Q3 2023 Martin Marietta Materials Inc Earnings Call
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Good day and welcome to Martin Marietta's third quarter 2023 earnings Conference call. All participants are now in listen only mode. A question and answer session will follow the Companys pro.
Remarks.
As a reminder, today's call is being recorded and will be.
Bailable for replay on the company's website.
I'll now turn the call over to your host MS. Jackson Rucker, Martin Marietta Director of Investor Relations Jackson, you may begin.
It's my pleasure to welcome you to our third quarter 2023 earnings call. Joining me today are ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas Executive Vice President and Chief Financial Officer. Today's discussion May include forward looking statements as defined by United States.
Securities laws in connection with future events.
Operating results or financial performance.
Like other businesses Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially we undertake no obligation except as legally required to publicly update or revise any forward looking statements, whether resulting from new information future developments or otherwise please refer.
Due to the legal disclaimers contained in today's earnings release, and other public filings, which are available on both our own and the securities and exchange Commission's website. We have made available during this webcast and on the investors section of our website.
Mental information that summarizes our financial results and trends as a reminder, all financial and operating results discussed today are for continuing operations.
In addition, non-GAAP measures are defined and reconciled to the most directly comparable GAAP measure in the appendix of the supplemental information as well as our filings with the SEC and are also available on our website Gordon I will begin today's earnings call with the discussion of our operating performance and the outlook for the.
<unk> 2023.
Jim Nickolas will then review our financial results and capital allocation after which ward will conclude with end market trends and our preliminary view for 2024.
A question and answer session will follow please limit your Q&A participation to one question.
I will now turn the call over to ward.
Thank you Jackie and welcome everyone and thank you for joining today's teleconference.
Martin Marietta once again delivered record results across nearly every financial and operational measure.
Extending our long track record of industry, leading performance and responsible profitable growth.
Thanks to the dedication of our colleagues across the enterprise, we achieved accompanying milestone by exceeding $2 billion in trailing 12 months adjusted EBITDA for the first time.
Our exceptional third quarter is highlighted by a 42% improvement in aggregates gross profit per ton. Despite lower shipments further validating the benefits of our value over volume commercial strategy and our commitment to operating with excellence, while meeting and exceeding our customers' needs.
Fortunately, while our work and continuous safety improvement is never done I'm proud to report the company concluded our safest third quarter on record with total and lost time incident rates, surpassing world class levels.
While not a third quarter event. It's notable that just yesterday on October 30, <unk>, we finalized the sale of our to hatch would be California cement plant substantially completing the planned asset sales from the 2021, Lehigh Hanson West acquisition.
Consistent with our Soar 2025 initiatives. This divestiture of a non strategic asset provides us with additional balance sheet flexibility to advance our well articulated path of quality aggregates led growth.
As detailed in today's earnings release, we raised our full year 2023 year adjusted EBITDA guidance to a range of 2.5 to $2, one $5 billion as pricing momentum will more than offset lower shipments and recently increased energy and related costs.
Turning now to Martin Marietta's third quarter financial performance, we established all time quarterly records across a number of areas including.
Consolidated total revenues of $2 billion or 10, 1% increase.
Consolidated gross profit of $676 million or 38, 6% increase.
Earnings per diluted share from continuing operations of $6 and 94.
A 48, 6% increase.
Adjusted EBITDA of $705 2 million or <unk>.
32, 3% increase in aggregates gross profit per ton of $7.89 of 42, 4% increase.
These results reinforce the durability of our aggregates led business, which is strategically situated and well curated geographies. These.
These record results also reflect our team's focus on what we can control despite heightened geopolitical tensions and persistent macroeconomic headwinds including growth restricted monetary policy and continued inflation.
Shifting now to our third quarter shipment and pricing results.
Aggregate shipments declined seven 3% our value over volume strategy is clearly an unapologetic component of that result, as the softening demand in certain Midwest and southwest markets, which was partially offset by continued strength in key southeast markets.
Aggregates pricing fundamentals remains very attractive with pricing, increasing 20% or 17, 2% on a mix adjusted basis as we continue to expect a fair value for our depleting resources.
Near sold out, Texas cement conditions, particularly in the Dallas Fort Worth Metroplex continue to drive strong product demand and a favorable commercial environment.
Third quarter cement shipments of $1 1 million tons were flat to last year's comparable period and pricing grew 18, 9% as we continued to largely sell as much as we can produce we expect favorable Texas cement pricing dynamics will continue and accordingly announced a 15 dollar.
Per ton price increase effective January one.
Turning to our targeted downstream businesses ready mix concrete shipments increased three 6% while pricing improved a solid 29%.
Asphalt shipments increased five 7% and pricing increased six 7%.
Before providing our outlook for the remainder of 2023 and a preliminary view of 2024 I'll turn the call over to Jim to conclude our third quarter discussion with a review of the company's financial results Jim.
Thank you ward and good morning, everyone.
The building materials business posted record quarterly revenue of $1 92 billion.
A 10, 5% increase over last year's third quarter and record quarterly gross profit of $649 5 million a year over year increase of 38, 4%.
Aggregates gross profit improved 32, 1% relative to the prior year period to a record $446 million as pricing growth more than offset lower shipments and higher production costs underscoring the strength and effectiveness of our value over volume commercial strategy is a distinguishing hallmark.
To grow profitability through economic cycles.
The business also achieved in aggregates gross profit margin of 36, 2% setting a new all time profitability record. Despite the shipment decline our Texas cement business also extended its track record of outstanding performance.
Revenues increased 18, 3% to $199 1 million, while gross profit increased 61, 5% to $108 7 million.
Pricing growth and lower energy costs more than offset higher raw materials and maintenance cost domestic production capacity constraints and robust demand continued to drive extremely tight supply, particularly in north Texas.
As a reminder.
Martin Marietta has taken two notable steps to increase our Texas cement production capacity to capitalize on the supply demand dynamics.
First with wholly converted our construction cement customers from type one type two cement to less carbon intensive Portland limestone cement.
No known as type one out at both Midlothian and Hunter, Texas plants.
This converging not only reduces our carbon footprint, but also expanded our production capacity by approximately 10% second half.
Midlothian, Texas plant is installing a new finished mill, providing 450000 tons of incremental high margin annual production capacity. This.
This project should be fully operational in the third quarter of 2024.
As previously discussed we began utilizing the new silos to low customer trucks in July.
In addition to increasing cement storage capacity by over 60%. These silos have considerably enhanced the customer experience by reducing cycle times and are saving our customers up to an hour at peak shipping times each day.
Our concrete revenues increased 25, 3% to $285 2 million and gross profit increased 81, 8% to $34 $1 million, driven primarily by steady volume growth pricing gains and megaproject contributions, which more than offset higher upstream raw material and delivery costs, our asphalt and paving revenues increased 14.
6% to $359 9 million and gross profit increased 33% $66 $1 million, reflecting higher selling prices and lower bitumen costs Magnesia specialties revenues totaled $75 5 million in the third quarter in line with the prior period and gross profit increased three 6%.
$21 4 million softening demand in certain magnesia end markets, including <unk> roofing and metal mining was more than offset by commercial and operational excellence initiatives and energy tailwind. We expect demand has softened due to labor unrest in the automotive sector and make these end markets remaining weak in the fourth quarter and as such.
We have reduced our magnesia specialties full year gross profit guidance during the quarter. Our board of directors approved a 12% increase to our quarterly cash dividend paid in September.
Demonstrating its confidence in the durability and sustainability of a company's future growth and free cash flow generation, our annualized cash dividend rate is now $2 96.
Since our repurchase authorization announcement in February 2015, we've returned a total of $2 6 billion to shareholders through a combination of meaningful and stable dividends as well as share repurchases.
Our net debt to EBITDA ratio was one eight times as of September 30th representing balance sheet strength and flexibility to responsibly grow through quality acquisitions and prudent capital investments, while returning capital to Martin Marietta shareholders to conclude my prepared remarks, I want to emphasize that the record breaking financial performance of this quarter and year to date has demonstrated.
Disciplined execution of our value over volume commercial strategy yields higher margins higher profits and higher cash flow without the benefit of growing volumes with.
That I will turn the call back to award.
Jim looking ahead to the remainder of the year and into 2024, we remain confident in Martin Marietta is well positioned to capitalize on attractive market fundamentals across our coast to coast footprint, specifically infrastructure demand from increased federal and state level investments and heavy industrial projects of scale.
Should counterbalance headwinds in the light nonresidential and historically under built residential sectors, which are more sensitive to tightening credit conditions and higher for longer interest rate expectations.
In the third quarter infrastructure accounted for 39% of total shipments predictably building to a higher and more normalized portion of our overall business the.
The value of state and local government Highway bridge and tunnel contract awards, a leading indicator for our future product demand is meaningfully higher year over year. These.
These infrastructure contract awards grew 18% to a record $114 billion for the 12 month period, ending September 32023, collectively we anticipate that the historic increase in public sector investment from the infrastructure investment and jobs Act or Iga a record.
Departments of transportation budgets, and voter approved state and local transportation ballot initiatives will provide sustained multiyear demand to this aggregates intensive often counter cyclical end market.
Aggregate shipments to the nonresidential market accounted for 33% of our third quarter shipments heavy side energy and manufacturing projects of scale continue to drive demand in this segment as warehouse and data center construction continues to moderate from the post Covid period.
Construction spending for manufacturing in the United States continues to trend favorably with the August seasonally adjusted annual rate of spending for 2023 at $198 billion, a 66% increase from the August 2022 value of $120 billion.
The inflation reduction Act and chips Act together with significant private investments provide funding certainty for these large scale manufacturing and energy projects that we believe will be disproportionately and positively impactful in Martin Marietta markets Importantly, we have both the ability and capacity.
<unk> to supply these large projects and with the successful execution of our commercial and operational excellence strategies will do so in a manner that is margin accretive moving to light nonresidential, while third quarter shipments remained resilient. We expect the recent interest rate acceleration together with tighter commercial lend.
Conditions may impact future demand.
That said the anticipated softness in this segment should be partially offset by the extended cycle and strength of the more aggregates intensive heavy nonresidential sector.
Softening in the residential end market, which accounted for 23% of aggregate shipments. This quarter is expected to continue driven by current mortgage rates, which are nearing 23 year highs at 8%. While single family housing starts are leading indicators aggregates demand signals a near term bottom in inflection point over the summer.
The current higher rates are exacerbating affordability challenges and driving our revised expectations of softer demand in this end market. Nonetheless, we fully expect this current single family housing slowdown will reverse once home prices and borrowing rates find equilibrium as demand far exceeds supply.
Across key Martin Marietta markets. The result of significant under building over the last decade, and homeowners reluctance to abandon low rate mortgages as.
As we look to 2024, our preliminary view anticipates aggregates shipments will be effectively flat as increased infrastructure investment coupled with robust activity from heavy nonresidential projects of scale should help balance expected softness in interest rate sensitive private construction end markets, we remain calm.
Fifth favorable commercial dynamics underpinned by our value over volume pricing strategy will be supported by 2023 exit rates as well as the realization of our previously announced January one 2024 price increases together, we expect this will drive low.
Double digit growth in aggregates pricing and another year of profitable growth in 2024.
To conclude our team achieved impressive results in nearly every aspect of our business against a challenging macroeconomic and geopolitical backdrop.
One of Martin Marietta's enduring qualities as our proven ability to adapt quickly and respond effectively and durably to changing circumstances. Accordingly, we're extremely proud of our company's exceptional safety operational and financial performance through the first nine months of 2023.
Over a record setting third quarter performance together with our fourth quarter expectations reinforce our confidence that we will deliver our full year adjusted EBITDA guidance midpoint of $2 1 billion, an organic improvement of $500 million were 31% over 2022.
Through the disciplined execution of our strategic plan, we intend to continue driving responsible and profitable growth in 2023 and into the future.
If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Should you have a question. Please press star followed by the one on your Touchtone phone you will hear three Tommy comp acknowledging your request.
Questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by the Q. If you are using.
A speaker phone.
Lift the handset before pressing any Keith one moment. Please for your first question.
Your first question comes from Kathryn Thompson with Thompson Research Group. Please go ahead.
Hi, Thank you for taking my question today.
Just following up on value over volume.
Clearly is showing three pricing performance this quarter and throughout the year.
But it can have an impact on relative market share potentially considering youre willing to give up some volume.
Core pricing could.
Could you discuss how it's working excellent niche to relative market share and how it effects your business not just only now but bigger picture over the next couple of years. Thank you.
You bet Katherine thanks for the questions. So several things.
Canada effect degrees of tonnage going out the gate, Ken So if we're looking at the tonnage down this quarter versus the prior year quarter, probably a little bit less than half of that was due to value over volume and by the way. We're perfectly okay with that we've got depleting reserves that said on average we've got 70 years.
So reserves at current extraction rates. So we've got a long lived business.
But we know the reserves are worth more in the ground tomorrow than they are today and if we're looking at really where we're seeding some share on it tends to be lower margin products in other words things like base and fines. So part of what we're trying to do is we're talking with our customers to make sure that they understand.
Really twice a year is something that we're looking at on revisiting our pricing. The other thing that's important to keep in mind relative to aggregates and this is different from some other functions as well it doesn't have to be at 24 seven business in fact in most of our locations it's not.
And <unk> got $24 seven businesses incremental volume can give a high degree of operating leverage that's just not something with which were encumbered and aggregates. So we shutdown each evening and open up each morning, and that gives us an enormous amount of flexibility and then probably most importantly, Catherine from the volume does come back and by the way.
It typically does it typically comes it comes back at higher pricing. So you can see the math I mean, the value over volume strategy works. It protects our reserves it protects the longevity of our business and it's something that we've been very clear with our team it is important to us.
And part of what you can see in the numbers is that it is coming through so I hope that's responsive Kathryn. Thank you for the question.
Yes, and just one quick follow up with the sale also in California and that asset could you speak to.
<unk>.
General State.
Got your Texas cement operations are inventories relative to demand have you seen any changes.
Okay that makes sense you plan for next year.
Thanks for the question.
When we went into cement in Texas, We said, we viewed that as a strategic cement business in my prepared comments that we sold a non strategic asset in California, and we set strategic cement for us where we are in aggregates leader, we're the markets naturally vertically integrated where we have a downstream business taking a significant portion of it in Texas is about 30 <unk>.
<unk> and where it cannot be meaningfully interdicted by water.
Our Texas cement business is very solid and part of the recent solid as it is in Dallas Fort worth and it's in San Antonio.
Remove from the vicissitudes of imports largely so what we're seeing in that marketplace and puts you saw in the quarter's volumes for largely flat.
Because we're broadly sold out and we continue to largely sell what we're producing.
And part of what we're anticipating and part of what we've announced is the $15 a ton price increase for cement.
<unk> January one so I think that that those data points give you a good snapshot of where Texas cement is today.
Great. Thanks very much.
Your next question comes from Trey Grooms with Stephens. Please go ahead.
Thanks, and good morning.
Right so.
Hey, Mark so maybe sticking to the the pricing theme here, particularly in aggregate. If you could maybe talk through your initial 2020 for aggregates pricing outlook.
Low double digits growth that you've laid out and maybe unpack how much you have coming from carryover of 'twenty three midyear increases and how you are setting the stage for low double digits price improvement in 'twenty four.
Happy to thanks for that so we're thinking about the 24 guidance similar to the way that we did for 23 guide and put on mean by that is the guidance that we've given I think this is more to stay now.
Mediately does not include any mid years and again just as we saw in 'twenty. Three we think we're going to have mid years in 'twenty four but right now the guide that we've given does not assume that so I think that's important secondly, as I indicated in the previous question. We think mid years are becoming more and more the norm with our customers and we think the expectations have been set.
The customer letters that have gone out indicate that pricing is largely effective from January one to June 30, so into correspondents that has already gone people know that we're going to protect them through through mid year now in fairness, there's a footnote to that end. The notable exception is California.
We are pricing letters already include announced mid year, so that our customers can plan for that in that marketplace. We've long talked about what we inherited when we bought the business in California, and we're trying to address that just to be clear, California totaled 2024 increases right now it looks like that's going to be about $4 a ton across.
Salt products and markets as we continue to implement that strategy in particular and puts a relatively new marketplace for Martin Marietta now to your point.
If we're thinking about the weight carryover. So kind of worked carryover next year are probably going to be in the low single digits. So a little bit lower than they were this year, but again, we've got a lot of confidence in what we think we will come out with on January one and then again, if we have something that even begins to replicate what we saw at mid year next year.
And frankly, there is probably some upside to that trade. So I think that gives you a good build on the way that we see that working in 2024.
<unk> exit rates in 2023.
Yes.
Super helpful. Thank you so much and good luck.
Thanks, so much.
Your next question comes from Stanley Elliott with Stifel. Please go ahead.
Hey, good morning, everyone and congratulations.
Jim could you just talk about what you guys are seeing on the M&A front I mean, historically, you've done a nice job strategically expanded the footprint and leverage the 108 free cash flow to net sale, even better by year end.
Operator: and welcome to Martin Marietta's third quarter 2023 earnings conference call. All participants are now in 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.
What does the M&A.
Youll market looking like these days.
Certainly thanks for the question and for the comments on the quarter. The M&A market essentially looking increasingly attractive the level of dialogue has amped up in the second half of this year from my perspective that was a tremendous surprise as you know 2021 was a big year for M&A for us and part of what we've been doing.
Since then is a lot of what you saw in today's announcements relative to the sale of Tahatchabe, Pete making sure we're getting our pricing right and different markets, making sure we're getting our hands around the operations and now as we sit here today. Several things are apparent number one we're looking at a debt to EBITDA ratio of one eight times so thats below.
Operator: To our third quarter 2023 earnings call joining me today are ward nine chairman and chief executive officer and Jim Nicholas executive vice president and chief financial officer. Today's discussion may include forward looking statements as defined by United States security laws in 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. We undertake no obligation except as legally required to publicly update or revise any forward looking statements whether resulting from new information, future developments or otherwise.
So our targeted range two you can see from the financials or the cash flow and disorganization looks like that that can clearly help fuel and will fuel some aggregates led.
Frankly from my perspective, pure aggregate transactions and then two or three one when we had the proceeds that have just come in from <unk>. It puts us in a very attractive place do I think we will have anything to announce here in the rest of this year probably to a hope that we'll have some things that we can announce.
Operator: Please refer to the legal disclaimers contained in today's earnings release and other public violence, which are available on both our own and the Securities and Exchange Commission's website. We have made available during this webcast and on the investor section of our website supplemental information that summarizes our financial results and trends as a reminder, all financial and operating results discussed today are for continuing operations. In addition, non gap measures are defined and reconciled to the most directly comparable gap measure in the appendix to the supplemental information as well as our filings with the SEC and are also available on our website ward nine will begin today's earnings call with the discussion of our operating performance and the outlook for the remainder of 2023. Jim Nicholas will then review our financial results and capital allocation after which ward will conclude with end market trends and our preliminary view for 2024. A question and answer session will follow.
Early next year I think that we will so more to come on that Stanley, but again, we'd like financially where we're sitting we like strategically where we're sitting.
We like what we believe what we know we can do from a regulatory perspective, because we think thats a differentiator right now. So we believe that we can continue to give you a price. We believe we can continue continue to give you really good cost control.
And we believe we can keep giving you good.
Solid attractive M&A.
And we think that's a hat trick that very few can offer today.
Great guys. Thanks, so much and best of luck.
Stan.
Your next question comes from Jerry Revich with Goldman Sachs. Please go ahead.
Yes, hi, good morning, everyone.
Gary.
Hi.
Just pulling together what you see.
Shared on your preliminary comments double digit.
<unk> growth was flat volumes embedding.
Call It high single digit.
Cogs per unit growth that essentially gets you to roughly $200 million of <unk>.
Operator: Please limit your Q&A participation to one question.
Aggregate profit growth.
Operator: I will now turn the call over to ward. Thank you, Japan.
<unk> versus 'twenty, three which is.
Broadly consistent with the consensus growth expectations for total company EBITDA.
24, <unk> 23, so I know youre not providing your full 24 outlook here, but it does feel like youre, giving us the pieces to get to consensus EBITDA numbers with probably higher profitability and lower volumes than what folks expected on a bottom up basis is that fair and any other puts and takes there.
Ward Nye: Welcome everyone and thank you for joining today's teleconference. Mark Marietta once again delivered record results across nearly every financial and operational measure, extending our long track record of industry leading performance and responsible, profitable growth. Thanks to the dedication of our colleagues across the enterprise, we achieved the company milestone by exceeding $2 billion in trailing 12 months suggested EBITDA for the first time. Our exceptional third quarter is highlighted by a 42% improvement in aggregates gross profit per ton despite lower shipments further validating the benefits of our value of volume commercial strategy and our commitment to operating with excellence while meeting and exceeding our customers needs.
You would add.
Yes, I think thats relatively fair and if you think about it Jerry I think that's what we did in Q2 and I think that's what we've done in Q3.
Part of what Youre seeing is the world can go through different degrees of economic turmoil and this is a business that continues to be very steady very durable and all forms of market. So I don't disagree at all I'll turn it over to Jim in just a moment. So he can add if there any particular things that he wants to make sure he calls out but one of the things.
Ward Nye: Importantly, while our working continuous safety improvement is never done, I'm proud to report the company concluded our safest third quarter on record with total and lost time instant rates surpassing world class love. I'm not a third quarter event, it's notable that just yesterday, on October 31st, we finalized the sale of our to hatch a B. California cement plant, substantially completing the planned asset sales from the 2021 Lehigh Hanson West Acquisition. Consistent with our SOAR 2025 initiatives, this divestiture of a non-strategic asset provides us with additional balance sheet flexibility to advance our well-articulated path of quality aggregates' lead growth.
I think it's worth noting Jerry.
Energy helped us this quarter absolutely it did.
I think part of what's so striking to me is even if we did not have the energy tailwind that we did this quarter. We would have set new records this quarter any way and I think it's so important because I know what youre looking for those puts and takes I wanted to go ahead and address that went upfront because while in the quarter that was powerful it would've been a <unk>.
Powerful quarter, even without that Jim anything you want to add yes, no. It just it just that the cost inflation continues to moderate slightly still elevated compared to historical levels, but again as we've demonstrated this year, we expect it to happen next year pricing growth exceeds cost inflation. So we do expect margins to expand next year.
Ward Nye: As to tailed in today's earnings release, we raised our full year 2023 adjusted EBITDA guidance to a range of 2.05 to 2.15 billion dollars, its pricing momentum will more than offset lower shipments and recently increased energy and related costs. Turning now to Martin Marietta's third quarter financial performance, we established all-time quarterly records across a number of areas, including consolidated total revenues of $2 billion, a 10.1 percent increase. Consolidated gross profit of $676 million, a 38.6 percent increase.
Super and can I ask just a follow up the downstream businesses you folks are executing.
Really well this year, how much of that has been because of the helpful. Moving.
Diesel and liquid asphalt versus whats sustainable in the new portfolio, particularly on the ready mix side post the divestitures.
Yes, Jerry Thanks for the question I would say several things one if you think about our ready mix business, it's almost uniquely in Texas, and Arizona and those are two very good markets. In one recent that Theyre. Good is look here in New York. If you look out your window youre going to see asphalt streets and when you get to the bridge issue will have concrete purchase if you are in Texas you are writing on.
Ward Nye: Earnings per deluded share from continuing operations of $6.94, a 48.6 percent increase. Adjusted EBITDA of $7.05.2 million, a 32.3 percent increase, and aggregates gross profit per ton of $7.89 cents, a 42.4 percent increase. These results reinforce the durability of our aggregates' lead business, which is strategic and situated in well-curated geographies. These record results also reflect our team's focus on what we can control despite heightened geopolitical tensions and persistent macroeconomic headwinds, including growth restrictive monetary policy and continued inflation.
Concrete roads, and concrete breeches, and Youre building things structurally with concrete as well so those markets tend to be more durable from a supply perspective, because again, you've got that really non cyclical work often countercyclical infrastructure market that will place so meaningfully in our ready mix business and are clearly.
ASP was up 20% and ready mix that helped a lot, but frankly volume was up very modestly and again, Texas is 80% of our volume in ready mix.
Alternatively, if you go to HMA give you a sense of that is going to be full year, probably about 9 million tons. So it's a fairly notable business now practically speaking it's in three places its in Minnesota, It's up and down the Rocky Mountains, and it's in California, and probably saw there was ASP was up six 7% because liquid wasn't moving as much.
Ward Nye: Shifting now to our third quarter shipment and pricing results, aggregate shipments declined 7.3 percent. Our value over volume strategy is clearly an unapologetic component of that result as is softening demand in certain Midwest and Southwest markets, which was partially offset by continued strength in key Southeast markets. Aggregates pricing fundamentals remained very attractive, with pricing increasing 20 percent, or 17.2 percent on a mixed adjusted basis, as we continue to expect fair value for our depleting resources.
But the fact was Q3 was an all time record of almost $3 9 million tonnes for us in asphalt.
Keep in mind asphalt is going to be about 95% crushed stone.
So from our perspective, that's a very attractive business, particularly in Minnesota, whereas you recall, Jerry it's largely an fob business. So its truly a materials business for us there.
Ward Nye: Near sold out Texas cement conditions, particularly in the Dallas-Fort Worth Metroplex, continue to drive strong product demand in a favorable commercial environment. Third quarter submit shipments of 1.1 million tons reflect a last year's comparable period, and pricing grew 18.9 percent as we continue to largely sell as much as we can produce. We expect favorable Texas cement price and dynamics will continue, and accordingly announced a $15 per ton price increase effective January 1st. Turning to our targeted downstream business Businesses, Redymix Concrete Shipments increased 3.6% while pricing improved a solid 20.9%. As well as shipments increased 5.7% in pricing increased 6.7%.
That 9 million tons, Minnesota is going to be a little bit over $3 million of it. So at least those are the puts and takes that we've got on that Jim anything you want to add on that yes, I mean, obviously the bitumen pri.
Pricing cost did help the asphalt business improved margins it wasn't wholly due to that of course, but on the ready mix side I would say it was very very little.
Added from the lower energy costs. So.
Hopefully that answers the question too just rounding out what warranted provided.
It does thank you.
Thank you Jerry and take care.
Your next question comes from Anthony Pettinari with Citi. Please go ahead.
Hi, good morning.
Hey, Anthony.
Hey, Ward you talked about some softness in AG.
Jim Nicholas: Before providing our outlook for the remainder of 2023 and a preliminary view of 2024, I'll turn the call over to Jim to conclude our third quarter discussion with a review of the company's financial results. Jim, thank and good morning everyone. The building materials business posted record quarterly revenue of $1.92 billion, a 10.5% increase over last year's third quarter, and record quarterly gross profit of $649.5 million, a year over year increase of 38.4%.
In the quarter and in the southwest and Midwest, If I heard that right and I was just wondering if you could talk a little bit more about that was that weather driven or maybe specific end market.
Just wondering if theres any carryover into <unk> or potential reach into 'twenty four.
Thanks for the question you had a couple of things one in the southwest frankly, you had a lot of heat in the heat slowed some things down and you also had some timing relative to the large energy projects as well so I see a lot of that being pushed off to the right I mean, clearly and it's not just the southwestern Midwest issue. There is some degrees of source.
Jim Nicholas: Aggregates gross profit improved 32.1% relative to the prior year period, to a record $440.6 million, as price growth more than offset lower shipments and higher production costs, underscoring the strengths and effectiveness of our value or volume commercial strategy as a distinguishing hallmark to grow profitability through economic cycles. The business also achieved an aggregate gross profit margin of 36.2%, setting a new all-time profitability record despite the shipment decline. Our Texas cement business also extended its track record about standing performance.
Offering relative to warehousing and data centers, I mean, thats not a surprise, we anticipated that but what we are seeing is a nice renaissance relative to manufacturing and then the timing of energy energy is coming energy is not one of those issues that we have any concerns about is just relative to pace.
So I think more than anything we had degrees of timing and we had certain degrees of softness that from my perspective, we're broadly anticipated and I think that's one of the reasons that when we were giving you our results at half year part of what we indicated to you as we thought we would probably see a near term need here in <unk>.
Jim Nicholas: Revenue increased 18.3% to $199.1 million, a gross profit increased 61.5% to $108.7 million. Pricing growth in lower energy costs more than offset higher raw materials and maintenance costs. Domestic production capacity constraints and robust demand continue to drive extremely tight supply, particularly in North Texas. As a reminder, Martin Arietta has taken two notable steps to increase our Texas cement production capacity to capitalize on the supply demand dynamics. First, we've wholly converted our construction cement customers from type 1, type 2 cement to less carbon-intensive Portland limestone cement, also known as type 1L, at both the Midlothian and Hunter Texas plants.
Volumes in the third quarter. So if we're looking at the way Q3 worked from our perspective Anthony.
Honestly.
No big surprises and including the way the pull through came through in some obviously some very attractive incrementals in the quarter.
Okay. That's very helpful I'll turn it over.
Thank you.
Your next question comes from Phil <unk> with Jefferies. Please go ahead.
Jim Nicholas: This conversion not only reduces our carbon footprint but also expanded our production capacity by approximately 10%. Second, our Midlothian Texas plant is installing a new finish mill providing 450,000 tons of incremental high-margin annual production capacity. This project should be fully operational in the third quarter of 2024. As previously discussed, we began utilizing the new silos to load customer trucks in July. In addition to increasing cement storage capacity by over 60%, these silos have considerably enhanced the customer experience by reducing loadout cycle times and are saving our customers up to an hour at peak shipping times each day.
Hey, guys. Congrats on a really strong quarter and obviously your price your value over volume approach is showing in your results.
But I'm just curious how much line of sight do you have on your average pricing in 2024, how are your competitors behaving in this environment.
That value over volume approach potentially a risk to your volumes and the reason why I ask is because one of your bigger competitors, calling for perhaps weaker volumes than your flattish outlook just wanted to understand how the competitive landscape is behavior on pricing.
Well the thing that we stay focused on fill is what can we control and how do we run our business and we did that based on what our needs are so we're very focused on Martin Marietta, We're focused on where our operations are we're focused on what our inventories look like we're focused on what our reserves looked like in the ground and we're focused on what we feel like the market can bear relative to these.
Products. So from our perspective those are really the unique drivers on that as I indicated before.
Jim Nicholas: Our concrete revenues increased 25.3% to 285.2 million dollars and gross profit increased 81.8% to 34.1 million dollars to prevent primarily by steady-bind growth, pricing gains, and mega-project contributions, which more than offset higher upstream raw material and deliver. Recost, Our Asphalt and Paying Revenues increased 14.6% to $359.9 million and gross profit increased 33% to $66.1 million, reflecting higher selling prices and lower-bitchment costs. Magnesia specialties revenues totaled $75.5 million in the third quarter, in line with the prior period, and gross profit increased 3.6% to $21.4 million, suffering demand in certain Magnesia and markets, including keep your roofing and metal mining, was more than offset by commercial and operational excellence initiatives and energy tailwinds.
If youre looking at volumes for the quarter, where our volume is down a little bit more than others, probably so are we okay with that you bet.
Do I feel like that's probably going to find more degrees of equilibrium going forward I think it probably will.
At the same time, if I'm looking at the geographies in which we tend to be focused.
Let's face it we're talking about Texas, thats going to be awfully. Good I mean, we're looking at our Txdot budget for FY 'twenty for that its seats $18 $5 billion. I mean, that's just a massive budget in Colorado, they've recently passed a $5 3 billion 10 year infrastructure Bill that's going to be massive in that state here in North Carolina.
And it was something that I'm proud to have been a part of it part of.
We structurally change the way that we're paying for infrastructure here and now we're using a degree of sales taxes and in FY 'twenty four it's going to ramp up to 4% here in North Carolina, because North Carolina recognized they needed to increase their spending by over $7 billion over the next decade, but even separate and distinct from that if we're looking at Florida.
Jim Nicholas: We expect demand to soften due to labor unrest in the automotive sector and Magnesia and markets, remaining weak in the fourth quarter, and as such have reduced our Magnesia specialties full-year gross profit guidance. During the quarter, our board of directors approved a 12% increase to a quarterly cash dividend paid in September, demonstrating its confidence in the durability and sustainability of our company's featured growth and free cash regeneration. Our annualized cash dividend rate is now $2.96.
Now.
Florida is looking at a $17 $2 billion budget for FY 'twenty, four and Thats, an all time record and I feel like Ive said for property of last six or seven years that every year. So an all time record for transportation, Florida, largely because it has been.
Jim Nicholas: Since a repurchased authorization announcement in February 2015, we've returned a total of $2.6 billion to shareholders through a combination of meaningful and stable dividends as well as shared purchases. Our net debt to emitter ratio is 1.8 times as of September 30th, representing balance sheet strength and flexibility to responsibly grow through quality acquisitions and prudent capital investments while returning capital to Martin Marriott as shareholders. To conclude by your pair remarks, I want to emphasize that the record-breaking financial performance of this quarter and year-to-date has demonstrated that disciplined execution of our value or volume, commercial strategy, yields, higher margins, higher profits, and higher cash flow, without the benefit of growing volumes.
And in California, where we brought on new business. The Caltrans budget is 25 billion next year now to give you a sense of but that's a five five or five 6% year over year increase with $12 1 billion designated for highway and bridge capital spending so as we're thinking about that.
<unk> funding looks like and we're coming back and looking at what's happening industrially in places like Atlanta, Whats going on in South, Georgia, literally just yesterday, Toyota announced they're adding $8 billion to what is already a large battery plant that's underway in Randolph County, that's just outside of Green.
Brian.
These are the types of things that we're seeing in our markets both in public and heavy non res that gives us a lot of confidence around the way that we think volumes will work next year and the fact is with the footprint that we have I don't have any doubt that we're going to get our fair share of that business I just want to make sure that we're doing.
Ward Nye: With that, I'll turn the call back to Ward. Thanks, Jim. Looking ahead to the remainder of the year and into 2024, we remain confident Martin Marriott is well positioned to capitalize on attractive market fundamentals across our coast-to-coast footprint. Specifically, infrastructure demand from increased federal and state-level investments in heavy industrial projects of scale should counterbalance headwinds in the light non-residential and historically underpilled residential centers, which are more sensitive to tightening credit conditions and hire for longer interest rate expectations.
What we feel like is fair value for that business.
Super.
And Ward you mentioned, maybe some of the weakness recently is tied to some of these bigger projects, whether its energy mega projects getting pushed out can you give us a little perspective, when do you see that kind of ramping up is that early next year middle part of next year and then on the public infrastructure side, we could all I. Appreciate there's a lot of money coming how do you kind of see.
Ward Nye: In the third quarter, infrastructure accounted for 39% of total shipments, predictably building to a higher and more normalized portion of our overall business. The value of state and local government highway, bridge, and tunnel contract awards, a leading indicator for our future product demand, is meaningfully higher year-over-year. These infrastructure contract awards grew 18% to a record $114 billion for the 12-month period ending September 30, 2023. Collectively, we anticipate that the historic increase in public sector investment from the Infrastructure Investment and Jobs Act or IIAA record state departments of transportation budgets and voter-approved state and local transportation valid initiatives will provide sustained multi-year demand to this aggregate's intensive often counter cyclical and work.
Ramping up and building into 2024.
Yes, those are great questions I think the public infrastructure side, we're still where we were we said we thought we would start to see that building and four and then build into 'twenty for when I say for Q4 of this year and that was part of what led us to the commentary around the fact that we thought we'd probably see this type of dip in Q3, so again very anticipated if we.
We're looking for example at the large LNG projects part of what we're seeing right. Now is several projects that are already underway Golden pass is underway Chevron Phillips central barge facility in Orange, Texas Thats underway at Port Arthur LNG at least portions of that are underway Cheniere has a lot that's underway, but if we look going forward.
I can think of at least four big jobs and I think this gives you a sense from a timing perspective in Texas. They were watching Cheniere has another one in Cameron parish, Louisiana, where Grande LNG in Brownsville, and Freeport LNG and Texas. All are looking at we believe 2024 start dates.
Ward Nye: Aggregate shipments to the non-residential market accounted for 33% of our third-quarter shipments. Heavy-side energy and manufacturing projects of scale continue to drive demand at this segment as warehouse and data center construction continues to moderate from the post-COVID period. Construction spending for manufacturing in the United States continues to confavorably with the August season-adjusted annual rate of spending for 2023 at $198 billion, a 66% increase from the August 2022 value of $120 billion.
We're actually anticipating some some acceptance of materials, maybe as soon as this week on some of those projects. So it continues to be a live conversation.
So if we think about it for the year has timing been a little bit of a headwind on those yes. It has do we think theyre going away absolutely not.
Ward Nye: The Inflation Reduction Act and Chips Act together with significant private investments provide funding certainty for these large-scale manufacturing and energy projects that we believe will be disproportionately and positively impactful in Martin Marietta markets. Importantly, we have both the ability and capacity to supply these large projects and with the successful execution of our commercial and operational excellent strategies will do so in a manner that is margin-accretive. Moving to light non-residential while third-quarter shipments remain resilient, we expect the recent interest rate acceleration together with tighter commercial lending conditions may impact future demand.
And part of what we're seeing and frankly in degrees. This is helpful. You've got degrees some material tightness in some of those markets and that continues to underscore at least the notion of the overall economy in Texas today. So I hope that gives you a snapshot at least on some of the heavy non recipes and some of it.
I appreciate the great color.
Yes.
Your next question comes from Timna Tanners with Wolfe Research. Please go ahead.
Thank you Brian.
Hi, Timna.
Yes.
I appreciate that.
Yes.
I'm sorry to interrupt you were having a hard time hearing you can you lean in a little bit more please.
Ward Nye: That said, the anticipated softness in this segment should be partially offset by the extended cycle and strength of the more aggregate-intensive heavy non-residential sector. Softening in the residential and market which accounted for 23% of aggregate shipments in quarter is expected to continue driven by current mortgage rates which are nearing 23-year highs at 8% while single-family housing starts, a leading indicator of aggregate demand signaled a near-term bottom and inflection point over the summer, the current higher rates are exacerbating affordability challenges and driving a revised expectations of soft demand in this end market.
Yes.
Yes, ma'am it does thank you.
Thank you.
Just the commentary on big projects.
And Thats starting.
Ward Nye: Nonetheless, we fully expect this current single-family housing slowdown will reverse what's home prices and borrowing rates find equilibrium as demand far exceeds supply across key market markets. The result of significant underbuilding over the last decade and homeowners reluctance to abandon low rate mortgages. As we look to 2024, our preliminary view anticipates aggregate shipments will be effectively flat as increased infrastructure investment coupled with robust activity from heavy non-residential projects of scale should help balance expected softness and interest rate sensitive private construction and markets.
Delays and cost overruns.
Geographies, perhaps as much how are you.
And budgeting for that as well.
I don't think theyre affecting number one our geographies that much and two.
To the extent that inflation or varying degrees of it continues to go through.
<unk>.
You know frankly, if we can keep up with that or stay ahead of it timna, it's actually been an allied to our business not an enemy to our business. So I do think if we had a strikingly different geographic profile than we have.
I would probably feel differently about it than I do but if we go back to that conversation I was having just a little while ago relative to our leading states and the degree of.
Both public and private activity that we're seeing in Texas, and Colorado in the Carolinas, and Georgia and Florida.
Those are very.
Powerful steady markets right now and I'm I'm, even taken too by the continued resiliency.
In markets like Indiana, and in Iowa as well.
Ward Nye: We remain confident that favorable commercial dynamics underpinned by our value over volume pricing strategy will be supported by 2023 exit rates as well as the realization of our previously announced January 1st, 2024 price increases. Together, we expect this will drive low double-digit growth in aggregate pricing and another year of profitable growth in 2024.
Iowa is a state that has been very steady all the way through cycles for us, including probably the single most steady market in which we participated during the great financial crisis. So I just call that out because it's one of those states that doesn't come to mind immediately if you're in New York or Chicago or Dallas or.
Los Angeles is thinking about this industry, but it's been one that for us that's been actually quite important and very durable.
Ward Nye: To conclude, our team achieved impressive results in nearly every aspect of our business against the challenging macroeconomic and geopolitical Drop. One of Martin Marietta's enduring qualities is our proven ability to adapt quickly and respond effectively and derably to changing circumstances. Accordingly, we're extremely proud of our company's exceptional safety, operational and financial performance through the first nine months of 2023. Moreover, our record-setting third quarter performance, together with our fourth quarter expectations, we enforce our confidence that we would deliver our full year adjusted EBITDA guidance midpoint of $2.1 billion, an organic improvement of 500 million worth 31% over 2022. Through the disciplined execution of our strategic plan, we intend to continue driving responsible and profitable growth in 2023 and into the future.
Okay helpful. And then just a commentary on M&A I know in the past <unk> done by the end of this year and you're talking about.
Next year is that just a timing issue or is there anything that you can share there.
It's more of a timing issue than anything else timna.
Obviously, you know what the process looks like youre going to have dialogue with with a potential.
Company you want to acquire you'll go through evaluation process you might go through letter letters of intent contracting and then you also have regulatory processes that you have to go through and none of that's easy, but our team essentially very good at it but.
But we're going to be thoughtful as we do it. So it's not the fact that you haven't seen more done is not indicative of anything other than it's just an ordinary process now part of what's been different to interference. We're typically not in the selling business and we've been in the selling business for the last year and a half more than we ordinarily would be.
Operator: If the operator will now provide the required instructions, we'll turn our attention to addressing your questions. Thank you.
And you've seen what we've done relative to the reading plant in northern California, the attach replant in southern California, and even relative to our ready mix business in Colorado, I mean, if you think back to it between Stockton reading to hatch of Pea and our Colorado business that we sold that's one.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question please press star followed by the one on your touch tone phone. You will hear a three-tone pump acknowledging your request and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, lift the hands up before pressing any keys. One moment, please for your first question.
$1 billion worth of divestitures.
And thats not ordinary for us, but again, we talked about the fact that it's an aggregates led business and when we talk about cement, we talk about our strategic cement business. So.
So some years most years, we're going to be busier buying and selling.
Catherine Thompson: Your first question comes from Catherine Thompson with Thompson Research Group. Please go ahead. Hi, thank you for taking my question today. Just following up on the value of our volume. This clearly is showing through with the pricing performance is quarter and throughout the year. But you're going to have an impact on growth of market share, because it's basically you're willing to give up some volume for secure pricing. So could you discuss how it's working, so it means to build a market share and how it affects your business.
Last year and a half we've actually had more on the sell side than on the buy side for all the right reasons.
Got it okay. Thanks again.
Thank you Timna.
Your next question comes from Tyler Brown with Raymond James. Please go ahead.
Hey, good morning.
Good morning, Tyler.
Heyward I wanted to come back to costs, a little bit how it feels like costs are.
<unk> remaining fairly sticky here, you mentioned a little bit of easing.
And particularly what are you seeing some of that moderation or are you seeing in labor consumables as maintenance starting to roll over a little bit.
Color there would be helpful. Sure I'd tell you what I'll do I'll turn to Jim and ask them to come back and give you more granularity. If you think about overall cost I mean have we seen supplies go up mid single digits. Yes have repair has gone up low double digits, yes, and contract services as well, but Jim can give you a little bit more.
Catherine Thompson: Not just only now, but a bigger picture of the next several years. Thank you. You've got that. Thanks for the question. So several things kind of affect the degrees of tonnage going out the gate. Yeah, it can. So if we're looking at the tonnage down this quarter versus the prior quarter, probably a little bit less than half of that was due to value of volume. And by the way, we're perfectly okay with that.
Color on that yes, it's largely the same story as before.
Which is a continuing slow moderation in cost inflation still elevated versus historical levels.
Catherine Thompson: We've got depleting reserves, that's said, on average, we've got 70 years of reserves in current extraction rates. So we've got a long lived business, but we know the reserves are worth more in the ground tomorrow than they are today. And if we're looking at really where we're seeding some share on, it tends to be lower margin products. In other words, things like base and fines. So part of what we're trying to do is we're talking with our customers to make sure that they understand.
Slowly coming back to normal from where it was very elevated but it still remains elevated I would say the most problematic areas or parts costs are still quite high.
Add on sales coming down for a bit.
But labor is behaving.
More and more normal as we go on.
But otherwise I'd say high single digits.
Catherine Thompson: Really twice a year is something that we're looking at on revisiting our pricing. The other thing that's important to keep in mind relative to aggregates. And this is different from some other functions as well. It doesn't have to be a 24-7 business. In fact, in most of our locations, it's not. And where you've got 24-7 businesses in common with volume can give a high degree of operating leverage. That's just not something with which we're in comfort in aggregates.
Mid to high single digits is the right way to think about it for the rest of this year.
Getting a little bit better moderating next year again, I'm holding aside energy, which is very volatile and.
I'm, just hoping that when our Psychs, we don't know where that ends up going.
Answer your question.
Yes, no that's.
That's very helpful. I appreciate it.
Thank you Tyler.
Your next question comes from David Macgregor with Longbow Research. Please go ahead.
Catherine Thompson: So we shut down each evening and open up each morning. And that gives us an enormous amount of flexibility. And then probably most importantly, Katherine, when the volume does come back. And by the way, it typically does. It typically comes back at higher pricing. So you can see the math. I mean, the value over volume strategy works. It protects our reserves. It protects the longevity of our business. And it's something that we've been very clear with our team is important to us.
David are you there.
Hey, I'm here now sorry about that I apologize, yes, congratulations on a great quarter.
Thanks, so much David.
Yes, just wanted to sort of revisit the.
The slide in your deck.
Highway contract awards up 18% and get your thoughts in terms of what's changing in the lag from awards too.
Catherine Thompson: And part of what you can see in the numbers is that it's coming through. So I hope that's responsive, Katherine. Thank you for the question, and just one quick follow-up with the sale of the California cement asset to just speak to the general state of other Texas cement operations, how are inventories relative to the man, have you seen any changes, just that business as you plan for next year. Thanks for the question.
Storms stone demand in stone shipments.
Yes.
It's been Dave from from my perspective fairly.
Predictable curve and I think in large measure because we went for such an extended period of time without more money coming from the federal government in a meaningful way on that so if you think about what happened we had a decade plus of continuing resolutions and we had to.
Fast act that didn't have more money, but it did have more time and so what's happened is you've had that very attractive double whammy here comes more money. He becomes more time and you also had dot's, who had actually been building up their own budgets for about 15 years, because they werent getting more money and more time from the federal government. So I think.
Catherine Thompson: As you know, when we went into cement in Texas we said we viewed that as a strategic cement business. And my prepared comments that we sold a non-strategic asset in California, and we said strategic cement investment, where we're an aggregate slater, where the markets naturally vertically integrated, where we have a downstream business taking the significant portion of it in Texas, it's about 30%. And we're cannot be meaningfully interdicted by work. Our Texas cement business is very solid and part of the reason solid is it's in Dallas, what work, and it's in San Antonio.
What we're going to see particularly in Martin Marietta States is it's not so much driven by maintenance and repair it's going to be more driven by bringing in new capacity and that's important for a number of reasons number one.
Catherine Thompson: So it's removed from the vicitudes of imports largely. So what we're seeing in that marketplace and put you saw in the quarters volumes, we're largely flat, because we're broadly sold out. And we continue to largely sell what we're producing, and part of what we're anticipating in and part of what we've announced is a $15 a ton price increase for cement, effective January 1. So I think that those data points give you good snapshot of where Texas cement is today. Great, thank you so much.
States have had a lot of people move to them. So if were just simply looking at overall population trends.
Pretty eye popping to think about the fact that.
Texas led all the states and population gains over the past decade, adding 4 million people. If we're looking at Colorado. Their population has grown 14, 8% just since 2010, I mean, North Carolina has been one of the fastest growing states in the country George is going to move up to number eight in the country in population. So if you think about why these states.
Need to add capacity as opposed to maintenance and repair that's a big reason and if youre thinking about what happens from a lag perspective on rather than putting new asphalt on top of Volta asphalt, but rather adding a new lane or building new roads, and frankly takes a little bit longer now the punch line is it ends up being.
Trey Grooms: Your next question comes from trade grooves with Stevens, please go ahead. Thanks for the morning. So maybe sticking to the pricing thing here, particularly in aggregates, if you could maybe talk through your initial 2024 aggregates pricing outlook of low double digits growth that we've laid out, and maybe unpack how much you have coming from carry over a 23 mid-year increases and how you're setting the stage for low double digits price improvement in 24.
<unk> more aggregates intensive so for us it.
It's like a big birthday, it's worth the wait sometimes so we feel like good things are coming from this but I think thats really driving that lag that we have seen the dollars are there and you can see where they are you can see what the state budgets are but again I think it's those states.
Trey Grooms: Happy to try thanks for that. So we're thinking about the 24 guides similar to the way that we did the 23 guide and put on mean by that is the guide that we've given I think this is more to stay out immediately does not include any mid years. And again, just as we saw in 23 we think we're going to have mid years in 24, but right now the guide that we've given does not assume that.
Those budgets those population inflows that are driving a different nature of construction, what we'll see in Charlotte, what we'll see in Atlanta, what we'll see in Dallas.
Is going to be a very different story than what you'll see in New York or what Youll see in Chicago.
Great. Thanks very much.
David.
Trey Grooms: So I think that's important. Secondly, as I indicated in the previous question, we think mid years are becoming more and more the norm with our customers and we think the expectations have been set. The customer letters that have gone out indicate the pricing is largely effective from January 1 to June 30. So in the correspondence that is already gone, people know that we're going to protect them through mid-year. Now, in fairness, there's a footnote to that and the notable exception is California, where our pricing letters already include announced mid years so that our customers can plan for that in that marketplace.
Your next question comes from Michael Dudas with vertical research. Please go ahead.
Okay.
The warming Jacqueline Jim Ward.
Good morning, Michael.
You've been terrific observations about the markets and some of the puts and takes heading into this year 2024.
Wondering it.
As you look at the residential side of the business in your important states it seems.
Is that the flywheel that could impact positively expectations on volume given it seems like we're at a bottom work in this kind of longer based bottom given the affordability issues is that kind of where the.
Trey Grooms: We've long talked about what we inherited when we bought the business in California and we're trying to address that. Just to be clear, California total 20, 24 increases right now. Look like that's going to be about $4 a ton across all products and markets as we continue to implement that strategy in particular. But it's a relatively new marketplace from our area. Now, to your point, if we're thinking about the way carryovers are going to work carryovers next year are probably going to be in the low single digits so a little bit lower than they were this year.
Help could come if volumes could get better and is that a market that you'd be able to take advantage of given your positioning and your and your certainly your backlog and your ability to Sir.
Yes look the I think the answer Michael is yes, and yes to all of the above.
It's interesting because you've got two issues relative to housing in the United States Day, we've talked about one of them and that its affordability and clearly seeing mortgage rates move to 23 year highs drive some of that the other issue that doesn't get the airtime than it probably should but it does in our states is availability and that's that's the big issue today.
Trey Grooms: But again, we've done a lot of confidence and what we think we will come out with on January 1. And then again, if we have something that even begins to replicate what we saw it mid-year next year. And thank you, there's probably some upside to that tray. So I think that gives you a good build on the way that we see that working in 2024 based off the exit rates in 2023.
And single family housing in the U S is structurally under built I mean, it's.
As a practical matter it ought to be trending comfortably over a million starts a year at least as we drill it down to the markets in which most of our businesses because again, we're back to those population trends that I mentioned the dialogue with the type of Gregor just a few minutes ago.
Trey Grooms: Yep, super helpful Lord, thank you so much and good luck, Trey, thanks so much.
Stanley Elliott: Your next question comes from Stanley Elliott with Steveville, please go ahead. Thank you, Good morning everyone, and congratulations.
If you come to Raleigh. Your biggest issue is can you find a house same issue in Charlotte same issue in Atlanta and bearing degrees the same issues in Dallas Fort worth and in Colorado today, So to the extent that there could be some upside there could it be single family housing driven I think so and for example.
Ward Nye: Lord Jim, can you guys talk about what you guys are seeing on the M&A front? I mean, historically, you've done a nice job strategically expanded the footprint, leverage the one eight, you know, free cash flow, cement sale, even better by year end, what does the M&A, you'll mark it look in like these days? Stanley, thanks for the question and for the comments in the quarter. The M&A Markets actually looking increasingly attractive, the level of dialogue has amped up in the second half of this year.
Several things are happening are homebuilders looking at having their own mortgage companies within homebuilding companies. They are are they doing that because they want to keep building. They do do they want to keep building because they know the market is there absolutely and in some instances are they building and basically building to rent even in the near term.
Ward Nye: From my perspective, that wasn't a tremendous surprise. As you know, 2021 was a big year for M&A for us and part of what we've been doing since then is a lot of what you saw in today's announcement relative to the sale of to hatch a fee. Making sure we're getting our pricing right in different markets, making sure we're getting our hands around the operations. And now as we sit here today, several things are apparent.
Term because they recognize that they can do that so I think your point around a swing factor on housing is important and I think it's relevant to say keep in mind single family housing is two to three times more aggregates intensive than is multifamily. So if you're watching housing book.
But because it nice to see multifamily go yes is it really nice to see single family go. The answer is yes, but I think what we've just described.
Ward Nye: Number one, we're looking at a debt that even our ratio of 1.8 times, so that that's below our targeted range, too. You can see from the financials with cash flow in this organization looks like that that can clearly help fuel and will fuel some aggregates lead, frankly, from my perspective, pure aggregate transactions. And then two or three, when we had the proceeds that are just coming from to hatch, it puts us in a very attractive place.
It is worth watching and could be a build in 2024 and I hope that helps smartphone.
Assured us excellent more thank you.
You bet.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the one your next question comes from.
Adam Palmer with.
Ward Nye: Do I think we'll have anything to announce here in the rest of this year? Probably not. Do I hope that we'll have some things that we can announce early next year? I think that we will. So more to come on that Stanley, but again, we like financially where we're sitting. We like strategically where we're sitting. We like what we believe what we know we can do from a regulatory perspective because we think that's a differentiator right now.
Thomas Davis. Please Thompson Davis. Please go ahead.
Hey, good morning, guys great quarter.
Adam two quick questions. It's getting late in the call two quick questions, one where do you want us for Q4, because the range is pretty wide and I'm. Just curious if we wanted to bake in.
Yes, and early onset to winter, where would that put us and then the second question is do you ever see yourself recreating.
What you've built in Texas and other geographies.
Ward Nye: So we believe that we can continue to give you price. We believe we can continue to give you really good cost control. And we believe we can keep giving you good solid, attractive M&A. And we think that's a hat trip that's there if you can offer today.
Well that's.
That's two big questions forgot later on the call today, Adam a couple of things that I'll take the second part of that I'll I'll take the first part of June.
Yes.
Texas is a tremendous market and when we bought <unk> XI and when we've done some of the moves that we've made in Texas since then.
Stanley Elliott: Great guys. Thanks so much in the front. Thank you, Stanley.
We thought it was going to be that kind of a market.
Gary Revitch: Your next question comes from Gary Revit with Goldman Sachs. Please go ahead. Yes, I get money, everyone. I'm here. Hi. We're just pulling together, you know, what you shared on your preliminary comments. You know, double digit pricing growth, flat volumes. You know, embedding, you call it high single digit. Cogs per unit growth. I mean, that essentially gets you to roughly $200 million of aggregate profit growth. 24 versus 23, which is, you know, a big broadly consistent with the consensus growth expectations for total company.
But at the same time.
We're in some other markets today that are enormously attractive do we think we can do some very great things in California, Yeah, I think we can.
Can we continue to grow our business in places like Florida, and still in Texas and in Tennessee, and others. The short answer is yes.
But one thing I think is so important for me to say Adam is you should expect us to continue to be an aggregates led company and and I think that part of what is so evident in these numbers is again, how durable that is now with respect to Q4, our pivot over to Jim and he can talk to you a little bit more about how we see some some puts and takes.
Gary Revitch: But the 24 versus 23. So I know you're not providing your full 24 outlook here. But it does feel like you're giving us the pieces to get the consensus even down numbers with probably higher probability and lower volumes. Then what folks expected on the bottom of my basis is that there and any other potential takes that you would add. I think that's relatively fair, and if you think about it, Jerry, I think that's what we did in Q2, and I think that's what we've done in Q3.
On that but frankly, a lot of it is going to be driven by when does winter show up in different parts of our business to Jim Yeah. So Q4, I would say it looks generally speaking look at the midpoint of whatever we put out that sort of.
The best way to think about it what could push it to the bottom and.
Ward mentioned actually bad weather rainy weather in Texas.
Early winter in the north parts of the of our footprint.
And then of course there is there is.
Gary Revitch: I mean, I think part of what you're seeing is the world can go through different Greece of economic turmoil, and this is a business that continues to be very steady, very durable in all forms of markets, so I don't disagree at all. I'll turn it over to Jim in just a moment so he can add if there are any particular things that he wants to make sure he calls out, but one of the things that I think is worth noting Jerry, I mean, did energy help us this quarter?
Cost timing some shifts there is nothing fundamentally.
Happening that sort of traveling.
Cost could shift from one quarter to next causing volatility.
It has slipped into Q1 that would help Q4, if they don't that would hurt Q4, so I.
I think I'll just stick with the mid point for now Adam and go with that.
Great. Thanks, guys.
Gary Revitch: Absolutely, it did, but I think part of what's so striking to me is even if we did not have the energy tailwind that we did this quarter, we would have set new records this quarter anyway, and I think it's so important because I know what you're looking for those puts and takes, I wanted to go ahead and dress that one up front, because falling into quarter, that was powerful. It would have been a very powerful quarter, even without that.
Thank you Adam.
There are no further questions at this time. Please proceed.
Thank you again for joining today's earnings conference call to conclude our strong third quarter results underscore the resiliency and secular durability of our aggregates led business model through various business cycles. Our focus remains on building the worlds safest most resilient and best performing aggregates led public company for the benefit of our.
Gary Revitch: Jim, anything you want to add? No, it's just that the cost inflation continues to moderate slightly, still elevated compared to historical levels, but again, as we've demonstrated this year, we expect it to happen next year, pricing growth exceeds cost inflation, so we do expect margins to expand next year. Super, it can I just follow up the downstream businesses you folks are executing really well this year, how much of that has been because of a helpful move in diesel and liquid asphalt versus what's sustainable in the new portfolio, particularly on the ready-mix side post for the investors?
Shareholders customers employees and other stakeholders, thanks to the disciplined execution of sore and the fidelity of our teams to safety commercial and operational excellence Martin Marietta is poised to continue delivering sustainable growth and superior shareholder value in 2024, and beyond we look forward to sharing our fourth quarter.
And full year 2003 results with you in February as always we're available for any follow up questions. Thank you for your time and continued support of Martin Marietta.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Gary Revitch: Jerry, thanks for the question. I would say several things. One, if you think about our ready-mix business, it's almost uniquely in Texas and Arizona, and those are two very good markets. And one reason that they're good is look here in New York, if you look at your window, you're going to see asphalt streets, and when you get to the bridges, you'll have concrete bridges. If you're in Texas, you're riding on concrete roads and concrete bridges, and you're building things structurally concrete as well.
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Gary Revitch: So those markets tend to be more durable from a supply perspective, because again, you've got that really non-cyclical or often counter-cyclical infrastructure market that will play some meaningful end in our ready-mix business standard. Clearly, ASP was up 20% in ready-mix, that helped a lot, but your frankly volume was up very modest, and again, Texas is 80% of our volume in ready-mix. Now, alternatively, if you go to HMA, give you a sense of that's going to be 4-year probably about 9 million tons, so it's a fairly notable business.
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Gary Revitch: Now, practically speaking, it's in three places. It's in Minnesota, it's up and down the Rocky Mountains, and it's in California. And what we saw there was ASP was up 6.7% because liquid wasn't moving as much, but the fact was Q3 was an all-time record of almost 3.9 million tons for us in asphalt. And keep in mind, asphalt's going to be about 95% crushed down. So from our perspective, that's a very attractive business, particularly in Minnesota, whereas you recall Jerry, it's largely an FOB business.
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Gary Revitch: So it's truly a materials business worse there, and up that 9 million tons, Minnesota's going to be a little bit over 3 million of it. So at least those are the quick puts and takes that we've got on that. Jim, anything you want to add on that? Yeah, I mean, the bitumen pricing costs did help. The asphalt paid business, improved margins. It wasn't wholly due to that, of course. But on the righty big side, I would say, was very, very little added from the lower energy costs. So hopefully that answers the question, too, just rounding out what work has been provided. It does. Thank you. Thank you, Jerry. Take care.
Anthony Pettinari: Your next question comes from Anthony Pettinari with City. Please go ahead.
Ward Nye: Good morning. Hey, Ward, you talked about some softness in eggs in the quarter in the southwest and the Midwest, if I heard that right. And I was just wondering if you could talk a little bit more about that. Was that, you know, weather driven or maybe a specific end market? Just wondering if there's any carryover into 4Q or potential leads into 24. Thanks for the question. You had a couple of things.
Ward Nye: One in the Southwest. Frankly, you had a lot of heat and the heat slowed somethings down and you also had some timing relative to the large energy projects as well. So I see a lot of that being pushed off to the right. I mean, clearly, and it's not just the Southwest or Midwest issue, there's some degrees of softening relative to warehousing in data centers. I mean, that's not a surprise. We anticipated that.
Ward Nye: But what we are seeing is a nice run of science relative to manufacturing and then the timing of energy. Energy is coming. Energy is not one of those issues that we have any concerns about. It's just relative to pace. So I think more than anything, we had degrees of timing and we had certain degrees of softness that from my perspective were broadly anticipated. And I think that's one of the reasons that when we were giving you our results at half year, part of what we indicated to you is we thought we would probably see a near term nadir and volumes in the third quarter.
Ward Nye: So if we're looking at the way Q3 worked from our perspective, Anthony, honestly, no big surprises. And including the way the poll through came through and obviously some very attractive incremental center quarter. Okay, that's very helpful. I'll turn it over. Thank you.
Phil Ng: Your next question comes from Phil in with Jeffries. Please go ahead. Hey guys, congrats on a really strong quarter and obviously your price hope your value over volume approach is showing in your results. But I'm just curious how much line of sight do you have on your aggregates pricing in 2024? How are your competitors behaving in this environment? Is that value over volume approach potentially or risk to your volumes? The reason why I ask is because one of your bigger competitors calling for perhaps weaker volumes than your flatish outlook. Please want to understand how the competitive landscape is behaving on pricing.
Ward Nye: Well, the thing that would stay focused on Phil is what can we control and how do we run our business? And we did that based on what our needs are. So we're very focused on Mark Marietta. We're focused on where our operations are. We're focused on what our inventories look like. We're focused on what our reserves look like in the ground. And we're focused on what we feel like the market can bear relative to these products.
Ward Nye: So from our perspective, those are really the unique drivers on that as indicated before. If you're looking at volumes for the quarter more volumes down a little bit more than others, yeah, probably so. Are we okay with that? You bet. Do I feel like that's probably going to find more degrees of equilibrium going forward? I think it probably will. At the same time, if I'm looking at the geographies in which we tend to be focused.
Ward Nye: Let's face it, we're talking about Texas that's going to be awfully good. I mean, we're looking at a text on budget for FY 24 that it seeds $18.5 billion. I mean, that's just a massive budget in Colorado. They recently passed a $5.3 billion 10-year infrastructure bill that's going to be massive in that state here in North Carolina. And it was something that I'm proud to have been a part of. We structurally changed the way that we're paying for infrastructure here.
Ward Nye: Now, we're using a degree of sales taxes and in FY 24, it's going to ramp up to 4% here in North Carolina because North Carolina recognized they needed to increase their spending by over $7 billion over the next decade. But even separate distinct from that, if we're looking at Florida right now, Florida's looking at a $17.2 billion budget for FY 24. And that's an all-time record. And I feel like I've said for probably the last six or seven years that every year is an all-time record for transportation in Florida, largely because it has been.
Ward Nye: And in California, where we brought that new business, the Cal Trans Budget is $20.5 billion next year. Now, to give you a sense of it, that's a 5.5 or 5.6% year-over-year increase with $12.1 billion designated for highway and bridge capital spending. So, as we're thinking about what that public funding looks like and we're coming back and looking at what's happening industrially in places like Atlanta, what's going on in South Georgia, literally just yesterday.
Ward Nye: Toyota announced they're adding $8 billion to what is already a large battery plant that's underway in Randolph County that's just outside of Greensboro. These are the types of things that we're seeing in our markets, both in public and heavy-non-res, that gives us a lot of confidence around the way that we think volumes will work next year. And the fact is, with the footprint that we have, I don't know, we don't have any doubt that we're going to get our fair share of that business. I just want to make sure that we're doing for what we feel like is fair value for that business. Super.
Ward Nye: And more, you mentioned maybe some of the weakness recently tied to some of these bigger projects, whether it's energy mega-products getting pushed out. Can you give us a little perspective when you see that kind of ramping up? Is that early next year, middle parts next year? And then on the public infrastructure side, we could all appreciate there's a lot of money coming. How do you see that ramping up and building into 2024?
Ward Nye: Yeah, Phil, those are great questions. I think the public infrastructure side, we're still where we were. We said we thought we would start to see that building in for and then build into 24. When I say for, I mean, Q4 of this year. And that was part of what led us to the commentary around the fact that we thought we'd probably see this type of dip in Q3. So, again, very anticipated.
Ward Nye: If we're looking for example at the large LNG projects, part of what we're seeing right now is several projects that are already underway, golden passes underway. Chevron Phillips has a large facility in orange. Texas is underway. Port Arthur, LNG. At least portions of that under way. Shaneer has a lot that's underway. But if we look going forward, I can think of at least four big jobs. And I think this gives you a sense from a time perspective in Texas that we're launching.
Ward Nye: Shaneer has another one in Cameron, Paris, Louisiana. We are Grand LNG in Groundsville and Freeport, LNG in Texas. All are looking at, we believe, 20, 24 start dates. We're actually anticipating some acceptance of materials maybe as soon as this week on some of those projects. So it continues to be a live conversation. So if we think about it for the year, has timing been a little bit of a headwind on those?
Ward Nye: Yeah, it has. Do we think they're going away? Absolutely not. And part of what we're seeing and frankly and degrees, this is helpful. You've got degrees, some material tightness in some of those markets. And that continues to underscore at least the notion of the overall economy in Texas today. So I hope that gives you a snapshot at least on some of the heavy non-rest pieces of it.
Ward Nye: I appreciate Gregor. You bet.
Timna Tanners: Your next question comes from Timna Tanners with Wolf Research. Please go ahead. Yeah, hey, good morning, everyone. Hi, Timna. I want to just appreciate that Timna, I'm sorry to interrupt you. We're having a hard time hearing you. Can you lean in a little bit more please? Yeah, is that better? Yes, ma'am. It is. Thank you. Okay, sorry about that.
Ward Nye: So, we're, you know, appreciate the comments around big projects and the starting up in 2024. We have heard some delays in cost overrun, so that was not affecting your geographies perhaps as much, or are you budgeting for that as well? You know, what, I don't think they're affecting number one are geographies that much and two, to the extent that inflation or varying degrees of it continues to go through. You know, frankly, if we can keep up with that or stay ahead of Timna, it's actually been an ally to our business, not an enemy to our business.
Ward Nye: So, I do think if we had a strikingly different geographic profile than we have, I would probably feel differently about it than I do. But if we go back to that conversation I was having just a little while ago relative to our leading states and the degree of both public and private activity that we're seeing in Texas and Colorado and the Carolinas and Georgia and Florida. You know, those are very powerful steady markets right now and I'm even taken to by the continued resiliency in markets like Indiana and in Iowa as well.
Ward Nye: You know, Iowa is a state that has been very steady all the way through cycles for us, including probably the single most steady market in which we participated during the great financial crisis. So, I just call that out because it's one of those states that doesn't come to mind immediately if you're in New York or Chicago or Dallas or Los Angeles thinking about this industry. But it's been one that for us that's been actually quite important and very durable.
Ward Nye: Okay, helpful.
Ward Nye: And then just on the commentary on M&A, I know in the past year that hope taps and done by the end of this year, now talking about next year. Is that just a timing issue? Is there anything that you can share there? It's more of a timing issue than anything else, Tim. Obviously, you know what the process looks like. You're going to have dialogue with a potential company you want to acquire.
Ward Nye: You'll go through evaluation process, you might go through letters of intent, contracting, and then you also have regulatory processes that you have to go through. And none of that's easy, but our team is actually very good at it. But we're going to be thoughtful as we do it. So it's not the fact that you haven't seen more done is not indicative of anything other than it's just an ordinary process. Now, part of what's been different to in fairness, we're typically not in the selling business.
Ward Nye: And we've been in the selling business for the last year and a half more than we ordinarily would be. And you've seen what we've done relative to the Redding Plan in Northern California, the Tachy Plan in Southern California, and even relative to our Redding Ex-business in Colorado. I mean, if you think back to it, between Stockton Redding, the Tachy and our Colorado Business that we sold, that's over a billion dollars worth of investitures.
Ward Nye: And that's not ordinary for us, but again, we talk about the fact that it's an aggregate select business. And when we talk about cement, we talk about a strategic cement business. So some years, most years, we're going to be busier buying than selling. Last year and a half, we've actually had more on the sell side than on the buy side, for all the right reasons.
Timna Tanners: Thank you, Timna.
Tyler Brown: Your next question comes from Tyler Brown with Raymond James.
Jim Nicholas: Please go ahead. I'll turn to Jim and ask him to come back and give you more granularity. If you think about overall costs, have we seen supplies go up mid single digits, yes. Have repairs gone up low double digits, yes, and contract services as well, but Jim can give you a bit more color on that. Yeah, it's largely the same story as before, which is a continuing slow moderation in cost inflation, still elevated versus historical levels, slowly coming back to normal from where it was, very elevated, but it still remains elevated.
Jim Nicholas: I would say the most problematic areas are parts costs are still quite high. I don't see those coming down for a bit. But labor is behaving more normal as we go on, but otherwise I'd say high single digits is the right way to think about it for the rest of this year, getting a little bit better, moderating next year.
Jim Nicholas: Again, I'm holding aside energy, which is very volatile, and just holding that one aside because we don't know where that ends up going. Does that answer your question? Yep, nope, that's very helpful. I appreciate it.
Tyler Brown: Thank you, Tyler.
David McGregor: Your next question comes from David McGregor with Longbow Research. Please go ahead. David, are you there? Hey, I'm here now. Sorry about that. I apologize. Congratulations on a great quarter. Thanks so much, David. Yeah, I just wanted to revisit the slide in your deck on highway contract awards, up 18%, and I get your thoughts in terms of what's changing in the lag from awards to storm stone demand and stone shipments. Yeah, no, I think it's been from my perspective fairly predictable.
David McGregor: And I think in large measure because we went for such an extended period of time without more money coming from the federal government in a many way on that. So if you think about what happened, we had a decade plus of continuing resolutions, then we had the fast act that didn't have more money but it did have more time. And so now what's happened is you've had that very attractive double whammy of, hey, here comes more money, here comes more time.
David McGregor: And you also had DOTs who had actually been building up their own budgets for about 15 years because they weren't getting more money and more time from the federal government. So I think what we're going to see particularly in Martin, Marietta, states is it's not so much driven by maintenance and repair. It's going to be more driven by bringing in new capacity and that's important for a number of reasons. Number one, our states have had a lot of people move to them.
David McGregor: So if we're simply looking at overall population trends, I mean it's pretty eye-popping to think about the fact that... Texas has led all the states and population gains over the past decade, adding 4 million people. If we're looking at Colorado, their population has grown 14.8% just since 2010. North Carolina has been one of the fastest growing states in the country, Georgia is going to move up to number 8 in the country and population.
David McGregor: So if you think about why these states need to add capacity, as opposed to maintenance to repair, that's a big reason. And if you're thinking about what happens from a lag perspective on rather than putting new asphalt on top of old asphalt, but rather adding a new lane or building new roads, it frankly takes a little bit longer. Now the punch line is, it ends up being considerably more aggregate-sintensive.
Ward Nye: So for us, it's like a big birthday, it's worth the wait sometimes. So we feel like good things are coming from this, but I think that's really driving that lag that we've seen, the dollars are there, and you can see where they are, you can see what the state-do-a-t budgets are, but again, I think it's those states, those budgets, those population inflows that are driving a different nature of construction. What we'll see in Charlotte, what we'll see in Atlanta, what we'll see in Dallas, is going to be a very different story than what you'll see in New York or what you'll see in Chicago. Great. Thanks very much. Thank you, David.
Michael Dudas: The next question comes from Michael. Do this with vertical research. Please go ahead. The warming Jacqueline Jim Ford. Are you ready, Michael? You've been terrific observations about the markets and some of the puts and takes heading into end of this year, 2024. Just wondering, as you look at the residential side of the business in your important states, it seems if we're at a, is that the flywheel that could impact positively expectations on volume, given that it seems like we were at a bottom or in this kind of longer-based bottom, given the affordability issues?
Michael Dudas: Is that kind of where the health could come if, you know, vines could get better? Is that a market that you'd be able to take advantage of given your positioning and your, certainly your backlog and your ability to serve? Yeah, look, I think the answer, Michael, is yes and yes to all of the above. It's interesting because you've got two issues relative to housing in the United States today. We've talked about one of them, and that is affordability.
Michael Dudas: And clearly seeing mortgage rates move to 23-year highs drive some of that. The other issue that doesn't get the airtime that it probably should, but it does in our states, is availability. And that's a big issue today. And single-family housing in the U.S, is structurally underbuilt. I mean, as a practical matter, it ought to be trending comfortably over a million starts a year. At least as we drill it down to the markets in which most of our businesses, because again, we're back to those population trends that I mentioned the dialogue with Dave McGregor just a few minutes ago.
Michael Dudas: If you come to Raleigh, your biggest issue is can you find a house, same issue in Charlotte, same issue in Atlanta, in very degrees, the same issues in Dallas, Fort Worth, and in Colorado today. So to the extent that there could be some upside there, could it be single-family housing driven, I think so. And for example, Several things are happening. Are our home builders looking at having their own mortgage companies within home building companies?
Michael Dudas: They are. Are they doing that because they want to keep building? They do. Do they want to keep building because they know the market is there? Absolutely. And in some instances, are they building and basically building to rep, even in the near term because they recognize that they can't do that. So I think your point around a swing factor on housing is important. And I think it's relevant to say keep in mind single-family housing is two to three times more aggregate-intensive than is multi-family.
Michael Dudas: So if you're watching housing, look is it nice to see multi-family go? Yeah, is it really nice to see single-family go? The answer is yes. But I think what we've just described is worth watching and could be a build in 2024. And I hope that helps Michael. It sure does excellent work. Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. Your next question comes from Adam Talmer with Thomas Davis.
Michael Dudas: Please, Thompson Davis, please go ahead. Hey, good morning guys, great quarter. Two quick questions getting late in the call. Two quick questions. One, where do you want us for Q4? Because the range is pretty wide. I'm just curious if we wanted to bake in an early onset to winner. Where would that put us? And then the second question is, do you ever see yourself recreating what you've built in Texas and other geographies?
Michael Dudas: Well, that's two big questions for a guy late on the call today. A couple things that I'll take the second part of that. I'll leave the first part to Jim. You know what, Texas is a tremendous market. And when we bought TXI and when we've done some of the moves that we've made in Texas since then, frankly, we thought it was going to be that kind of a market. But at the same time, we're in some other markets today that are enormously attractive.
Michael Dudas: Do we think we can do some very great things in California? Yeah, I think we can. Can we continue to grow up business in places like Florida and still in Texas and in Tennessee and others? The short answer is yes. But one thing I think is so important for me to say, Adam, is you should expect this to continue to be an aggregate sled company. And I think that part of what is so evident in these numbers is, again, how durable that is.
Michael Dudas: Now with respect to Q4, I'll pivot over to Jim and he can talk a little bit more about how we see some puts and takes on that. But frankly, a lot of it is going to be driven by when does winter show up in different parts of our business to Jim? Yeah, so at Q4, I would say, look, generally speaking, look at the midpoint of whatever we put out that sort of best way to think about it.
Michael Dudas: What could push it to the bottom end? Word mentioned that actually bad weather, rainy weather in Texas, early winter in the north part of our footprint. And then, of course, there's big costs, timings and shifts. There's nothing fundamentally happening that's sort of troubling. But cost could shift from one quarter to the next causing volatility. If it was slipped into Q1, that would help Q4 if they don't, that would hurt Q4. So I think I just stick with the midpoint for now, Adam, and go over that. Great. Thanks, guys. Thank you, Adam. Thank you for the questions at this time. Please proceed.
Ward Nye: Thank you again for joining today's earnings conference call to conclude our strong third quarter results underscore the resiliency and secular durability of our aggregates led business model through various business cycles. Our focus remains on building the world's safest, most resilient and best performing aggregates led public company for the benefit of our shareholders, customers, employees and other stakeholders. Thanks to the disciplined execution of SOAR and the fidelity of our teams to safety, commercial and operational excellence, Martin Marietta's poised to continue delivering sustainable growth and superior shareholder value in 2024 and beyond.
Ward Nye: We look forward to sharing our fourth quarter and full year 23 results with you in February. As always, we're available for any follow-up questions. Thank you for your time and continued support of Martin Marietta. Ladies and gentlemen, this concludes your conference call for today.
Operator: We thank you for participating in that that you please disconnect your lines.