This week, Martin Marietta, USA, released its third-quarter 2021 results with its Building Material business segment achieving a record US$1.39bn of revenues for the period. ICR looks at what is helping the company break records and how it is evolving its business model to favour future growth opportunities.

Martin Marietta is set up as an aggregates-led building materials company. It is the market leader or in second place in 90 per cent of US aggregate markets, having bolstered its operations significantly since 2010. Its aggregate platform stretches from Florida, the Carolinas and Virginia in the east to the central markets of Minnesota, Iowa and Nebraska, and down to Texas in the south. 

The performance of the company's aggregate shipments rose sharply in the 3Q21 to 57Mt, up 10 per cent from 51.8Mt in the 3Q20. However, average selling prices were relatively steady at US$14.93/t compared to US$14.75/t in the 3Q20, up just one per cent. 

The 3Q21 saw Martin Marietta's Building Materials business benefit from organic shipment and pricing growth as well as value-enhancing acquisitions. It also achieved successful mid-year price increases for its products.

Steady cement sales
The contribution of the cement division saw the slowest growth for the US building material company in the 3Q21. Total shipments of cement reached 1.1Mt, up just four per cent in the 3Q21 from 1Mt in the 3Q20. However, company revenues were supported by an eight per cent rise in cement prices that saw cement revenue climb from US$113.4m in 3Q20 to US$122.9m in the 3Q21. Still, the cement product gross margin declined 250 basis points to 37.7 per cent, as higher energy and raw material costs outpaced pricing gains.

Ward Nye, chairman and CEO of Martin Marietta, stated, "Our third-quarter results demonstrate Martin Marietta's industry-leading performance and disciplined execution of our proven Strategic Operating Analysis and Review (SOAR) plan."

Western cement expansion
The company has strong representation in the western region now, covering the states of Nevada, California, Utah and Arizona. Martin Marietta made a strategic acquisition this year to acquire the Lehigh West region, adding the cement plants of Tehachapi and Redding as well as distribution terminals, 17 aggregate and asphalt sites. Martin Marietta viewed the investment as a priority SOAR 2025 target, offering mega-region markets with attractive long-term demand drivers and further bolt-on opportunities. Its west coast presence includes cement (2.6Mt), aggregates (~13Mt), ready-mix (2.3Mm³) and asphalt (2.8Mt).

Texas remains the main hub of the company's cement operations, where a new finish Mill No7 will soon add 0.5Mta of cement capacity to the flagship Midlothian cement plant. The company's total grey cement capacity is approximately 6.2Mta, while the white cement capacity totals 0.11Mta, according to ICR estimates.

Current drivers for the company include the continuation of the resolution of the Fixing America’s Surface Transportation Act (FAST ACT), which maintains funding until 3 December 2021 and the future role of the bipartisan Infrastructure Investment and Jobs Act (IIJA Act). The IIJA Act will see increasing funding levels not seen for more than 15 years. Meanwhile, in the FY22, the annual Federal Highways programme will see appropriations of US$67bn and this will continue to rise each year through to US$72bn in FY26, according to the American Road & Transport Builders Association.

The US housing market is less buoyant for building material companies with single-family housing starts in 2022 down 42 per cent to 991,000 from the 2005 high of 1.216m, according to the US Census.

Outlook
The new western markets have expanded Martin Marietta's cement operations so that it has coast-to-coast coverage. It cites further bolt-on acquisition targets in the west, central, southwest and east divisions as well as new market expansion in the west coast, South Florida, DC Metro and Tennessee.

The company's preliminary view of 2022 anticipates: "Organic aggregates shipments to increase in the low-to-mid single-digits as third-party labour and logistics challenges continue to impact an otherwise robust product demand environment. Martin Marietta remains confident that favourable pricing dynamics will continue, supported by the company's locally-driven pricing strategy, and anticipates mid-to-high single-digit growth in organic aggregates pricing in 2022."

Published under Cement News