Pit & Quarry, December 2014
View from the top Ward Nye chairman president and CEO of Martin Marietta says his companys third quarter 2014 results reflect the acquisition of Texas Industries Inc the benefits of our larger presence in the western United States continued growth and enhanced profitability across the companys heritage business and a disciplined approach to cost The acquisition of TXI added 274 million of net sales and even in advance of full integration and realization of significant synergies contributed 445 million of gross profit excluding the one time increase in cost of sales for acquired inventory Nye says Based on our evaluation to date we expect to surpass our stated target of 70 million in annual synergies prior to 2017 This transformational acquisition when combined with our solid heritage business creates a strong and broad foundation for dynamic revenue and profit growth in 2015 and beyond positioning Martin Marietta to capitalize on increasing demand for building materials In addition to aggregates and ready mixed operations the TXI acquisition provided us with a leading position in the Texas cement markets as well as a state of the art rail located cement plant in Southern California Driven by a sold out Texas market cement made a solid contribution to our quarterly earnings as volumes increased 16 percent in the third THIS TRANSFORMATIONAL ACQUISITION when combined with our solid heritage business creates a strong and broad foundation for dynamic revenue and profit growth in 2015 and beyond WARD NYE President CEO Martin Marietta Materials quarter compared with the three months ended August 31 2013 when Martin Marietta did not yet own the business Nye says Job growth continues as a significant catalyst for construction activity and Texas leads the nation in employment gains Texas strong Department of Transportation budget is supporting investment in multiyear construction projects including the expansion of Interstate Highway 35E in Dallas and the TIFIA funded Grand Parkway project in Houston These and other numerous state level major projects have provided for continued stability in public sector construction activity Product line growth For Martin Marietta heritage aggregates product line shipments reflect growth in the three largest end use markets P Q AGGREGATES INDUSTRY INDEX JAN 14 FEB MAR APR MAY JUN JUL AUG December SEP 286 OCT NOV DEC Source Pit Quarry 300 250 200 150 The Pit Quarry Aggregates Industry Index which looks at construction starts the producer price index industry stocks and more climbed 33 points in 2014 Shipments to the infrastructure market comprised 47 percent of quarterly volumes and increased 3 percent Growth was strongest in the West Group notably in Texas and Colorado which continue to benefit from strong state Department of Transportation programs Highway awards in Texas increased about 26 percent for the trailing 12 months through August Infrastructure shipments in Colorado were up 21 percent reflecting activity from the Responsible Acceleration of Maintenance and Partnerships or RAMP program as well as reconstruction efforts resulting from the historic flooding in 2013 The nonresidential market represented 30 percent of quarterly shipments and increased 3 percent driven largely by energy sector shipments The company continues to benefit from the nations increasing investment in shale energy particularly in South Texas Martin Marietta believes this trend will continue driven by 100 billion of anticipated energy projects along the Gulf Coast including a significant portion in Texas as well as anticipated infrastructure repairs in South Texas The residential end use market accounted for 14 percent of quarterly shipments and volumes to this market increased 9 percent The overall rate of residential growth has slowed owing in part to a reduction in available lot inventory However the company continues to experience significant growth in certain markets and expects an increase in aggregates intensive subdivision development The company is encouraged by positive trends in its business and markets notably Nonresidential construction is expected to increase in both the heavy industrial and commercial sectors The commercial building sector is expected to benefit from improved market fundamentals such as higher occupancies and rents strengthened property values and increased real estate lending Residential construction should continue to grow driven by historically low levels of construction activity over the previous several years together with low mortgage rates signifi SPECIAL REPORT 16 PIT QUARRY December 2014 www pitandquarry com
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