Q3 2020 Martin Marietta Materials Inc Earnings Call
[noise], ladies and gentlemen, today's conference scheduled to be in shortly please continue to standby and thank you for your patience.
[music].
Good morning, ladies and gentlemen for Martin Marietta third quarter 2020.
My Name's Alan RBC coordinator.
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I will now turn the call Suzanne Oh for Martin Marietta, Siphoned, they'll definitely there and maybe that.
Good morning, and thank you for joining Martin Marietta's third quarter 2020 earnings call with me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas Senior Vice President and Chief Financial Officer.
Reminder, today's discussion May include forward looking statements as defined by the United States Securities laws in connection with future events future operating results or financial performance like.
Like other businesses Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially.
Except as legally required we undertake no obligation to publicly update or revise any forward looking statements, whether resulting from new information future developments or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the FCC website.
We have made available during this webcast and on the Investor Relations section of our website Q3, 2020 supplemental information that summarizes our financial results and trends.
In addition, any non-GAAP measures discussed today are defined and reconciled to the most directly comparable GAAP measure in our earnings release and FCC filing.
Effective July one in connection with a streamlining our operating structure, we also changed our reportable segments.
Our building materials business now consists of the East group, whose operations were previously reported in the mid America and southeast grid.
And the West group, which had no significant changes. In addition, the magnesium specialties business comprises our third reportable segment.
Prior year results have been revised to conform with this new reporting structure.
Todays earnings call will begin with ward Nye, who will discuss our third quarter operating performance and market trends as we move toward 2021, Jim Nicholas will then review our financial results and liquidity position and then more will provide some closing comments.
Question and answer session will follow our prepared remarks.
I'll now turn the call over to ward.
Thank you Suzanne and thank you all for joining todays teleconference. We sincerely hope that you and your families are safe and healthy.
One memory and a strong business execution and commitment to operational excellence provides the foundation for our company to consistently deliver record financial operational and safety performance.
As highlighted in today's release, we established new profitability and safety Records for the first nine months of 2020 year to date gross profit increased to $927 million and adjusted earnings before interest taxes, depreciation and amortization or adjusted EBITDA.
Passed the 1 billion dollar Mark we.
We have also achieved the best safety performance and Martin Marietta's history with the company wide last time and total entry incident rates exceeding world class levels.
For the third quarter increased pricing across all product lines and disciplined cost management helped mitigate anticipated shipment declines driven by the COVID-19 pandemic.
Third quarter financial highlights as compared with the prior year period included.
Consolidated gross margin increased 100 basis points to a record 30.6%. Despite a 7% reduction in revenues demonstrating the resiliency of our business and our focus on cost control.
Selling general and administrative work yesterday expenses as a percentage of total revenues improved 10 basis points to an industry leading 5.4%.
Adjusted EBITDA was $502 million inclusive of $70 million of nonrecurring gains.
Diluted earnings per share was $4.71 for clarity the nonrecurring gains contributed 87 cents per diluted share.
These results are a testament to our dedicated and talented employees, who are managing through today's challenging public health and economic environment as well as the proactive steps we have taken to adjust the company's cost profile.
Now for a review of our third quarter operating performance.
Aggregates shipments declined nearly 9% versus a robust prior year comparison as anticipated given the widespread COVID-19 disruptions across the United States shipment declines were experienced across our footprint with the east group down, 9% and the West group down 8%.
Additionally, the east crude shipments were impacted by weather delayed projects in the Carolinas, Georgia, and Florida anticipated lower infrastructure shipments and portions of North Carolina, and reduced wind energy activity in Iowa.
Wet weather in Texas, and lower energy sector demand negatively impacted west group shipments.
In line with broader macroeconomic trends aggregates shipments to both the infrastructure and nonresidential markets decline shipments to the residential market improved modestly.
Aggregates average selling price increased 2.7% or 4% on a mix adjusted basis underscoring this product lines resilient pricing power by region. The East group posted a 4.4% pricing increase which strengthen our key geographies of North Carolina, Georgia.
Indiana and Maryland.
West Group average selling price declined slightly reflecting a lower percentage of higher price shipments from distribution yards, we continue to see attractive pricing in both Texas and Colorado on a mix adjusted basis, the West group average selling price improved nearly 4% as a reminder, we anticipate overall.
Full year, 2020, aggregates pricing growth of 3% to 4%.
Underlying demand for our Texas based cement business remains positive supported by a diversified customer backlogs and large project activity.
Third quarter cement shipments, however decreased 4%, reflecting continued energy sector headwinds.
Reported cement pricing increased 1%, while average selling prices for our core smid products, namely type one and type two summit.
Up $4 over the prior year period, lower shipments of oil well and light weight specialty cements bound for West, Texas disproportionately impacted overall pricing growth as a reminder, specialty summit's can sell for over $200 per tonne.
On a mix adjusted basis overall summit pricing increased 3.4%.
Turning to our targeted downstream businesses.
Ready mixed concrete shipments decreased 4%, excluding acquired shipments and third quarter 2019 shipments from our southwest divisions concrete business in Arkansas, Louisiana, and Eastern Texas, which we divested earlier this year 10.
Texas construction activity was hindered by wet weather by contrast, Colorado shipments benefited from favorable weather and continued activity on a large Amazon fulfillment center.
Favorable geographic mix from robust, Colorado shipments was the primary driver of the 2% increase in third quarter concrete pricing.
Asphalt shipments for our Colorado asphalt and paving business decreased 3% following near record levels in the prior year period.
Asphalt pricing increased 6%, reflecting a higher percentage of attractively priced specialty asphalt mix sales.
For our magnesia specialties business weakness in chemicals, and lime demand began to moderate during the quarter as steel utilization rebounded from june's trough, we expect continued improvement through the balance of the year.
Before discussing our preliminary 2021 outlook I'll now turn the call over to Jim to conclude our third quarter discussion with a review of our financial results and liquidity Jim.
Thank you ward and good morning to all.
For the third quarter, the building materials business, the litter products and services revenues of $1.2 billion.
6% decrease from the prior year period.
The product gross profit of 380.
The $4 million a 3% decrease.
Aggregates product gross margin expanded 130 basis points.
36.4%.
All time record.
Lower shipment volumes.
Strong mix adjusted pricing gains.
Disciplined cost management and lower diesel fuel costs contributed 6.5% growth.
Unit profitability.
These results demonstrate the cost flexibility and resiliency aggregates led.
Business.
<unk> product gross margin was 40.2%.
A 40 basis point decline.
Despite lower revenues.
Cement business benefited from lower fuel costs.
Prior year.
That improved reliability and throughput.
For our downstream businesses ready mix concrete product gross margin declined 90 basis 0.9, 0.7%.
Attributable.
The higher cost raw material.
Asphalt paving achieved record gross profit of $32 million in the 140 basis point improvement in margin.
Lower revenue.
Thank you just specialty third quarter product revenues decreased 7%.
$55 million.
Looking lower demand for chemicals and Lifelock.
For revenue and reduced fixed cost absorption resulted in a 240 basis point decline.
Product gross margin to 30.
Yes.
Our consolidated results included $7 million of gains on surplus noncore land sales and divested assets.
Mm Hmm, which will recorded in other operating income.
Our nonrecurring.
Not be extrapolated in a run rate calculation.
As a reminder for footwear sales were part of the value proposition.
Acquisition.
Exactly what you're seeing this quarter.
2016, we sold nearly $200 million of excess land that was not used for operations.
No I can paint operating assets.
While we cannot predict the timing of any future land sales.
Sex additional noncore real effects of a secure.
Favorable opportunities develop.
We achieved the highest adjusted EBITDA margin Martin Marietta's history.
Sales inclusive and exclusive of the previously discussed nonrecurring gain.
We anticipate adjusted EBITDA to range from $1.35 billion.
$1.37 billion inclusive of the $7 million nonrecurring gain.
Full year 2020.
No kidding.
Turning to capital allocation and liquidity.
We continue to balance our longstanding discipline capital allocation priority to responsibly grow our business.
Creating a healthy balance sheet.
Reserving financial flexibility to further enhance shareholder value.
Our priorities remain focused on value enhancing acquisition.
This one and prudent organic capital investment.
The return of capital to shareholders, while maintaining our investment grade credit rating profile.
In August.
Choir.
Ready mix concrete company, the Dallas Fort worth Metroplex.
These acquired operations complement our existing geographic footprint and expand our customer base.
We also enhanced our aggregates estimate throughput to drive incremental upstream value.
We have widened our for your capital expenditures guidance and now expect it to range from $350 million to $400 million.
We are exploring there's no kind of thing.
Opportunities that would further practice.
Otherwise paid on this your sizeable land sales.
Since our repurchase authorization announcement in February 2015.
We have returned $1.8 billion to shareholders through a combination of share repurchases.
Meaningful sustainable dividend.
Our board of Directors recently approved a 4% increase.
Quarterly cash dividend paid in September.
Underscoring continued confidence in our future performance and cash generation.
Our annualized cash dividend rate no $2 from 20 cents.
Share repurchase activity remains heavily pause during the quarter, however repurchases can resume management's discretion.
With a debt to EBITDA ratio of two times, we were at the lower end of our target leverage range of two to 2.5 times.
We remain confident in our balance sheet strength.
$1.2 billion total liquidity.
With our low leverage and liquidity.
Paying the financial flexibility to continue to profitably grow our business.
With that.
I'll turn the call back over to award for his market trends commentary.
Outlooks for 2021.
Thanks, Jim.
We're confident that our favorable pricing dynamics will continue and that attractive underlying fundamentals and long term secular growth trends across our key geographies will remain intact.
To offer some specific color on how this is playing out it's notable that both our upstream and downstream businesses have seen improvements in data shipment trends since July lows with October average stated shipments above prior year levels well.
Well, we're cautiously optimistic about these trends, we believe COVID-19 related uncertainty will likely persist through the winter and spring seasons.
Keeping that in mind, we currently anticipate product demand will remain modest through the first half of 2021 and product pricing will remain strong.
As the US economy resets from COVID-19 disruptions the longer term macroeconomic indicators, such as underbuilt conditions, historically low interest rates and hourly workforce availability are favorable and should support a construction led recovery.
We're seeing encouraging long term trends across our three primary end use markets and key geographies, including bipartisan support for robust multiyear federal surface transportation reauthorization heavy industrial activity to support E Commerce and remote work needs and single family housing expansion driven by.
Accelerated de urbanization.
We believe these trends bode well for more aggregates intensive construction cycle than experience during the slow but steady recovery from the great recession.
Infrastructure activity, particularly for aggregates intensive highways roads and streets continues to be resilient.
With gas and tech sales revenue shortfalls less than originally anticipated state departments of transportation Rdio T. budgets are in better condition than expected at the Pandemics onset for.
For example, Texas DMT scheduled Lettings for fiscal year, 2021, which began September 1st our currently planned a $10 billion an increase of 35% over the comparable fiscal year 2020 Lettings.
Updated Colorado to your T. projections indicate relatively flat transportation spending levels for 2021, and North Carolina, DMT, which temporarily suspended awards for certain projects in response to pre pub 19 funding issues and other factors recently revised its letting schedule upward and resume bidding for real.
Surfacing work earlier this month.
As a reminder, these three key states represent over 60% of our building materials business revenues.
On the federal front, the President recently signed into law, a continuing resolution that included a one year extension of the fixing America's surface Transportation Act or fast Act at current funding levels, which was consistent with our expectations.
In our view this provides state and local governments the visibility needed to plan design and let transportation projects through the 2021 construction season.
Over the medium to long term future, we expect the industry to benefit from the passage of a reauthorize comprehensive federal surface transportation package, which we anticipate will be enacted by mid 2021.
Both the United States House, and Senate have advanced Federal Highway legislation underscoring bipartisan support to remedy the nation's crumbling surface transportation infrastructure.
Notably both bills provide the first sizeable increase in federal transportation funding in more than 15 years.
Regardless of the upcoming election outcomes increased infrastructure investment and should provide volume stability and drive aggregates shipments closer to 45% of our total shipments moving us toward our 10 year historical average for reference aggregates shipments to the infrastructure market accounted for 30.
8% of third quarter shipments.
Although certain sectors of non residential construction remain challenged in the near term COVID-19 is driving a paradigm shift that should promote more diverse non residential demand than the previous cycle fueling long term aggregates growth ex.
Accelerating technology E commerce, and remote work trends require increased investment in heavy industrial warehouses, and Datacenters, which are generally more aggregates intensive than by commercial construction due to the size and scale of these projects.
Importantly, we have purposely shifted our non residential exposure over the last 10 years or so to be more heavily industrially focused as we've expanded our geographic footprint along major commerce corridors.
Additionally, light commercial construction despite its current weak demand should benefit in the longer term from the drag along effects of strong single family residential trends.
Aggregates shipments of the nonresidential market accounted for 33% of third quarter shipments.
Single family housing is expected to lead this economic recovery as to your participation accelerates prospective homebuyers are increasingly moving from large metropolitan cities to smaller metro or suburban areas amid the pandemic risk.
Recently, North Carolina, our third largest state by revenues was identified as a tough migration destination ranking number seven among states that experienced the most inbound moves from March through August of this year. According to data from United Van lines.
These trends extend beyond those moving from one state to another they also include existing restaurants opting to move farther out from city centers.
Across our southeastern and south western footprint undeveloped conditions and favorable population and unemployment dynamics provide Martin Marietta with a distinct competitive advantage for outsized secular growth in single family housing development Importantly single family housing is two to three times the AG.
It gets intensity of multifamily housing given the ancillary nonresidential and infrastructure needs of new suburban communities AG.
Aggregates shipments to the residential market accounted for 24% of third quarter shipments.
In summary, as our third quarter and year to date results demonstrate navigating challenging times and emerging from them stronger are hallmarks of our company.
We've executed a thoughtful strategy and taken deliberate steps to position Martin Marietta as a resilient efficient and cash flow generative business that can consistently drive shareholder value creation.
We will continue to do what we do best.
Manage our business safely and responsibly, ensuring that we're prepared to seize profitable growth opportunities for the benefit of our stakeholders.
Martin Marietta remains well positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long term.
Our attractive underlying fundamentals strategic priorities and best in class teams. We're excited about our bright prospects for driving long term sustainable growth and shareholder value in the fourth quarter in 2021, and well into the future. If the operator will now provide the required instructions, we'll turn our attention.
To addressing your questions.
Thank you to ask a question you would need to press star one of your telephone to withdraw your question press the pound key.
We ask that you please limit yourself to one question and.
And a quick follow up to allow time for everyone to Q.
Please standby, while we compile the company roster.
Our first question comes from Trey Grooms with Stephens. Your line is now open.
Great. Good morning are you there.
Oh, I'm, sorry, I was on mute.
Sorry about that between having a land conversation.
Yeah.
Sorry about that.
Well, thanks for taking my question.
And thanks for the color.
And really I want to dive in first on the aggregates margins.
I mean, very strong, especially given the lower volume and also.
One of your your.
Hi, its price highest market.
North Carolina, it's pretty challenged.
So pretty.
Pretty strong there and so more could you update us on maybe some of the cost tailwinds that you're seeing in the aggregates business.
Clearly diesel, but it seems like there's much more at work here.
And how do you think about the sustainability.
Right. Thanks for the question I know you're entirely right to put up these numbers, but as you said North Carolina is not at peak of its game right. Now we think it's going to be back to normal by the way, but half year next year, but what we've done in this very impressive quarter is done it with about an arm and a half tied behind our back because north Carolina is down, but it's not been as data and magnesia specialties is going through a difficult.
Moment, right now, but it's not going to stay down either so what you're saying, it's really a twofold impact trade one pricing was very good and that's something that we've come to expect and you come to expect as have as have our shareholders. So there are no surprises there it's nice to see it performing in resilient fashion again, when you're close down to the double digits on volume, but to your point.
What we're really seeing even separate and distinct from the energy piece of it is very good cost performance and Thats something that our team has been focused on its nothing thats new to Martin Marietta you can see it also in the S.J. numbers, but if I go through and look at where we not just in energy, but where we relative to contract services repairs supplies and other.
Plant costs, all down and Thats exactly what we would anticipate as you recall trade as we've gone through cycles.
We tend to invest very carefully in our company and when we were going through the financial crisis and the great recession, we did pull back on Capex at the same time. The last few years, we've taken capex up and that has truly been an investment in our business. So what we are seeing the benefits of is a better cost profile off.
Operational excellence cost performance across the spectrum, but we would anticipate and the other thing Thats important trade is the way that we've grown our business. So when we've added businesses as we have in Colorado, and what we've done in Texas with Dxi and what you're seeing from excess real estate sales and separately, what we've done with bluegrass. These.
We have all been enhancing this organization that is truly aggregates led and you're seeing good performance come through on the cost side, which again is exactly what we would have expected.
And the thing that I've really enjoyed in them. So grateful for the steam on is continuing to show their agility and being able to manage that on the fly and as they would need we're always going to remember 2020 2020 is the year that could have been because if you're seeing this type of performance with volumes down.
You can imagine what I believe we'd be doing this year, if we were not in the midst of a pandemic.
All right. Thanks Award, that's that's encouraging and helpful.
Helpful.
So my follow up.
Product demand I think you mentioned in your prepared remarks.
Youre expecting to be modest through the first half of 21 and pricing will remain strong could you go into any more color. There for next year, maybe a high level look at the end markets and does this imply a return to volume growth in the back half for an acceleration what's the what's your messaging there.
True Thats another great question I would say several things I would think in the back half it should certainly be pointing toward volume growth coming here. We are in Q3, which is the single largest quarter for the industry is the largest quarter for Martin Marietta and were down 9%. So I would expect and have to next year, we are seeing growth keep in mind.
Quarter, one is really a rather inconsequential quarter, there's very little volume that goes in Q1. The season really begins in earnest for a business like ours in may because that's when you'll have everything open across the enterprise, including those parts of the country that tend to be more weather effect. So.
What I'd say on a comparative basis Q1 would be a tough compare yes, but it's not going to be huge tonnage.
As a practical matter at the pandemic really started settling in as we went into Q2, but I would think when we get to the back half of next year, we should start to see the economy grow in some ways I do think that the urbanization trends that we're seeing will help us nicely on housing I think Martin Marietta is going to.
Be a very nice beneficiary of that because you saw the data that are revealed even in North Carolina relative to United Van lines data, but that same data is true for Georgia and.
And it's true for Florida, and it's true for Texas, and it's true for Colorado and again, what we start going through those impacts states. It matters I think thats something that's real and we're going to watch as we go into 2021. The other thing that I would say relative to 2021 tray is infrastructure puts a lot better today than we.
Dawn infrastructure is going to look when we were at half year. So if we look back at even where textile said they were going to be at half year as they were thinking about 2021. They were at $7.5 billion that they've got a 10 handle in front of that today were looking in a state like Colorado, they're saying, it's going to be relatively flat and we know our third.
As stated our revenue in North Carolina is going to be better when we get into the second half of the calendar year of 2021 remember the states work on fiscal years that in large part and on June 30, I think the end use that is going to be the one thats. When you could watch most carefully is.
Not a surprise to anyone it's going to be non residential and I think you're going to have a tale of two different stories in nonres I think the heavy side of it Trey is going to be pretty good I mean, I'll give you a sense of it in the greater San Antonio area. All by itself right now we're bidding on wait for six different Amazon fulfillment centers just in that marketplace.
So as we're looking at heavy side non rose in states, where we have very intentionally built our business, we think thats going to look attractive so whether its data warehousing warehousing or otherwise, we think thats going to be good at I do think hospitality is going to be challenged for a while I think varying degrees of energy.
On a comparative basis are going to be challenged for a little while and I think office and retail will as well, but here's what I would say if the housing trends continue the way that we believe that they will and we believe it's going to be more single family driven.
We're going to see homebuilders buying more land, we're going to see them entitling that land and we're going to see the drag along effect probably not in 21 for probably more going into 22 of a white portion of non res. So what I've tried to do tray in response to your questions go through those three primary end uses that we have.
And speak to at least what we're seeing relative to trends right now obviously, when we come out with our full year results in February.
The more precise guidance, we'll give much more granularity to that but again my commentary, saying that this october compared to last October looks pretty good.
We like that as a data point.
Absolutely well thanks for taking my questions I do want to say one last thing that I think this goes overlooked sometimes the analyst and investor community, but I did want to call out the safety record that you guys have achieved.
Blasting rock and working around heavy equipment can be a dangerous business. So hats off to you on that achievement trait.
Great. Thank you very much it means a lot to us all right. Thank you.
Our next question comes from Kathryn Thompson with Thompson Research. Your line is now open.
Hi, Thank you for taking my questions today.
First focusing on the cement segment could you give more color on the backlog.
This segment, particularly.
Particularly when you look over the next 12 months.
Mark.
What does this mean for pricing environment.
With needless to say an unusual year this year for pricing.
It looked at it youre right its been an unusual year, but at the same time, but I'd say Katherine as pricing. If we're really looking same one segment is up 3.4% so pricing in cement in Texas is behaving like aggregates and keep in mind Thats something that Weve long said, we thought we would be the case, if we look at our summit backlogs I will tell you that that's one of the great stories.
Because we are seeing Smith backlogs up 24% on strong infrastructure bookings and primarily a large job that Tesla has going on in the Austin area and some property that we sold them.
So again, the backlog situation looks quite quite good there and.
And actually the pricing was pretty good Kathryn if you look at it the optics the pricing.
And the reality of them are two very different things because the reality is energy sector sales for us which are not a big amount of tons were down 74% in west, Texas, So big percentage, but small tons, but the reason thats so important and we called it out in the end the prepared comments, that's where that cement sales were over.
$200 a ton so if we're coming back and just looking at type one and type two summit in San Antonio and Dallas those numbers are actually up very nicely and we think that that's likely what we're going to see next year as well now in fairness. We have said that we're going to take cement pricing up in April of next year and we have a.
Letter out to that effect right now and we're talking about $9 and that Texas market place next year. So I think that gives you a sense of how pricing has behaved. This year what has been the mix effect on it what this type one and type two looked like the other thing that I'll know Catharine because this is important too is we have.
Continued to see efficiency improvement quarter over quarter year over year in our cement business. So part of what I would call out for you as volume is down but the summit EBITDA in Q3, the margin of 46.2% represents actually a new quarterly record. So we are getting.
Both ways, we're doing it the hard way on cost, but we're doing it the other way on pricing as well, but again backlogs up 23% or little bit over 270000 tons.
Okay Perfect and then the follow up question is more on the infrastructure side, particularly with the keys.
You have confirmed that in our work also shows that the worst appears to be behind from North Carolina.
Could you just got to confirm what gives you optimism for that but also looking at other key state like Georgia.
Who is still continuing to move along and taxes and other key markets that are important for you from an infrastructure standpoint, particularly against the backdrop.
How they are looking into next year for sure.
Happy to couple of things one, Texas ill just go through them in order of revenue. So Texas has has huge f. why 2021 buildings of $10.2 billion, we spoke about that just a minute ago.
Thats going to have a multiyear benefit to Martin Marietta, our backlogs in that state are up in all three product lines and we see some very large projects coming in 2021, what's important to remember is prop seven funding is currently projected.
And at a full $2.5 billion, even as we're looking at prop one that's looking at $620 million and keep in mind, none of that anticipates, Texas, having to tap into their 10 billion dollar rainy day funds. So again texstar feels very healthy even compared to where we were at half year.
Colorado.
Looks pretty flattish and that's what we're expecting.
We see construction activity there thats being supported by about a $1.8 billion for year Bond program.
Two years remain on that and that could provide an additional billion dollars or more so we're feeling good about where that state is again, a nice improvement over where it was at half year. The North Carolina DRC situation that you called out very specific land and appropriately is improving and part of what weve seen even in the last week as North Carolina now is sending out.
Some double a rated bonds. They were just rated last week, it's going to be $700 million of build North Carolina bonds and importantly, the state has started.
For restarted Lettings and anticipate about $1.3 billion of F Y 21, Bunnings and that's pretty pretty similar to the pre pandemic numbers of about 1.4 billion. So again, we're feeling much better about North Carolina and Thats, one that we obviously stay very close to.
Similarly, you asked about Georgia and were anticipating they're relatively flat DRTV spending at about $2 billion, but part of what we think is important because it appears that Georgia is going to advance at least two of the major mobility projects in Atlanta, they're not going to have a 21 star for they are likely to have a 22. So.
Dart and remember these are major mobility projects at about $12 billion in their primary aim is to reduce congestion along key partners in in Georgia, and the last one at least in our top five is Florida, DC and again, we're looking at something there that we think is going to be very steady year over year keeping.
In mind, they've got a very healthy P. Three program in that state. So you've got a lot of hold activity in Florida. So again, if we look at our top five states and that's exactly what I've just taken you through from an infrastructure perspective.
Year over year, we like the looks of that.
Great. Thank you very much thank.
Thank you Catherine.
Our next question comes from Paul Roger with Exane. Your line is open.
Hi, Good morning, guys guys called Lovejoy.
Yes can you just sit there obviously, it's a big leap next meet with the election can can you just speak a bit about the potential implications of a different outcome. I'd also say that new highways Dale maybe some stimulus as well when you think that would impact demand on the ground is it likely to be a 2020 two study.
Paul Thanks for the question, it's good to hear your voice.
Yes, I would say that we're one of the few industries, but probably can't lose next week and here's what I mean by that.
If the president is reelected we anticipate there is going to be a new highway bill and we think it's probably going to be up very similar to the Senate's number that's 28% over fast act and that being the largest increase all by itself in 15 years. So.
Similarly, if we should have a change in part in the White House and Mr. Biden is lifted and the fact is the Democratic control House is looking at a 41% increase and highway spending so here's what I would say if the presence reelected it's going up as going up with less regulation.
If Mr. Biden is lucked, it's going up would probably more regulation and the irony and that is we actually do pretty well with regulation Paul.
We've got great teams. They are very sophisticated they can deal with that very efficiently. So we I believe either way Martin Marietta will be well positioned if theres more regulation one of the things that we certainly see that drive in the past.
Is perhaps more M&A opportunity as well because often times, if you're looking at a higher tax higher regulatory environment.
Closely held family businesses start reconsidering, what their long term future is as well so as we sit here and anticipate what different outcomes could be it can change the way that we're going to think about some things around the margin, but in large measure we think under either one of those scenarios Martin Marietta does very well.
How about for that that's very clear and I think we can sit in your opening remarks, I mean, you and said that they could have obviously been a fantastic year, let it knocks the Kobe.
If you see a situation, where we do get some volume growth guiding 2020, one I use basis adjusted net loss that you can go on the margins and I guess, particularly some at the mall.
Okay.
Like the Carolinas stabilize all Glen.
Well I would say a couple of things one volume will always be this industry's friend because you're going to have a certain degree of cost as much as we like to be able to flex cost as much as we can some of them are going to be fixed it's a big heavy industry, but I think we controlled cost extraordinarily well.
Again, I think geography from a mix perspective actually this quarter was not particularly our friend. So if we see these eastern markets behaving in a more robust fashion and volume hits those markets it could be pretty impressive relative to margins keep in mind in the east. This year, we saw significant project delays and we saw extremely wet.
Weather and what was formerly the mid Atlantic Division and again, we've discussed the fact that we saw lower in Cdot T. funding, that's going to be remedied and we saw less wind farm activity. So if we look at what Didnt happen in the east and things that we don't think we'll continue to recur into the future, we think thats probably a very.
Track, therefore, our margins.
The other thing that I would say is I would not expect the cost that we have been very good at controlling this year to go backwards on us I think the investments that we have made on capital will be our friend now in fairness. There is a piece of that that's tied up in energy.
And there are a lot of things we can control I wish I could tell you that we could control overall energy prices, but we can.
But at the same time as energy has tended to move upward keep in mind. That's also served historically that's a mechanism for us to make sure that we can cover that with increased average selling prices as well. So I do think relative to margins geography, it's likely to be more of a friend the not going forward and I think this type of cost performance that you see.
I would expect us to continue to deliver.
Having taken thank you very much thank you.
Our next question comes from Jerry Revich with Goldman Sachs. Your line is now open.
Yes, hi, good morning, everyone Jerry good morning.
Ward in your opening remarks, you were optimistic about pricing into 21, which is a really interesting considering pricing typically follows volumes and obviously, we're looking at.
Pretty coke back half of this year and first half of 21. So can you just expand on those comments, what's enabling you.
To achieve this.
Strong pricing and what have you announced the customers for 21, if if I got the gist of your opening remarks right. Now you know you did Jerry and I guess, what I would say is that I'm not sure that there was anything strikingly knew about the observations I was making when 21 I think the primary thing that I just want to underscore is that pricing.
It's something that we tend to do really well in Martin Marietta when volumes go up pricing goes up when volumes goes down go down pricing still goes up and now this quarter I thought was pretty good because they're not a lot of industries that could come forward with volume down nine and pricing up the way that we saw pricing up this year. So I think.
Thats the underlying themes that I want to make sure that crime score I think the other thing to remember Jerry is we're seeing that as we pointed out in some of the conversations we've had with that you one of our higher priced higher profitable businesses.
Not at the top of their game this year because of whats not coming out to bid Sidoti. So we've got I think we'll continue to see good price trajectory.
And in large part because we are really good locations and I think as we continue to see single family housing go up that's actually an area that we tend to do quite well in housing on because if you if you're thinking about people who will at least try to utilize some form of volume on occasion as a lever to talk to you about pricing.
That's typically not the homebuilder because at the end of the day, there's so many things they care deeply about in the home.
But the news flashes the price of crushed stone usually is not one of them. So I think if we end up seeing a new highway bill we see the volume that we think will come from that probably not in 21, but as spreads go matter coming in 22, but we see a very healthy residential market and then we see the drag along in the course of time on the.
Like non res I think all of that portends very well for pricing and again, if we look at those top five states that are disproportionately important to us and you look at even whats happened with cement pricing in Texas I think that tells you that the overall marketplace is in a pretty healthy spot.
So we're normally in this type of volume environment I would have thought aggregates pricing should be up in the 2% range and it sounds like based in your comments that you're announcing customers is it's more like the pricing we saw in 20 than what I'm describing.
Well and again, we'll give you even more granularity around that when we come out in February because some of those conversations are still ongoing but again I think you get the overall sense that there's nothing in our pricing model that we feel like has been shaken by this stay.
Strange Strange time, there were all navigating together.
Yeah I appreciate the discussion cracks thank you Gerry.
Our next question comes from Anthony Pettinari with Citi. Your line is now open.
Hi, good morning.
Word on the decision to reestablish full year guidance I mean is it fair to say you were surprised by the resilience you saw in your end markets or maybe some of those cost factors that boosted margins.
Was it just more of a function of having one quarter left in the year I am just wondering if you could talk you kind of walk us through the decision, making process and what you saw specifically that may be comfortable with reestablishing the guide.
Yes. Thanks.
Thanks for the question I think part of it is you get deepen up into something that's strange and you start to figure it out a little bit so I think candidly thats part of it.
The other part of it as Anthony there's just not that much runway left this year and we've got a pretty good sense of how October is looking obviously Q4 itself can have some some swing factors to it and and obviously one of them is when does winter really set in in earnest. It's been interesting Anthony because there have been years that we have been paid.
Thing almost up to Christmas and Colorado, and equally there have been years that well before Thanksgiving. It was shut down. So obviously, we try to bracket. What we think Q4 can look like from just a volume perspective, we know what it is going to look like.
Pricing perspective, and we believe we've got a pretty good handle on what it is going to look like from a cost perspective as well so.
I think those were the factors candidly that went into it and again to the conversation, but I was having just a few minutes ago.
Jerry and others on on it uses we're trying to give is it realistic to look into 21 as we can but again, we feel pretty good about all of it.
Okay, that's very helpful.
Then you talked about some of the project delays that you saw earlier in the year I'm just wondering from a big picture perspective, the pace of project delays or cancellations that you saw over the course of the quarter did that pace was it fairly stable or did it. He has maybe saw some more projects come back than you expected or.
Any kind of general thoughts there, yes, I would say several things one we see deferrals, we don't see cancellations and I think thats, an important bifurcation to draw.
Because pushing projects to the right. This is an entirely different animal than calling them off so.
During the financial crisis, and the great recession, we saw projects cancelled that's not what we're seeing so.
I want to call that.
The other is in some instances, we simply so whether deferrals. Obviously, we've had some hurricanes that have come in through the southwest this year and we've had a good bit of rain in the southeast, but the primary place that again I think we're taking some degree of comfort. It's one we're seeing North Carolina DMT start realizing some surface transportation again.
In some respects for the first time in almost a year. So when when we see that state beginning to return to something that feels more like in a patient a normal sinus rhythm that certainly feels better to us. So we're we did not see anything relative to deferrals in the quarter that.
We thought were extraordinary we're surprised us.
And in many respects, what I would say is.
From a volume perspective, I don't think were very surprised this quarter I think from a pricing perspective, we were not surprised and I am not going to tell you that from a cost perspective, we were surprised I would tell you gratified is probably the right word.
But again, we expect to see more of that going into the future Nonetheless up.
Okay. That's very helpful I'll turn it over thanks Anthony.
Our next question comes from Stanley Elliott with Stifel. Your line is now open.
Hey, good morning, everybody. Thank you for taking the question.
When you're talking about or talking to your residential contractors. You are you getting a sense that they're actually looking to buy land now and and build out new subdivisions or that.
They're busy enough just keeping pace with with what they are and I'm curious kind of in the context that we've heard about a lot of delays for higher lumber prices and things like that.
Any thoughts to what extent that could be kind of a governor on the residential recovery into next year.
Stanley Thats, a great question and what I think is this one they're busy and busy usually bigots busy and.
Number two I do think the shift that we're seeing in the great American move move moving more away from multifamily moving to single family, where people frankly want some space that they haven't had for the last several years is going to lead to the necessity of buying more land and by the way. We don't think Thats a bad thing, we actually think that's a good thing because it.
We look at the markets in which we are operating one they tend to have led to the entitlement for new subdivisions isn't something that that's highly difficult to do and three the the ability to borrow money is there. So we feel like all of that's important the other piece of it Stanley that we think is important is.
These markets are not overbuilt, and that's such a fundamentally different place and part of what we spoke about in the half year call is we've seen single family move around over the last couple of decades. So single family recovery is we're really looking at coming out of the great financial crisis fell to about 70% of.
Starts versus what had typically been closer to 80%.
So if we're seeing it move back to more of a normalized portion of what we would expect single family to be.
Particularly as we're looking at these deals organization trends and as we're looking at states in which we have a significant presence, Texas, Colorado, North Carolina, Georgia, Florida, those are going to be cities and those are going to be states. There will be growth out not states that will be growing up and places that are growing out.
Tend to be more aggregates intensive so yes, I think homebuilders are busy yes, I think they will have to buy more land I think they will be in the entitlement business, but I think in the areas, where we are the entitlements will not end up being significant at to use your word I think it's a good win a governor on White house.
The growth is going to look like.
Great and then switching gears you.
Thinking about kind of the.
Leverage range that you guys have talked about operating in the past I mean, youre kind of there right now.
Barring any sort of thing on the Capex side should be another good year cash flow.
How are you what are you more comfortable given the uncertain environment to to kind of let the cash build assertion.
Is there some things on the M&A front the team and intriguing right now I'm just curious how you're thinking about capital deployment into next year sales.
That's a great question and you're right with the low end of our range sorry, our debt to EBITDA ratio stood at two times today, you see that steadily come down and I'm proud of the way that we pulled that down as you know our capital priorities have not changed and our capital priorities are to find the right acquisition.
We think there may be some opportunities in 2021 that we're certainly looking at the deal pipeline has become.
More active here over the last few months and that does not surprise us and equally the other thing that were waiting to watch it and everybody else on this call as to what happens in the election and it'll be odd for example, if we do see a wider blue streak go through the United States and we see a higher regulatory.
Regime come in as I indicated earlier, we have certainly seen that as something that they can serve as a bit of a catalyst for.
For M&A activity as well so I think we want to make sure that we keep ourselves in a very flexible spot obviously, it's in management's discretion, whether we go and turn it back on the repurchases. We will certainly look at that and think we're carefully you did see us as Jim commented in his opening comments, we raised our dividend.
In September so our September shareholders have already benefited from that so I like where we sit from a balance sheet perspective, but equally Stanley and I think this is important as we think about M&A I like where we sit from a regulatory perspective as well the the areas of the country, where we would be most interested in growing.
Particularly if we are looking to establish new footprints.
We've got a lot of white space and we have a lot of regulatory ability from a Hart Scott Rodino perspective, and I think our teams have proven that they are very good at one identifying transactions number two going through the process of memorialized in it and then upon closing pulling the synergy side of it as well so.
We're going to find good uses for that cash whether it's investing in Martin Marietta returning to shareholders. We're finding the right deal, but but you know how we rank those in order standpoint.
Perfect. Thanks, so much for your time good luck. Thank you thanks, Dan.
Our next question comes from Garrett.
Capital Your line is open.
All right. Thanks, Thanks for taking my question.
Non residential construction is there any way to quantify how much of the non resin volumes split is between the heavy industrial piece versus the retail and office just given the shift you've made more towards the heavy nonres side over the last several years.
Absolutely stand to establish as you'll recall.
Historically nonres would have been around 30% of our business and over the last several quarters, you've seen it actually considerably more than that closer to the mid thirtys and you'll recall historically this was really when I give you. This background. This is pre txi. This is pre river for the Rockies. This is three bluegrass we will.
<unk> said, it's almost a 50 50 break between light on one hand and heavy on the other.
As we've done these large transactions as we come out of the river as we have focused our business increasingly on these large E commerce carters.
We feel like it now the heavy side of it is probably at least 60%. So its probably moved that much just as we've done these transactions and it's interesting to go back and revisit that number I gave just a few minutes ago, even talking about the fact that in the San Antonio area right now we're bidding on seven Amazon.
Warehouses datacenter projects at various stages of bidding so the locations, where we've been whether it's on the 25 corridor, whether it's on the I 35 corridor, whether it's on the 85 corridor or the 95 corridor has really helped move that and if you think about those corridors 95 was.
Secondly change by Bluegrass 85 was significantly changed by what we did with the assets that we acquired in Atlanta 35 was significantly change by what we did with Dxi and 25 was completely remade with what we did and the river for the reverse I mean river for the Rockies swap so.
The percentage shift is probably 60 40 today, but again nonres is moved to a bigger piece the pie in large measure because infrastructure has underperformed as we've gone through a series of Reauthorizations that unlike next year has not gone up in value over the last 15 years.
Okay. Thanks for that.
So just wanted to follow up on the guidance.
That you provided for the year I don't want to focus too much on fourq, because it's the seasonally slower part of the year, but just give me a whole are you provided on the October growth I mean, what do you think is driving the increase is project timing catch up from maybe some of the weather.
Headwinds that you saw in Threeq, you and then maybe just more broadly how to calibrate the different ends of the guidance range, Yes, I think several things probably.
One we don't have some things going on this year than we had going on last year that actually have varying degrees of headwinds last year. So if you go back to it garik part of what you'll see is we did have some increased grading last year were stripping at the glories, we did accelerate some maintenance at our Hunter cement plant.
Grand Canyon, Cory, which sits in southern Wyoming, which feeds that very vibrant northern Colorado market was later coming on last year than we would have hoped and then her hurricane Dorian said over Freeport Bahamas last year, a little bit longer than we would have was so number one that you put some headwinds in Q4 last year and were.
Thinking we're probably passed some of that this year.
But equally.
Yes, I think the October trends are nice I think part of what we're seeing is some of the work, particularly in central Texas as Tesla is building their gigafactory on that property that we sold them that certainly adds some benefits and again, if we see something that feels like a normal winter cadence, we're very comfortable with what.
We feel like would be the midpoint of that range. So if that at least gives you a sense of what the puts and takes would be in the little bit of the year. That's left I hope that's helpful.
Yes. Thanks here, thanks very much.
Welcome Gary.
Our next question comes from Phil Ng with Jefferies. Your line is now open.
Hey Ward.
Morning, and congrats on a strong quarter. Thank you Phil if.
If we think of some of the policy.
Now let me go into next year, if we get a stimulus package and this is separate from a longer term authorization Bill yes.
You see that impact coming through a little quicker on the demand side, where the lag is shorter because maybe states can dial up lettings mid year and see a benefit 2021 and it together, it's like a year flush lag okay.
Yeah, I think they can't because part of what's happened Bill if we go back over time.
Several things if you look at the way different states came out of the financial crisis. Some states ended up hiring more people and deities, Texas is a good example, some states started doing more outsourcing North Carolina is a good example of which means at least as we're sitting here today. They have more projects that are engineered.
Their design right of way has been purchased and they are in a position that they want to go that they can and I think thats, a very fundamentally different place. So to your point, if theres a phase four or if theres anything else and they are simply as you know ash tow has long been advocating for about $37 billion that they feel like should go down.
Lastly to states to help build a hole that was created because gas tax revenues right. There now keep in mind early in the year. They said that whole is going to be $50 billion. So that whole got a lot narrower or not is not as steep overtime, but to your point.
If that money went directly to end Sidoti do they have plenty of uses for today, absolutely. It's why their floating $400 million worth of bonds could text I do the same thing to be sure and could Colorado do the same thing absolutely because again, if you look at that state there metering out there buying activity over time and that could simply come.
Men and help augment that so I do think your point's a good one because most of what we've been discussing to date has been around the reauthorized Bill and what the timing would look like on that and again, we're saying passage and 21.
The real event from a tonnage is probably 22, but I do think if you got some near term stimulus that could actually be a 21 event.
Got it that's Super Helpful Award and then anything on the margins in the quarter, certainly really impressive in light of weaker volumes, but we think out to 2020 wine, assuming you have a little inflation or deflation.
Deflation like you've seen this year on energy you get.
Some pricing and lower volumes do.
Do you have enough levers there to kind of drive unit economics higher or at least keep it flat and any color on the gross margin side as well yes.
Yes look I will obviously give just some really good guidance on that in February but I think part of what we're trying to outline Bill is this was a really impressive quarter with volumes down almost double digits and our most profitable business with its arm tied behind his back so again, our backlogs for example in Texas.
Very good side I think we can feel good about where that business is heading into 21, obviously NCD OTI is fighting some jobs I think we feel increasingly good about that.
If the eastern business gets some some momentum going into 21, even in the back half bill yet.
That's where your story would be.
Okay. Thanks, a lot would appreciate the color. Thank you much.
Our next question comes from Seldon Clarke with Deutsche Bank. Your line is open.
Hi, Thanks for squeezing me in.
I guess just based on on where October is trending right now obviously weather.
But just based on where October is trending.
How you are positioned.
From a non resi perspective any improvement there you're talking to in regards the outlet for our state Federal funding is it fair then to say that that's Threeq you will probably represent the.
Steve just of the volume declines throughout this sort of downturn.
Yes that wouldn't surprise me and again, we'll come out with more granular information February but if we think about ourselves and mean that this is the big quarter.
And and keep in mind that this was a big quarter last year. So this this was the beast of compares and.
It's always interesting to look at how percentages can work in Q1, but I would suggest you percentages in Q1 don't mean, a lot because the tonnage is so slow.
So it would not surprise me that this on a percentage down.
Unless we see things just changed dramatically.
It would not surprise me that this would be your stake single steepest climb to use your words.
Okay. That's helpful. And then you gave some context around aggregates potentially gone from 38% to 45%.
Shipments with one of these highway bills.
Well I guess can you just help us understand sort of the relationship between.
28% or 45% increase in annual spending on.
Coming from the government and and how that relates to your actual product demand. If we go back and look at some of these historical highway deposits yet activity, 28% growth.
Yes.
I guess the way that we think of it if we look at the states in which we see significant population trends and really that's going to be our top five states, where there will be capacity needs in capacity issue. So if you take that Georgia mobility program and think about that it more than just an Atlanta contacts and you think about Atlanta, but you think all.
So about.
Columbia, South Carolina, and Jacksonville, Florida, and Orlando, and Raleigh, and Charlotte and then you start looking at lane miles added that your single most aggregate intensive undertaking because several things happen. Some one it's taken a lot of tonnage, but its taking a lot of very tonnage as well so you're putting.
Based products down your venture to putting clean stone and either asphalt or concrete that's going down so you're taking that entire rate up more products. So number one that's actually very healthy for inventories number two it's actually very healthy for the way that we can run our business now can you take a crushing plan.
At hone it in some degree and produce less space and more clean stone sort of Canada, but I mean, it's not a science and doing that because it's not that easy.
But as a practical matter if you've got a wider array of products going out that would tend to be the case. If you have a new highway bill and you've got capacity that is being added in states what that does from an operating efficiency.
And what it does from an inventory efficiency is incredibly helpful and part of what we've seen over the last several years is what would appear to be a fairly significant outperformance in non residential and what I would tell you is non residential has actually been quite good but nonresidential hasn't been really on fire.
It's really that the public side of it has been slower than it should have been so if we see more.
Infrastructure go it's high spec material is material that we can deliver and we think of these states in which we're operating as they add needed capacity. It adds tonnage and it adds efficiency I hope that helps.
Yes that is helpful. Thank you.
Our next question comes from David Macgregor with Longbow Research. Your line is now open.
Hi, good morning, everyone or good afternoon, now I guess, congratulations on a great quarter what banks.
Thank you. So so I guess lots been covered here in the past our sales I'll just make a couple of quick ones I guess.
Ready mix.
It seems like maybe there's just a price pass through issue do we catch that up in the fourth quarter is this just a timing issue or is there something maybe more structural in the markets thats coming into play here.
No I would say several things one we saw a good price in Colorado, and we saw some mix shifts in Texas, a little bit. So I think that's largely what you are seeing and look the other piece of it is.
Hey, the concrete business paid more for aggregates and the concrete business paid more for summit and any.
Well thats, okay from where we sit because.
We're providing most of the aggregates and we're providing most of the summit and.
So so that's a lot of what was going on there but.
But really if you look at it it nice 2.2% per ton better on SP. So a lot of lot of good things that we're seeing in ready mix right now, but in large measure it helps.
Undergirded.
Very attractive upstream business. So it's doing exactly what we would have thought.
Right right second question is really just on Houston and aggregates, you talked about the lower rail costs going into Houston.
Is that a function just what's happening in energy or are you seeing congestion or a reduced level service in rail.
Well the service and rail has been reasonably good and it's really not so much Houston, it's really more south Texas when you get down to the pure LNG projects that are that are even closer to the water and and that was really a piece of the mix issues in the southwest because if we have fewer tons coming out of those yards as you know.
Those tons are transportation loaded David So that was really the big shift there. So it wasn't as much of a Houston metro per se issue because there's some very good projects going on in Houston, including the Grand Parkway and for example, we've seen a good amount of some that go to that and as you may recall that actually.
So Matt is modestly lower priced in San Antonio than it is in Dallas and things are going to the Grand Parkway are really coming out of our hunter facility. So.
We're not seeing better activity in Houston whatsoever, as it was really more coastal oriented about that commentary.
Great. Thanks, very much congrats thank you David So you.
Our next question comes from Michael Dudas vertical research your line is open.
Good afternoon, gentlemen, Suzanne.
Hi, Michael.
We appreciate the insight on your some of your tops important states, but maybe you can highlight or call. It a couple in the.
The second fiber, others, where you've seen from either positive or negative trends that might be helpful too.
How about a little bit more on say the volume expectations that some of these.
A macro.
Events impact.
Yes, 21, and 22 look I'll certainly try and if we're looking at South Carolina, They've got to 520 21 program of about $1.8 billion, that's up about 15%. So we like what we're seeing there remember South Carolina did something the other year that was very on South Carolina them in that as they raise the gas tax so they're taking that up.
Incrementally over a period of six years, we're about halfway through that so we're seeing good activity. There part of what we're really heartened by is Kansas passed a 10 year 10 billion dollar funding plans, so that basically doubles their funding over $8 billion over a 10 year plan and we like where we see that business going keeping in mind, we've got it.
Very attractive business in and around Kansas City, and we're seeing good activity at the airport there as well.
Our business in Indiana, just to be clear, we call it our Indiana district, or we have historically, it's really our Indianapolis district, and what we've seen in that business and the leadership. There has just done a superb job of controlling costs exceptionally well I mean, they really do deserve a call out on that but.
Equally done very well and making sure we're getting good recognition on pricing on what we're doing in that marketplace. I think Indiana is looking quite strong if I'm looking at places just to be completely open book with you on where we have seen more difficulty this year.
It's been in places like Kentucky, and portions of Southern Ohio, Kentucky, DRC has not had its finest Mona moment this year and I think equally you've heard that from others as they've gone through I think you would have heard a bit of that from summit and his commentary earlier in the week as well, but if we're looking at places like Maryland.
And we're looking at Virginia, and Iowa, and Nebraska as we've gone through those just give you a sense of it Michael that does round out our top 10 states, which is going to be 85% of our revenue.
They're not things that we feel like are troubling to us as we look at Maryland, Virginia, I, what we're Nebraska right now again, Maryland has a very significant P. Three program and the other states just tend to be very solid states remember iowans consume on average more stone per capita than any place else because they.
I'll go through a hard freeze thaw cycle, each year and its a big farm to market economy, but equally that's been an economy that has been served quite well by whats happening relative to data warehouses. So we've seen Microsoft and Amazon and others, not just build warehousing, but phases.
Two and phases, three and sometimes spaces for of that so that's actually been quite good the one area in the Midwest that has been more challenging this year.
Has been what's not happened relative to wind energy and we called that out on some of the commentary that we had just breaking down between business in our east group and business and our West group, but hopefully that was responsive to taking a little bit deeper dive in the bottom five.
Well it certainly was a night it was intriguing about the fact went on iOS on where that thank you.
That's what we're here for.
[laughter].
Take care Michael.
Thank you.
Our next question comes from Adam Thalhimer Thompson Davis. Your line is now open.
Hey, nice quarter guys. Thank you Adam.
Can I ask a quick question and then I'll I'll turn it over but I wanted to ask on ready mix.
If you could comment on the backlogs and ready mix and also the outlook for pricing for.
No no happy to I mean, it's interesting that the outlook on pricing is always a little bit.
More challenging at least and half of it I'm looking in pricing in Colorado tends to be very attractive pricing outlook on pricing in Texas continues looked pretty steady I would tell you is we look at backlogs year over year. They are up 3% and if you're looking at a very dynamic market.
I like the way that that looks so again part of what we've done in Texas. In particular item is we moved a certain degree of our volume in Texas from infrastructure in some instances to housing.
And I'll tell you very candidly why we did it we wanted to have it and.
A little bit more of it in housing one because housing look good.
And to housing does not tend to be as weather sensitive as infrastructure is now that said housing tends to have a little bit lower ASP, so were picking and choosing very much by design there, but again, we think pricing will be solid and we think backlogs in that business right now are actually up in the southwest.
Okay perfect. Thanks.
Q1.
Our next question comes from Adrian quota with JP Morgan. Your line is now open.
Hi, Hi, good talking to you. Thank you for taking my question.
The I wanted just to add on on on you you have mentioned in the past there was room on recent acquisitions sales to increase prices.
How far are you on that is there is still room to increase prices on from recent acquisitions.
Adrian its always a journey, it's like safety, we never think we're done.
And what I would say if we go back and look at the way things have worked.
One of the best examples I can give you is is Maryland, and we're talking about just a moment ago.
With Michael what puts some of the states looked like they were not in our top five and I spoke specifically to Maryland, and what's interesting to me on that Adrian is Maryland for us in the bluegrass transaction was not necessarily can consolidation play we had a couple of facilities in that state there with the western part of the state and.
Most of what we acquired with Bluegrass there was in Maryland was really more in Baltimore Metro.
And what we brought to that is a disciplined and we brought to it.
A sense of not being ashamed to make sure we're getting the right value for a product that we're making that meets state and federal specifications and that we think is not easy to do.
And keeping in mind.
That on the infrastructure side stone, it's about 10% of the cost of building road on the housing side, it's about 2% of the cost of a home and if we look in non residential it's somewhere between those two numbers in other words, our product is never going to be what's going to make or break whether the project goes are not easy.
Finally, our product isn't going to make or break whether that contractors typically low or not but at the same time to do what we do with the skill that we do and do it as safely as we do.
We want to make sure we're getting good value for something that's a depleting resource now that said if we look on average at todays rates of taking stone out of the ground. We've got a century worth reserves left so we don't have an issue of the stone going away, but in a world that we think will continue to have higher regulatory barriers and burdens to it.
Sorry.
Making sure we're getting value for this product is important.
We'll tell you equally you can see what our average selling prices and it's going to be in the low teens right now, but there are plenty of markets in the United States, where we're selling aggregates for numbers that have a two in front of it and we don't see those higher numbers, having any degree a chilling effect on construction in those markets. So.
This has been an area for our company that has been one of strength for a long time back to my point. Vincent. This continues to be a journey I think it's going to be an area of strength for years, you have to come major.
Understood. Thank you.
Thank you Adrian.
And thank you all for joining our third quarter 2020 earnings conference call moving forward, we're confident in Martin marietta's opportunities to build on our successful track record of strong financial safety and operational performance and remain focused on maximizing value for all shareholders. We look forward to discussing our fourth.
Quarter and full year 2020 results in February as always we're available for any follow up questions. Thank you for your time and continued support of Martin Marietta, Please stay safe and healthy.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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