Martin Marietta Supplies, Inc. (NYSE:MLM) This autumn 2023 Earnings Name Transcript February 14, 2024
Martin Marietta Supplies, Inc. beats earnings expectations. Reported EPS is $4.63, expectations had been $3.96. MLM is not one of many 30 hottest shares amongst hedge funds on the finish of the third quarter (see the small print right here).
Operator: Welcome to Martin Marietta’s Fourth Quarter and Full Yr 2023 Earnings Convention Name. All individuals are actually in a listen-only mode. A matter-and-answer session will comply with the corporate’s ready remarks. As a reminder, at this time’s name is being recorded and might be out there for replay on the corporate’s web site. I’ll now flip the decision over to your host, Ms. Jacklyn Rooker, Martin Marietta’s Director of Investor Relations. Jacqueline, you might start.
Jacklyn Rooker: Good morning and thanks for becoming a member of Martin Marietta’s fourth quarter and full yr 2023 earnings name. With me at this time are Ward Nye, Chairman and Chief Government Officer; and Jim Nicholas. Government Vice President and Chief Monetary Officer. Right now’s dialogue could embrace forward-looking statements as outlined by the US securities legal guidelines in reference to future occasions, future working outcomes, or monetary efficiency. Like different companies, Martin Marietta is topic to dangers and uncertainties that would trigger precise outcomes to vary materially. We undertake no obligation, besides as legally required to publicly replace or revise any forward-looking statements, whether or not ensuing from new info, future developments, or in any other case.
Please check with the authorized disclaimers contained in at this time’s earnings launch and different public filings, which can be found on each our personal and the Securities and Alternate Fee’s web site. We now have made out there throughout this webcast and on the Traders part of our web site, supplemental info that summarizes our monetary outcomes and traits. As a reminder, all monetary and working outcomes mentioned at this time are for persevering with operations. As well as, non-GAAP measures are outlined and reconciled to essentially the most straight comparable GAAP measure within the appendix to the supplemental info in addition to our filings with the SEC and are additionally out there on our web site. Ward and I’ll start at this time’s earnings name with a dialogue of our 2023 monetary highlights and working efficiency.
Jim Nickolas will then overview our monetary outcomes and capital allocation in additional element. After which, Ward will conclude with finish market traits and our 2024 outlook. A matter-and-answer session will comply with. Please restrict your Q&A participation to 1 query. I’ll now flip the decision over to Ward.
Ward Nye: Jacklyn, thanks. Good morning and thanks a lot for becoming a member of at this time’s teleconference. I am happy to report 2023 was the most secure and most worthwhile yr in Martin Marietta’s historical past. We delivered each file monetary efficiency, eclipsing $2.1 billion in adjusted EBITDA and likewise world-class security outcomes, attaining a world-class whole damage incident fee for the third yr in a row and a world-class lost-time incident fee for the seventh consecutive yr. This yr was additionally highlighted by a number of portfolio enhancing transactions considerably strengthening each the sturdiness of our enterprise and our steadiness sheet and which cumulatively, positions us nicely to proceed delivering sustainable progress. Our 2023 achievements had been achieved regardless of a macroeconomic surroundings encumbered by restrictive financial coverage, a housing slowdown, and heightened geopolitical tensions.
That our workforce was in a position to efficiently overcome these challenges additional underscores the continued success of our strategic working evaluation and overview or SOAR plan, the vitality of our purposely curated geographic footprint, our workforce’s steadfast execution of our confirmed worth over quantity industrial technique, and the resiliency and earnings energy of our aggregates-led enterprise. Subsequent to year-end, on January twelfth, we closed the acquisition of Albert Frei & Sons, a number one aggregates producer in Colorado, increasing our aggregates platform within the high-growth Denver metropolitan space. Extra lately, on February 11, 2024, we entered right into a definitive settlement to accumulate the Alabama, South Carolina, South Florida, Tennessee, and Virginia aggregates operations of Blue Water Industries, a carefully held pure-play aggregates producer with a portfolio of 20 energetic operations and enticing Southeast markets, together with Nashville, Knoxville, and Miami.
In step with our SOAR plan upon closing of the Blue Water Industries acquisition, which is anticipated to happen later this yr, topic to regulatory approvals and customary closing circumstances, these two pure-play aggregates transactions is not going to solely add roughly 1 billion tons of high-quality reserves in particular SOAR-targeted markets, but in addition improve the product mixture of our portfolio. Assuming these transactions have closed on January 1, 2024, we might have anticipated these two acquisitions to generate roughly $180 million of adjusted EBITDA in 2024, greater than offsetting the adjusted EBITDA divested within the February 9, 2024 sale of the corporate’s South Texas Cement and associated concrete enterprise. As we flip the web page to 2024, favorable industrial dynamics underpinned by our price over quantity pricing technique and giving impact to the lately closed Colorado acquisition and Texas divestiture, we count on to ship consolidated adjusted EBITDA of $2.24 billion on the midpoint.
Nevertheless, assuming these transactions and the lately introduced Bluewater Industries’ acquisition had all been accomplished as of January 1, 2024, we might have anticipated the brand new portfolio to generate adjusted EBITDA of $2.37 billion in 2024 on the midpoint. Earlier than discussing our full yr 2023 outcomes, I will spotlight just a few notable takeaways from our file fourth quarter. Aggregates pricing elevated 15%, driving product line gross revenue of $328.6 million, a year-over-year enhance of 36.8% and gross revenue per ton of $7.04, a year-over-year enhance of 39.8%, each fourth quarter information. Whereas combination shipments decreased 2.1%, these monetary outcomes clearly exhibit the success of our gross sales workforce’s dedication to receiving applicable industrial consideration for our helpful and long-lived reserves.
The first and disproportionate natural earnings progress driver of our enterprise. Turning now to our full yr 2023 outcomes. As beforehand famous, we established new monetary information in every of the next year-over-year metrics. Consolidated whole revenues of $6.8 billion, a ten% enhance. Consolidated gross revenue of $2 billion, a 42.1% enhance. Earnings per diluted share from persevering with operations of $19.32, a 41% enhance. Adjusted EBITDA of $2.1 billion, a 33% enhance and aggregates gross revenue per ton of $6.93, a 46.4% enhance. Furthermore, we efficiently applied midyear worth will increase throughout the vast majority of our markets as we endeavor to cross via persistently excessive price inflation. Shifting now to our full yr 2023 working efficiency starting with aggregates.
Mixture shipments declined 4.3%, the mixed results of our price over quantity technique and softer demand in sure Midwest and Southwest markets, partially offset by continued power in key Southeast markets. Aggregates pricing elevated to 18.9% or 17.2% on a mix-adjusted foundation as pricing fundamentals stay enticing. Texas Cement shipments decreased 3.4% to 4 million tonnes. Pricing elevated 22% or 21.6% on a mix-adjusted foundation, pushed by favorable provide/demand dynamics within the Dallas-Fort Value Metroplex. Turning to our focused downstream companies. Prepared-mixed concrete shipments decreased 12.1%, however that discount was largely pushed by the April 2022 divestiture of the corporate’s Colorado and Central Texas concrete companies. Pricing elevated a strong 20.4%.
Asphalt shipments elevated 3.5% and pricing elevated 6.7%. Earlier than offering finish market traits and our 2024 outlook, Jim will now talk about our full yr monetary outcomes. Jim?
Jim Nickolas: Thanks, Ward and good morning everybody. As Ward talked about, we accomplished the sale of our South Texas Cement plant and associated concrete operations final week on February ninth. Whereas these companies had been categorized as held on the market on the steadiness sheet as of December thirty first, revenues and income from these operations via the divestiture date are included within the earnings from persevering with operations. Accordingly, the revenues and income from these property are included in each 2023 as reported earnings from persevering with operations and in our 2024 earnings steering via the February ninth shut date. The revenues and income from the Colorado property acquired on January twelfth, 2024, are also included in our ahead earnings steering.
Lastly, the Bluewater Industries transaction has not but closed and stay topic to customary closing circumstances and regulatory overview. Accordingly, the contributions from the pending acquisitions will not be included in our 2024 earnings steering. That mentioned, we’ll present up to date earnings steering after closing Bluewater transaction, which is anticipated to happen later this yr. The Constructing Supplies enterprise posted full yr 2023 revenues of $6.5 billion, a rise of 10.3% and gross revenue of $1.9 billion, a notable 43.7% enhance year-over-year, each new information. The aggregates enterprise achieved all-time file revenues in 2023, rising 10.9% to $4.3 billion. Gross revenue elevated 40.1% to $1.4 billion, and gross margin elevated 660 foundation factors to 32%.
Once more, each all-time information. Stable pricing progress greater than offset decrease shipments, additional demonstrating how the disciplined execution of our price over quantity, industrial technique yields, larger income and better margins even with out the advantage of rising volumes. Our Texas Cement enterprise prolonged its observe file of excellent efficiency and as soon as once more delivered file high and bottom-line outcomes. Revenues elevated 17% to $725.5 million and gross revenue elevated 64.6% to $333.6 million, pushed primarily by favorable provide/demand dynamics within the Dallas-Fort Value Metroplex and power price tailwinds. As a reminder, the brand new end mill at our Midlothian, Texas plant in North Texas is anticipated to be absolutely operational within the third quarter of 2024, including roughly 450,000 tons of incremental excessive margin annual manufacturing capability.
Transferring to our focused downstream companies. Our concrete revenues elevated 5.9% to $1 billion and gross revenue elevated 44.2% to $102 million, pushed primarily by pricing good points and mega venture contributions, which greater than offset larger upstream, uncooked materials, and supply prices. Asphalt and paving revenues elevated 12.6% to $887.1 million. Gross revenue elevated 34.7% to $109 million. The results of sturdy demand and decrease bitumen prices. Magnesia Specialties full yr revenues elevated 3.8% to $315.4 million, whereas gross revenue elevated 6.9% to $97.1 million. Robust pricing and power price tailwinds greater than offset weaker demand in sure magnesia finish markets, together with TPO roofing and cobalt mining. We proceed to steadiness our long-standing disciplined capital allocation priorities to responsibly develop our enterprise.
In 2023, we invested $650 million of capital into our enterprise and returned $324 million to shareholders via each an elevated dividend and share repurchases. Since our repurchase authorization announcement in February of 2015, now we have returned a complete of $2.6 billion to shareholders via each dividends and share repurchases. Our internet debt to EBITDA ratio was 1.4 instances as of December thirty first, assuming the Albert Frei & Sons and Bluewater Industries’ acquisitions and South Texas Cement and associated concrete operations divestiture had been efficient as of January 1st, 2024, after giving impact to the impacts of those transactions, our internet debt to EBITDA ratio would have been 1.85 instances, slightly below our focused vary of two instances to 2.5 instances, which would offer ample dry powder to make the most of further value-enhancing acquisitions.
With that, I will flip the decision again to Ward to debate finish market traits.
Ward Nye: Jim, thanks a lot. We’re captivated with Martin Marietta’s prospects in 2024 and past. We anticipate wholesome demand in public and heavy non-residential building will largely offset softness within the residential sector and anticipated moderation in gentle non-residential building. Nevertheless, anticipated decreases in mortgage charges ought to present tailwinds in residential demand and an uptick in single-family house building as evidenced by current [Indiscernible] information. As you have heard us say for years on this enterprise, the place you’re issues and Martin Marietta is uniquely positioned to capitalize on these long-term secular traits. Infrastructure exercise is anticipated to stay resilient as funds from the Infrastructure Funding and Jobs Act or IIJA, together with file State Division of Transportation or DOT budgets, in addition to voter-approved state and native transportation-related poll initiatives coalesce to per years of regular funding and demand.
The worth of state and native authorities freeway, bridge, and tunnel contract awards, a number one indicator for our future product demand, grew 8% to $113 billion in 2023. In line with the American Street & Transportation Builders Affiliation or ARPA, Texas, Colorado, California, Georgia, and Florida, key Martin Marietta states are amongst a number of the largest rising markets based mostly on contract awards. Importantly, our funding in our nation’s infrastructure continues to keep up broad bipartisan help. In the course of the November 2023 election, voters permitted 88% of transportation-related state and native poll initiatives, representing roughly $7 billion of further infrastructure funding. We count on this enhanced degree of federal, state, and native infrastructure funding will yield regular, multiyear demand on this essential aggregates-intensive typically countercyclical finish market.
Transferring to non-residential and beginning with heavy industrial, sturdy demand for big manufacturing and heavy facet power tasks is anticipated to counterbalance ongoing moderation in warehouse and information middle building from its COVID peak. Development spending from manufacturing in the US continues to development positively with the December seasonally adjusted annual fee of spending for 2023 at $214 billion, a 61% enhance from the December 2022 worth of $133 billion. Manufacturing tasks proceed to be supported by well being demand from the continuing reshoring of important product provide chains, together with semiconductors and electrical car battery manufacturing. For instance, within the fourth quarter of 2023, Toyota introduced an $8 billion enlargement to their battery manufacturing campus in North Carolina, bringing their whole funding to roughly $14 billion.
This incremental funding solidifies North Carolina is Toyota’s central hub for lithium-ion battery manufacturing in North America with this campus having over 7 million sq. toes. Importantly, our quarries are well-positioned to provide the aggregates wants for the sort of multiyear venture. Shifting to gentle non-residential, whereas demand remained resilient via 2023 regardless of larger rates of interest, excessive workplace emptiness charges, and tighter industrial lending additions, we count on 2024 demand on this phase to average because it usually follows single-family residential growth with a lag. Given the structural housing deficit and favorable inhabitants traits in key Martin Marietta markets, we absolutely count on the affordability-driven single-family residential slowdown will recuperate as rates of interest declined additional and month-to-month mortgage funds develop into comparatively extra inexpensive.
Though there’s nonetheless near-term uncertainty, we’re inspired by current traits in single-family housing begins, a number one indicator of combination demand, which had been 1 million models in December, a rise of 16% from a yr in the past. Trying forward, we count on 2024 to be one other file yr for Martin Marietta. As beforehand talked about, we anticipate flat combination shipments as infrastructure and large-scale non-residential tasks ought to largely offset softness within the residential and lightweight non-residential sectors. With regular product demand, supporting favorable industrial dynamics and the disciplined execution of our price over quantity technique, we count on double-digit aggregates pricing progress to beat inflationary pressures and result in expanded gross margins and unit profitability progress.
Mixed with contributions from our cement, downstream and Magnesia Specialties companies and contributions from our lately acquired Colorado property, we’re assured in our expectations for consolidated adjusted EBITDA of $2.24 billion on the midpoint. To conclude, we’re extraordinarily pleased with our record-setting efficiency in 2023. We demonstrated our capability to efficiently navigate one other difficult macroeconomic surroundings and ship superior returns for shareholders. As we start the brand new yr, our groups stay dedicated to worker well being and security, industrial, and operational excellence, sustainable enterprise practices, and the execution of our SOAR 2025 initiatives as we construct the most secure, best-performing, and most sturdy aggregates-led public firm.
We look ahead to persevering with our sturdy momentum in driving accountable and worthwhile progress in 2024 and past. If the operator will now present the required directions, we’ll flip our consideration to addressing your questions. Thanks.
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