Q4 2020 Martin Marietta Materials Inc Earnings Call
Ladies and gentlemen, please continue to hold your conference call will begin momentarily.
[music].
Good morning, ladies and gentlemen, and welcome to Martin Marietta, its fourth quarter and full year 2000, and 'twenty earnings Conference call. All participants are now in a listen only mode.
Question and answer session will follow the company's prepared remarks.
As a reminder, today's call is being recorded and will be available for replay on the company's website I will now turn the call over to your host Ms. Suzanne Osberg Martin Marietta as Vice President of Investor Relations Suzanne you may begin.
Good morning, and thank you for joining Martin Marietta fourth quarter, and full year 'twenty and 'twenty earnings call with me today are ward Nye, Chairman and Chief Executive Officer, and Jim Nickolas, Senior Vice President and Chief Financial Officer.
As a reminder, today's discussion may include forward looking statements as defined by United States Securities laws and connection with future events future operating results or financial performance 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 statement, 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 'twenty and 'twenty supplemental information that summarizes our financial results and trends and.
In addition, any non-GAAP measures disclosed today are defined and reconciled to the most directly comparable GAAP measure and our earnings release and SEC filings.
What and I will begin today's earnings call with a discussion of our full year operating performance. Jim Nickolas will then review, our 'twenty and 'twenty financial results and liquidity position after which ward will discuss market trends and our 'twenty 'twenty one outlook.
Western and answer session will follow.
I'll now turn the call over to ward.
Thank you Suzanne and thank you all for joining today's teleconference. We sincerely hope that you and your families remain safe and healthy.
By all accounts 2020 was extraordinary for Martin Marietta, and we're proud to have extended our long track record of financial operational and safety excellence, particularly and a year filled with unprecedented disruption.
Martin Marietta set new performance records, delivering our most profitable year and the best safety performance and our company's history.
These impressive results demonstrate our resilient business model and our team's commitment to Martin Marietta as vision and successful execution of our proven strategic operating and analysis and review or store plan. As noted today's discussion focuses on our full year results and 2021 outlook before doing so.
Highlight a few notable takeaways from our record setting fourth quarter.
Importantly, we achieved solid shipment and price and growth across all product lines as construction activity stabilized from the spring and summer months, when we saw a greater impact from COVID-19. These.
And these top line improvements along with our steadfast focus on cost controls resulted in 7% growth and consolidated total revenues, 20% growth and adjusted earnings before interest taxes, depreciation and amortization or adjusted EBITDA, and a 40% increase and diluted earnings per share.
For the full year, we established new records for products and services revenues profitability and adjusted EBITDA, specifically full year consolidated products and services revenues increased to $4 4 billion consolidated gross profit increased 6% to $1 3 billion.
Adjusted EBITDA increased 11% to nearly $1 $4 billion and diluted earnings per share was $11.54 and 18% improvement.
Martin Marietta is 'twenty and 'twenty results Mark the ninth consecutive year of growth and these financial metrics.
Operating our business safely sets the foundation for our long standing financial success.
Martin Marietta is industry, leading safety performance continues to trend near where exceed world class safety levels.
We achieved a 25% reduction and total reportable incidents across the enterprise and 2020 and for the fourth consecutive year, we achieved a company wide world class loss time incident rate.
These superior financial and safety results are directly attributable to the dedication and agility of our nearly 9000 talented employees I'm extraordinarily proud of how our team managed the challenges and disruptions caused by the pandemic, while remaining focused on being good wingman working safely and efficiently together.
And seamlessly meeting our diverse stakeholders needs with that overview, let's now turn to our full year operating performance.
Aggregate shipments declined 2% to nearly 187 million tons, reflecting anticipated lower infrastructure shipments and portions of North Carolina reduced energy sector demand and headwinds from COVID-19 disruptions. However in line with broader macroeconomic trends full year aggregates shipments.
The residential market increased benefiting from healthy single family housing activity.
Aggregates average selling price increased 4% on a mix adjusted basis in line with our expectations Importantly, all divisions contributed to this solid growth a testament to this product lines resilient pricing power and our leading market positions and attractive geographies.
And the disciplined execution of our locally driven pricing strategy, along with attractive underlying market fundamentals will continue to support sustainable pricing growth moving forward.
Our cement operations established new records for shipments, which increased 2% to nearly 4 million tonnes.
Large project activity supported underlying product demand in both north and south Texas throughout the year offsetting weakness in the energy sector.
Pricing increased 3% on and mix adjusted basis, demonstrating the resilient price fundamentals of our core products and the state of Texas, We expect our cement business will continue to benefit from favorable shipment and pricing trends supported by tight supply and healthy demand and Texas diversified customer backlogs and <unk>.
April 'twenty 'twenty, one price increases.
Turning to our targeted downstream businesses ready mixed concrete shipments increased 3% excluding shipments from acquired operations and from our southwest divisions, former concrete business, and Arkansas, Louisiana, and Eastern Texas, which we divested in January 'twenty and 'twenty.
Concrete pricing increased 2%.
Our Colorado asphalt and paving business established a new record for asphalt shipments increasing 15% to 3 million tonnes. This growth reflected solid underlying product demand together with carryover work following a weather challenge 2019 asphalt pricing increased nearly 3%.
I'll now turn the call over to Jim to discuss more specifically, our full year financial results and liquidity Jim.
Thank you ward and good morning to everyone.
We concluded 2020 and with the highest full year adjusted EBITDA margin and Martin Marietta history.
Driving this achievement was our building materials business, which delivered record products and services revenues of $4 2 billion, a 1% increase and record product gross profit of $1 2 billion, a 7% increase.
Our upstream and materials businesses, namely aggregates and cement established all time records for both full year product revenues and gross profit.
Aggregates product gross margin expanded 130 basis points to 36% a new record.
And unit profitability improved 8%.
These accomplishments, which resulted from strong pricing gains and disciplined cost management and lower diesel fuel costs and demonstrate the cost flexibility and resiliency of our aggregates led business.
The cement business benefited from the planned kiln maintenance outage that occurred through the end of 2019.
The timing of that outage resulted in some expense is being recognized in 2019 versus early in 2020.
More importantly that and other capital investments have dramatically improved our cement operations.
We achieved 90 per cent and kill and reliability this year up from 82% and 2019.
Which facilitated increased throughput and fixed cost absorption at both our Midlothian and hunter plants.
These factors combined with mix adjusted pricing strength and lower fuel costs contributed to the 510 basis point improvement and cement product gross margin to 37, 8%.
Our targeted downstream businesses also delivered solid full year financial results.
Ready mixed concrete product gross margin increased 10 basis points to eight 4%.
And as pricing growth offset higher raw material costs.
Asphalt and paving achieved gross profit of $60 million and a 100 basis point improvement and gross margin driven by double digit revenue growth.
Our magnesia specialties business returned to revenue and profitability growth during the fourth quarter.
The 12% top line improvement and the quarter, However was not enough to offset demand declines experienced earlier in the year.
As a result full year product revenues decreased 12% to $221 million.
We anticipate fourth quarter strength and line <unk> chemicals demand to continue in 2021 now that steel utilization has rebounded from last summer's COVID-19, driven trough.
And our cobalt customers are resuming activity.
And practically product gross margin improved 80 basis points to 46% as.
As we proactively responded to lower shipments with effective cost control measures.
Turning now to cash generation capital allocation and liquidity.
Martin Marietta ended 2020 with the strongest cash generation in our history.
Operating cash flow of $1.05 billion increased 9% driven.
Driven by earnings growth.
We continue to balance our long standing disciplined capital allocation priorities to responsibly grow our business, while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value.
Our priorities remain focused on value enhancing acquisitions.
Prudent organic capital investment and the consistent return of capital to shareholders, while maintaining our investment grade rating profile.
For 2020, we invested $360 million of capital into our business and returned $190 million to shareholders through both an increased dividend and the first quarter repurchase of 211000 shares of our common stock.
In August 2020, our board approved a 4% increase and a quarterly cash dividend underscoring its continued confidence and our future performance and continuing Martin Marietta has a track record of dividend growth.
Since our repurchase authorization announcement in February 2015.
We have returned more than $1 $8 billion to shareholders through a combination of meaningful and sustainable dividend as well as share repurchases.
We ended 2020 with a debt to EBITDA ratio of one nine times slightly below our target leverage range of two to two five times, which offers us the flexibility to pursue accretive investment opportunities.
Our solid balance sheet combined with $1 $1 billion of availability on our credit facilities.
The financial strength for Martin Marietta to respond to the execution and disciplined capital allocation priorities and continue profitably growing our business with that I will turn the call back over to ward to discuss our 2021 outlook. Thanks. Jim Looking ahead, we believe 2021 will be a year and which we see a return to a more normalized state.
Is underlying demand fundamentals reset and the nation's economy regains momentum, we remain confident and Martin Marietta as attractive business drivers and are encouraged by accelerating long term secular trends across our three primary end use markets and key geographies. We expect these trends to drive construction led aggregates intensive.
And of growth.
Infrastructure activity, particularly for aggregates intensive highways roads and streets continues to prove resilient with the one year extension of the fixing America's surface Transportation Act or fast Act at current funding levels state and local governments have the visibility needed to plan design and award transportation.
<unk> through the 2021 construction season.
Importantly, estimated fiscal 2021 weddings for our top five departments of transportation or D. O. Ts are currently above or near prior year levels keep in mind, our top five states, Texas, and Colorado, North Carolina, Georgia, and Florida are disproportionately important to us representing 17.
And 1% of our 2020 building materials business total revenues.
Additionally, D O Ts were recently granted nearly $10 billion of targeted relief as part of the Corona virus response and relief Act passed in December 2020 to help offset pandemic driven transportation revenue shortfalls. This funding assistance has the benefit of no state and matching requirements based on preliminary.
And every estimates over $2 billion. So this assistance will be apportioned to Martin Marietta is top five states.
Over the medium to long term, we anticipate voter approved state and local transportation measures and passage of a comprehensive federal transportation program package to promote multiyear growth and product demand and November 2020 voters and a powerful message of support per state and local transportation invest.
But ah proofing, 94% of ballot measures the highest ever approval rating. These initiatives are estimated to generate an additional $14 billion and onetime and recurring transportation funding of which 82% is in Texas, our top revenue generating state.
Bipartisan support exists for new surface transportation legislation aimed at increasing funding levels not seen and over 15 years with both the United States House of Representatives and Senate previously advancing proposed bills. We believe this 117th Congress creates a path toward advancing a notable increase.
And funding over the fast Act, we are optimistic that agreement on a new bill could be reached the summer generating meaningful benefits in 2022 and beyond.
We expect increased infrastructure investment to provide volume stability and drive aggregate shipments and VAT and us closer to our 10 year historical average of 43% of our total shipments where reference aggregates shipments to the infrastructure market accounted for 36% of 2012.
<unk> shipments.
Non residential construction should continue to benefit from accelerating E commerce and remote work trends that require increased investment and heavy industrial warehouses and data centers, particularly and our key metros of Dallas Fort Worth San Antonio Austin, Denver des Moines, Indianapolis and Charlotte.
And Atlanta.
Importantly, this type of construction tends to be more aggregates intensive and light commercial construction due to the size scale and structure of these projects.
Commercial and retail construction will remain comparatively challenged until COVID-19 vaccines are more widely distributed.
Over the longer term light non residential activity will benefit from the attractive collateral effects of strong single family residential trends AG.
Aggregates shipments to the non residential market accounted for 34% of 2020 shipments.
Single family housing is poised for multi year growth returning to more normalized levels. During this economic cycle.
We believe Martin Marietta, as leading southeastern and southwestern footprint positions the company to be a notable beneficiary of these trends given undergone conditions favorable population and employment dynamics land availability mild climates and lower cost of living in these regions single family housing is too.
Two to three times more aggregates intensive than multifamily construction, given the ancillary nonresidential and infrastructure needs of new suburban communities.
<unk> to the residential market accounted for 24% of 2020 shipments.
In summary, we're confident and the fundamental strength and underlying drivers of our business as disclosed in today's release, we've returned to providing full year annual guidance. We currently expect 2021 aggregate shipment growth to range from up one to up 4%, reflecting single family housing.
Strength expanded infrastructure investment and heavy industrial projects of scale that will support our near term shipment levels.
We remain confident that our favorable pricing trends are sustainable supported by improved contractor confidence and healthy customer backlogs for 'twenty and 'twenty. One we expect annual aggregates price increases which become effective from January one to April one to increase and a range of about three two up 5%.
Combined with contributions from our cement downstream and magnesia specialties businesses on a consolidated basis, we expect adjusted EBITDA of $1.350 billion to 1 billion and $450 million keep in mind when comparing this guidance range to prior year, we're not anticipating.
<unk> the same level of nonrecurring gains from land sales and divested surplus assets as seen in 2020.
To conclude we're proud of our 2020 record financial results and industry, leading safety performance. We're also extremely optimistic about our future.
Martin Marietta has a strong foundation and thanks to our solid balance sheet and the investments, we've made and our assets people and capabilities.
Due to our work over the last several years Martin Marietta is uniquely well positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long term importantly, the disciplined execution of our strategic plan, coupled with our pricing discipline operational excellence.
<unk> prudent capital allocation and adherence to robust health protocols, we will continue to enhance Martin Marietta as a solid foundation for enduring success as.
As we move forward, we have the resources team and capabilities to drive value enhancing growth.
We're confident and Martin Marietta as opportunities to build on our successful track record of strong financial operational and safety performance and remain focused on delivering superior returns for investors, while meeting and exceeding our commitments to our other stakeholders, including our customers employees and communities.
If the operator will now provide the required instructions, we will turn our attention to addressing your questions.
Thank you Sir and.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the pound key.
In order to get through everyone's questions. We ask that you. Please limit yourselves to one question.
Please standby, while we populate the Q&A roster.
I show. Our first question comes from the line of Kathryn Thompson from Thompson Research Group. Please go ahead.
Hi, Thank you for taking my questions today, and Microsoft the day and given a tough market.
I wanted to focus on cement if you could discuss the pricing dynamics you saw in the quarter and importantly, and thoughts on both volume and pricing going forward.
And then just really kind of a follow up.
Related to cement somewhat which is more on infrastructure do you see any potential air pockets and lettings given with each revenues and.
When might that be seen if ever and how might that and Pat.
And that volumes and also aggregate volume. Thank you very much and.
And we're happy new year to the Katherine that's a mouthful.
We'll work through it and let's talk about cement and pricing first number one to see the cement price performance and Texas. This year was actually a firming and if we go back over time and remember how we spoke about cement when we acquired it with <unk> side we.
We believe Texas cement price and would start to unlock aggregate pricing and that's exactly what we saw and this quarter. What I think is doubly important about that and impressive keep in mind for much of the year. We've we're not and are positioned to go and see our customers. So to see that type of performance on a mix adjusted basis is actually quite impressive keep.
Keep in mind too, although you don't see it in the numbers and if were looking at type one and type two cement and that was actually selling per closer to 4% up as opposed to 3% up. So we're really looking at the bread and butter products.
It looks really quite impressive if we look at overall cement dynamics and the state.
Texas is a nice place to be and any heavy side building materials business, because particularly for cement lifestyle demand outstrips supply and that's always a good place to start we think that's particularly going to be the case as we go through the year and North Texas. This year, so again that feeds directly into our operations and the globe and equally the marketplace.
And that we're seeing around Hunter.
It's actually quite attractive as well what we see from volume perspective has been driven by a series of things one by some big jobs, So and the North we're seeing loop 12, we're seeing <unk> 35, which is also known as the L. P. J. If you go down toward South, Texas, what's going on relative to the Grand Parkway has been nicely generative or <unk>.
Utilizing cement and ready mixed and aggregates and and all the way through so we think the outlook is frankly as good as we just saw and Q4.
If youre looking really more to what potential air pockets could be I'll tell you very candidly and Texas, we don't see it Kathryn a couple of things lead me to believe that one day FY 'twenty, one and Lettings in Texas are actually 25% over where they were last year and other words, we're looking for about $9 $5 billion worth of Lettings and.
The other two pieces to keep in mind is the 2021 revenue streams that we're seeing either coming through prompt seven.
And prop one and Texas are really quite healthy.
So we're looking at transfers of about $2 $5 billion. This year relative to prompt seven and about $1 2 billion relative to prop one and something else that's worth keeping in mind too is when we were looking at the Covid relief that's gone to different dot's.
<unk> was the recipient of almost $914 million again, we spoke to the fact that those did not come and encumbered with any particular state and match.
So for a state that already found itself and a very good position.
To have that extra money come in as well gives us a sense that we're in a very very good place and Ultimate reminder, Texas has a rainy day fund a $10 $5 billion that they have not tapped so as we're looking at Texas, both near term medium term and long term, we liked very much what we see so I hope.
And that's responsive to your series of questions Catherine.
Thank you very much thank you.
Thank you. Our next question comes from the line of David Macgregor from Longbow Research. Please go ahead.
Yes, good morning, everyone, and congratulations, Florida, and a really good quarter.
David Thank you very much.
And a good outlook statement as well.
It's nice to see guidance again.
Just staying on cement.
I guess, how are you thinking about.
And the guide that you're providing and $4 60 to 500, what does he got for price versus volume and there could help me with that and and also it would appear that maybe theres limited operating leverage and that guidance as well and I'm. Just wondering if that's maybe some of the kill and expenses from 2020 that got pulled into 2019, if it does come back and maybe that's weighing a little bit on the leverage and.
And just if I could also add to that you must be feeling.
Some pinch points in terms of capacity and cement at this point and I'm, just wondering how youre thinking longer term about your capacity footprint.
Can you flex your shipments with import tons or do you invest capital either organically or through acquisitions and building your capacity or maybe you're just happy with what you got I mean, if you could talk about that thank you know happy too David. Thank you very much for your questions. We will start with respect to pricing. So as we think about pricing and the Texas market.
Place today, and what we're seeing our price increases out there that had been put up we put out a $9 a ton price increase effective in April we've seen others that customers have shown us that had been closer to $6. So that I think that gives you at least some buoys to think about relative to pricing for the year.
I think equally as we look at.
Likelihood of price increases hitting and different percentages clearly north, Texas is going to look stronger than south, Texas and central is going to be just fine.
I think to your point, if it's going to be tight any growth. This year on cement tonnage, it's likely more in the Dallas Fort worth area, meaning with Logan.
And so we'll just have to watch that as the year goes on one.
One thing I would ask you to do and that is you asked a very good question around capacity and Texas, because youre going back to the notion that right now demand is outstripping supply.
As you know we have an analyst and Investor day, that's coming up later this month, we're going to talk about some of the very specific capital initiatives that we have underway and.
And I would ask you to wait and listen to what we have to say about that particular process. When we are talking to your livelihood and month relative to our cement output and our aggregates outlook and Texas.
With respect to some of the other numbers that you mentioned you're entirely right relative to rhythm and cadence around kiln maintenance. We did have a relatively lower number of kiln maintenance and 2020, if we're looking at the overall kiln maintenance spend in 2020 was about $19 7 million.
We're looking.
And to see what it's going to be and into the new year. We are looking into the number that is going to be somewhat higher than that we're looking more at about a $22 $7 million and number four total kiln maintenance and 21 and so we're looking at some of those puts and takes but I think that gives you a sense of do we have capacity issues that.
We need to think about longer medium term yeah. We do are we and a circumstance that pricing is doing what we thought it would it absolutely is.
Are the dollars that we put into the kilns, having them run at a higher rate of efficiency. There's no doubt that they are so if we're looking at kill and reliability as Jim commented in his commentary they ran at 90% kill and reliability and the year just ended the year before at 82%.
So we like very much the way that business is going operationally the way that business is going commercially and what we feel like its future is so David I hope that was responsive to your question.
Thanks, very much and congrats on all the progress David Thank you so much.
Thank you.
Question comes from the line of Trey Grooms from Stephens, Inc. Please go ahead.
Hey, good morning.
Good morning, Thanks for taking my questions.
So I guess first off and now.
And looking at the volume guidance for aggregates and I appreciate your color and comments on the end markets, but.
Especially on the infrastructure piece, you sound and maybe more constructive on that side.
And then we've heard and a while first I mean, I want to make sure I'm hearing that right.
Because I'm hearing that youre expecting increased demand versus 'twenty.
And would that mix, becoming closer to the historic average even directionally that way.
Implies decent volume growth and that end market and how you.
You mentioned.
And some details around Texas.
Could you touch on some of the other market share and where youre seeing the strength, that's giving you that.
Increased.
Confidence and that end market.
No happy to trade. Thank you very much.
And as you indicated we've walked through what some of the numbers it looks like and Texas as Jim indicated in his prepared remarks, if we look at Texas, Colorado, North Carolina, Georgia, and Florida, those stages comprise around 71% of our revenue. So at those states are going well a lot of things good happens for Martin Marietta as I indicated I won't go back through all the details.
So we hit but we're looking at Texas flooding sub 25%, let's go through the others and I think that'll give you a sense of why we've got the degree of confidence that we do.
Colorado, which as you know and 'twenty.
Had just a spectacular year I mean, you've heard US reference the fact that our asphalt and paving business excuse me and that state had a record year.
We're looking at a D O T program and Colorado that we believe is going to be flat year over year and what I'm about to tell you is when we're looking at our top five states get the <unk>.
Worst that we're seeing anywhere is flat that's not a bad place to be coming off of a record year. So if we're looking at the $10 billion Covid stimulus about $134 million of those dollars is finding its way to Colorado, which we believe is to bring their <unk> program up about even with where it was last year now by contrast, our home state.
North Carolina did not have a particularly good year last year, we think North Carolina Dot is and a far better position and as you know if we look at this state historically it has not only been one of our most profitable it's been one of our most consistent as well. So we think North Carolina is trending back into an area that makes.
Much more sense for us to give you a sense of what that means the FY 'twenty, one and Lettings projection is about $1 3 billion, that's $670 million better than I think people would have expected when they were looking at it last year. The other thing Thats important to keep in mind is North Carolina did issue $700 million.
Build and C bonds. So again as we're looking at the near term future of North Carolina, We're really very pleased with that one thing I will mention as well.
And C First commission, which I was a part up here in North Carolina looked at really how North Carolina and needs to think about its investment and infrastructure over the next 10 years and our view was they needed to put at least $20 billion more and infrastructure in the states. The state is looking at ways to do that but thats clearly excuse me and longer term.
And then just this year, if we go to Georgia.
And again, we think Georgia is relatively flat year over year, but if you look at where that state has been sequentially. If we go back to 2016 Youll see a bunch of it's gone from about $1 7 billion to one thats about $2 1 billion.
And then the other thing to keep in mind is Georgia still has ahead of it the major mobility investment program and the overall goal of that is to have a number of very large projects about $12 billion to be more specific underway by 2025 and completed by 2030, and then of course the last the top five states, Florida there looks.
And they're spending to increase about 20% year over year. So again, if we look at the top five Texas better North Carolina is better, Florida is better and Colorado and Georgia are broadly flat. So when we look at that type of trajectory on something thats around 71% of our revenues and those states I think thats part of what <unk>.
Gives us the confidence that we have and the volume at book that we've offered trend.
Alright, Thank you for that war and if I could sneak one and just for clarity. There was a question about the cement and the maintenance and you talked about some.
Color around that and some details which was helpful. On the AG side, Jim This might be for you is there is there anything there.
Obviously diesel is not going to be the tailwind you experienced and.
<unk> 'twenty, but is there any other costs outside of diesel coming off a year like 2021.
I mean from a margin and cost standpoint, you and the <unk>.
Team did a great job there is there any catch up on costs that are baked into your guide or anything we should be aware of on that front.
Question right now.
We are anticipating.
Otherwise hitting a 60% incremental target for next year, but for the diesel headwind so.
Our incrementals around 40% because of diesel we've got about $30 million of higher expense from higher oil prices coming through and.
And we would add 6%, but for that so but otherwise our costs are well behaved.
Quite quite we're expecting to be well controlled and they were in 2020, and we expect that to continue.
Hold onto the gains we saw in 2020 and build on those 2021.
Alright, Thanks, a lot I appreciate the color and good luck and the rest of the quarter. Thank you. Thanks, Kurt Thank you Trey.
Thank you Sharon.
Next question comes from the line of Anthony Pettinari from Citi. Please go ahead.
Good morning.
Word on the full year outlook is there any way, we should think about the quarterly cadence of volume growth implied in the guidance do you still expect kind of sharper and year over year volume declines and the first half and then kind of inflicting into the second half or any kind of finer point you can put on that.
As we look at it and and that I think part of what you heard US say earlier I mean, we're back to the point that we've put in all guidance again. So I think that gives you a sense of that.
We've all found a way to manage through this and I think to that and Anthony.
Would suggest as a normal rhythm and cadence is probably broadly the right way to think about this I do think theres going to be a degree to which you will see some of it is going to be modestly more and the back half as opposed to the front half, obviously Q2, and particularly Q3, where the two quarters there were.
Most impacted by Covid by the time, we got to Q4.
And in many respects, we we had a lot of this figured out and certainly we had more favorable weather and Q4. So I would look broadly at a rather normal rhythm and cadence slightly heavier toward half two as opposed to half one I hope that's helpful.
No. That's very helpful. And then I mean to your point I mean, the volumes have held up better than expected over the over the last 12 months in terms of what could get you to the high end or the low end of that 1% to 4% aggregates volume guide.
Is private and commercial was that the biggest question Mark for you or do you think residential would slow down and the second half are there any particular states just wondering if there's maybe a few.
Swing factors for you when you think about 2021 that could get you to the high end or the low and no.
And that's a great question, Here's how I would cash and I think we've got a good sense of what publicly is going to look like and we think public that's going to look better.
We have a good sense of what residential is going to look like and residential is going to look better and residential and particularly point to look better with respect to single family and we believe single family as a percentage of overall housing will return to more normalized percentages in other words, it's going to be about 80% of housing and the United States and.
When we see single family housing at 1 million starts of one one and 1.2 I would tell you that's a pretty healthy place for our business because here's what happens.
Evidence of new neighborhood is being built and so if you think about two cities that are reported to us thinking about Atlanta and think about Dallas, both tend to be north south and cities both tend to be growing more north and south and so what that means is years ago, you were growing north from Dallas to Plano, and now youre growing north from Dallas to Frisco and.
Now youre going to be moving north from Frisco to north of Frisco.
As we see new communities come and fresco or as they go into alpha radar or other places north of Atlanta.
New communities need the follow on effect that you get and nonresidential.
Now history tells us depending on geography that can have a six to let's call. It an 18 month lag behind it.
And if we're seeing single family growth and communities and you've got a six month lag on that.
And that can start pushing you towards the higher end of our volume guidance because if we think about the different end uses.
Infrastructure is going to be better residential is going to be better, particularly single family as.
As we land on non res as we've said comparatively the toughest of the three and uses the heavy side of that we believe is going to be good with warehousing data et cetera, all of which are very aggregates intensive. So some of the swing side to the upper end of that is going to be relative to the <unk>.
Rag along effect on the white portion of non res.
We believe we'll follow continued single family growth. So that was a mouthful and I apologize for that was a mouthful, but I hope that was followed.
No that's very helpful I'll turn it over.
Very good thank you Matthew.
Thank you.
As a reminder, we ask that you please limit yourself to one question.
I show. Our next question comes from the line of Jerry Revich from Goldman Sachs. Please go ahead.
Yes, hi, good morning, everyone.
Good morning, Jerry.
And I'm wondering if you could talk about how app.
Your M&A pipeline.
At this point and how much it was uncertainty around tax.
Tax rates could look like.
Is that plenty and P.
<unk>.
And your appetite for M&A and.
And although overall Inc.
Paul Pablo.
And you see it Jerry Thanks for the question what I would say is if you look at what M&A is done for Martin Marietta through the store years and by that I mean from 2010 today.
M&A has been our preferred methodology.
Growth. It has served us and our owners well, we think it will continue to serve us well.
When we think about M&A, we think about it and a long term strategic view.
At the same time, we're not going to go into transactions that we know we're not going to be near term attractive deals for cedar and.
Fairness typically we're not going to take tax rates much into account and the way that we're looking at M&A, because we feel like getting the right deal and the right market is the most important thing that we can do for our company near term and long term.
It allows our teams to grow it allows our company to grow it lets us grow into markets that we think will be attractive and at the end of the day, where we believe we can have leading positions as you recall, we have a leading position and 90% of our markets. Today 10 years ago, we had a leading position and 65% of our markets.
We're going to be looking at M&A through two different lenses, we're going to be looking at it and bolt on acquisitions and markets that we currently exist, but equally we will look at potential platform acquisitions and markets in which we would like to grow.
As a reminder, and we've not been shy about this we've long talked about the 2050 regional planning that shows what growth is going to look like in the United States between now and 2050 and the short answer is the country is going to add about 140 million people over that time period, and 70% of them will land and one of 11 Mega regions and so.
If you watch the Mega regions and see what where they are and if you look at our footprint. The likelihood is we will continue to want to be focused and those mega regions, either with bolt ons or with platforms relative to our M&A pipeline and our team.
They would like to sleep more.
But the short answer is they are very busy people right now theyre very talented people and we're very grateful for them and our intention is to do all that we can to keep them tired and hungry.
And maybe you can send them a cup of coffee.
Thank you.
You bet.
Thank you. Our next question comes from the line of Nishu Sood from UBS. Please go ahead.
Thank you.
So I wanted to ask about that.
This has obviously been an unusually volatile time for the industry.
Coming off a quarter and which volumes were.
Quite affected by the pandemic do you think there was any effect and <unk> of may be.
And some deferrals.
Projects that might have been affected by the pandemic being completed and <unk> and obviously with the milder weather. It would have been conducive to that do you think that that that that had any effect on net and <unk>.
Issue number one welcome back it's good to hear your voice.
Number two with respect to your question and I'm sure that we would be naive not to assume that there was some that would have been pushed into Q4 simply because Q3 would have been more impacted and the weather was favorable so I think that's certainly a possibility.
And I think we saw more of those to build up some momentum and saw nice momentum going into four.
Experience tells me that the contractors are finishing a year and.
Which they don't have good confidence and the next year.
Rather than hurry up they tend to slow down because they want to make sure that they have plenty of work for their workforces as they come into a new year. So what I would what I would say too. So I think thats, certainly possible and issue, but I equally think what we're seeing particularly relative to single family housing and tending to follow it and.
And then the overall health of the Dod and the states and which we're operating.
I think those are coalescing to give nice momentum and for that we believe persist into 'twenty one.
Got you makes sense. Thank you so much.
Thank you Nishu.
Thank you.
Our next question comes from the line of Phil <unk> from Jefferies. Please go ahead.
Hey, good morning, everyone and congrats on a really price of quarter Phil. Thank you.
Probably a little more color on bidding activity and how your backlogs are shaping up broadly, but certainly and.
Any color, particularly on non res and maybe some of these energy projects that you have talked about and the Pathic may have gotten pushed out are you seeing some of that come back as well.
Phil Thanks, so much for your question what I would say is the customer backlogs are looking fairly similar in many respects to where they were last year, one thing Thats worth remembering as the backlog is really at this time of year for customers only represent about 20% to 35% of what people really think their shipping needs are going to be but what I would say it's over.
Aggregate tons are modestly up as we talk to our customers right now if we book at cement tons, they're actually up double digits right now if we look at magnesia specialties, they're actually up double digits as well. So I think part of what's important to remember Phil as we're going into 'twenty, one two parts of our business that have historically.
<unk> been very good steady parts of our business, meaning North Carolina, and Magnesia specialties did not have the best years and.
And in 'twenty and are both looking at considerably better years, coming and entered the year and 'twenty, one and so as we're looking at overall backlogs. They look really quite good force the only area that our backlogs are notably all would be and portions of Colorado, and what we're seeing and Colorado and I.
This goes back to your question is actually right now a very good level of bidding activity and that state.
As we mentioned we cut we're coming off what was a record year last year, and Colorado, and we anticipated coming into 'twenty, one and there would almost have to be modestly slower as I indicated and some of the earlier questions with some of the Covid money that has come into Colorado Dot's numbers are broadly even and now we're seeing much better.
And bidding activity. So I guess, what I have to say on that Phil is more to come but I've tried to give you. What we feel like is a good march across the enterprise and give you a sense of where we think customer backlogs are.
Any color on any new projects, you've talked about that got pushed out maybe.
Yes, the large energy projects, it's going to be interesting to see because obviously, we're seeing energy prices come back and.
And ways. This year that we anticipated that they would I think part of what we had anticipated is until we started seeing that we were likely to see a slowdown on those jobs. We think we're likely to see those take off more in 2022, we have picked up there recently.
And some volume on one of those projects and South Texas.
So again I think there are no big surprises and there is nothing markedly different there than we spoke of as we've really wrapped up the year last year, although it does look near term.
Modestly brighter on some of the commitments that have been made over the last few weeks.
Got it thanks, a lot ward thank you Phil.
Thank you.
Our next question comes from the line of Courtney <unk> from Morgan Stanley. Please go ahead.
Hi, Good morning, guys. Thanks for the question.
Maybe if you could just comment on within the quarter I think you gave for the full year, what what your infrastructure and ready with.
And infrastructure.
You mentioned North Carolina being down, but can you just comment what it what it.
And the fourth quarter.
And market and then and light as the comments you would expect more typical seasonality.
First half first and second half next year can.
Can you just help us.
And if they're going to be any difference and how you would envision.
And market.
Returning to growth next year, so he'll be starting in the first quarter or some of those will.
And we'll be more back half weighted.
Courtney number one welcome we're delighted to have you here and this groups and nice to have your question too if I think about and uses here's the way I would think about it and I'd rather just talk about from a four year perspective, because I think that's probably a more directionally appropriate way to look at at least from my seat and the bus and infrastructure ended up last year at about 30.
6% per us non res was tied for infrastructure at 36% and residential was at 24%. So that gives you a pretty good snapshot of what volumes look like for the year. What I would tell you is I think 36 per infrastructure is awfully low.
And and use that ought to be and the low to mid forties.
And I certainly believe with what we're starting to see from our leading states right now and.
And again, we've not built and a long term highway bill into anything that we're talking about relative to 'twenty, one, but if our states continue investing the way that they are and.
And we see a long term bill come through from the Federal government, we think that 36% move up toward the 40% number and maybe even ahead of that that would feel more logical to us if.
And if we look at non res at 36%, that's an odd one Jimmy and I will tell you why historically, if we look at non res and it would have been very consistent at about 30% of our volume and that would have historically been a pretty clear defining break with non res and light being about half of that and.
Non res heavy being about half of that overall, 30%.
Year, just ended it was 36%, but here's what's happened clearly and white portion of non res has gone down but heavy portion of non res has gone up.
But the irony is the heavy portion of non res is really heavy right now so what we're seeing is and data warehousing and the other.
Delivery products that we're having this.
And the sheer aggregates intensity of heavy non res is richer than we've ever seen before that essentially serving to fill in large measure the tonnage hole that would otherwise be left.
When we look at what's happened to hospitality retail et cetera.
So that gives you a sense of where that is now residential last year at 24%.
Is a relatively high number.
And that's probably the highest single Rev number that we've ever seen.
And to give you a sense of what it looked like at absolute Nadir is about 7% now what's happening is we're seeing <unk> at 24% of our volume, but we're not seeing residential starts and a particularly high level at least relative to a 50 year snapshot of it.
I think as most telling is back to the portion of the dialog that we had before relative to what's happening with single family residential within the overall residential snapshot.
And the recovery that ended with Covid arrived.
Single family housing was about 67% of overall housing activity.
If we look at what.
2030 year average as it tends to be closer to 80%.
That's what we're starting to see today. So again as we think about what and uses looked like on a percentage basis for 'twenty.
And the way that we think they are trending for 'twenty, one again infrastructure 36, and 2000 and non <unk> 36, <unk> 24, as we move into 'twenty, one should we see infrastructure move up I think we properly shut.
We see non res and move around a little bit, but probably not huge numbers, probably so do we think rents will be pretty consistent. The answer is yes. I also think it's worth noting that the railroads have said that they intend to be back to relatively normal levels of maintenance and repair as we come into the year, that's important because of the.
<unk> and rail portion of our business, which covers not only the rail portion, but what we sell to farmers as agricultural line and the Midwestern United States can be eight 910% portion of our business as agricultural prices have continued to get better.
And our outlook for AG line I think we will continue to improve so according.
Through a lot of data for the first time on a call and I apologize for that but I hope that was helpful.
That's very helpful. Thank you.
You bet.
Thank you.
Our next question comes from the line of Derek <unk> from Loop capital. Please go ahead.
Yes.
Great. Thanks, and congrats on the quarter and outlook were given your optimism and new infrastructure spending going through and the middle of the year and some of the large growth figures associated with it how.
And how should we think about the timing around the new funding showing up and your volumes is it unrealistic to think that it could be a 2022 driver or is it more 2023 and can you speak to the dot's, maybe ability to handle such a potential step up and funding is there enough capacity to handle Inc.
And.
And revenue its a good problem to have and just kind of wondering how quickly you can see this benefit you know.
No I agree Garik I think there is a great question, So I would say several things.
One I do think most dot's today.
<unk> utilized their engineering and planning and eminent domain resources over the last several years to have themselves and a position that they are better placed than anytime in my career to be able to take these funds and move with them.
And I think part of that is going to be underscored by what they are going to be doing with the COVID-19 relief dollars they've done as well.
And then if we look at the Covid relief dollars all by themselves out of the $10 billion.
And we're looking at 900 million taxes, 134 to Colorado, 260 Day, North Carolina, Georgia is getting $323 million in Florida is getting 473 million <unk> 123, Indiana, $2 38, South Carolina, 167, Maryland, $1 50 and Nebraska.
<unk> got $72 million.
So those are nice big numbers go into those states. So if we look at what theyre going to be able to do with that <unk> and 'twenty. One we think theyre going to be able to put most of that work to the extent that we see a highway bill that is and some form of passed by the time, we get lets call it toward half year we.
I'll leave you start seeing some degree of pull through and that and 22, but we equally believe what youre going to see us and I spoke from that and 22 and we believe that's going to give at least that.
The single biggest most consistent and use it we have a nice multiyear run and what I think can happen Garik is this notion of having perhaps infrastructure funding at levels that we haven't seen ever.
Never before and the nicest increase that we've seen and 15 years together with what we feel like and our footprint is going to be a continued expansion and single family housing.
And then also following these corridors of commerce, so intentionally built our business around and we think it does set the industry generally up but we think it sets Martin Marietta, specifically up for what could be a very nice multi year volume trends. So garik I hope that was helpful.
Yes, Thanks Scott.
You bet.
Thank you.
Our next question comes from the line of Adam.
From Thompson Davis. Please go ahead.
Hey, good morning Hayward.
When you think about M&A, how open would you be to.
Buying a vertically integrated company versus pure play aggregates.
And good morning, it's good to hear your voice I guess, what I would say Adam is it all depends on the wear.
Were specifically driven by markets. What we think are attractive markets to position that we would have and that market and what we think we can do with the business. So here's the way I would encourage you to think about that.
When we swapped out of the river business and we.
We swapped out of a pure stone business and we swapped into a vertically integrated marketplace. We.
We didn't do that on that day, because we lost any conviction and aggregates. This is and aggregates led company.
So what you should always expect us to do wherever we're looking at M&A is for it to be aggregates led and that's the important thing to remember, but what I think you and I recognize is there is some markets and the United States that do tend to be vertically integrated and if you want to be and in attractive market that's vertically integrated.
<unk> you better be in a position that you have competencies around stone and at times ready mixed and at times Hot mixed asphalt so would we consider it.
Of course, we would consider it but are we going to be very picky about the market, we will and I think what you've seen from our track record is when we go and do that but we've been able to do is add considerable shareholder value and the process.
Agreed good answer I'll turn it over thanks.
Adam.
Thank you our.
Our next question comes from the line of Paul Roger from Exane BNP Paribas. Please go ahead.
Yes, good afternoon guys.
And the English countryside, congratulations on the results.
I think most of the questions would be helpful.
So you got a follow up on the downstream side of the business.
I think if we if we look historically.
Downstream price and a margin tends to be a bit more volatile than cement and aggregates and his thoughts out to build a little bit if hydrocarbon cost are going up.
Looking at your veins.
Middle of the guidance and it looks like you would expect.
And saw a flat margin.
And I was wondering if you can comment on what gives you confidence.
And that will be achievable and particularly in ready mix.
No Paul Thank you very much for the question. It's good to hear your voice and hope, you're well and the U K.
Paul I think if we look at where our downstream businesses are and Thats, what gives us the confidence and those keep in mind, we have downstream businesses and Colorado, where we have ready mixed and we have asphalt and we have downstream and Texas, where we have ready mixed only.
And I think what we're seeing is particularly in Texas, a good amount of bidding not only on private work that's tied into residential but also on public work on some large projects. So as we look at what we believe is happening in that marketplace.
Despite what can be some of the raw materials cost, particularly on the energy side I think we feel like that we can maintain those.
Equity, if we look at our business and Colorado.
That's really one of the better ready mixed markets and the United States, we see actually a pretty significant delta and ready mixed pricing and Colorado versus what we've seen ready mixed pricing and most of Texas and again, the hot mixed asphalt and paving business that we have in Colorado I think is really one of the better hot mix asphalt and paving businesses and the <unk>.
And I did states, it's got very high barriers to entry and that marketplace and part of what we're seeing in that marketplace to although we're not experiencing about others are Paul.
And there are some depletion scenarios on stone that are underway and portions of the front range. Martin Marietta is not affected by that we've got nice long term reserve positions, but what we've done in that marketplace to one have good long term reserve positions, but number two make sure we have a.
Nicely spread out distribution system is what's going to allow us to maintain margins and those downstream businesses.
At the same time part of what Youll see if you look at the downstream businesses is the raw materials piece of it does appear to be going up and in large measure that's because we're selling ourselves and raw materials and those businesses and we recognize that the value of aggregates is very valuable and it is getting more valuable each year and we're going to make sure that even when we're done.
And those internally, we're doing it and and very equitable fashion, because we want to treat our internal customers and our external customers exactly the same way Paul So hopefully that's helpful.
Yeah, that's great. Thank you very much.
Thank you Paul and tears.
Thank you. Our next question comes from the line of Stanley Elliott from Stifel. Please go ahead.
Good morning, everybody. Thank you all for fitting me in and.
This work and a tough year.
And for you with the change in administration do you guys see anything and working through the committees on the regulatory environment that would either add cost to the process, maybe slowdown and the construction markets at all and then.
And kind of a more broad thought with the discussions around a $15 minimum wage not really for you all but for the customer contract or what sort of disruption that might cause if any.
Yes, great question Stanley.
<unk>, we haven't seen anything coming through right now that we feel like it's going to be wildly disruptive to what we're doing I do think we're going to C considerably more.
ESG factors built into and maybe not one big Bill I think youre going to see it built into most of those that come through and.
And by the way we're perfectly okay with that if you think of it from this perspective, one a lot of it is going to be geared towards safety activities and you can see what our numbers are.
We do that extraordinarily well the other thing that I would tell you you can go and look at the sustainability report that we put out what youll find out is that to the extent that we have greenhouse gases.
We have 400 operations across the United States really only four of them have any degree of notable ghd issues and that means 84% of our <unk> issues come from from four locations.
Which tell us that we've already set out really robust targets between now and 2030 on how we intend to deal with those and we've published those annually. So as we're sitting here looking at what we feel like it could be a higher regulatory and market we.
We don't feel like we're seeing things right now that will be negatively impacting our business do I think it might make barriers to entry are difficult and in our business and the fact is it.
It may.
Is that something to lament I'll leave that to you if you've got 90 years of reserves at current extraction rates.
Not sure that's something that we're particularly concerned about today.
The other thing that I'll say is to the extent that had increased costs.
The simple fact is we can usually deal with that on the commercial side, because we would typically see pricing going up and the other thing that I would say, it's at least right now our customer base is not complaining about a lack of available employees. What you remember standing as a couple of years ago.
And there was a trucking shortage there was the labor shortage right now and we're not seeing that in our space.
And so logistics are working relatively well and contractors are in a position that they can do what they need to with their projects day in and day out so hopefully that.
Doug took off.
Items that you listed.
You did and you guys really do you have a nice safety record so.
And that's on that and best of luck the rest of the year Stanley. Thank you so much.
Thank you and next question comes from the line of Rohit Seth from share with Securities. Please go ahead.
Hey, Rod Thanks for taking my question just building on and something you mentioned and the last.
Question and back in 2018, we had a pretty sharp spike in inflation and the second quarter and.
The fiscal stimulus that we have out there today.
It could be some supply tightness out there and just curious.
How do you plan on defending your margin should that reoccur.
Second quarter.
This year.
Rohit is good to hear your voice. Thank you for the question. If you go across our footprint and you look at what cost of goods sold look like for US. The primary thing that youre going to C is the single biggest cost of goods sold that we have is labor and <unk>.
Employees, then you're going to find a series of others that tend to be and the aggregates business around 12% to 15% of our Cogs that will be things like supplies.
Other inventories, what's happening with respect to maintenance and repair et cetera. So if we go back over time and look at what we have done relative to our employee base. The way that we pay them. The tenure that they have we don't see and inflation situation relative to wages.
Anything that we're concerned about with respect to maintenance and repair what youll see as well is if you go over let's call it the <unk>.
Youll find that we've been very consistent with the weighted we deployed capital in our business and what Youll see from that is a continuing thoughtful management of maintenance and repair now one thing that you will see that went up a bit last year is some degrees of DD&A and DD&A was up and large measure due to what we have done to invest responsibly and <unk>.
<unk>.
So the one item and I'll ask Jim to speak to it very specifically that we think could be a bit of a headwind. This year is relative to energy and more specifically with respect to diesel fuel because clearly we've seen that move around a little bit diesel fuel. It's a fairly notable tailwind for our company and for our industry.
All during 2020 that persisted into Q4, so I'll ask Jim to speak to that the other thing and I'll ask Jim to speak to is what we saw relative to the sale of some excess properties last year that will likely not repeat.
Think from inflation perspective that is going to talk to you about energy, but also once you're modeling to be thinking about what we're not going to do or at least replicate relative to land sales share. So so we've got <unk>.
Currently forecasted headwind of $30 million for higher diesel in 2021, <unk> is I think $38 per per barrel and I think I saw this morning that the average price that was out there in 2019, so effectively were going back to that level of diesel pricing as far as we can tell.
So that's already and the forecast and frankly that we're holding onto our margins from 2020 and and slightly building on those so were content.
And that environment to maintain margins and then offset diesel pricing.
And as it relates to the landfill gains award referred to that we had those very large gains in 2020 $70 million worth of gains.
Those are hard fought and and.
Very much enjoyed but they are not going to be repeating this year. So as you model out and your numbers. We ask that you look at 2020, EBITDA as a core NIE plotless land sale gains and not build on those as repeating into 'twenty 'twenty one.
Understood and then on transportation costs, and seeing trucking costs going up a bit.
And what your what are you thinking there is that just a nominal grower and seeing.
And above normal growth.
No look I think we'll just see some fairly typical growth and transportation, we're not particularly troubled by that and keep in mind most of the transportation, particularly in the quarry side, we're selling stone Fob Macquarie. So were counting on the customers to make transportation arrangements and typically when they pick up the stone risk of loss leases.
Leaves us as it goes up the scales.
Understood so and.
<unk> and it was really just about it was diesel and transportation, but theres nothing else to really think about net.
I think that's entirely correct rohit.
Alright, Thats all I have thank you very much thank you rohit and take care.
Yes.
Thank you. Our next question comes from the line of Josh Wilson from Raymond James. Please go ahead.
Yes, good morning, and ward, Jim and Suzanne and thanks for fitting me in and congrats on the quarter you bet and another welcome we're glad to have you on the call Josh.
Good to be here and most of my questions have been asked but I did want to make extra sure I understood. The cement margin commentary I understand.
The year on year comparability issues with the.
And the outage, but it looks like the margin actually declines between the low and the high end of your guidance can you elaborate on maybe if theres. Some costs you would bring back and businesses at the high end of your expectations. Let me ask Jim to respond to that but yes go ahead, Catherine and from a cost perspective natural gas is one of our and.
Puts for fuel.
It's pretty benign in 2020, we're forecasting net cost to go up slightly in 2021, and that's why you're seeing the margin slightly.
Slightly degrade year over year.
Does that answer your question.
I was talking about the high and the low end of the 'twenty one guidance.
Yes, well the natural gas equivalent revenues or margins.
Margins margins, yes, so natural gas is an input for our cement business the fire the kilns.
And we're forecasting those costs to go up.
So what's going to happen and as a practical matter Josh if we look at energy overall for the aggregates business. It is going to tend to be about 12% and up that diesel fuel is going to be about 8% of that and we look at energy overall for the cement business.
Much larger percentage of the overall cost of goods sold for cement and it's tending to be and the 20% range for overall energy. So I think that probably helps bridge that a bit for you.
Okay. Thanks, so much and.
If I could just sneak one.
One other your Capex guidance is about the same as you. Initially started in 2020 is that a good long term number as well as we think about the cash potential as we get into an infrastructure bill.
It is.
We had start out there last year as you pointed out and then Covid and.
Brought in the level of uncertainty and we pulled back quite a bit on Capex 2020, we restored it in 2021, I think nine 8% to 10% of sales as a rough proxy of where our capex. It. So you can kind of scale as the business grows our capex will grow accordingly.
And so $4 50 is probably not a bad number to be at its a little bit higher than we've been and recently, but again, we brought it down and 2020, so it's probably not a bad number to be at going forward.
Thanks, Good luck with the Mexico.
Thank you so much Josh.
Thank you and our next question comes from the line of Timna Tanners from Bank of America. Please go ahead.
Oh, Hey, Thanks for squeezing me and I'm sure you'll talk about that's also at your upcoming Investor day, but the big thing that sticks out to me and looking at your high quality problem and of these very strong cash flow is what youre going to do with them going forward. So I just wondered if you could just remind us of your priorities. It sounds like Youre excited about M&A you did have a little more capex you just talked.
But what does it take for the board to consider more buyback sorry.
The increased dividend if you could just remind us about that.
And I'm happy to Timna. So thank you so much for the question. It's good to hear your voice our capital priorities haven't changed and that is we feel like the best first dollar spend is on the right transaction and.
Several years ago, I remember, we were coming into a year and we said that we thought it could be a year of some notable transactions for the industry.
I think the prospect is this could be a year of some notable transactions, we've tried to have ourselves financially and regulatory.
And in a position that if large transactions from notable transactions are attractive ones came along we would be and in place that we can play.
So if we think about our best first dollar spent that set.
And next we're looking at assuring that we're investing responsibly and the business and if you look at what we've been able to and through cycles relative to Capex and as Jim was just indicating.
We think we've treated the business really quite well and if we look at what that has allowed us to do relative to our cost performance. We think that we have been largely outperforming and then third to your point and your very good question as a return of cash to shareholders and we've done that through two very different ways timna.
Number one we've had a meaningful and sustainable dividend and we think both of those words are really important. So one thing to keep in mind I believe we're the only heavy side building materials company, who can say this we've never cut a dividend.
As we've been able to maintain a dip and all the way through cycles and puts important as this company even in August when the World was faced with all the uncertainties from COVID-19, we raised our dividend by 4%. If you go back and look at where we were the year before that or the year before that youll find even bigger increases so.
Clearly our board is going to come back and look at the dividend and August as you'll recall as well when we bought ESI, we issued 20 million shares of stock to combine the companies together.
Shortly after that our board took the view okay. Our shareholders were good enough to give us license to go and do this with a very high percentage of shareholder vote, we're going to make sure over time Opportunistically, we come back and take that dilution back and we've been on that journey.
And we've got about 15 million shares left and that authorization, we want to continue chipping away on that but the conversations we've had with our shareholders have tended to be.
If you have the ability to do the right deal that's where we want you to be and these are conversations that we're always very frontal with our shareholders. Because there are owners at the end of the day and we want to make sure that we're meeting their needs and their expectations, but that's the priority and that's how we're looking at it timna. So again I hope that's helpful.
Got it thanks again.
And <unk>.
Thank you.
Our next question comes from Adrian <unk> from J P. Morgan. Please go ahead.
Hi, Thank you, hi, warranty and Memphis and congrats on the results.
Yes, most of my questions were answered but.
Very quickly on if you can comment a little bit on how the first quarter is looking I mean, usually we see volume is down sequentially, 10% to 15% and the first quarter.
But we are ending with a very strong.
Volume and the fourth quarter.
Given what you have seen so far with weather.
And activity and set that can we expect the Liza sink guidance that we have seen in the past.
Adrian I really appreciate the questions and it's.
It's a good one because here's here's the dichotomy that we find ourselves in.
Last year when most companies we're withdrawing guidance. They were certainly encouraged to be forward leaning and be even more forthcoming and to what they might see in the coming months part of what we're so pleased with is we feel like we're back and a more normalized state trending to and even more normalized state and because.
And of that we've reinstituted guidance and our practice has always been if we had guidance and place to make sure that we were really sticking very close within the four walls of the quarter and.
Which we are addressing so.
I'll talk a little bit well I'll talk a lot more about January when we're together and we're reporting.
For the quarter results.
And I'll say this much part of what we thought was important was ending the year with momentum and we thought that we would see carrying into the year. So we'll talk more about the first quarter when we come up with the results but.
I wanted to give you a sense of why unlike at least the last two calls.
We're not rushing to talk about the month that we're in right now.
Understood. Thank you ward thank you Adrian.
Thank you.
Our next question comes from the line of Michael Douglas from vertical research. Please go ahead.
Yes.
Yes.
Or afternoon, I guess now So award just quickly you mentioned about the $10 billion and the allocations and there are certain states on the relief funds and Dot's.
And some pretty good numbers for some of the states that are not in your top five what are the two or three areas or states you look at going and you look at the plan at 24 and that could be generating positive surprises from you generally and the business and maybe more so and some of that funding were to flow more aggressively into those states on the infrastructure side. Thank you.
Look thank you very much for the question I think two states that will particularly watch and they were important states to us last year and candidly they don't get depressed that they should Indiana had a fantastic year last year.
The management team that we have Theyre, just ran that business like a Swiss watch last year, and Indiana is getting $238 million more and they've got a very good highway program. There. The other business that performed extraordinarily well last year and this shouldnt be a surprise to anyone is the business that we have and Maryland and the aftermath of the bluegrass transaction again.
<unk> got $150 million coming in to that marketplace as well. So we've talked about how important Texas, Colorado, North Carolina, Georgia, and Florida are those those are one through five but again, if we see the type of performance I think we can expect to see and Indiana, and what we might see and Maryland, those could be some very nice surprises coming into <unk>.
2021, and I'm not even sure we'd say surprises, but I think that could give some potential nice upside.
Thank you.
You bet and Michael.
Thank you.
Our last question comes from the line of Brent Thielman from D. A Davidson. Please go ahead.
Hey, great. Thank you.
And we're just a question on the North Carolina and public sector in particular, just because of the depth.
And whole and Lettings last year was so significant do you feel like you've already felt the brunt of that and the business are you anticipating the spillover effect from that recognizing that obviously, it's been recovery and <unk>.
Forecast to pick up this year, just wanted to get a sense of how you're thinking about the spill over into 'twenty. One no I think that's a great question, Brent I would say several things one we went into 'twenty.
With some of the best backlog, we've ever had and North Carolina, and so that allowed us to weather, a pretty challenging time and our state net I'm, probably going to jinx. This write down and so I Shouldnt say this but right now we've had no harsh winter weather and North Carolina, either which means let's face it at the end of the day, we really don't want to C D.
And having to move snow.
Off road and North Carolina So.
And I think as a practical matter seeing.
Resurfacing project scope seeing the 700 million from build and C bonds.
And utilizing debt and a much healthier bidding circumstance on top of the backlogs that we have.
Make weathering.
We've already done much better and I think it does outline a much brighter 2021, and certainly 2022 and beyond and North Carolina. So we feel like we have been through the toughest period by far.
And we're going to see this state begin to perform much more in line with what our historical expectations would have been so Brent I hope that helps.
Hey, guys. Thank you.
Alright, you're welcome.
Well. Thank you all for joining our earnings conference call today building on our solid foundation of past successes, we're confident and Martin Marietta as prospects to drive continued sustainable growth and shareholder value and 2021 and beyond we look forward to discussing our first quarter 2021 results and a few months and importantly.
Sharing our strategic priorities with you at our upcoming Investor Day on February 25 registration details for this virtual event will be available soon as always we're available for any follow up questions. Thank you again for your time for your continued support of foreign Marietta, Please stay safe and stay well take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
Yes.
And then.
Yes.
Okay.