Q1 2025 Martin Marietta Materials Inc Earnings Call
Okay.
Ladies and gentlemen, and welcome to Martin Marietta's first quarter 2025 earnings Conference call.
All participants are now in a listen only mode and a question and answer session will follow the company's prepared remarks.
As a reminder, today's call is being recorded and will be available for replay on the company's website.
I will now turn the call over to your host Ms. Jacqueline Rucker, Martin Marietta as director of Investor Relations Jaclyn you may begin.
Good morning, and welcome to Martin Marietta's first quarter 2025 earnings call. Joining me today are ward Nye, Chairman and Chief Executive Officer, and Bob Carton Senior Vice President interim Chief Financial Officer, and Chief Accounting 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.
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 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.
We have made available during this webcast and on the investors section of our website supplemental information.
Summarizing our financial results and trends.
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: Gordon I will begin today's earnings call with a discussion of our operating performance 2025 outlook and related market trends.
Gordon: Bob Cardin, well, then review our financial results and capital allocation.
Warwick: After which Warwick will provide closing comments.
Warwick: 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.
Warwick: Thank you Jonathan good morning, and thank you all for joining today's teleconference.
Warwick: Before discussing our Q1 results I'll take a moment to discuss our previously announced chief financial Officer transition.
Warwick: On April 10th we announced Jim Nicolas his departure as CFO to move his family back to their beloved hometown of Chicago.
Warwick: We're grateful to John for his nearly eight years of service to Martin Marietta over which time he made meaningful contributions to our success.
Warwick: We wish him and his family the best in your next chapter.
Speaker Change: In partnership with a leading executive search firm, we've initiated a process to identify our company's next CFO and are considering both internal and external candidates while the searches underway. We're pleased Bob Cardin will serve as our interim CFO since joining Martin Marietta in 2019, Bob has been.
Speaker Change: An integral member of our executive and finance teams. We're grateful he is willing to assume this role. In addition to his responsibilities as senior Vice President controller, and Chief Accounting Officer and are confident that under Bob's leadership will not Miss a beat during this transition period.
Speaker Change: Now turning to our financial results.
Speaker Change: I am pleased to report this year is off to a strong start highlighted by record first quarter aggregate revenues gross profit gross margin and gross profit per ton. Despite some challenging winter weather in January and February across key southeast southwest and Midwest markets.
Speaker Change: This record setting performance was driven by 7% pricing growth disciplined cost control and margin accretive acquisitions. Additionally building upon its full year of 2024 performance Magnesia specialties established new quarterly record revenues gross profit and gross margin with gross margin increasing.
Speaker Change: 806 basis points compared with the prior year quarter.
Speaker Change: These results demonstrate why we have consistently said this business has earned the right to grow and we will continue to evaluate both organic and inorganic opportunities to do so.
Speaker Change: We also established several consolidated first quarter records, including consolidated gross profit of $335 million or 23% increase <unk>.
Speaker Change: Consolidated gross margin of 25% an increase of 300 basis points.
Speaker Change: Consolidated adjusted EBITDA of $351 million or 21% increase in consolidated adjusted EBITDA margin of 26% an increase of 274 basis points.
Speaker Change: These results underscore the resiliency of our differentiated business model and benefits of our 2020 for portfolio optimization actions.
Speaker Change: Given current macro uncertainty, we continue to focus on matters within our control most notably realizing fair value for our vital materials, while appropriately managing our costs with product demand.
Speaker Change: Looking ahead, we are encouraged by the double digit growth in organic March aggregate shipments April daily shipment trends and realization of April 1st aggregate price increases in select markets, all of which provide us confidence in reaffirming our full year of 2025, adjusted EBITDA guidance of $2 $2 5 billion.
Speaker Change: At the midpoint.
Speaker Change: Consistent with our past practice the company will revisit guidance at mid year.
Speaker Change: Moving to end market trends will start with observations regarding infrastructure, which continues to benefit from robust federal and state investments, including the five year infrastructure and investments and jobs Act or Iga.
Speaker Change: As a result, the American road in Transportation Builders Association or ARPA.
Speaker Change: <unk> construction activity to grow in 2025 is work advances on projects supported by federal and state funding sources in.
Speaker Change: Importantly, with only about one third of the <unk> funds reimbursed to states through the end of February 2025, we expect <unk> spending will peak next year in 2026, followed by an extended tail thereafter as further described on page eight in today's supplemental information.
Speaker Change: Our contract award growth rates have moderated as reflected in the value of contract awards for the 12 month period ended February 28, 2025, the underlying baseline remains elevated.
Speaker Change: Funding certainty reinforced at both federal and state levels provides the impetus for steady product volume levels and underpins a strong pricing environment for years ahead, and this counter cyclical public end market.
Speaker Change: Importantly to congressional priorities now appear to be increasingly shifting towards the reauthorization of federal surface transportation programs with key legislative discussions already underway.
Speaker Change: Early indications suggest the successor Bill may emphasize projects with national or regional significance favoring roads bridges and ports.
Speaker Change: Shifting to nonresidential construction artificial intelligence or AI continues to drive strong demand for data centers across the United States is hyperscale or to invest significant capital in new sites.
Speaker Change: Projects underway in our geographic footprint, including Star Gate in Texas, Google in South Carolina, and <unk> 4 million square foot facility in Louisiana underscore this momentum, but not yet a meaningful contributor to product shipments. We expect data center energy consumption requirements will drive ancillary demand for new <unk>.
Speaker Change: <unk> intensive power generation facilities across many of our key markets.
Speaker Change: Warehouse construction appears to have reached a cyclical bottom with more green shoots emerging including large Amazon warehouse projects, and Claiborne, Texas, Fort Myers, Florida, and Wilmington, North Carolina to name a few.
Speaker Change: With respect to residential activity affordability challenges continue to act as a natural governor on single family housing starts. We don't expect this dynamic to resolve in the near term absent either a modest home price contraction lower mortgage rates or both.
Speaker Change: That said long term housing market fundamentals remain resilient underpinned by demographic shifts and structurally under build conditions in many of Martin Marietta's key sunbelt markets.
Speaker Change: In summary, we anticipate demand for infrastructure and our public end markets and data centers in the nonresidential sector will remain robust.
Speaker Change: <unk> of interest rate sensitive private construction demand is expected to remain subdued in the near term.
Speaker Change: I'll now turn the call over to Bob to discuss our first quarter financial results Bob.
Bob: Thank you ward and good morning, everyone.
Bob: Building materials business posted revenues of $1 3 billion.
An 8% increase.
Bob: Gross profit increased 20% to $298 million and gross margin improved by 229 basis points to nearly 24% both first quarter Records.
Bob: As Ward mentioned, our aggregates business achieved record first quarter revenues gross profit gross margin and unit profitability of $1 billion $297 million, 30% and $7 60 per ton respectively.
Bob: Notably aggregates gross profit per ton improved over 16% in aggregates gross margin expanded 260 basis points as organic price cost improvement and the benefit of margin accretive acquisitions more than offset headwinds from targeted inventory management efforts.
Bob: As mentioned in our previous earnings call, we will continue to prudently manage our inventory levels.
Bob: That said, we expect these inventory drawdown headwinds on gross margin will conclude by mid year, as we began reducing inventory levels in the third quarter of last year.
Bob: Cement and concrete revenues decreased 12% to $233 million due to the threefold impact of the February 2020 for divestiture of the South, Texas cement plant and related concrete operations winter weather this past February and slower residential demand.
Bob: Gross profit decreased 23% to $24 million as the year over year gross profit improvement in cement was more than offset by a decline in ready mix concrete gross profit due to higher raw material costs.
Bob: Asphalt and paving revenues grew 37% to $80 million due to increased asphalt shipments in California.
Bob: This business posted a $23 million gross loss due to customary winter shutdowns in Minnesota, consistent with typical first quarter seasonality trends as well as higher raw material costs and Colorado Meg.
Bob: Magnesium specialties achieved all time quarterly records for revenues gross profit and gross margin of $87 million $38 million, and 44%, respectively, driven by pricing improvement and continued cost discipline.
Bob: Turning now to capital deployment, Martin Marietta's capital allocation priorities remain consistent and focused on prioritizing value enhancing acquisitions responsible reinvestment in the business and returning capital to shareholders relative to the ladder during the quarter, we repurchased nearly 900.
Bob: 11000 shares and an average share price of $494 and paid $49 million of dividend.
Bob: Since Martin Marietta's repurchase authorization announcement in February of 2015, we have returned a total of $3 8 billion to shareholders through dividends and share repurchases.
Ward Nye: Our one $3 billion of total liquidity free cash flow generation and net debt to EBITDA ratio of two five times as of March 31 provide ample balance sheet flexibility to capitalize on our active M&A pipeline with that I'll turn the call back over to ward.
Ward Nye: Thank you Bob.
Ward Nye: We're pleased with our strong first quarter financial results and remain optimistic about the opportunities ahead in 2025.
Ward Nye: The foundational strengths and our resilient aggregates led business strong balance sheet disciplined execution of our strategic plan and proven experience successfully navigating market cycles reinforce our confidence in delivering our full year adjusted EBITDA guidance.
Ward Nye: Longer term in 2026 and beyond we remain confident then Martin Marietta is exceptionally well positioned for sustainable growth and compelling value creation too.
Ward Nye: To conclude these prepared remarks I'll briefly touch on tariffs.
Ward Nye: <unk> represent both opportunities and challenges some enhanced profitability, while others may increase certain input costs or impact product demand. However, it's worth noting that our company supply chain is largely domestic that said given the uncertainty surrounding potential exemptions and retaliatory measures are $20.
Ward Nye: 25 guidance, neither assumes any material tariff related tailwind nor headwinds at this time.
Ward Nye: If the operator will provide the required instructions, we'll turn our attention to addressing your questions.
Ward Nye: Thank you and we will now begin the question and answer session.
Speaker Change: If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you will.
Speaker Change: To withdraw your question simply press Star one a second time.
Speaker Change: If you are called upon to ask your question and our listening via speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again, it is star one if you would like to join the queue.
Speaker Change: And our first question comes from the line of Kathryn Thompson with Thompson Research Group. Your line is open.
Kathryn Thompson: Hi, Good morning, and thank you for taking my question today.
Speaker Change: Thanks for the color that you gave in prepared commentary and go into that and earning season broadly.
Speaker Change: We at TNT has been focused on talking to a wide range of construction value chain.
Speaker Change: And Theres certainly seem to be some that are doing better versus others in the heavy materials generally.
Speaker Change: Seem to be doing better, but it's still early days with tariffs.
Speaker Change: Good day thanks.
Speaker Change: <unk>.
Speaker Change: Against that backdrop, what gives you confidence with the volume guidance and maintaining it and pulling the string a little bit further.
Speaker Change: We are seeing some green shoots stabilization in certain end markets like distribution that PTC has been weak.
Speaker Change: What are you seeing there and are you seeing any projects canceled or delayed.
Speaker Change: Or any other upside that youre seeing as you said in the infrastructure market. Thanks, so much.
Speaker Change: Kathryn Good morning. Thank you for the question several things one I do believe heavy side materials and these types of circumstances fair better than most and I think that's exactly what we're seeing I think we've long been a safe Haven for investors I think we will continue to be.
Speaker Change: If we're looking at the trends that I think are worth noting.
Speaker Change: Infrastructure as we noted is going to be good for the rest of this year infrastructure ought to be good going into next year as well we talked about the fact that only 30 some percent of the state reimbursements have even occurred so far with Iga, So theres lots of money to come in that and the state Dot's in which we're doing business. If we look at our top 10 states eight of the top 10.
Speaker Change: Budgets up year over year infrastructure strong, it's going to remain strong.
Speaker Change: Equally and you called it out.
Speaker Change: Data centers, and what's going to be coming behind data centers.
Speaker Change: At the moment, we're seeing that in a host of markets. As you know they are terribly powered generative and as a consequence, we think we're going to see could energy activity in those markets as well, but the other thing that I called out in the prepared remarks and you noted is warehousing. We believe has found a bottom and the fact is we have the largest Amazon project and.
Speaker Change: North America underway right now just outside of the Dallas Fort Worth Metroplex, we're seeing good activity on the West Coast of Florida, We are seeing good activity in that respect.
Speaker Change: The coastal areas of North Carolina, as well, but separate distinct from that if we're looking at customer backlogs right now they are nicely up year over year and sequentially.
Speaker Change: So thats looking at work. It's also looking at prospective work, but here's what's important too because I think this is something that's really important.
Speaker Change: We're not seeing project cancellations and so the backlogs are building projects are not being canceled.
Ward Nye: So those three building blocks I think Kathryn really gives us some nice outlook for the year. The other thing that I think is important for us to remember is we really got flushed out last year in Q2, particularly in the southwest in Dallas Fort Worth, which is our largest single MSA market. So.
Ward Nye: We're looking at volume and we'd look at the trends in Q1, and I mentioned in my prepared remarks, the daily trends that we're seeing in April right now all of that points to meet to a very steady and attractive and appealing volume environment for heavy side building materials, particularly in the aggregate space. So Catherine Thank you I hope that helps.
Ward Nye: <unk>.
Ward Nye: Does thank you very much.
Ward Nye: Got it.
Speaker Change: And your next question comes from the line of Trey Grooms with Stephens. Your line is open.
Speaker Change: Hey, Good morning Ward good morning, Bob.
Ward Nye: Good morning.
Speaker Change: So.
Speaker Change: I did want to touch on the cement business I mean, its fairly small part of the overall business now but.
Speaker Change: If you look at the margins there in the segment.
Speaker Change: It looks like ready mix.
Speaker Change: Headwinds there more than offset the improvement you may have seen in the cement margins.
Speaker Change: How are you thinking about.
Speaker Change: Margins in that segment as we progress through the year, especially with any additional increases in cement pricing that we could see going forward and then.
Speaker Change: To that point.
Speaker Change: The Texas market is clearly importer of cement how do you think the tariff backdrop could play into that and potentially into the pricing outlook for your cement business. Thank you.
Thank you for the question I would say several things one if we're looking just at summit and pricing was up 6% and profits and gross margin actually grew despite the fact that we had lower production volume and cement. So when we're looking at that business. It performed really well. Despite what was a pretty tough February simply because of the weather.
Speaker Change: The other thing Thats worth noting is <unk> seven is obviously finished its operating well.
Speaker Change: Obviously pricing growth and cement is moderating that's totally as expected from the rates that we've seen in the past couple of years, but we expect good mid single digit growth this year and again to that and pricing was up 6% in Q1, if we're looking at ready mix I mean ready mix several things were driving that portion of the <unk>.
Speaker Change: In Q1, some of it was simply seasonality.
Speaker Change: Other is if we're looking at organic shipments they were down 2% to prior year and Thats really due to continued softness largely driven by residential demand and degrees of weather headwind as well.
Other thing Thats happening there is in our downstream businesses were taking the increased aggregates and cement cost impacts as well so keep in mind that really ends up being a distribution chain chain for us more than anything else.
Speaker Change: Relative to your question on Texas cement and tariffs, it's interesting because I think that actually could provide some upside for us because that's going to further insulate midlothian cement from the waterborne imports and frankly, it's not just thinking about tariffs generally for our business I know I've said enough.
Speaker Change: Paired remarks that we're not putting in a headwind nor tailwind if I really think about them. It's really in two different buckets strength, what happens from a revenue perspective, and what happens from a cost perspective.
Speaker Change: And if I'm thinking about it from a revenue perspective, frankly is pretty helpful to aggregates because you end up passing the cost through we talked about cement.
Speaker Change: The fact is in Magnesia specialties.
Speaker Change: Depending on what happens with steel production the more steel production, we see them more doberman decline thats going to go out to the gates as well and of course much of this is driven to drive more reassuring and manufacturing demand across the United States generally which will help us specifically.
Speaker Change: And again as I noted our supply chain is largely domestic so we really don't see a notable threat there, but I do think relative to tariffs and the essence of your question that was around cement.
Speaker Change: I don't see that there is any downside for us in that respect whatsoever trace so again I hope that's responsive.
Yeah Super Helpful Award, Thank you and best of luck.
Speaker Change: Thanks, Brett.
Speaker Change: And your next question comes from the line of Jerry Revich with Goldman Sachs. Your line is open.
Jerry Revich: Yes, hi, good morning, everyone.
Speaker Change: Jerry.
Speaker Change: In your prepared remarks, you spoke about Magnesia specialty has earned the right to grow organically and via M&A correct me, if I'm wrong, but I believe the first time I recall, you, saying that can you just expand on what value added M&A would look like in this line of business, where you folks at value in AG is very clear.
Speaker Change: What's that recipe for value add if we see you move down that May trail for maybe some specialty.
Speaker Change: Jerry I appreciate the question. So first let's begin with the baseline and if we look at that persistent one it's always been a very good steady performer for us if we look at the recent years the working work that they've done on pricing actions operational reliability and efficiency efforts are really coming together and you just saw very attractive story for the quarter and we actually think.
Speaker Change: That business has more upside than downside right now the reason that we think that business has the right earned the right to grow is it's got many of the same attributes to the aggregate stars. It's got very high barriers to entry. It's got pricing power through cycles. This is a business that has been through but we feel like is probably the single most challenging chemical market.
Speaker Change: Place that we've seen in my career and it's a business that continues to put in record quarters.
Speaker Change: Back to the financial crisis and by the way I don't think were anywhere near that but if you think about the financial prices.
Speaker Change: Martin Marietta always remain profitable, we never cut or suspended the dividend one of the big reasons. Why was we had the differentiated portion of our business that was magnesia specialties. So to the extent that we can take that portion of our business and grow responsibly. It's something that we will certainly look at obviously, we're going to continue to be on AG.
Speaker Change: Brigade sled business, but when we look at our business and we recognize that is truly a differentiator for us and something that number one I think they've earned the right to be called out on because they are really good at it and number two to the extent that we can continue to invest organically and invest inorganically, we should and I believe our shareholders would richly benefit.
Speaker Change: From that.
Speaker Change: Thank you.
Speaker Change: Great. Thank you good to hear your voice.
Speaker Change: Our next question comes from the line of Phil <unk> with Jefferies. Your line is open.
Speaker Change: Hey, guys congrats on a strong quarter.
Speaker Change: Ward I mean, you sound at Uber bullish on infrastructure, which is great.
Speaker Change: With the New administration, and certainly a lot of head fake in terms of projects being Pas and what's formal base and whatnot So award.
Speaker Change: Help educate us what youre seeing out there.
Speaker Change: And then two you kind of hinted at as we kind of look out to 2026, maybe we get a new surface Transportation Act.
Speaker Change: There was some news the other day with.
Speaker Change: Transportation and infrastructure Chairman, Sam graves potentially pushing for a new source of funding for the Highway Trust fund, which is the first.
EV and hybrid wanted to get your thoughts on that opportunity and what that could mean for you guys.
Speaker Change: Phil. Thank you for the question I would say several things one.
Speaker Change: True heavy side construction that we're looking at the traditional highway funding we haven't seen any project forward, we've seen some of the grant projects bold and again that's.
Speaker Change: That's an entirely different animal than a very small portion of overall infrastructure. So that's been nothing that has caused us any concern again, if we're looking at really what we're tracking right now with several things you've seen the data that I've seen as well and that is if we're looking at highway contract awards. So we're looking at LTM from March 23 to March of 'twenty five thereof.
Speaker Change: 19%. So number one that's a great number number two if we're looking at the cumulative state reimbursements I mentioned this before 118 billion has gone out of the 350 billion Thats really been set aside for highway and bridge funds. So as a practical matter only 34% of the total funds have found their way out into.
Speaker Change: Commerce at this point in time, but if we also go back in time and say how does this usually play out that ticks and ties back into my commentary both on 25 and 26. So we're going to see a nice continued build over the next couple of years and again, if you look at the.
Speaker Change: Slide I guess slide.
Speaker Change: I forget which slide it is tricky in the supplemental material, but it did takes you through the ARPA snapshot of what these $25 26, and 27 will look like and then it shows the out years, but importantly, the out years are not showing what we anticipate will be unattractive successor Bill.
Speaker Change: Now to your point the successor Bill is already gaining some degree of dialogue in both the house transportation and infrastructure Committee as well as CPW and I'm seeing a couple of things one they arent talking increasingly about projects of regional and national scope. So look I think there's going to be.
Speaker Change: Less about bicycle trails, and a lot more about highways bridges roads and streets I mean, I think that's code for what that means, but importantly, too and this goes to the grabbing one of your question Sam Graves as you mentioned Republic from Missouri, who heads how C&I.
Speaker Change: Open to a dialogue here this week that needed to be opened and that is.
Speaker Change: He is looking at what are we going to do with Evs, what are we going to do with hybrid vehicles and how are they going to be in a position that they are helping pay for infrastructure when they're wearing out infrastructure just as much as the gasoline cars and in some respects more because these vehicles tend to be really heavy so actually what we're seeing is the revenue package.
Speaker Change: Put forward would begin from my perspective, a much overdue conversation and bring some fresh ideas to a problem that has long been avoided.
Speaker Change: The issue is simply this the gas tax and the diesel tax we're never indexed for inflation and if we go back and look at what's happened or more to the point not happened there since bill Clintons first term in office. It has remained utterly static so as a consequence, we have been having to go to the general fund for years and if you look over the last <unk>.
Speaker Change: 19 years, it's been to the tune of about $275 billion now do I think we're going to have to look to the general fund going forward, yes, probably so but do we need to have multiple drivers no pun intended.
Speaker Change: Putting funds into that Highway Trust fund the answers that we do and Thats what the states have been doing very effectively I think the fact that now we're having that conversation at a national level is important and it's really good start.
Okay I appreciate the color.
Speaker Change: Yes.
Speaker Change: And your next question comes from the line of Tyler Brown with Raymond James Your line is open.
Tyler Brown: Hey, good morning.
Speaker Change: Hi, Tyler, Hi, gentlemen, Hey, Hey, Bob actually cost performance was very solid in aggregate I know that there is some discussion with the peer that maybe some maintenance or stripping costs got pushed out on the weather one I guess I'm. Just curious if you saw the same thing in two can you just help us shape, how we should think about cost inflation for the rest of the year.
Speaker Change: I know you lapped the inventory pressures mid year, and then you're kind of looking at double digit gross profit per ton each each corner I appreciate it.
Speaker Change: Yes. Thanks for the question. So in the first quarter I would say that we saw just excellent cost management.
Speaker Change: By our operations teams.
Speaker Change: In light of the inventory reduction the team was very proactive. So if you look at energy and contract services on a per unit basis, they were down low double digits supplies and repairs kind of down in the mid single digit range.
Speaker Change: Again on a per unit basis. So overall I think just effective management, we do have a diesel fuel.
Speaker Change: Tailwind, that's helping us as well.
Speaker Change: The other thing I'll mention is if you back out the impact of the 72 per ton impact from the inventory.
Speaker Change: Drawdown, we were actually down two 3%.
Speaker Change: On a unit cost basis, so as we look forward, we expect in the future quarters.
Speaker Change: That we will see continued healthy expansion in gross margin.
Speaker Change: Perfect, Yes, thank you very much.
Tyler Brown: Thank you Tyler.
Speaker Change: And your next question comes from the line of Angel Castillo with Morgan Stanley. Your line is open.
Angel Castillo: Hi, Thanks for taking my question and again congrats on a strong quarter here, just maybe wanted to unpack a little bit more along the lines of that kind of <unk> and <unk>, but maybe more from the price perspective.
Speaker Change: You had some of your pricing maybe get pushed out to April. So just curious how should we think about the progression of price cost as we get into <unk>.
Speaker Change: As part of that could you talk about midyear is what you're seeing in terms of any pushback from perhaps those customers that have shifted to April or anybody else.
Speaker Change: Perhaps pushing back on it on an <unk>.
Speaker Change: Andrew Good morning. Thank you for the question. So several things one if we look at the pricing as reported up six 8%. So that was nice steady growth.
Keep in mind, we do have some April increases that are going in as well, so thats primarily to certain cement concrete customers.
Speaker Change: This is important angel if we're looking at in our organic business. The pricing was up about seven 4%. So actually you saw pretty healthy delta between as reported cumulatively in the organic business that tells me several things one yes.
Speaker Change: We continue to have some room ahead of us relative to assets that we have bought to get them up to Martin Marietta pricing.
Speaker Change: I think that also tells us that theyre going to be mid years in a number of markets and keep in mind. The guide that we have given you does not assume any mid year price increases and we're going to see degrees of midyear price increases.
Speaker Change: I think the other thing to keep in mind.
Speaker Change: Just from an optical perspective during the first quarter in particular, the central Division operations, because they tend to be more northern climate are not operating and not selling as much those will now start coming on and to play more meaningfully obviously in Q2 and Q3 their average selling prices tend to be more.
Speaker Change: Modestly lower now all of that said really as im looking at the ranges that we've given for pricing.
Speaker Change: At this point I'm thinking, we're probably going to be on the higher end of Asps relative to the guide that we've given and obviously, we'll come back and review the overall guide at half year as is our custom but I think if you think about pricing in Q1 strong. If you think about pricing relative to the organic business, particularly strong if you think about the <unk>.
Speaker Change: Price increases that we believe can be coming relative to the acquisitions.
Speaker Change: They look actually quite good and I think I've given you a sense of how I think thats going to play out for the full year Angel. So I hope that was responsive to your question.
Angel Castillo: Absolutely very helpful. Thank you.
Andrew: Take care Andrew.
Speaker Change: And your next question comes from the line of Anthony Pettinari with Citi. Your line is open.
Anthony Pettinari: Hi, good morning.
Andrew: Anthony.
Anthony Pettinari: Hey, Ward you referenced I think historically bad weather that you saw in North Texas in <unk> last year is there a way to think about or can you remind us sort of what the impact of that was or if there's sort of an add back. We can think about I'm just trying to kind of circle back on this you saw such strong.
Anthony Pettinari: <unk> gross profit per ton growth in <unk>, just wondering what that could look like in <unk> given some of the puts and takes when you look at I think it will look attractive in Q2 again I'd have to go back and pull out exactly what the hit was last year in Q2 because of the weather in North Texas, but.
Anthony Pettinari: It was notable Anthony and I know I spoke to it last year very specifically, we can go back and maybe take offline what that was.
Anthony Pettinari: But again I think we should see a nice sequential build throughout this year and keep in mind. The other thing that will happen by the time, we're done with Q2 as the inventory headwinds that we're working our way through we'll have been totally dealt with as Bob mentioned in his comments a few minutes ago. If we're simply looking at this quarter the inventory <unk>.
Anthony Pettinari: One was $28 million and we had indicated coming into the year that we thought it would be somewhere between 20 and $30 million a quarter in both quarter, one and quarter. Two so do I think quarter two ought to be more attractive simply because we don't anticipate.
Anthony Pettinari: Something thats epic in North, Texas in the quarter, Yes, I think we probably do do I think <unk> got a nice build also in quarter three because suddenly you don't have that real headwind from what we're going through right now relative to the inventories So Anthony I hope that helps.
Anthony Pettinari: Yes, that's very helpful I'll turn it over thanks.
Anthony Pettinari: Anthony.
Speaker Change: And your next question comes from the line of Timna Tanners with Wolfe Research. Your line is open.
Timna Tanners: Hey, good morning, guys.
Kevin: Kevin Good morning.
Speaker Change: Noticed the release to any share buyback in the quarter bigger than all of last year.
Kevin: <unk>.
Jim Nicolas: Question of Jim.
Kevin: But I didn't.
Speaker Change: Keep that level going forward and just any thoughts on the amount was it opportunistic because of where the share prices is that a commentary on a lull in M&A and any more color would be great. Thank you Tim.
Tim: Timna. Thank you for the question it was not a commentary on M&A, because I continue to think thats going to be attractive for us. This year. It was really more of a commentary that look we like where the share price was when we thought that was a great place to go in and buy so we bought 911000 shares and that was $450 million because we thought it was opportunistic and goodbye.
Speaker Change: No.
Speaker Change: And if you recall when we bought <unk> in 2014 2015.
Speaker Change: We had an authorization that point to buy back 20 million shares and if we look at where we are in that we bought back about half of that over that period of time. So we still have plenty of runway ahead of us.
Speaker Change: Importantly, if you look at where we finished the quarter relative to a debt to EBITDA ratio, we're still very much in the range that we'd like to be and obviously, we're about to hit the time of year, where we really start making considerable money as well. So no. It is not a commentary on a lack of M&A pipeline because in fact that actually looks quite good it is the commentary.
Speaker Change: The fact that we thought that was an attractive entry place for the stock and we proverbially put our money for home office. So thank you for the question no tender.
Speaker Change: Thanks.
Speaker Change: And your next question comes from the line of Steven Fisher with UBS. Your line is open.
Steven Fisher: Thanks, Good morning.
Speaker Change: Morning.
Speaker Change: Good morning.
Speaker Change: So back in February you would characterize the guidance as being sort of conservative guidance and I'm curious how you feel about that today is.
Speaker Change: Is there any conservatism you think you need to draw on in in Q1.
Speaker Change: Or the first four months of the year.
Speaker Change: Or that you see in Q2, and I know you just said a couple of questions ago that the.
Speaker Change: And this does include does not include the mid year. So I'm just curious how you kind of characterize the <unk>.
Speaker Change: Look today also in light of things have kind of changed a little bit in the macro backdrop.
Speaker Change: Thank you for the question they have changed a little bit in the macro backdrop, but what I will say is this youre right I forget whether we use the word measured or conservative coming out of.
Speaker Change: Coming into the year, but I think it was one of the other they're probably synonymous.
Speaker Change: Where I'm sitting today I actually feel better today than I felt in February so to the extent that we felt like it was some measured guide at the time.
Speaker Change: We feel that same way, maybe a little bit more strongly today than I did then obviously, we as we indicated in the prepared remarks, we come back and we'll revisit our guide at half year, which we typically do.
Speaker Change: We indicated I think our pricing is going to be at the <unk>.
Speaker Change: Higher end of that so obviously more to come but there's been nothing that I'm seeing in the way. This year is playing out and the way that our teams are responding well.
Speaker Change: Whether it's relative to cost whether it's relative to pricing, whether it's relative to what we're looking at from M&A that has been a disappointment to me I think our teams are performing well.
Speaker Change: Again, I think the business is revealing the type of durability, but I would respect expected to.
Speaker Change: Particularly given the significant portfolio shaping that we brought to the business last year seeing this nice margin enhancements are not a surprise to us. It is a nice affirmation on where the businesses and I think it gives you a good sense of where the business is going.
Speaker Change: Terrific. Thank you.
Speaker Change: Most of them.
Speaker Change: And your next question comes from the line of Michael Dudas with vertical research. Your line is open.
Speaker Change: Good morning, Jackie.
Jackie: Hey, good morning, Mike, we're having a hard time hearing you. If you can speak up just a little bit please.
Speaker Change: Yes.
Mike: Can you hear me now much better. Thank you so much Greg.
Speaker Change: Great terrific.
Speaker Change: I'm following up on <unk> question me turning to acquisitions has the macro environment looking at the sentiment amongst your acquisition pipeline changed materially.
Speaker Change: Have things been maybe pushed off a little bit because of the uncertainty in and we will take your temperature on where you feel like you've transformed portfolio quite a bit in the last 18 months.
Speaker Change: We had similar types of levels, given where the cash flows are going to be in your own balance sheet and the opportunities ahead of you given theres going to be some pretty reasonably sized assets, maybe coming out of the market.
Speaker Change: Great questions and I would say several things.
Speaker Change: One I don't see material changes in the sentiment on businesses that are looking to do M&A today I think it feels broadly the same as we've discussed before typically people aren't selling businesses because they are trying to time it in our space. They are typically doing it relative to family succession.
Speaker Change: Other issues that drive M&A, so we havent seen that as a significant issue for us.
Speaker Change: As I've also indicated before I think we're in a place that given take normal year is going to be around $1 billion worth of M&A.
Speaker Change: But don't expect that to be linear they're going to be years that it's likely going to be notably more than that and again I think in some respects M&A can be a little bit like the buybacks that we did this year. It can have a head of opportunism that comes with it because if some businesses come along that are particularly compelling <unk>.
Speaker Change: As.
Speaker Change: Youll see us lean in the <unk>.
Speaker Change: Smart and sensible about our business because you are frankly, not going to see it come through again, so what am I seeing anything that I would view as a material change no do I think it will continue to be an attractive year for us on aggregates led M&A, yes.
Speaker Change: Do I think thats likely to be the case.
Speaker Change: Not for a matter of quarters, but really for a matter of years and likely through this next soar 2030 period I think the answer's undeniably, yes, because when I'm looking at simply closely held aggregate businesses in markets in which we want to grow.
Speaker Change: We've identified businesses that produce and sell let's call. It 250 million tons of stone per annum, right now, which tells US there's effectively a business out there thats modestly larger than Martin Marietta is today.
Speaker Change: That would be in something that we would think of as our sweet spot. So I think there is there's a lot that's been done on shaping there's a lot that's going to be done over the next several years and decades and growing this business and continuing to shape it and doing it in ways that hopefully you will continue to see more profitability, but youll see continued margin expansion.
Speaker Change: And the quality of the business continued to grow.
Speaker Change: That's a lot of rock out their award good luck.
Speaker Change: Thanks, so much.
Speaker Change: And your next question comes from the line of David Macgregor with Longbow Research. Your line is open.
David Macgregor: Hello, everyone and congrats on a good quarter, where I work.
David Macgregor: Thank you David I, just wanted to yeah I wanted to just take your temperature I guess this is.
David Macgregor: As an M&A question of sorts, but.
David Macgregor: It would relate to just any changes youre seeing in the permitting prospects out there in the permitting process.
David Macgregor: Improve your ability to increase reserves oriented acquisitions.
David Macgregor: It's interesting David I don't see that changing notably in I would say several reasons why obviously there is.
David Macgregor: A certain degree of aggressiveness relative to the regulatory state that's underway with the current administration and frankly I'll welcome that the fact is the regulatory state that drives what's happening relative to permitting greenfields, adding reserves et cetera.
David Macgregor: <unk> not to be a national issue it tends to be a local issue. So is it a national issue relative to an air quality permit sort of kind of as is it a national issue relative to water quality and discharged yeah, it's sort of kind of us, but the bigger issues arent those the bigger issues are zoning and the bigger issues are land use.
David Macgregor: Relative to either conditional use permitting or special use permitting and those tend to be decidedly local and when I say local I don't mean to the state level I mean.
Speaker Change: At the city level or the county level.
Speaker Change: And the fact that those barriers to entry are notable.
Speaker Change: I think it's important it also plays to the strength that we have relative to land use part of what Youll see us do and you can see that some of the Capex numbers is we will buy properties adjacent to our existing operations.
Speaker Change: And recognize that we can go through especially use zoning process on those parcels that at times can take years and thats. Okay. Because we typically have long lived reserves, but when we get those adjacent reserves zoned and permitted two things happen one the setbacks that we have on our existing.
Speaker Change: Inquiries basically go away.
Speaker Change: And then we also have opened up to us the new reserves that we've just bought so the fact is we ended up winning twice under those circumstances. So do I think it's changing relative to Greenfield Ing no I don't think it's going to continue to be a challenge in many instances do I think it's changing relative to next door no doubt.
Speaker Change: And do I think there is opportunity at the national level to change that actually I really don't because this ends up being a highly local issue and it's an area in which Martin Marietta has long head.
Speaker Change: <unk>.
Speaker Change: Very capable resource and we've done that well so I hope that helps David.
David: Yes. It does thanks, Bart good luck, Hey, Kara Thank you.
Speaker Change: Your next question comes from the line of Brent Thielman with D. A Davidson your line is open.
Brent Thielman: Hey, great.
Speaker Change: Good morning.
Speaker Change: The detail I appreciate all the color around the federal funding.
Speaker Change: Visibility here.
Speaker Change: Great.
Speaker Change: I think the other side of the question that we seem to get.
Speaker Change: Is on the state side, I mean, as you sort of scrutinize some of your largest states on the public infrastructure side and the mechanisms for funding infrastructure projects.
Speaker Change: Be curious whats your assessment your experience as to whether there is risk of reallocation within those state budgets away from transportation funding, especially if the economy.
Speaker Change: Yes.
Speaker Change: Begins to see a shortfall in tax revenue.
Speaker Change: Brian. Thank you so much for the questions. So I would say several things one.
Speaker Change: If we're looking at Texas, Florida, North Carolina, Indiana, Georgia, Colorado, Arizona, Iowa, as I indicated pro forma comments.
Speaker Change: Our top 10 states eight of them are seeing budgets.
Speaker Change: Year over year that are up and Thats, particularly true if we're looking at their baseline budgets I think more importantly, if we go and look at some of the information on those individual states themselves and really think about that.
Speaker Change: I mean, if we're looking at the 2025.
Speaker Change: Approved increasing for Texas long term 10 year program, its already up 4% to $104 billion.
Speaker Change: If we look at how that translate if we're looking at our March 25 aggregates backlog for customers in that state. They are up about 18%. So again these state budgets matter.
Speaker Change: If we're looking at Colorado, they expect to have about $3 7 billion available to spend in FY 'twenty five and that's a new.
Speaker Change: A nice increase over what we've seen in recent years equally in North Carolina. Their budget has increased year over year, but important importantly, this goes back to the question I had before relative to federal budgets in North Carolina did something that was important and they started taking sales tax revenue and shifting back to the highway fund and beginning in 2025.
Speaker Change: That goes up to 6% here in the state.
Speaker Change: And if we're even stepping back and looking at what has to be done.
Speaker Change: Obviously hurricane Helene came through created a lot of mayhem in the western part of the state and we're seeing nearly $5 billion worth of work that has to be done there $3 billion of it will come from the federal government.
Speaker Change: 2 billion from the state in North Carolina has a $6 billion rainy day fund.
Speaker Change: Part of the reason I call all of this out.
Speaker Change: When we began our store process in 2009 and 2010, we were looking to do business in states that had a very very strong physical condition. Because we believed that was going to be important as state populations continue to grow and we wanted to be in states that had the capacity to continue to grow what theyre seeing from a <unk> perspective again, that's what we're seeing in Georgia as well.
They've got a 7% increase this year from the original 2020 for FY budget FY 'twenty four budgets. So I think if we look at the federal side that you mentioned and then go to the state side that you specifically asked about aided the top 10 are up and then if you take even within a sub.
Speaker Change: Subset of those 10 and start looking at precisely what we're seeing it's a very healthy story.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And your next question comes from the line of Adam <unk> with Thompson Davis Your line is open.
Speaker Change: Hey, good morning, guys nice quarter. Thanks.
Speaker Change: Thanks, Ed.
Speaker Change: When you talk about data centers and the associated power demand toward are those projects.
Speaker Change: Thinking about those as a driver in 2025 or is that more 2026 plus.
Speaker Change: I think thats more 2026, plus so I think in the near term you're going to see more activity on data centers and I think that's going to be pretty significant I think in the near term you will see growing activity on warehousing I think in the medium to longer term youre going to see more energy activity. I mean for example, we've got local power companies talking about small.
Speaker Change: Nuclear facilities for the first time in years and the fact is we're going to have to see a number of those types of things. It's been interesting to watch what's happened in Europe. This week relative to Spain, Portugal and other countries.
Speaker Change: And I do think the United States is going to have to be really thoughtful about the way that we're going to continue to grow in light non res and we're going to continue to see population shifts and dynamics to the southeast and southwest and these states in particular are going to have to be ready for that type of power transition.
Speaker Change: Got it thank you thank.
Speaker Change: Thank you Adam.
Speaker Change: And your next question comes from the line of Keith Hughes with true Securities. Your line is open.
Speaker Change: Alright. Thank you award I wanted to go back to your comment on potential new legislation is.
Speaker Change: Are there any kind of timeline of emerging when that was formally introduced in congress potentially pushed down the law.
Speaker Change: There hasnt been anything formal Keith Thats come out, but I will tell you anecdotally, what I'm hearing and that is I think theres going to be a push to get that done.
Speaker Change: Before the mid terms next year.
Speaker Change: I think there are practical reasons that people are going to want to see that done I think the other thing that it does is it makes the takeoff for the next bill much smoother I would not be surprised to see a headline bill that's less than one two trillion, but I'd be really surprised to see within that built the same geos.
Speaker Change: Feed that we saw this last time, one two trillion dollars build that had $350 billion dedicated to highways bridges roads and streets. That's not the way I think this is going to come out. So I think we're going to see several things one I think what you've seen in housekeeping on this week relative to funding is a good part of an overall conversation.
Speaker Change: Odyssey House C&I would take the lead on putting this out that's the way that historically has worked so they've taken the lead EP W is solid but I still think it's going to be something that we will see done before midterms Keith.
Speaker Change: As the talk in the I'm not sure lobbyists and trade groups something greater than the full roads bridges streets.
Speaker Change: Something greater than the 348 billion that we saw and IH II.
Keith: That's certainly where people are trending yes Keith.
Keith: Alright. Thank you. Thank you so much.
Speaker Change: And your final question comes from the line of Garik <unk> with loop capital. Your line is open.
Speaker Change: Oh, hi, thanks, and congrats on the quarter I wanted to just follow up on comment you made toward that.
Speaker Change: Feel better now on the outlook then you did after <unk> I wanted to come specifically drill down on the volume piece.
Speaker Change: The concern on private construction with affordability.
Speaker Change: Consumer confidence issues is it fair to assume the outlook.
Speaker Change: We had a lot of discussion on infrastructure, but fair to assume that your outlook for infrastructure. This year, maybe directionally stronger than it was.
Speaker Change: Was coming out of the fourth quarter.
Speaker Change: Yes, Garik I think that's entirely fair I mean, if we think about Q1, if I look at the breakdown that we had 33% was infrastructure, 36% was non rose 24% was rise.
Speaker Change: Look I think going forward, we're clearly going to see that 33 get get bigger and I think we should.
Speaker Change: Given the quantum of projects that are out there given their relative aggregates intensity that number should move that to me is a seasonally driven number at the same time I think people would be surprised that 36% was non res. So the fact is we go to the point that the heavy side of that is actually doing pretty well the light side of it frankly in some areas are doing better.
Speaker Change: Then people would have thought at this point.
Speaker Change: We're not putting a lot of stock and what happens on residential all by itself. The things that I think is worth, noting though is residential and at least in our markets is so far from being overbuilt.
Speaker Change: Really almost ridiculous.
Speaker Change: If we're looking at builders are focused on right now they are focused on and this goes back to part of the question that David Macgregor as builders are finding that it's taking more time to get zoning and special use permitting for subdivision. So their notion of buying land and then getting entitlements in place is important we think they are focused on that.
Speaker Change: Tenured to believe look don't put a lot of money on housing on the second half of this year, but we will see that come it's not going to take a lot of movement relative to interest rates, our home prices to have it moved pretty notably in our markets and the fact is we're well positioned to meet that whenever it does show up.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you Karen.
Speaker Change: And my apologies now our final question is from Brian Brophy with Stifel. Your line is open.
Speaker Change: Hello. This is Andrew <unk> on for Brian. Thank you for taking my question.
Speaker Change: Had a quick one on pricing opportunities for prior M&A I believe some of the M&A you completed in the past here generally had asps below corporate averages I was wondering where you stand on closing that gap and then separately. How are you thinking about the potential for mid year price increases in markets, where last year's M&A won't be a tailwind.
Speaker Change: Thank you. Thank you so much Andrew it I would say several things so as I indicated organic pricing. We saw seven four reported was up six eight that gives you a pretty good snapshot right. There on what's the difference between the M&A sites that we've had and the organic that we've had there's some places for example in California, where we have now.
Close that gap.
Speaker Change: Factors from my perspective, California, Shouldnt be at a corporate average.
Speaker Change: Barriers to entry in California are higher the difficulty in doing business in California is higher so the fact that we've closed that gap is nice but it doesn't indicate to me that we finished the journey that we started on there.
Speaker Change: I do think we will see a number of mid year price increases as I indicated before I think the quantum will probably look a bit like it did last year more to come on that we'll talk more about that when we're together at half year, but directionally I hope that gives you a sense of where we are and where I think we are going.
Speaker Change: Great. Thank you.
Speaker Change: Welcome.
Speaker Change: Sure.
Speaker Change: And that concludes our question and answer session I will now turn the conference back over to Mr.
Speaker Change: <unk> for closing remarks.
Speaker Change: Abby. Thank you and thank you all for joining today's earnings call, while the unpredictability of policy shifts heightened broader economic uncertainty, we remain confident about Martin marietta's ability to appropriately navigate these conditions since 2010, we've transformed the durability of our portfolio and positioned our business in attractive markets through disciplined execution.
Speaker Change: <unk> of our store plans, we built a strong foundation to continue extending Martin Marietta has long track record of delivering sustainable growth and superior value creation for investors for years to come we look forward to sharing our second quarter 2025 results in the summer as always we're available for any follow up questions again. Thank you for your time and continued support.
Speaker Change: <unk> of Martin Marietta.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.