Q2 2021 Martin Marietta Materials Inc Earnings Call
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And for your patience.
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Good morning, ladies and gentlemen, and welcome to Martin Marietta Second quarter 2021 earnings Conference call. All participants are now in a listen only mode. A 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 MS. Suzanne Osberg Martin Marietta, as Vice President of Investor Relations Suzanne you may begin.
Good morning, and thank you for joining Martin Marietta of second quarter 2021 earnings call with me today are ward Nye, Chairman and Chief Executive Officer, and Jim Nickolas.
<unk> 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 in connection with future events future operating results or financial performance like other businesses Martin Marietta is subject to risks and.
And the 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.
The list and other filings with the Securities and Exchange Commission, which are available on both of our own and the SEC websites. We've made available during the webcast and on the Investor Relations section of our website Q2, 2021 and supplemental information that's the.
Summarizing our financial results and trends.
In addition.
Additionally, any non-GAAP measures discussed today are defined and reconciled to the most directly comparable GAAP measure and our earnings release and SEC filings.
Ward and I will begin today's earnings call with the discussion of our second quarter operating performance and current market trends as well as our recently announced acquisitions and Jim Nicholas.
And then review our financial results after which ward will provide some brief concluding remarks, a question and answer session will follow I will now turn the call over to ward.
Thank you Suzanne and thank you all for joining today's teleconference.
Martin Marietta has once again reported impressive results.
The old extending our strong track record of industry, leading performance and responsible growth, we delivered record profitability and the best safety performance and our company's history through the first half of the year. We're also making notable progress on our soar 2025 initiatives to further enhance our ability to capitalize from growing.
Construction activity and favorable pricing dynamics and the post pandemic landscape, we're confident about Martin Marietta as prospects for the remainder of 2021.
In May we announced an agreement to acquire and Lehigh Hanson West region.
Those of you who joined US early this year for our Investor day, we're likely.
Likely not surprised when you read the announcements.
The acquisition, which is consistent with and advances SOR of 2025 provides the new upstream materials led platform and 3 of the western United States largest and fastest growing mega regions.
With this leading Pacific presence will be well positioned to capitalize on.
Term demand drivers from increased state infrastructure investment and California, and Arizona as well as continued private sector growth across these regions.
This strategic acquisition also provides Martin Marietta with and enhanced coast to coast geographic footprint and serves as a valuable platform for potential.
The long tenured and geographic expansion, we expect to close the transaction and the second half of 2021. Following customary closing conditions, we look forward to welcoming of the Lehigh West reach and team to Martin Marietta.
We're also very pleased with the performance of our recently acquired total operations.
The Kannapolis, St Paul region, which exceeded management's initial expectation since closing on April 30 of them.
Taylor contributed 1 million tons each of aggregates and asphalt during may and June and provides Martin Marietta and upstream materials platform and 1 of the largest and fastest growing Midwestern metropolitan.
And the areas, while also expanding and complementing our product offerings and our existing operations and surrounding markets integration into our Central Division is underway and synergy realization is progressing as planned.
This business remains on track to contribute $60 million of adjusted EBITDA. This year.
And the Martin Marietta has established a long track record of superior value creation by prudently balancing inorganic growth opportunities, while maintaining our strong balance sheet and returning capital to shareholders.
Our latest acquisitions and successful growth initiatives demonstrate that sore and our disciplined capital deployment.
C continue to deliver significant value to our shareholders customers and other stakeholders positioning our company for sustainable long term operational and financial success.
Now, let's turn to the company's second quarter performance.
We achieved record second.
Strong revenues gross profit adjusted EBITDA and earnings per diluted share driven by strengthening product demand pricing gains across all product lines and meaningful contributions from the recently acquired <unk> acquisition.
On a consolidated basis products and services revenues increased 9% to 1.
Quarter $1 billion.
The gross profit increased 3% to $393 million, adjusted EBITDA increased 8% to $439 million and.
And adjusted diluted earnings per share increased 9% to $3 and <unk> 81.
Ah.
Our building materials business continued to benefit from single family housing growth infrastructure investment and heavy industrial projects of scale.
Adverse weather, however, and muted shipments, most notably and our top 2 revenue generating states, our aggregates cement and ready mix concrete operations and Texas.
And 3 variance lower than expected shipment levels as a result of excessive rainfall in fact, the second quarter was texas's 11th wettest on record.
<unk>, Colorado home to our front range aggregates and downstream operations surpassed the average annual precipitation levels during the first half of the year.
Second quarter aggregates shipments increased 1.5% on an organic basis, and 3% and total <unk>.
And this group total shipments grew 7% strong demand across all of end use markets and the Carolinas, Georgia, and Florida, and Maryland, combined with shipments from the acquired tuner operations more than offset.
Net lower shipments in the Midwest from weather induced project delays and west.
Westgroup shipments declined nearly 4% as mother nature and erupted otherwise robust construction activity in both Texas and Colorado.
Organic aggregates average selling price increased over 3% supported by our value.
Over volume pricing strategy led by the Eastgroup Jia.
Geographic mix from a lower percentage of higher priced long haul shipments limited west groups reported price and gains on a mix adjusted basis West group pricing increased 2.4%, we announced mid year price increases and a number of markets, which should further contribute.
The favorable pricing trends heading into next year.
Our Texas cement business delivered solid operating performance despite significant precipitation the disrupted more than 1 third of the quarters available shipping days.
Second quarter shipments declined less than 2% as major projects in South Texas.
Along with recovering energy sector activity helped to mitigate weather impacts, notably we established an all time record from monthly cement shipments and June largely due to the robust demand and construction activity throughout the Texas triangle.
Second quarter cement pricing increased 7% or 4%.
Sent on a mix of adjusted basis as annual increases went into effect on April..1. Additionally, we have announced the second price increase of $8 per ton on September 1 for both North and South Texas. This represents the first mid year increase since 2014.
Attractive demand drivers.
Continued market tightness and diversified customer backlogs will support sustainable construction activity and pricing for our Texas cement operations over the next several years.
Turning to our targeted downstream businesses ready mix concrete shipments increased 8% despite significant weather headwinds.
And by incremental volume from large non residential projects and operations acquired last year in Texas.
Concrete pricing increased modestly, reflecting geographic mix from a higher percentage of lower priced Texas shipments.
The overall asphalt shipments increased 68% driven by contribution.
Terrific and the pillar operations, which more than offset weather related shipment declines and our Colorado asphalt and paving business, Colorado market fundamentals remained strong supported by healthy bidding activity and overall customer optimism organic asphalt pricing improved 4%.
Looking.
And said, we remain confident that Martin Marietta as attractive market fundamentals and accelerating long term secular demand trends across our 3 primary end use markets will drive increased levels of building activity and continued favorable pricing trends and the second half of 2021 and into the future demand.
Demand for our construction.
<unk> products is growing and we have both the ability and capacity to supply of the needed building materials, However, transient contractor labor and supply shortages compounded by weather deferred days that become increasingly difficult to recover as the year advances can govern the near term pace of overall construction activity.
Fortunately, we expect work not completed this year to simply be pushed into 2022 and foresee bottlenecks like these moderating and throughput improving as federal unemployment benefits expire in September.
We're also in the midst of the most significant seemingly bipartisan national.
Capture debate and a long time with a number of proposals from both political parties to advance and address much needed investment.
Regardless of the pathway to successor infrastructure legislation, all proposals provide for sizable increases and federal surface transportation funding over the fixing America's surface.
Interest transportation or fast act, we are optimistic that meaningful progress and Washington D. C will be made and the fast act replacement will be passed before its expiration in September and such.
Such legislation would immediately stimulate economic growth contractor optimism and job creation, while also dry.
Irving meaningful product demand starting in late 2022 and beyond.
Our company's top 5 states department of transportation or <unk> are well positioned to put increased transportation dollars to work.
More specifically, Texas, and Colorado, North Carolina, Georgia, and Florida, which accounted.
Surfaced over 70% of our 2020 building materials revenues have an abundance of projects and their backlog that would benefit from higher federal funding and generate growing demand from our products at the same time increased visibility and funding certainty of the federal level supports a healthy pricing environment for construction materials.
And for Us.
For reference aggregates shipments to the infrastructure market accounted for 34% of second quarter shipments well below our 10 year historical average of 43%.
Non residential construction continues to benefit from increased investment and aggregates intensive heavy industrial warehouses.
<unk> and data centers. We're also beginning of C. Early signs of recovery and the more COVID-19 impacted light commercial and retail sectors, notably in key markets, such as Denver, Atlanta, and the Texas triangle.
Like nonresidential activity should be and more significant demand driver in 2022.
Our house and given the attractive drag along effects of strong single family residential growth aggregates shipments to the non residential market accounted for 36% of second quarter shipments.
Martin Marietta continues to be a beneficiary of single family housing growth across the southeast and southwest C.
Single family.
<unk> starts remained strong despite higher home prices and longer material delivery times supported by significant under building over the past decade, low mortgage rates and accelerated the urbanization trends and importantly single family housing is 2 to 3 times more aggregates intensive than multifamily.
Hi.
Given the ancillary nonresidential and infrastructure needs to build out new or expanding suburban communities.
Aggregates to the residential market accounted for 25% of second quarter shipments and I'll now turn the call over to Jim to discuss more specifically, our second quarter financial results Jim.
Construct thanks Ward and good morning to everyone.
The building materials business posted products and services revenues of $1.2 billion.
A 7% increase from last year's second quarter and product gross profit of $357 million.
Aggregates established second.
<unk> quarter records for revenues and gross profit.
Higher diesel costs, and a $6 million negative impact from selling of acquired inventory that was marked up to fair value as part of acquisition accounting are reflected in product gross margin of 34%.
Excluding the acquisition impact adjusted.
The aggregates product gross margin was 34, 8%, a 70 basis point decline versus prior year.
In addition, gross profit per ton shipped improved modestly when excluding the impact of acquisition accounting.
Cement product gross margin declined 870 basis.
<unk> points, despite topline growth driven by the timing and scope of planned kiln maintenance as well as higher energy and raw material costs.
While the first half results were impacted by some weather related headwinds our cement business is well positioned to benefit from growing demand and tight supply.
Ready mixed concrete product gross margin declined 350 basis points to 7% of shipment and pricing gains were offset by higher costs for raw materials and diesel.
Okay.
Magnesia specialties continued to benefit from improving domestic steel production and global demand from Magnesia chemical products.
<unk>.
Generating product revenues of $70 million, a 43% increase.
Revenue growth more than offset higher energy costs for energy and contract services.
Moving a 260 basis point improvement and product gross margin to 39, 9%.
And the consolidated basis.
<unk> earnings from operations included more than $9 million of acquisition related costs as well as a $12 million gain and the sale of property.
This gain is non recurring in nature and should not be extrapolated for run rate purposes.
Relative to often cited broader economic questions regarding.
Regarding supply chain and inflation, we are pleased that our overall supply chain and remains resilient with only a handful of indications of strain for some suppliers.
On the cost inflation from the only notable headwinds we have seen of from increased energy costs.
For the second quarter alone our.
Total energy costs increased $24 million companywide.
Absent this headwind our consolidated adjusted margin would have outpaced prior year, a testament to our team's commitment to cost control and operational excellence.
We remain focused on the disciplined execution of our proven strategy and a long.
Long standing capital allocation priorities that preserve our healthy balance sheet financial flexibility and investment grade credit rating profile.
As the word noted we continue the balanced value enhancing inorganic growth opportunities with prudent capital spending and returning cash to shareholders.
To that and we have raised our full.
Capital spending guidance to $450 million to $500 million.
As we prioritize high return capital projects.
And growing sales and increasing efficiency to drive margin expansion.
Additionally, since our repurchase authorization announcement in February of 2015, we have returned $1.90.
Full year <unk> dollars to shareholders through a combination of meaningful and sustainable dividend as well as share repurchases.
As of June 30, our debt to EBITDA ratio was 1.9 times and.
In late June we accessed the capital markets to finance, the Lehigh West region transaction issuing $2.5 billion of senior.
Senior notes with a weighted average interest rate of 2.2% and weighted average tenure of 15 years.
The bond sales settled in early July and as such is not reflected in our second quarter results.
We expect pro forma leverage at year end to be above our target range.
9 book consistent with our practice of repaying debt following significant acquisitions.
We are committed to returning to our target leverage range of 2 to 2.5 times with an 18 months following the closing of the transaction.
As detailed in today's release, we've updated our full year guidance to reflect current expectations. The.
And of the Taylor acquisition, and the $2.5 billion bond offering.
We now expect full year adjusted EBITDA to range from $1.465 billion to $1 billion $535 million.
With that I will turn the call back over to ward.
Thanks, Jim to conclude.
Completion of proud of our record first half results and industry, leading safety performance and remain highly confident and our outlook for the balance of 2021.
Martin Marietta is well positioned to capitalize on emerging growth trends that are expected to support sustainable construction activity, both in the near and long term.
Whereas we saw 2 of sustainable future. Our focus remains on building the safest best performing and most sustainable aggregates led public company.
Thanks to our disciplined execution of <unk> commitment to safe and efficient operations and our dedication to both commercial and operational excellence today.
And Martin Marietta is superbly positioned.
Our confidence and Martin marietta's ability to deliver sustainable growth and superior shareholder value in 2021 and beyond.
If the operator will now provide the required instructions, we will turn our attention to addressing your questions.
As a reminder, in cask of question you will need to press star 1 on your telephone till withdraw your question press. The pound key we ask that you. Please limit yourself to 1 question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of.
Stanley Elliott from.
Paul Your line is now open.
Hey, good morning, everyone. Thank you all for taking the question.
You mentioned the strong pricing environment on the cement side of the $8 increase yield coming out of September can you talk about what youre seeing on the aggregates side as well and.
Some of the downstream businesses.
Happy to stand and good morning, and nice to hear your voice. So you're right September 1 and it's going to be and important data and cement, we're taking that pricing up as you indicated $8 a ton, but as we also indicated during when we were at the end of the first quarter. We thought we would see more mid year price increases than we've seen in years past that's entirely.
And what's happening if we're looking on the aggregates side first and look at our East Division, We're looking and a number of places for 1 dollar a ton on clean stone 50 cents per ton on based on all of effective July 1 so that's something that we put into effect.
But equally we're looking at aggregate price increases mid year and the southwest Division. So for example.
<unk> and North, Texas and <unk>.
This REIT Dallas Fort worth we're looking at 50 to 75 per ton on September 1 and Austin, we're looking more at $1 per ton on August 1 and Hunter Stone, which was 1 of those found synergies from tsi of where we have the quarry in conjunction with the cement plant and new Broncos.
We're looking 52 of dollar a ton on August 1 and of Garwood Dow just outside of Houston San of gravel facility and looking at a dollar a ton there. So that's what we're seeing on the stone side of it equally and I think this is important Stanley.
We're looking for that also and ready mix, particularly in Texas. So we're looking for.
Just anywhere from $4 of cubic yard and Austin and in East, Texas up to $6 per cubic yard and North Texas. So if we think about what we're seeing and mid years, we're seeing it and aggregates were seeing it and the east we're seeing and the southwest we're seeing it and cement and our uniquely Texas business today and.
Range, though seeing it and ready mixed and Texas. So again the type of backdrop that we anticipated we would see Stanley and I'm happy to report that to you.
That's great and then secondly can you talk a little bit more about the inflation side that you saw and the cement.
So some of the maintenance is.
Not a whole lot last year, and and kind of a normal cadence this year.
But any other thing to call out and then I guess, 1 other thing and the any update on the additional grinding capacity expansion of the Joel.
What about earlier and the year there, yes, so what I will say relative to the grinding capacity again, that's something that we're finished growth that we'll be adding to mid low the and so you'll hear more about that as we go into 2022.
And again Thats a market that we believe simply needs of that with respect to the maintenance and cement Youre exactly right. If you think back to 'twenty part of what we indicated coming into 'twenty..1 is that we would spend more and cement maintenance. In fact, we had indicated to the market early on that we thought we would spend of about 6 million more on killing and finished.
<unk> mill outages and 'twenty, 1 than we did in 2000 and and really Q2 was the time to do that so if youre looking at the Delta on what we did last year and Q2 and what we did this year and Q2 on cement and maintenance. It was about $7.3 million difference. So we spent that much more.
And Q2 than we did last year. So in other words that full annual difference that we had anticipated that you should expect we pretty much did that and Q2. So what we're expecting is the very comparable smoothed run here and the second half of the year and frankly, we're expecting better margins and that business in the second half of the year is the consequence.
Perfect. Thank you all for the time and best of luck.
Thank you Stanley.
Thank you. Our next question comes from the line of Kathryn Thompson from Thompson Research. Your line is now open.
Thank you for taking my question today.
The it's a little bit and to the previous question.
And could you provide a stair step in terms of the guidance update in terms of puts and takes in terms of good guys bad guys, and then layering and on the price increases.
And of margin then excluding some of the the cost from energy.
Outlined and how the margins really play into the back half of the year.
And really end of 'twenty, 2 and from a margin per day.
Thank you <unk>.
You bet costs and so several things, let's talk about the margin piece of the first because as Jim indicated in his commentary and there was the prepared energy was.
$4 million for the quarter. So that's the big.
The big number and if we look at the diesel fuel all by itself that was up almost $15 million. So if we go and look at our diesel fuel usage sales, but.
And at over 12 million gallons excuse me of diesel fuel up about 1 dollar and 11 cents per gallon. So if we go and pullback.
2000, <unk> piece of it out and look at the margins actually puts you will see on the margin across the enterprise is the adjusted gross margins actually improved over Q2.2020, what that tells me and Katherine is the underlying performance of the cost side of the business is actually doing extraordinarily well and.
So what I'm.
Pleased with is the underlying cost is doing well and we're seeing the price move forward and a way that we thought that we would particularly as the economy continues to improve now with respect to your question on guidance and particular Youre right.
Some things moving around 1 we did just drop and what we had indicated verbally before.
Net interest and that was we expect $60 million of EBITDA contribution from the acquired total operations equally if we're looking at our cement business that has no pun intended whether the deep freeze and Texas in February and then as we indicated and extraordinarily wet Q2, we've taken cement down a little better and of course ready.
The mix is going to fall of that so we've pulled that down a little bit and asphalt and paving and Colorado had a very challenging year over year quarter 2 of both of those down but equally and taken magnesia specialties backups. So those are some of the broader puts and takes that we have if we look overall at the pricing.
Before we've really not changed pricing and we've kept that very consistent with where we thought keep in mind. The mid years that we're putting in.
We will not affect pricing that much. This year is setting the stage, even more robustly or 2022, and we did pull aggregate volume down just a hair and large measure we're just looking.
And at the days, but and the year its not indication of any lack of robustness and the market at some point today and just get shorter so Kathryn and I hope that answers your series of questions.
Okay. Thank you Youre welcome.
Thank you. Our next question comes from the line of Gary.
Robert <unk> from Goldman Sachs. Your line is now from.
Hi, Good morning, everyone. This is Chuck and come out on behalf of share retirements.
And of the wrong aggregates pricing the midpoint of heritage pricing guidance implies of about 5% organic pricing and the second half.
Once it's about 3% and the first half is that'd be the extent of which you expect pricing to accelerate and they've done maybe appliances and creatives and also what would have to happen to hit the high end of the guidance range. Thank you.
Thank you for the question and so a couple of things 1 if we think.
Think about volume guidance and the second half of what it's implying is basically about a 4% increase in volume and the second half and you are right. What we're anticipating is we're going to see some accelerating pricing a.
And number of the things that we've seen during the first half of the year that I think is important is we've seen considerably more base work than we have before.
And I think that's actually good because as you may recall based work ends up turning into <unk>.
Finished work on top of that so youre going to see several thing things 1 we believe North Carolina, Georgia, and the East will continue to perform actually quite well if youre looking overall at the volume and again the volume is going.
And have some degree of impact on Asps, If you think about geographic mix the.
Eastgroup and the first half was up 7% excluding pillar it was up 4%, but it's important to note the tourist pricing, it's about 30% lower than heritage Martin Marietta, So that actually gave us a modest headwind. So if we're looking at the point.
And I think we'll be more clean stone sales, most likely and the second half of the year of continued good performance from the east and in some instances we were selling some products that were in reserve and typically those those tend to go for a relatively lower average selling price.
Think it does backend.
Triangulating around the number that.
And yes, we continue to have good confidence around that and the back half of the year.
Thank you very much.
Welcome.
Thank you. Our next question comes from the line of Trey Grooms from Stephens. Your line is now open.
Good morning, Thanks for taking my question.
So if you look at.
Yeah.
Sorry, the guidance again.
Digging into that just a little bit more you talked about the energy costs that were obviously present, probably not going to change any of you talked about some pricing.
And you would anybody that follows of that that you guys are putting in place.
Where do you also mentioned that it will be probably more next year before this pricing.
Really starts to impact so as we look at the back half of your margins were impacted and <unk>, but I think Catherine asked the question earlier, but maybe a little bit different angle.
And.
On the back half margins as we look through the balance of the year.
How are we looking at the price versus some of these energy impacts that youre that youre seeing and and then how that flows through relative to what we saw and the <unk>.
Well again, I think I think <unk> clearly, we'll get some benefit.
The fit from the mid years and the second half of the fact that most of that as we've discussed right. It's going to play more into next year and I think the other thing that we saw a bit and the first half as we did see a bit more maintenance and repair and some of that was tied into the acquisition activity as well. So we think that's going to moderate itself. So I think that's clearly going to come back.
And helpful and the margin piece of it I think the other thing is if we simply look at what was happening in Texas and in Colorado, it's difficult to be as efficient as you want to be from Youre dealing with those high degrees of rainfall as well. So we're entering a period of time that typically is drier we're entering a period of time that some of the mid years will play and we're entering.
During a period of time, where I think we're going to see more clean stone going relative to base and I think we're entering a period of time that you are likely to see less maintenance and repair because in many respects people are simply blowing and going in Q3. So I think you take that combination of factors and I think it comes back and addresses some of the margin questions and ill turn.
And my colleague Mr. Nicholas and see if he has anything he wants to add to that trade sure. So hey, Trey I hope you're doing well the like.
1 notable thing on energy and our old guidance compared to the new guidance, we increased energy expense by $34 million.
And the despite that to your margin question our Incrementals.
Year once once of the year's all said and done we're expecting 60 per cent and.
Incremental margin still of the accurate side, despite that heavier energy expense, so by and large of and we're very happy with where things are ending up and just to put in perspective, <unk> 2021 of the energy expense and diesel.
The higher versus last year, it's pretty much in line with what we saw in 2000.
And in 19 so.
For us this is not not and.
And how much of a stretch the kind of keep keep pulling and gardens and.
Great got it and thanks for clarifying some of that stuff it was.
Just just questions and getting in the weeds was definitely helpful. Thank you and then if I could sneak 1.
And just on the Big picture because you did mentioned net on the bipartisan Bill I mean this is.
And kind of surprising I think the sum that where we're seeing the folks in Washington actually.
It looked like there may be coming together on something here, but.
Just given kind of where they've outlined funds for St.
Street and highway and bridge.
And other things.
Which I think the bridge piece of it might have been taken up a little bit, but I'd love to get your thoughts on on this version of the Bill Ward and maybe what it could mean longer term for from Martin Marietta.
For the question and very much on that and obviously, we're all watching quite happened.
The Senate and last night I guess the good news is I'm not sure. The here we were not surprised by it so look based on the way we see it.
The overall proposal trillion dollars.
5 years 550 billion and new spending.
And really if we're looking at roads and bridges strength, that's going to be by our math of about 110 billion.
And so that's going to be around 39 billion for public transport and another 66 billion per rail and keep in mind with the largest balanced producer and the country 25 billion for airports and about $17 billion reports.
It's going to be a lot of work what does that mean overall I think it means several things 1 is its recognition that it's overdue.
Number 2 it's a recognition that at least from our perspective trade and you heard in the prepared remarks.
Having watched this business for a long time and this industry for a long time typically 40 some percent of our products is finding its way to highways bridges roads and streets, and we've been and the $30 for the last several years.
And Thats really evidence.
And as of the fact that there has not been the level of investment at the federal level that was needed. So if we're looking simply at the Senate bipartisan plan and we're looking at what that means from a percentage up from baseline of FY 'twenty, 1 appropriations under fast it's up about 46% from the baseline.
<unk>. So this is not of trifling number.
And what I really liked about it too is if you look at the vote last night on basically basically the closer of motion.
Youre going to find the 67 and senators voted for this and among them was mitzvah comp and so when we start looking at where Senate leadership.
And who really came along to move that goes along it was C.
Some pretty notable players and the other thing that I think is important is obviously the pay force are going to matter and this and when we look at the pay for us and at least how they'd been pulled together and the Senate version and you've got a lot of repurpose.
Purpose Covid relief, that's going into this you've got some unused unemployment insurance thats going into it and then obviously theyre going to be looking at degrees of economic growth that is going to be derived from the programs investment in other words dynamic, scoring that's also going to be a piece of it so and.
And the fact that you've got that degree of of vote that it got that type of support from.
<unk> centres mentioned cinema.
<unk> is and Mcconnell, we think is important and we think it helps put the industry and an attractive place not just from an infrastructure perspective going forward, but we believe residential is going to remain strong. We think heavy non res is going to remain strong and.
<unk>.
The Reds is going to inflect that light portion of non res and long story short we think this bill if it is pushed forward into law and we believe it will be before the fast act expires puts the industry and a very attractive place for a multiyear run track.
That's great color. Thanks.
Thanks for the thoughts and airborne and take care. Thank you.
Take care.
Thank you. Our next question comes from the line of net from Jefferies. Your line is now open.
Hey, good morning, everyone.
The second round of price increase you called out for aggregates and the East, Texas I believe.
Any way to kind of put that into context of what's driving that is that more of tightness in supply and demand versus inflation and if it's more tight market conditions, just wanted to get all of flavor and how broad base is this potentially as we kind of look out to next year and if thats. The framework should we expect a noticeable step up from the 3% to 5%.
Pricing, we've seen and the last few years with Bill and that's a great question and I would submit to you. It's not so much driven by tightness right now and I think it's driven more by what is anticipated I think it's driven by the by a much higher degree of confidence if we're looking at the condition of most dot and the state's duties are asking.
Okay very good place for example, if we look at where the North Carolina Department of transportation is their.
<unk> issues are very much in the past with 22 Lettings of 2.7 billion. That's up I mean, if you could imagine 260% from the prior year. So if we're looking at what's happening relative to homebuilding and these markets.
Markets. If we're looking at what's going on with respect to infrastructure. If we're looking at a very healthy non res environment as well and the east.
And it all looks very very attractive, whether that's going to be and North Carolina, or Georgia, or South Carolina for Florida as well. The other thing that I think is really telling us when we pause.
Cause and take a look at the backlogs and backlogs are always something funny and dissenters free because it's the practical matter the usually represent only around 25% of 35% of annual aggregates and cement going forward, but it does give you a good dipstick and do the tank to get a sense of where things are and total aggregates backlogs is.
It's pretty attractive it's around 13% ahead of prior year levels.
So again, if we're going back to the notion of overall contractor confidence if we're looking at the people who are going to be busy and they know they're going to be busy and then seeing broadly on overall inflationary market and a lot of different respects.
<unk>.
It's actually a very.
Appropriate and opportune moment for us to make sure that we're getting the value for a speck materials that not everybody can put on the ground.
That's super helpful and sorry to sneak 1 and you mentioned youre starting to see some improvement and light commercial and any color on.
Call trends out of progress. The last few quarters are you starting to see shipments flatten out a little bit any color on the bidding activity would be helpful as well.
That's a great point and we clearly are starting to see better activity on white non res I mean, if we're looking and Colorado, I mean, clearly office retail and hospitality.
And looking for.
And how longer inflection and have to if we're looking here and our backyard and North Carolina, and it's been fairly fascinating to watch and the retail and hospitality of both already beginning to inflect and we're starting to see strong corporate reloads tier population trends are following that we've got Apple and Google making significant.
Our statements here.
And again as we're looking and markets like Florida Office hotel retail and industrial activity and that marketplace actually continues to really be quite strong a lot of what's driving it and look we get at the U S.
<unk> added since 2000 and over 48 million people and population.
And <unk> and what that's doing is it's driving what we're seeing now and single family housing and then single family housing is driving what we're starting to see and flipped basically the way that we thought we would but during analyst Investor day here as we go into half to fill so I hope that helps yes super helpful. Good luck on the quarter guys.
Thank you.
<unk>.
Thank you. Our next question comes from the line of carriage wines from loop capital. Your line is now open.
Great. Thanks for taking my question.
You mentioned the tiller as the first couple of months of ownership outperforming.
Expectations, So I'm, just kind of curious as to what's.
Driving that and then also if I heard you right. You said total of pricing is about 4 points below the corporate average so can you speak to the.
Perhaps the commercial synergy opportunity there.
No happy to number 1 we're thrilled to have pillar as part of this organization culturally and otherwise.
The wonderfully for.
Of course, you've heard what I said in the prepared remarks, basically and May and June they sold of 1 million tonnes of aggregates and of 1 million tons of.
The <unk> by the way I think of their history thats, the fastest they've ever gotten to that million tons and hot mix I think what youre seeing is several things 1 the Minneapolis St. Paul market is a good healthy Midwest market.
Market it tends to be very steady we're seeing good activity. There we've talked before about the fact and Minneapolis, St. Paul actually consumes more tonnes of aggregates and opex on a per annum basis than even Charlotte does switch of premier market here.
So again, I think from a timing perspective and from a market perspective.
And putting their business together with ours and that important market to us the timing was good the operational synergies are going to be real.
We have a lot that we can learn from each other there Taylor is extraordinarily good on the asphalt side. They are already teaching us things that we can take from that.
We can.
Specter of on the aggregates up and I will tell you. They are very good on the aggregates side. So again, if we're looking at margins and that business. They tend to start with the 3.
So again I think everything that we were hoping that we would see and that transaction has come through the other thing thats happening to us they have some very attractive real estate.
Help them that they've been able to sales we've been able to sell that actually takes the overall purchase price paid for the business and pulls it down and actually very nicely. So I'm happy to report to you. Gary There is nothing about that transaction that is you might be able to glean from the commentary that we're not gushing about right now so we're very pleased with it.
And think there are great things to come.
Great. Thanks again.
Thank you Gary.
Thank you. Our next question comes from the line of Michael and dividends from vertical research. Your line is now open.
Good morning, <unk> and gentlemen.
Hey, Mike.
And.
And then maybe you share some thoughts on the performance on especially Magnesia.
Pretty unprecedented times it appears like and the U S steel market and certainly the demand for <unk>.
Alex and chemicals around the world.
What are your managers are they is there still some sustainability to this.
Very cyclical as theyre going to be maybe more of a sustainable aspect to what the business could be like and maybe looking in next couple of years out or is it just.
Cyclical pop here that.
The market will dictate a little bit even though we're having some strong tightness and and those down the midstream market.
Number.
The 1 thank you for the question of that business, because that's an extraordinary business. It does not get the airtime that it is earned and the deserves so what I would say and several things what youre seeing and the business. This quarter isn't so much and unusual pop. This is more of like returning to usual for that business. So if we think about what was happening globally last year at this time steel.
The visit very challenging place overseas chemicals, Swiss and a challenging place because in many respects markets were closed. So if we go back to June of 'twenty steel was running at about 55% capacity today, it's running at around 83. So that's a good healthy number everything that we're seeing and that market tells us that we expect that business.
And if it run strong and remained strong certainly for the rest of this year. The other thing that we're seeing is cobalt and that ends up being an important market force overseas is up 52% since the end of 2020. So when we're looking at how the business is performing on steel, where it's performing relative to its chemicals business all of that is really.
Quite good and.
And here's what's even more impressive because if you keep in mind energy has actually been going up during much of this year.
Keep in mind that is the large tellement driven business and portions of it both and goodwill and and Manistee and typically as net gas goes it can have.
Have a profound effect went out of profound effects of notable effect on the way that business is operating and basically what we're seeing is their ability to manage their costs extraordinarily well the continued to get good pricing and we believe that business back to the essence of your question is in fact very very durable.
Mike. So we expect continued great things from Mac specialties, but again, thank you for the question.
No.
Excellent growth well said.
Thank you. Our next question comes from the line of David Macgregor from Longbow Research. Your line is now open.
And.
Hi, This is Joe Nolan on for David Macgregor.
You're going to give magnesia specialties of little more air time here.
Just wondering about capacity availability and that business just wondering if you're approaching constraints and if so you have any intention to invest and.
And the new capacity or would you rather pursue debottlenecking increments.
Any details there.
That's a great question and there can't be enough Magnesia specialties law. So thanks. Thank you for round 2 of the question that is the business and in many respects is running at capacity right now and we recognize that.
So.
Much of what that business is doing of several fold..1 is looking for ways to debottleneck and run things more efficiently and number 2 it continues to look at its product mix and will continue to drive more of what it's doing to its higher margin products. They've had a great history of doing that I'm sure. They have a very bright future of doing that as well.
And the growth so difficult about that business and it's 1 of the great things about the business.
As we produce 24% of the total and the decline in North America from our facility of wiggle.
And opening permitting and otherwise the total decline flat is very costly it is very time consuming.
Both our.
Our facilities and manage the end and we'll have title of 5 operating permits and they operate very very efficiently.
And adding more capacity is something that is very difficult. We're always looking for responsible ways to grow the business, but I think and the near term. What you can anticipate is debottleneck and focusing on higher margin products.
And at the end of the day, we're going to be focused on pricing and that business. Just as we are and the aggregates and cement business. So Joe I hope that helps.
Very helpful. Thanks.
And if I can just sneak another quick 1 in.
North Carolina, if you could just talk about the growth youre seeing and that market and how much of that made the states.
Pending vs private sector construction and also just the extent of what you feel that pattern and will continue into 2022. Thank you and I don't know happy to and as.
As indicated in our FY 'twenty 2 lettings, just looking at it and Sidoti for a second our increasing 260%. So I mean clearly dios.
It is and a much different very healthy place right now keep in mind, that's and overall with an annual budget of <unk> 5 billion.
So that's 1 of the public side of it if we look on the non res side.
I'd say several things if you think about North Carolina really working from the middle of the state the 2 a little bit farther.
States, Nevada from Raleigh, Durham, and then you go farther west of Greensboro High point, once and say lump into Charlotte all markets and which we have leading positions. So if I think about what's going on and Charlotte for example from a non res perspective, Charlotte continues to be of significant beneficiary of a lot of warehousing activity, you've got I 77, I 85, and a host of.
Large thoroughfares that are coming together and <unk>.
<unk> capital of the Carolinas. So if you think about it what's important to us in places like Greensboro, and the Tri Ed and again, we're seeing good warehousing, we're seeing good medical and surprisingly healthy retail activity there, but here's part of what I think is driving that so for example.
The Westport and recently announced their plans to build of 1000 homes subdivision in Greensborough 1 of them.
I'm going to suggest to you Joe if you go back and time and listened to the last time I was talking about somebody building of 1000 homes subdivision in the Tri Ed It's been a while so the fact is if youre seeing that type of single family housing growth.
And the Tri Ed Youre going to continue to see good non res activity and then I spoke just a few minutes ago about what's happening here and the Raleigh Durham area with Apple with Google with generally whats happening and the research Triangle Park and keep in mind, when you've got North Carolina State University in Raleigh, and the University of North Carolina, and Chapel Hill and.
Dr University of Durham, you've got 3 large universities the tend to drive a lot of economic activity and <unk> got state government here and so this is an area that and good times does extraordinarily well and more challenging times.
Not going to say, it's recession proof, but it's but it's pretty close and so those of the types of things.
And Duke and and North Carolina Joe.
Thanks, and I'll pass it on.
Thank you take care of Investor day.
Thank you. Our next question comes from the line of Josh Wilson from Raymond James Your line is now open.
Good morning, and thanks for taking my questions you bet Josh.
I wanted to clarify the pricing commentary that you gave and aggregate sorry of those.
The mid year price increases include and the guidance or a potential source of upside depending on how quickly the gain traction well.
We've done our best to bake those and as a practical matter of what Youre doing Josh as you are protecting people who already have prices from you and.
So we're still rule what I would tell you is youre going to recognize of about 25% of a midyear price increase if in fact, you are putting the minute and mid year and the year that they are baked in and so that's how I would ask you to think about those in many respects the mid years that I outlined for you on aggregates at least and the east were effective on July 1 now keep in mind.
Jim went through those different portions of the southwest most of those were effective on August 1 somewhere effective September 1 so we've done our best to bake that into what we have but it could be a little bit allusive of jobs.
And just to sneak 1 other and on cement Theres no.
Maintenance differences and the rest.
And.
Of the year than either good or bad.
And the balance of the year ought to be of pretty smooth run because I think of indicating the conversation with Stanley. We had indicated there was going to be about of $6 million Delta more and 2021 and then there was in 2000 and again, we had outlined the fact that in Q2 of the maintenance costs were up about $7.3 million.
Yeah.
Thanks, Good luck with the excellent alright, very good. Thank you so much take care of Josh.
And again, thank you all for joining today's earnings call will continue to focus on maximizing value for shareholders as we build and our strong results and continue executing on our SOR of 2025 plan.
And we look forward to sharing our third quarter of 2021 results and a few months as always we're available for any follow up questions. You may have thank you for your time and your continued support of Martin Marietta, Please stay safe and healthy we'll speak to you soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
And.
And then.
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