Pit & Quarry, December 2016

Martin Marietta upbeat following latest quarterly perforMance M artin Marietta Materials Inc published its third quarter results reporting company records for consolidated net sales gross profit and net earnings In addition Martin Mariettas aggregate product line pricing was up nearly 9 percent Our ability to take advantage of a slow and steady economic expansion and improvement across our markets helped us achieve exceptional performance in each of our business units says Ward Nye AggregAte ForecAst By David chereb Forecasting nonbuilding in coming years A large infrastructure program will probably emerge sometime over the next few years from Washington The timing and details are unknown at this point but we can make some guesses as to the impact within a reasonable range Our assumptions for this exercise are that the program will be in the 250 billion range or 50 billion per year over five years Not all of the budgeted amount will find its way into construction contracts Most of the 2009 stimulus program for example was spent on non construction related items In fact it is hard to find the 2009 stimulus bounce in the historical data for aggregate during the 2009 to 2012 period Even if this new program UPdATe chairman president and CEO of Martin Marietta According to Nye positive underlying market conditions contributed to the companys Southeast Group and Mid America Group expanding their gross margin 530 basis points and 90 basis points respectively In addition aggregate product line volume increased 8 percent in the Carolinas with some markets increasing 15 percent or more This growth was driven by early and small advances in both non residential and is concentrated on construction there will be a big push to spend it on non highway projects such as California high speed residential demand Nye says Importantly some market challenges we faced during the quarter Indeed volume headwinds were more prevalent than tailwinds during the quarter and constrained construction activity in our markets Specifically Martin Marietta continues Department of Transportation projects declines in railroad ballast shipments abnormally wet weather and a slower energy related marketplace rail Because it takes time to work through the political process the impact on these results were achieved despite materials consumption will take place mainly after 2017 to experience delays in Texas Dr David Chereb has many years of experience forecasting construction materials and his webbased forecasting models have captured every major turning point in materials demand for more than 15 years Chereb received his Ph D in economics from the University of Southern California He can be reached at david chereb@ sc marketanalytics com For this analysis we have assumed most of the budgeted amount turns into construction contacts far higher than the 2009 stimulus program With that as background the chart shows the impact on construction contracts for nonbuilding for 2016 2022 versus our baseline outlook The infrastructure plan will take a few years to work its way into contracts Our maximum increase occurs in 2019 when nonbuilding contracts are 37 percent higher than our baseline outlook For aggregate consumption the maximum gain is in 2020 when consumption Aggregate consumption baseline vs nonbuiding push billions of metric tons 2015 2016 2017 2018 2019 2020 2021 2022 260 250 240 230 220 210 200 baseline Nonbuilding push DCG Inc U S Aggregate forecast billions of metric tons 2012 2013 2014 2015est 2016est 2017est 2018est ReSIDeNtIAl 43 39 48 53 58 54 50 NoNReSIDeNtIAl 68 60 65 70 73 72 70 NoNbUIlDING 91 106 106 105 106 108 102 totAl 202 205 219 228 237 234 222 Yr Yr Ch 20 15 68 41 39 13 51 Note These results are based on our county level aggregates model More details are available for an additional fee Continued on page 45 44 PIT QUARRY December 2016 pitandquarry com