, for joining this teleconference.
As indicated in today's earnings release, several dynamics impacted our second quarter financial results, and particularly, product shipments. The most notable driver was an historic 119% increase in precipitation in Dallas-Fort Worth, our Company's single largest and most profitable metropolitan marketplace, as well as disproportionate rain and flooding in parts of the Midwest. Secondarily, the lag effect of restrictive monetary policy is pressuring interest rate-sensitive private construction demand more than previously anticipated. And while our value over volume philosophy also contributed modestly to the shipment decline, the benefits of our commercial strategy are clearly evidenced by the second quarter's strong unit profitability growth and adjusted EBITDA margin expansion. Moving forward, our team remains focused on what we can control and view the demand impacts from weather and high interest rates as temporary.
That said, we expect slower shipment trends to persist in the year's second-half. As a result, we revised our full-year 2024 adjusted EBITDA guidance to $2.2 billion at the midpoint. While second quarter shipments were below our initial expectations, there were notable highlights worthy of mention as foundational for Martin Marietta's long-term success.
Starting first with safety. I'm proud to report that we concluded the first-half of 2024 with the best safety instant rates in our Company's history, inclusive of our newly acquired businesses. Operationally, we expanded our adjusted EBITDA margin and achieved record second quarter organic and total aggregates gross profit despite significant weather headwinds. Importantly, aggregates pricing fundamentals remain attractive, with aggregates average selling price increasing 11.6% or 12% on an organic mix-adjusted basis. We expect this commercial momentum and related margin expansion to continue following realization of our previously announced July pricing actions. These accomplishments underscore the resiliency of our aggregates-led business, reinforced by our team's fidelity to maintaining a safe workplace and our unrelenting commitment to both commercial and operational excellence.
From a portfolio optimization standpoint, on April 5, we completed the acquisition of 20 aggregates operations from Blue Water Industries, and in so doing, efficiently redeployed the cash proceeds from the South Texas cement and concrete divestiture. These high-quality pure-play aggregates operations from Blue Water strategically complement our existing footprint in the Southeastern United States and position us in attractive new markets, including Tennessee and South Florida for future growth. I'm pleased to report that the integration of both the Blue Water and Albert Frei & Sons acquisitions is complete. The combined financial performance has exceeded management's initial expectations and the synergy realization will be increasingly compelling. Moving forward, the M&A pipeline remains active and largely focused on pure-play aggregates businesses in attractive SOAR identified geographies.
Shifting now to end market trends. Our single most aggregates intensive end use is infrastructure, which continues to benefit from increased funding and investment levels. While highway and street spending is expected to remain well above historic levels, leading indicators are predictably starting to lap more robust comparable periods. This is evidenced in the value of state and local government highway, bridge and tunnel contract awards for the 12-month period ending June 30, 2024, which declined modestly below 2023 levels to $114 billion. Funding certainty at the federal level through the Infrastructure Investment and Jobs Act, or IIJA, together with record state DOT budgets and constituent actions support a healthy pricing environment for construction materials in 2025 and beyond. With the 2024 election process well underway, it's important to note rebuilding and enhancing our nation's infrastructure and manufacturing capabilities remain bipartisan, national strategic priorities, as revealed by the high passage rates on local infrastructure ballot initiatives and three key legislative actions, the IIJA, the Inflation Reduction Act and the CHIPS Act.
Moving now to heavy non-residential construction. Reshoring activity for large manufacturing and energy projects continues to drive product demand. Aside from warehouse construction, which is contracting from its post-COVID peak starts on a square footage basis, remain well-above what were healthy 2019 levels. While not wholly offsetting, construction spending for domestic manufacturing continues to trend positively with the June 2024 seasonally-adjusted annual rate of spending at $236 billion, a 19% increase from the June 2023 value of $198 billion. Importantly, the breadth of reshoring projects is expanding from automotive, batteries and semiconductors to pharmaceuticals. For example, Novo Nordisk is investing $4 billion to build a 1.4 million square foot manufacturing facility near Raleigh, North Carolina, for which we're well-positioned to supply from our nearby quarries. In addition, while artificial intelligence is in its early stages, Martin Marietta is geographically well-positioned to capitalize on the related data center and infrastructure build-out led by big tech, including Amazon, who has announced plans to invest more than $100 billion over the next decade on data centers alone.
Relative to light non-residential and residential activity, restrictive monetary policy continues to impact these interest rate-sensitive end markets. The lock-in effect of high mortgage rates and low inventory are only serving to exacerbate the well-chronicled housing affordability and availability issues in many of our Company's key metropolitan areas. That said, recent inflation and employment data should provide the foundation for accommodative Federal Reserve policy actions later this year and into 2025. I encourage you to read more on this as discussed in the CEO Commentary and Market Perspective released earlier today.
Beyond 2024, we expect the generational highway and streets investments as the nascent reshoring and artificial intelligence infrastructure build-out are very much expected to provide an extended multi-year construction cycle in these aggregates-intensive end markets. Equally, when the affordability headwinds recede, we fully expect an accelerated housing construction recovery, specifically in single-family, which will be required to address the structural deficit of homes in many of Martin Marietta's key markets. Importantly, as history informs us, growth in single-family construction bodes well for light non-residential activity, which typically follows with a lag. But in this instance, a lag which we believe will be more abbreviated than previous cycles.
I'll now turn the call over to Jim to discuss our second quarter financial results. Jim?
