Q4 2024 Martin Marietta Materials Inc Earnings Call
Welcome to Martin Marietta's fourth quarter, and full year 'twenty 'twenty four earnings conference call. All participants are now in a listen only mode.
Question and answer session will follow the company's prepared remarks.
As a reminder, today's call is being recorded and will be available for replay on the company's website I will now.
Speaker Change: I'll turn the conference over to your host MS. Jaclyn Rucker, Martin Marietta as director of Investor Relations Jaclyn you may begin.
Speaker Change: Good morning, It's my pleasure to welcome you to Martin Marietta's fourth quarter and full year 'twenty 'twenty four earnings call Joy.
Speaker Change: 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 future operating results or financial performance.
Speaker Change: Like other businesses Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially.
Speaker Change: 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.
Speaker Change: Please refer 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 commissions web sites.
Speaker Change: We have made available during this webcast and on the investors section of our website supplemental information that summarizes our financial results and trends.
Speaker Change: As a reminder, all financial and operating results discussed today are for continuing operations.
Speaker Change: In addition, non-GAAP measures are defined and reconciled to the most directly comparable GAAP measure in the appendix to the supplemental information as well as our filings with the SEC and are also available on our website.
Speaker Change: Ward Nye will begin today's earnings call with a discussion of our full year operating performance 2025 outlook and supporting market trends.
Speaker Change: Jim Nickolas will then review our financial results and capital allocation after which ward will provide closing comments.
Speaker Change: A question and answer session will follow.
Speaker Change: Please limit your Q&A participation to one question I will now turn the call over to ward.
Ward Nye: Thank you Jacqueline good morning, and thank you all for joining today's teleconference.
Ward Nye: Over the years, the disciplined execution of our proven strategic operating analysis and review or shortly.
Ward Nye: <unk> has significantly transformed our company.
Ward Nye: Martin Marietta with a coast to coast footprint with the majority of our products and services going to areas exhibiting the highest growth potential by.
Ward Nye: By demonstrating our ability to manage through uncontrollable circumstances.
By adhering to our value over volume approach to meet customers' needs without discounting the value of our own assets and generating a higher return on those assets and by showing the resiliency of our business model no matter the macroeconomic backdrop.
Ward Nye: As a result, our business is superbly positioned for near medium and long term success.
Ward Nye: 2024 was no exception to those themes as we once again delivered record aggregates financial performance and successfully completed nearly $6 billion portfolio enhancing transactions.
Operationally our team successfully managed many exogenous factors, including persistent increment weather.
Ward Nye: Tighter than expected monetary policy and related modest private construction slowdown.
Ward Nye: The team's steadfast commitment to managing what they could control, namely commercial excellence cost management and portfolio optimization enabled the fourth quarter delivery of record profits margin expansion and record cash flow from operations.
Ward Nye: Before discussing our full year results in 2025 outlook I'll highlight a few notable takeaways from 2020 fours fourth quarter.
Ward Nye: With the weather better cooperating in fourth quarter earnings growth and margin expansion resumed evidenced by our record fourth quarter consolidated gross profit of $489 million consolidated adjusted EBITDA of $545 million, reflecting an increase of 8% and consolidated adjusted.
Ward Nye: The EBITDA margin of 33% an improvement of 210 basis points.
Ward Nye: Pricing gains more than offset the impact of inventory management efforts driving fourth quarter record aggregates gross profit per ton of $7 to 92 cents, an increase of 12% and aggregates gross margin of 33% an improvement of 120 basis points.
Ward Nye: In addition to our impressive financial results, we successfully completed three aggregates bolt on acquisitions, and southwest, Florida, Southern California, and West, Texas, all of which are attractive SOR identify geographies.
Ward Nye: Our full year results were notable given the year's extreme weather and a difficult macro economy.
Ward Nye: Despite these headwinds we established new aggregates in Magnesia specialties records specifically.
Ward Nye: Aggregates revenues and gross profit both increased 5% to $4 5 billion and $1 $4 billion respectively.
Ward Nye: Aggregates gross profit per ton increased over 9% to $7.38.
Ward Nye: Magnesia specialties revenues increased 2% to $320 million and magnesia specialties gross profit increased 10% to $107 million.
Martin Marietta safety and enterprise Excellence culture have long underpinned our financial results I am pleased to report we achieved our best full year safety incident rates in our company's history inclusive of our newly acquired businesses.
Ward Nye: Notably this marks our eighth consecutive year of a world class lost time incident rate and fourth consecutive year of World class total injury incident rate.
Ward Nye: 2024 surpassed 2021 is our most active M&A year ever with nearly $4 billion of aggregate sled acquisitions and over $2 billion of noncore asset divestitures.
Ward Nye: We selectively pruned cyclical and non strategic cement and ready mix concrete operations and redeployed the proceeds into pure aggregate assets in attractive markets.
Adding nearly 1 billion tons of aggregate reserves to our footprint.
Ward Nye: These proactive portfolio actions created a more durable business increased the gross profit contribution from our core aggregates product line and enhanced our margin profile, all while maintaining a strong balance sheet for continued acquisitive growth.
Ward Nye: Looking ahead, we expect the reshaped portfolio together with our fourth quarter results will provide a solid foundation for profitable growth in 2025 and beyond specifically, our full year 2025 aggregates shipment guidance of 4% growth at the midpoint assumes that strong infrastructure.
Ward Nye: Data center demand a full year of 2020 for acquisition contributions and normalized weather patterns will all more than offset the slowdown in private construction, which is primarily interest rate driven.
Ward Nye: Our full year 2025 pricing guidance of six 5% growth at the midpoint.
Ward Nye: More than the last three years of double digit growth remains notably higher than the long term industry average of 3% 4%. These.
Ward Nye: These revenue drivers combined with moderating cost inflation contributions from our cement and downstream businesses Magnesia specialties and a full year of contributions from our 2020 pork acquisitions underpin our 2025 full year adjusted EBITDA guidance of $2 billion to $5 billion at the midpoint.
Ward Nye: 9% improvement compared with prior year.
Ward Nye: Moving now to end markets, we'll start with infrastructure, our most aggregates intensive and often counter cyclical end market.
Ward Nye: Building and maintaining our nation's having infrastructure remains a bipartisan national strategic priority.
Ward Nye: Three years into the five year infrastructure investment and job Zac Dora II J, a nearly 70% of highway and bridge funds remain to be invested indicating robust multiyear tailwind.
Ward Nye: Importantly, according to the American Road in Transportation Builders Association or ARPA public Highway paper and Street construction is expected to continue to grow reaching $128 $4 billion in 2025, compared with $119 1 billion in 2024 and 8% increase.
Ward Nye: <unk> <unk>.
Ward Nye: Notably based on recent state and government contract Awards arent boost 2025 transportation construction market outlook shows, Texas, Florida, North Carolina, and South Carolina Key Martin Marietta States are among the largest markets expected to show growth.
Moving now to nonresidential construction artificial intelligence or AI continues to drive unprecedented demand for digital and energy infrastructure as evidenced by recent announcements from Microsoft and the New administration in Washington.
Speaker Change: Croissant expects to invest 80 billion and fiscal 2025 under construction of data centers that can handle AI workloads with over half of that spend in the United States.
Speaker Change: Moreover, the new administration recently announced Stargate, which aims to simplify permitting and significantly boost datacenter construction in the U S through a massive investment of up to $500 billion.
Speaker Change: The build out is already underway with a data center in Abilene, Texas, then Martin Marietta's supplying from its December acquisition of Ari James Gravel company. Moreover.
Speaker Change: Moreover, Dodge construction network's warehouse square footage starts for the 12 months ended November 2024 inflected positively for the first time since December 2022, and Martin Marietta was recently awarded the material supply for two large Amazon warehouse projects in North, Texas, and Fort Myers, Florida, respectively.
Speaker Change: Yeah.
Speaker Change: Shifting to residential activity affordability and availability remain key issues impacting single family demand. Neither is expected to resolve in the near term given the higher for longer interest rate environment.
Speaker Change: Relative to the availability issue alone realtor Dot Com recently estimated that U S housing market is underserved by approximately 7 million homes.
Speaker Change: That said when single family residential construction inevitably rebounds, Martin Marietta has leading positions in key sunbelt msas provide attractive opportunities to capitalize on structurally undeveloped markets with pent up demand.
Speaker Change: In summary record state and federal investments re shoring, the artificial intelligence infrastructure Buildout and the long awaited single family housing recovery should provide multiyear shipments stability and provide a healthy pricing environment for years to come I will now turn the call over to Jim to discuss our full year financial.
Jim Nickolas: Faults and liquidity Jim.
Jim Nickolas: Thank you ward and good morning, everyone.
Jim Nickolas: The building materials business generated full year 2024 revenues of $6 2 billion.
Jim Nickolas: A 4% decrease in gross profit of $1 8, billion% to 6% decrease.
Jim Nickolas: The decline in both metrics, which are comparing year over year results.
Due to the February 2020 for divestiture of our South, Texas cement and related concrete businesses, along with shipment declines in all product lines, partially offset by acquisition contributions.
Jim Nickolas: Our aggregates product line achieved all time record revenues gross profit gross margin and unit profitability in 2024.
Jim Nickolas: Contributions from acquired operations and strong pricing more than offset lower shipments.
Jim Nickolas: Importantly, this was the second consecutive year of margin expansion in the fourth year in the last six experiencing a price cost widening.
Jim Nickolas: Over those six years margins have expanded 870 basis points.
Jim Nickolas: In 2020 for aggregates gross profit per ton improved 9% to full year record of $7 58 per ton.
Jim Nickolas: Cement and concrete revenues decreased 29% to $1 1 billion and gross profit decreased 40% to $260 million.
Jim Nickolas: Then driven primarily by the divestiture for South, Texas cement plant and its related concrete operations.
Jim Nickolas: While cement margins held up nicely the ready mix business experienced margin compression from Q2 through year end due to higher input costs, including aggregates and cement.
Jim Nickolas: Outpacing pricing growth.
Jim Nickolas: Asphalt and paving revenues decreased 2% to $869 million.
Jim Nickolas: Due to slower market demand.
Jim Nickolas: Gross profit decreased 7% to $101 million due.
Jim Nickolas: Due to lower revenues and higher aggregates input costs, partially offset by lower liquid asphalt costs.
Jim Nickolas: Magnesia specialties established all time records for revenues and gross profit of $320 million and $107 million, respectively as benefits from strong pricing more than offset lower chemical and line shipments.
Jim Nickolas: Turning now to capital allocation and liquidity.
Jim Nickolas: We achieved record fourth quarter cash flows from operations of $685 million.
Jim Nickolas: An increase of 23% compared with the prior year quarter.
Jim Nickolas: Driven by improvements in working capital and deferred income tax payments due to the internal revenue service, providing disaster tax relief for North Carolina businesses.
Jim Nickolas: <unk> by Hurricanes, Debbie and Helene.
Jim Nickolas: Our capital allocation priorities remain focused on prioritizing value enhancing acquisitions.
Jim Nickolas: Reinvestment in our business.
Jim Nickolas: And returning capital to shareholders.
Jim Nickolas: In 2024, we returned $639 million to shareholders through dividend payments and share repurchases.
Jim Nickolas: Even with significant M&A activity, we ended the year with a net debt to EBITDA ratio of two three times well within our targeted range of two to two five times.
Jim Nickolas: Our strong balance sheet offers ample flexibility to execute on our active M&A pipeline and pursue value enhancing investment opportunities.
Jim Nickolas: Finally, I will close by prepared remarks with some views on tariffs.
Speaker Change: The depth breadth and duration of Paris, Ashley levied remains highly uncertain.
Speaker Change: As a result, our 2025 guidance assumes no impact from tariffs.
Speaker Change: There are some situations, where tariffs might enhance the companys profitability and others, which may lower it.
Speaker Change: The vast majority of our supply chain is sourced from U S locations.
Speaker Change: The company was served well by that during the supply chain shocks of the Covid era.
Ward Nye: And should serve us well going forward with that I will turn the call back over to ward. Thank.
Speaker Change: Thank you Jim.
Speaker Change: To conclude we're proud of our strong fourth quarter financial results and industry, leading safety performance.
Thanks to our team's collective commitment to Martin Marietta's vision and strategic priorities. We have deliberately built an increasingly resilient highly productive coast to coast aggregates led business positioned to grow unit profitability through various end market demand environments. We are enthusiastic about Martin marietta's prospects in 2025 and beyond.
Speaker Change: The fundamental strength and underlying drivers of our differentiated business proven strategic plan strong balance sheet with significant opportunities for growth and long history of successfully managing through economic cycles provide us great confidence in our ability to continue delivering strong financial operational and safety performance.
Speaker Change: If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: Like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw that question again press Star one and as a reminder, please limit yourself to one question for any additional questions. Please re queue.
Speaker Change: Your first question comes from the line of Trey Grooms with Stephens. Please go ahead.
Speaker Change: Thanks, and good morning, Gordon, Jim Hi, Jim.
Speaker Change: I'm sorry, how are you.
Jim Nickolas: Doing well thank you.
Speaker Change: <unk>.
Speaker Change: As we look at the 25 guide more could you walk us through any of the puts and takes.
Speaker Change: Around the overall guidance for the year, including your aggregates price and volume outlook.
Speaker Change: Happy to Trey. Thanks for the question look at the outset, I'd say, we're taking a pretty measured approach to the guide this year.
Speaker Change: Look there is uncertainty relative to monetary policy and put whatever the other policy.
Speaker Change: Fluctuations maybe during the course of the year.
Speaker Change: Look at the guidance proves conservative and frankly I hope that it is we can come back and adjust for upside later relative to volume in the first instance, obviously, we're looking at low single digits and that includes by the way Trey a full year.
Speaker Change: Of acquisition contributions. So if you think about what thats going to look like BWI.
Speaker Change: Closed last April so, we'll see that fully in the first quarter. If we're looking at the transactions that we did in West, Florida, and Southern California, and Texas, those will clearly be additive to quarters. One through three so again, if youre just thinking about the cadence on that.
Speaker Change: But if we think about and uses right now I mean overall I think we should expect mid to high single digits growth and infrastructure.
Speaker Change: I think we're probably looking at low single digits at least right now relative to both non res and rez and if we think about what the builders are under those.
Speaker Change: Look I do think infrastructure should stay strong I mean, there are some.
Speaker Change: 70% of the dollars from <unk> that are still yet to come in our sector and as a practical matter that has to rollout and 25% and 26, so that should be pretty constructive.
Speaker Change: The other thing that we're seeing is nice steady consistent and frankly growing activity relative to data centers. I know there was some concern there was a blip. The other are the weak relative to deep seek we've actually seen most AI and others come back and double down. Since then so we think that should be very healthy this year.
Speaker Change: Frankly, we're not planning for notable residential recovery in 2025, given the higher for longer mortgage rates that we're seeing because we think that will just continue to affect monthly affordability.
Speaker Change: That said in some instances we are seeing that homebuyers are simply getting accustomed to this higher interest rate environment. So we're going to see how that plays out.
Speaker Change: But here's something that I think is notable and I've mentioned it in my prepared remarks, I mean, clearly we're seeing green shoots in Weyerhaeuser.
Speaker Change: The Claiborne, Texas facility that we have the Fort Myers facility that we have are both large jobs and thats not the type of activity that you would have seen for the majority of last year. So we've been waiting for warehousing to find bottom. We think it has the other thing that I think is important to keep in mind as we go throughout the year, we're going to start.
Speaker Change: Lapping some pretty weather impacted quarters last year I mean, if you think about it Q2 was really a washout in our southwest division, particularly in Dallas Fort Worth which is the company's largest marketplace. In Q3 was a real challenge for us in portions of the east, including the Carolinas, which is a notable marketplace for us as well so if you.
Speaker Change: If you think about the way it rolls up.
Speaker Change: Most profit guidance shows double digit unit profitability growth and nice gross margin expansion and it's going to be driven by pricing and what we think will be moderating inflation relative to price price is going to be a little bit different. This year issue simply think about the cadence because particularly in the cement market we saw.
Cement producers rolled their first price increases back to April one.
Speaker Change: Which meant as a practical matter of lot of ready mix players were looking for that so what we've seen in our world is most hot mix and others had price increases effective January one as you've become accustomed to their portions of the ready mix community. In fact, most of it that are seeing April one price increases so the price increases.
Speaker Change: <unk> will be outsized relative to what history has been pricing.
Speaker Change: <unk> is still very solid will be attractive for the year, but your cadence. This year is likely to be a little bit different. So don't expect to see that same degree of pop in Q1 that we've seen in the last several years, you'll start seeing in building into and three et cetera. So I hope that gives you a sense of it.
Speaker Change: Last thing I'd say is if we think about the estimated carryover effect from last year's pricing.
Speaker Change: 80 bps coming into the year Trey So I've tried to give you a sense of and markets I tried to give you a sense of volume I've tried to give you a sense of pricing and how do I think thats going to play relative to margins. So I hope that helped.
Speaker Change: Yes.
Speaker Change: Extremely helpful. Thanks for that additional color, but just just for some clarity and correct me if I'm wrong.
Speaker Change: That that pricing in April movement, there for aggregates, if I remember going back historically that's.
Speaker Change: With the exception last few years that that's not unusual for the industry. It seems like that was kind of a normal kind of timing.
Speaker Change: That may be have had kind of shifted a little bit more to January just in more recent years.
Speaker Change: Is that the right way to think about it that is the right way to think of it Trey I mean, you're you've been around this interest for a long time and I have to and Thats. The way that has typically worked.
Speaker Change: So, yes, I don't see anything there, that's causing me any angst, but but again, if youre looking at it and modeling as I know.
Speaker Change: I just wanted to make sure that I was giving you and your colleagues the ability to model that degree of precision.
Speaker Change: Yes, well that was super helpful. Thank you I'll pass it on thank you Trent.
Speaker Change: Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.
Hi, Thank you for taking my question today.
Speaker Change: I appreciated your color on the tariff impact in your prepared commentary I wanted to follow up on that.
Speaker Change: Two part way.
Speaker Change: Im just pull the string on what could be impacted from tariffs from your perspective, we certainly had.
Speaker Change: Metals tariffs announced yesterday, but also to what did Martin Marietta due to diversify.
Speaker Change: Supply chain.
Speaker Change: In the wake of the first Trump administration and Harry.
Speaker Change: A little bit better prepared today.
Speaker Change: <unk> 2016, thank you.
Speaker Change: Good morning, Katherine Thanks for the question I'll take the last part first and say this if we go back to the Covid years, when really supply chain. We're in a mess, we actually came through that pretty well I mean, we were having record years during that period of time, and we were not running into supply chain issues largely because as Jim noted in his prepared remarks.
Speaker Change: Most of our supply chain is domestic there were some.
Speaker Change: Outliers, where we had things coming in from overseas and to your point, we have moved very carefully in the intervening period of time to make sure that we can look primarily to domestic production and I think that served us well before I think if we see something that is amped up from a tariff perspective will be even better served.
Speaker Change: Right now to.
To the second part of your question what are some of the specifics look obviously steel is something that we're going to watch steel tariffs very frankly could be pretty helpful to our magnesia specialties business and we're supplying a lot of that material to domestic steel producers. So if they see steel production ramp up in the United States and Thats going to help us.
Speaker Change: Lotte on volume and if we think about the magnesia specialties business look they just had a record year and they had a record year with chemical and steel markets frankly.
Speaker Change: Pretty low spots. So again, I think tariffs very selfishly for us on that could be helpful.
Speaker Change: Equally if we think about tariffs potentially on cement look where domestic cement producer, we're a long way away from water.
Speaker Change: But again I think that would be helpful to our north Texas position by the way that that business continues to perform extraordinarily well. So I think it would just get that business even more upside.
Speaker Change: Imports.
Speaker Change: Relative to stone has a twofold effect.
Speaker Change: Number one I think it actually adds value to what we're doing with our long haul network, particularly relative to rail.
Speaker Change: So keep in mind, we're shipping more rail more stone by rail than anybody else in the United States. That's about 30 million tons, a year its going into coastal areas principally in the United States, we think that could be helpful.
Speaker Change: To be perfectly transparent about it we do have an operation in Canada, that's coming into the United States by boat. So that would be one of the headwinds that we could potentially see from that but again, it's not going to be a material issue to the company, but again.
Speaker Change: Just in full disclosure I think thats fair to say.
Speaker Change: If we think about more indirect impacts from tariffs I mean, we could certainly see a drive more re shoring and more domestic manufacturing demand and I think that goes back to your.
Question relative to supply chain.
Speaker Change: It could.
Speaker Change: Could impact inflation, and some degrees and that could lead to maybe higher for longer and that could have a negative impact on real estate or residential as we look at it and I think it goes back to the observation that assured Trey I think we have given a very measured guidance approach today.
Speaker Change: And the fact is if we come back and adjust this I sure would like to adjusted up and I Hope, we put ourselves in the position that thats exactly what we can do Catherine.
Speaker Change: Great. Thank you very much good luck welcome. Thank you.
Speaker Change: Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.
Speaker Change: Yes, hi, good morning, everyone Hi, Jerry.
Speaker Change: Hi.
Speaker Change: Jim I was wondering if you could just talk about the.
Speaker Change: Ton cost cadence that you expect obviously mix is moving around on board you spoke about.
Speaker Change: And you have price increases normally.
Speaker Change: Price cost spread is pretty consistent do you expect similar gross profit per ton growth in the first quarter as the full year can you just give us a bit of color on that.
Speaker Change: Taking my question I'll, let less Jim to come back and give you some color relative to cadence I'm going to come back to the very first notion that you raised and that is let's talk about what's happening with respect to cost per ton because I think this quarter was a really good example of what you can and you should expect going forward.
Speaker Change: Look at it and thought we had good cost management, if we're looking frankly at organic Cogs. They were they were flat despite revenue being up nicely in the organization, but what I like Jerry is when I go back and look at it I mean, clearly energy was down and energy was down because diesel was better and a host of things, but what I'm moved by as I go through the different cost Buck.
Speaker Change: It's whether it was supplies or whether it was repairs or whether it was <unk>.
Speaker Change: Contract services or otherwise, they're all in the green for the quarter. So I like the way that that shaping up and the fact is we can continue to make these businesses that we bought increasingly.
Speaker Change: Increasingly efficient relative to ASP, but also relative to the cost profile.
Speaker Change: The other part of your question was relative to cadence and so for that let me turn it over to Jim Thanks word Hey, Gerry.
The cadence is going to be.
Speaker Change: Two dynamics one is the the P&L effects for the temporary P&L effects of our inventory.
Speaker Change: Auction that.
Speaker Change: That will continue through the first half so that's already built into our guide, but that will show up more in first half not in the second half of it really as much.
Speaker Change: Aside from that dynamic the underlying Cogs inflation are getting pretty consistent throughout the quarters. So that will be pretty evenly balanced Q1, Q2, Q3, Q4, we're not anticipating anything changing dramatically on the underlying inflation piece, but again the inventory work down the temporary P&L effects from that we'll see in the first half and then that should abate thereafter.
Speaker Change: That answered the question.
Speaker Change: It does so just to make sure. We're on the same page with you Jim So yeah. It sounds like Youre thinking of gross profit per ton up low single digits, maybe in the first half and then.
Speaker Change: In the back half maybe mid teens given the comps.
Speaker Change: The inventory destock point is that the range of expectations.
Speaker Change: Probably lower.
Speaker Change: <unk> than what you just described I would say.
Speaker Change: Low low low teens kind of consistently maybe a little bit lower or plus or minus a couple hundred basis points.
Speaker Change: Low teens growth.
Speaker Change: I would say pretty consistently quarter over quarter.
Speaker Change: And Jerry let me add one more thing let me add one more footnote to that because as Jim mentioned, the inventory reduction or management efforts that we've been going through for the quarter that was about a $20 million P&L impact and my point with that is if you think about overall cost control and if you think about pricing and you think about the margin expansion that we had in the quarter give.
Speaker Change: That $20 million headwind on inventory, that's my point that was a pretty impressive quarter relative to cost control.
Speaker Change: Thank you.
Speaker Change: Gary.
Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.
Anthony Pettinari: Good morning.
Anthony Pettinari: Good morning, Ed.
Speaker Change: Okay.
Speaker Change: The recent acquisitions and I'm wondering if it's possible to put a finer point on the volume benefit that you expect in 'twenty five.
Speaker Change: Either in terms of tonnes or percentage volume benefit or how are you.
Speaker Change: How are you.
The framework.
Speaker Change: Happy to Anthony as a practical matter if youre looking just at what would have been organic it's probably up.
Speaker Change: And then if youre looking at the balance of it its largely acquisition driven so I think on a percentage basis, that's probably not a bad way to think about it.
Speaker Change: Got it got it thank you thank.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Phil <unk> with.
Speaker Change: With Jefferies. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: I guess since Trump has stepped into his office certainly a lot of noise on the funding front on the public side, but it seems more centered around EV charging station in some of these projects. So my question to you award have you seen any pause in projects and any slowdown in bidding activity for new projects, just kind of help us think through any choppiness in <unk>.
Speaker Change: On the public side, when we look at 25.
Speaker Change: The question, we've not seen any slowdown in that and in fact, we think thats, probably going to continue to be pretty constructive and let's say for several reasons. One if we just look at what we think is going to happen relative to non res square footage starts.
Speaker Change: We're projecting 2025 recovery of somewhere between 8% 9%.
Speaker Change: But to contextualize that that's still down 19% from 2020, twos peak and still below at 2021 level and if we're looking at what we're seeing right now relative to Stargate that I mentioned in my opening comments that the investments that Amazon is making we are simply not seeing a slowdown in those sectors right now.
Speaker Change: If we look at our footprint more specifically I mean, Google has activity right now both in Kansas City, which is an important market for us as well as in South Carolina, Microsoft We talked about how much investment. They have ahead of them, but they've already got projects underway in North Carolina, and obviously I've already mentioned the Amazon projects in both Claiborne.
Speaker Change: Texas and in Fort Myers, but part of what I'm moved by as we think about the.
Speaker Change: The non res sector, as we think industrial construction's going to be pretty healthy, we think health care and education is going to be pretty healthy and we think the broad commercial real estate sector is going to be the one that's going to come behind that single family sector that we said is under built by around 7 million homes today.
Speaker Change: At least according to realtor dot com. So we're not seeing a slowdown in that we're actually seeing a nice steady pickup in that.
Speaker Change: So much of what's going to happen in our business is going to be driven by the locations that we have in the states in which we built leading positions. We believe are going to be on the front end up much of this development.
Speaker Change: The award of lot of the commentary was more around private but I guess on the public side, you haven't seen any choppiness in terms of funding being pause or any of that <unk>.
Speaker Change: Don't have as great a appreciation how much of a good guy has it been and what it could.
Speaker Change: We're not seeing anything choppy on the public side, we think public essentially going to be really constructive and expect it to stay that way for a period of time I mean, the fact is if we're looking in Texas. This year Txdot lettings are going to be really robust. They were $13 5 billion last year and they are expected to be.
Speaker Change: In that same range again this year again as you recall, Colorado actually has approved budget of nearly $2 $1 billion North Carolina is a bunch of it is going to increase I think it's about $7 6 billion and part of that's driven by the fact that now we're seeing about 6% of sales taxes going into <unk>.
Speaker Change: Today, So we think thats going to be attractive equally if we go to Georgia. I mean, there are budget is up 7%, Florida is at record levels. If you take out onetime supplements that they've had so if we're looking at our state dot budgets and our top 10 states on a same on same basis eight of the 10 year over year.
Speaker Change: Our up so that's why we're looking at the heavy side non res and on <unk>.
Speaker Change: Big infrastructure, we don't anticipate Choppiness, there, we expect pretty healthy good steady diet of work okay.
Speaker Change: Okay really helpful. I appreciate it.
Speaker Change: You.
Speaker Change: Your next question comes from the line of Garik <unk> with loop capital. Please go ahead.
Speaker Change: Alright, thank you.
Speaker Change: Just a follow up question and a new one for me just a follow up just on the inventory drawdown I was wondering if you could perhaps quantify how much you still have remaining in the first half of the year and then just broadly on the volume outlook recognizing that youre looking for low single digit growth.
Speaker Change: Has any of the components change either for the better for the worst.
Speaker Change: Since you provided the preliminary outlook back after the third quarter. So a couple of things. So I would say relative to the inventory drawdown. If you think think about it it's about a 30 million dollar headwind in Q3 'twenty.
Speaker Change: $20 million headwind in Q4, we do think we're going to be done with that by the time, we could to half year.
Speaker Change: Garik, if you think about bookings so it's probably not a not a bad way to think about book ending it.
Speaker Change: And the other part of your question repeat that again for me Garik.
Speaker Change: Yes, I was wondering if the volume outlook has changed at all since last quarter.
Speaker Change: Recognizing here, you're still speaking to low single digit growth, but has any component gotten better or worse, maybe infrastructure. It sounds maybe it's.
Speaker Change: Better.
Speaker Change: Bob.
Speaker Change: Any other color there so what I would say is I think people generally have felt like interest is higher for longer. So I think overall there is a sense that degrees of public are probably going to be a little bit more muted now than we would've thought several months ago, I mean, I'm, sorry, private and but at the same time I think we feel like public is going to be.
Speaker Change: Pretty healthy and I think we feel like it has to be for several reasons Garrick number. One you have to assume this administration is going to be looking at a reauthorization at the end of 2006, and having 70% of those dollars still hanging around the hoop doesn't sound like a really good idea. So our sense is that's probably going to be a pretty aggressive.
Play that we're going to see on public and 25% and 26.
Speaker Change: So I think that property feels honestly, a little bit more robust and I think portion surprise it probably feels modestly slower for something that feels something Michael Walsh.
Speaker Change: Got it thanks for that and best of luck. Thank you Garrett.
Speaker Change: Your next question comes from the line of Joe Castillo with Morgan Stanley. Please go ahead.
Joe Castillo: Hi, Thanks for taking my question.
Joe Castillo: Sorry to beat a dead horse here, but just wanted to clarify on their organic growth side, you talked about maybe 1% and the rest is on the volumes that was maybe driven by.
Joe Castillo: On the M&A front, but when you walk through your end markets you highlighted high single digits for Amphora, and then low single digit growth in resi non resi so.
Joe Castillo: It seems to imply that the end markets themselves maybe going.
Joe Castillo: Above that 1% is kind of put that all together. So just curious is that just conservatism or is there anything.
Joe Castillo: We should kind of consider there as to why maybe that part of that organic growth is only 1%.
Joe Castillo: That was not organic that was meant to be kind of a year over year view inclusive of the acquisitions.
Speaker Change: Sorry, the 1% on volume.
Speaker Change: The slides that show mid single digits for infra and et cetera in low single digits for the other categories that those were inclusive of acquisitions.
Speaker Change: Thank you.
Speaker Change: And I think to your point look forward as I said in my comments, we're trying to be really measured in this guide right now.
Speaker Change: So if we come back to you, we'd like to be guiding up not sideways or down.
Speaker Change: Got it understood.
Speaker Change: It's helpful. And then just wanted to go back to your comments around the industry pricing and in some pockets, perhaps are turning to April 1st and maybe a little bit more of a smooth cadence through the first half.
Speaker Change: Should we take that to mean that mid years, we're kind of moving as an industry away from <unk> or do you still expect to.
Speaker Change: Steve mediators in aggregates.
Speaker Change: I'd say a couple of things one the guide that we've given you does not assume mid years, but we believe that there will be degrees of mid years, just as they were last year and keep in mind, where we saw them mostly last year were in the new acquisitions, we think we will likely see that again this year.
Speaker Change: And part of what we'll just have to watch for next year is to see again, how does cement rollout next year because what that did is this year came into play is it really made that January one more challenging specifically relative to ready mix concrete so again.
Speaker Change: January one price increases are broadly in four products going into <unk>. So it's really more of a.
Speaker Change: Basically a ready mix issue in our cement issue than anything else, but yes. It does not include <unk>.
Mid years in the guide we do think there'll be some mid years, we'll be back to you to talk more about that.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Tyler Brown with Raymond James. Please go ahead.
Tyler Brown: Hey, good morning.
Speaker Change: Good morning, Tom.
Tyler Brown: Hey.
Speaker Change: As it relates to capital allocation priorities can you guys talk a little bit about the M&A pipeline.
Speaker Change: Change in the regulatory environment impact anything there and if that were not to materialize, what's the appetite on debt paydown versus the buyback just given the balance sheet health.
Speaker Change: So number one if you think about a ton of $6 billion worth of transactions last year. We ended the year at two three times debt to EBITDA ratios. So we're in a very attractive place to continue growing our business number one.
Speaker Change: Number two there is still a lot of work to be done in this industry relative to M&A and look I am going to see it for the rest of my career My successor will see for the rest of their career.
Speaker Change: My bet is my successor successor will see that for a good part of their career as well.
Speaker Change: As we've indicated before we firmly identified over 200 million tons of businesses on a per annum basis that are in geographies in which we would have an interest in being and then to your point.
Speaker Change: We believe we can get cleared regulatory.
Speaker Change: Look do I think this is going to be a $6 billion year no probably not.
Speaker Change: A few things break could it be I suppose it always could because it tends to be.
Tyler Brown: <unk>, but my sense is Tyler we're looking just in a year end year out circumstance that we're doing around $1 billion a year of transactions and we think thats a good steady number and theyre going to be instances, where you may well see it above that because you might have something opportunistically.
Speaker Change: Comes along.
Speaker Change: But if we think back to it as well relative to different administrations et cetera, one thing that Martin Marietta has always been very consistent in doing is being in a position that we look at the markets very thoughtfully.
Speaker Change: And we understand.
Jim Nickolas: Businesses that we believe we can by regulatory endpoints that we can't and we tend to move very purposefully on the ones that we can now relative to other uses of cash let me turn it over to Jim. So he can talk to you a little bit about that yes. Good question. Good question Tyler we do a bond coming due in December of this year, it's quite small.
Jim Nickolas: Whether thats repaid with cash on the balance sheet, our refinance what we'll see.
Jim Nickolas: Going forward, but it's relatively small and I would anticipate share buybacks to outstrip any kind of debt reduction. If there is any debt reduction at all so we have been in the market last year, but a fair bit of shares will be in the market again. This year as we are every year and by buying back stock, but that would come before debt paydown.
Anthony Pettinari: Yes, Okay, and then Super quick Jim It sounds like there's a few dynamics in first half versus second half FIFO pricing cadence M&A et cetera can you just shape first half and second half EBITDA mix slightly skew second half just any help would be very helpful for your model.
Jim Nickolas: Yes, I think.
Jim Nickolas: It will skew second half as it traditionally does.
Jim Nickolas: Perhaps less so this year than last year, though.
Jim Nickolas: Okay. Okay. That's helpful. Okay. Thank you.
Tom: Thank you Tom.
Speaker Change: Your next question comes from the line of Michael Dudas with vertical research. Please go ahead.
Good morning, gentlemen, Jacqueline.
Speaker Change: How are you.
Speaker Change: Yes, great little chilly here in the northeast.
Speaker Change: We're self insured.
Speaker Change: I would expect nothing else.
Speaker Change: Yes. Thank you.
Speaker Change: The residential market, just a little bit more thought.
Speaker Change: It's been frustrating I think for most of the industry.
Speaker Change: <unk> seen the affordability and the rate issues.
Speaker Change: Is it.
Speaker Change: Sensitivity on like if the economy picks up for Paul.
Speaker Change: Paul just a little bit that there is this pent up demand will flow through are you anticipating that.
Speaker Change: Is there any shift in say multi versus single that you might portray.
Speaker Change: <unk>.
Speaker Change: Longer term numbers, but certainly as.
Speaker Change: Things normalize what kind of a benefit that could be in the regions that hearing.
Speaker Change: Yes, Michael it's a great question I would say several things as we talk to customers. When we talk to builders right now theyre focused on buying and entitling land. So number one I think that's a really good sign number two that tends to be a really good sign relative to single family residential and selfishly, we'd like to skew toward that because thats two to three.
Speaker Change: Times more aggregates intensive than its multifamily the.
Speaker Change: The other thing that strikes me as well, it's been a long slog builder confidence in places like Texas, Colorado, North Carolina, and Georgia is clearly getting better. So we think that's that's a very good sign.
Speaker Change: I think they believe starts and permits are expected to pick up more broadly across the marketplace today.
Speaker Change: And the other thing that I think is worth, noting and I said in the earlier response as well I do think two degrees buyers who are adjusting to higher rates.
Speaker Change: So I think to your point I think cuts could actually see.
Speaker Change: Pretty significant surge in demand, it's all going to be a matter of timing because it's not going to turn on with immediacy.
Speaker Change: But when we go back to the notion of <unk> 7 million homes that are under built and a disproportionate number of them and states in which or Msas in which we have a leading position that's a pretty attractive place to be so I hope that helps.
Speaker Change: Sure. Thank you.
Speaker Change: Well.
Speaker Change: Your next question comes from the line of David Macgregor with Longbow Research. Please go ahead.
David Macgregor: Yes, good morning, everyone and thanks for taking the questions I apologize.
Speaker Change: Airport I'm in an airport here so.
Speaker Change: Ward I guess on infrastructure I hear you when you say that.
Speaker Change: Not seeing any interruption in orders right now, but I just kind of the elephant in the room is how safe is federal funding for infrastructure construction projects and I just wanted you to.
Speaker Change: Share with US how you would characterize the risk of federal government D. Obligating funds for state Dot projects.
Speaker Change: David It's a perfectly good question and I don't see that as a big threat and here's one of the reasons why I mean, if you think about the overall <unk> one two trillion right.
Speaker Change: But $350 billion to highways bridges roads and streets, the things that you and I look at is hard core construction and if we think back to when when <unk> was going through.
Speaker Change: Debate process in the Senate and the house.
Speaker Change: Then former President Trump was not in favor of IAA because he did not think enough of it was going toward what he would refer to as real infrastructure.
Speaker Change: So if we look at what's going on with that and we think about what I believe is marching orders had been to secretary Duffy and that is to build big and build big in this context, I think means highways bridges roads streets airports and big heavy infrastructure in the United States. So.
Speaker Change: I think if they do anything with that I'm not sure that they will I think it'll be nuanced and I think if it's nuanced, it's not going to be in those areas that you and I think about as being nicely aggregates intensive and oftentimes counter cyclical. So I think if we think of Iga through that lens. So I think thats, probably the right place to be.
Speaker Change: If we think about iras. So many of those funds have already been obligated to obviously a much smaller program anyway, so as im sitting here measuring risk.
Speaker Change: And thinking about the way the administration may be thinking about a reauthorization.
Speaker Change: I just view bad things happening there as having a relatively low likelihood so David I hope I hope that helps.
Speaker Change: It does thanks very much work.
Speaker Change: Welcome.
Speaker Change: Your next question comes from the line of Adam Thalheimer with Thompson Davis. Please go ahead.
Adam Thalheimer: Hey, good morning, guys. Congrats on the Q4 beat.
Thank you Adam and good to hear your voice.
Adam Thalheimer: I have two things that have some confused clients on pricing and I think you said aggregates pricing up.
Speaker Change: Up a little bit sequentially in Q1 with a bigger pop in Q2, yes.
Speaker Change: And then my other question was.
Speaker Change: Vis vis what somebody else asked about the weather its been a pretty tough winter.
Speaker Change: Just curious if we should bake in a conservative Q1.
Speaker Change: I wouldn't go over your skis on baking in a conservative Q1, I think Q1 is going to be just fine.
Speaker Change: So.
Speaker Change: Wouldn't lean too hard there.
Speaker Change: Look I think you nailed it on the pricing I'm not at all worried about pricing as Trey indicated in his question too I mean, an April price increase for some portions of our marketplaces, where this industry has resided for a long time.
Speaker Change: And my only commentary around pricing was I'm trying to make sure from a modeling perspective.
Speaker Change: To your same point, yes, im not wanting people to get over their skis on certain components as they go through on a month by month basis.
Speaker Change: But if I, if I break yours down no I don't think you need to to build anything.
Speaker Change: Draconian at all into Q1, and I do think if you've got price increases layering in in a more robust way.
Speaker Change: Post Q1.
Speaker Change: The model will hold together.
Speaker Change: And in a better fashion.
Speaker Change: Perfect. Thanks, a lot.
Speaker Change: Sure.
Speaker Change: Your next question comes from the line of Avi Slavic with UBS. Please go ahead.
Avi Slavic: Hey, good morning.
Speaker Change: Good morning.
Speaker Change: Given all the volatility and fluctuations with policymaking These days Curie.
Speaker Change: Curious, how that's affecting your own capital planning and strategic decision, making.
Speaker Change: The nice thing about this industry as I can tell you. This company has always been profitable.
Speaker Change: This company has never cut a dividend and even when we went through the financial crisis and loss, let's call it 40% to 45% of our volume we always have pricing power.
Speaker Change: When we look at history, and but some of the history dictate how we look at the future going going ahead.
Speaker Change: Look theyre going to be some policy things that will move around.
Speaker Change: Thank you.
Speaker Change: The policy issues that I believe we will see from this administration relative to public and infrastructure will be constructive to what we're doing.
Speaker Change: The policy decisions, we may or may not see from this administration relative to tariffs, whether it be cement steel or otherwise, we'll probably be constructive to what we're doing.
Speaker Change: When I think about where I think this administration would like to see interest rates and what that can do to single family housing I think that ought to be constructive to what we're doing.
Speaker Change: I think about a company that has proven itself to be actually very capable at M&A.
Speaker Change: Yes, I think we're likely to be in a time with availability of potential transactions and administration, that's frankly going to be.
Speaker Change: We'll look more favorably upon transactions going forward than we've seen in the more recent past so.
Speaker Change: Are we watching carefully yes are we going to remain agile, yes, but as we look at it and really start thinking about what are going to be potential pluses here, what are going to be potential minuses here.
Speaker Change: We see a lot of pluses here.
Speaker Change: And we see that relative to what M&A will look like we see that relative to what we think monetary policy is going to look like and frankly, I think we're likely to see it in the way of reauthorization works.
Speaker Change: The way that I think about that is I think this administration, while they have control of our house of Representatives and the United States Senate are likely to want to get a reauthorization done before mid terms.
Speaker Change: Because if past is prologue.
Speaker Change: Using mid terms don't work terribly well for the party that's in the White House. So if the current administration is looking at having the White house and the Senate and the house of Representatives.
Speaker Change: And is consistent with telling secretary Duffy to build big.
Speaker Change: Again, as we're watching the policy decisions that have been announced and policy decisions that we anticipate I think on a whole we feel like theyre going to be pretty positive for Martin Marietta.
Speaker Change: Alright very helpful. Thank you.
Speaker Change: You bet. Thank you.
Speaker Change: Your next question comes from the line of Michael Feniger with Bank of America. Please go ahead.
Michael Feniger: Great. Thanks for squeezing me in guys. Just of course, Jim You mentioned, you mentioned price versus cost spread has widened in recent years I'm. Just curious ward. If we are in are higher for longer rate environment in that private side.
Michael Feniger: Is still somewhat under pressure is it inevitable that as you turn the page in 2026 pricing comes back down to that long term, 3% to 4% average or just.
Michael Feniger: Just qualitatively do you think that price versus cost spread remains wider than maybe what we historically have seen outs.
Michael Feniger: Outside of just the last three years, so I'm going to answer your last question first look.
Michael Feniger: Think the price cost spread continues to work in our favor and I think for a couple of reasons I think answered two fold into sensors one.
Michael Feniger: And Jim can talk to what we're seeing broadly on inflation I think inflation is moderating inflation is coming down so that's going to help but I think the bigger drivers.
Michael Feniger: Pricing is going to remain in a fundamentally better place going forward then pricing was at least in my view.
Michael Feniger: All of the years up until let's call. It the last two or three and I think thats a fundamental change I don't see that changing.
Michael Feniger: Lucky if youre looking to face financial statements as Youre seeing asps around $22 a ton for aggregates, that's had a nice run, but Michael I'm going to say again, what you've heard me say in the past there are very few things that you won in your life that you can buy for $22 a ton exempt our product and I continue to believe that we're going to be in a position that we can do.
Michael Feniger: Get appropriate value for our product going forward I think we'll see that spread continue I will ask Jim to give you a little bit of color relative to what we're seeing with respect to inflation, yes. So.
Michael Feniger: As we indicated last late last year, we're still.
Michael Feniger: The same view.
Michael Feniger: Cogs per ton Inflations mid single digits.
Michael Feniger: And then trailing by a fair bit of the A&P growth were expecting so.
Michael Feniger: Based on our guidance I would say, we would expect gross margins to widen that spread by another 100 basis points and 225 over 'twenty 'twenty four that's even after overcoming the temporary P&L effects of the inventory reduction so I think that bodes well for 25 bodes well for 2026.
Michael Feniger: And beyond so over the arc of history, we've widened the price cost spread.
Michael Feniger: It's not a straight line, but it's pretty consistent over time and I don't see why that would end.
Michael Feniger: Great Great Jim Ward, maybe just.
Michael Feniger: Two one of your earlier comments I think you saw in Q4.
Michael Feniger: Net margin was healthier relative to what you saw in ready mix just how is that evolving in 2025, I mean, I think nat gas prices are a bit higher just kind of curious how we should kind of think about that cement versus ready mix.
Michael Feniger: In 2025.
Michael Feniger: I would say think considerably better about cement.
Michael Feniger: Ready mix in 2025, even as we're looking at cement for the quarter and pricing was constructive.
Michael Feniger: The fact is the business really performed well despite pretty significant headwinds from a weather perspective in both November and December.
Michael Feniger: We saw nice revenues in cement we saw good gross profit we saw good gross margins good EBITDA.
Michael Feniger: Poorly that FM seven operation that we opened.
Michael Feniger: It was running at greater than 90% of availability during the fourth quarter. After we opened that up so.
Michael Feniger: Yes.
Michael Feniger: We're not going to be cement every place, we're going to be submit which really strategic to us and in Dallas Fort worth It is really strategic and.
Michael Feniger: Mid low <unk> is a fantastic cement plant.
Michael Feniger: If you think about what's happening relative to ready mix volumes relatively flat there that the limited ready mix has is ready mix is taking significant aggregate price increases is taking cement price increases and it's hard for ready mix to keep pricing ahead of that so if we think about what the combinations can look like youre going to see some more.
Michael Feniger: Margin compression in ready mix, but again, if we think about ready mix. It so much of a shock absorber for our company we have it in very select markets.
Michael Feniger: Important to us in places like Dallas, Fort worth and Arizona, but your question really was geared around cement and I wanted to make sure I gave you a good robust snapshot of the way cement is performing because if you could really see it at a granular basis you'd be very comfortable with it as are we.
Michael Feniger: Thank you.
Michael Feniger: You're most welcome.
Michael Feniger: And that concludes our question and answer session and I will now turn the conference back over to Ward Nye for closing comments.
Ward Nye: Thank you Christian Thank you all for joining today's earnings conference call as we close the chapter on our 13th year as a public company and look forward to the next 30 years, you should expect Martin Marietta to continue building on our solid foundation of past successes with our world class teams and proven strategic priorities underpinned by a resilient aggregates led business and unparalleled markets.
Ward Nye: Martin Marietta is well poised to deliver sustainable growth and shareholder value for years to come we look forward to sharing our first quarter 2025 results in a few months as always we're available for any follow up questions. You may have thank you again for your time and continued support of Martin Marietta.
Speaker Change: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
Ward Nye: [music].