The operator introduces the Martin Marietta's Fourth Quarter and Full Year 2023 Earnings Conference Call, and reminds participants that the call is being recorded. The host, Jacklyn Rooker, introduces the CEO and CFO and mentions that the discussion may include forward-looking statements. She also reminds listeners to refer to legal disclaimers and supplemental information available on the company's website. All financial and operating results discussed are for continuing operations and non-GAAP measures are defined and reconciled in the appendix.

In the second paragraph, Ward and Jacklyn begin the earnings call with a discussion of Martin Marietta's financial highlights and operating performance in 2023. They mention that the company achieved record financial performance and strong safety results, despite challenges in the macroeconomic environment. They also highlight the successful execution of their strategic plan, the strength of their geographic footprint, and the resilience of their aggregates-led business. They end by mentioning a recent acquisition that will further expand their aggregates platform.

In February 2024, the company entered into an agreement to acquire the Alabama, South Carolina, South Florida, Tennessee, and Virginia aggregates operations of Blue Water Industries, which will add 1 billion tons of high-quality reserves and enhance their product mix. This, along with other recent acquisitions and divestitures, is expected to generate significant adjusted EBITDA in 2024. In the fourth quarter of 2023, aggregates pricing increased by 15%, leading to record gross profit and gross profit per ton.

Despite a 2.1% decrease in aggregate shipments, the company's sales team was successful in securing profitable deals for their valuable reserves, resulting in record-breaking financial performance in 2023. This was driven by strong organic earnings growth and successful price increases to offset high cost inflation. In 2023, the company saw a 4.3% decline in aggregate shipments, but strong pricing increases of 18.9%. Cement shipments also decreased, but pricing increased due to favorable market conditions. The company's downstream businesses saw a decrease in ready-mixed concrete shipments due to a divestiture, but strong pricing increases. Asphalt shipments and pricing both saw increases. The company's financial results and market trends will be discussed further by Jim.

Jim Nickolas, speaking at a conference, discussed the recent sale of the company's South Texas Cement plant and related operations. The revenues and profits from these assets are included in the 2023 earnings and 2024 earnings guidance. The acquisition of Colorado assets is also included in the forward earnings guidance. However, the pending Bluewater Industries transaction is not yet closed and will be included in future earnings guidance. The Building Materials business achieved record revenues and gross profit in 2023, with the aggregates business also achieving all-time record revenues and gross profit. This was driven by solid pricing growth despite lower shipments, showcasing the success of the company's value over volume strategy. The Texas Cement business also had another strong year of record results.

In 2023, the company saw a 17% increase in revenues and a 64.6% increase in gross profit, driven by favorable supply and demand in the Dallas-Fort Worth Metroplex and energy cost benefits. The new finish mill at their Midlothian, Texas plant is expected to add 450,000 tons of annual production capacity. The company's targeted downstream businesses also saw increases in revenues and gross profit, with strong demand and lower costs contributing to growth. Despite weaker demand in certain markets, the company's disciplined capital allocation priorities have allowed them to invest $650 million into their business and return $324 million to shareholders in 2023. Since 2015, they have returned a total of $2.6 billion to shareholders through dividends and share repurchases.

Martin Marietta has a strong financial outlook for 2024, with a net debt to EBITDA ratio just below their targeted range. The company is well-positioned to take advantage of long-term trends in the construction industry, with expected growth in infrastructure and public construction offsetting potential softness in the residential sector. The recent passing of the Infrastructure Investment and Jobs Act and record State DOT budgets are expected to drive steady investment and demand for Martin Marietta's products, particularly in key states like Texas, Colorado, California, Georgia, and Florida.

The company's investment in infrastructure has strong bipartisan support, with voters approving transportation-related initiatives and increased funding. Demand for aggregates in the heavy industrial sector is expected to remain steady due to large manufacturing and energy projects, while the light non-residential sector may see some moderation in demand in 2024. Manufacturing projects, particularly in the areas of semiconductors and electric vehicle batteries, continue to drive demand for aggregates.

Martin Marietta expects the single-family residential slowdown to recover due to declining interest rates and favorable population trends. They anticipate another record year in 2024, with flat aggregate shipments but double-digit pricing growth. They are confident in their expectations for consolidated adjusted EBITDA and remain committed to employee safety, operational excellence, and sustainable business practices. They aim to continue driving responsible and profitable growth in the future.

The operator asks for questions and the first one is about the recent acquisition announcement and how it affects the company's full year guidance. The speaker explains that they have closed two transactions and the acquired business will bring in around $40-45 million of EBITDA, while the divested business will take away around $170 million. The Bluewater acquisition, which will bring in around $135 million of EBITDA, is not included in the current guidance but will be updated once it closes.

The speaker is discussing the impact of January weather on the company's first quarter earnings. They mention that last year's first quarter was unusually good due to favorable weather, but this year's first quarter is expected to be lower due to challenging weather. The speaker also notes that the last two weeks of March can heavily influence first quarter earnings. They then turn to another speaker for more details on the expected cadence of earnings for the first quarter. The second speaker explains that last year's first quarter represented 15% of gross profits, while this year's is expected to be around 11.5%. They also mention that the following quarters are expected to have a slight increase in profits compared to last year.

Ward Nye, CEO of Martin Marietta, discusses the company's performance in January and February and addresses a question about SOAR 2025, their five-year strategic plan. He highlights their success in doubling their market cap in previous SOAR plans and mentions their focus on commercial execution, with an 11% increase in average selling prices expected for this year. He also mentions the possibility of mid-year adjustments, similar to what happened in 2023.

In response to a question about M&A activity, the speaker emphasizes the company's focus on aggregates and mentions recent transactions and a strong pipeline. They also mention the importance of commercial discipline and operational excellence in creating shareholder value. The speaker then addresses a question about gross profit per ton guidance, stating that it implies a slight increase in cost per ton compared to the previous year.

The speaker is discussing the expected inflation in the company's cost inputs for the rest of the year. They mention that overall, inflation will be in the mid to high single-digits range, but there are some areas that will see higher inflation, such as oil lubricants and parts for the plants. Labor is not expected to be a major cost driver. The assumption for diesel prices is slightly higher than current spot prices.

Ward Nye, the speaker, is responding to a question from Angel Castillo about recent acquisitions. Nye mentions that the previous business in Colorado was doing 3.5-4 million tons of stone per annum and that the Denver market is attractive. He also mentions that the barriers to entry in the hard rock market can be high. Nye is confident in their team in Colorado and believes the marketplace will continue to be attractive. He also mentions the Walstrom quarry and the Spec AGG quarry as attractive positions in the marketplace. Nye then talks about the Bluewater acquisition, which has not yet closed, and mentions that it could potentially add 13 million tons of stone.

The speaker discusses the company's recent expansion into new markets and the potential for increased efficiency and cost savings. They also mention their strong performance in terms of price/cost spread, which is higher than historical averages in a flat demand environment.

The speaker discusses the industry's experience with hyperinflation and whether the fear of inflation will continue beyond this year. They mention that their company took steps to protect against inflation and that their long-lived reserves are valuable and difficult to replace. The company thinks about their business in terms of decades and recognizes the importance of their product in heavy side development.

The speaker discusses the company's perspective on the cost and value of their product, aggregate, and how it factors into their overall business strategy. They also mention their plans for future growth through responsible and strategic acquisitions, and the potential for continued success in the commercial market. The speaker also addresses the company's current and future financial leverage.

The company has been acquiring new businesses and expects to see more transactions this year. The CEO believes that the current year will be busy and that there will be more pure stone type transactions. The company is expecting flattish volumes for the full year, but the CEO remains optimistic about the future and believes that volumes could potentially increase in the back half of the year and into 2025.

The company is considering bringing in Frei, which would add 3.5 million tons to their production. However, the sale of the Hunter cement plant also included some stone production, which accounted for about 2 million tons. This, along with the seasonal impact of their business in Colorado, leads the company to believe that their overall production will remain relatively flat. They anticipate a slow recovery in housing and non-residential construction in the second half of the year, which may lead to increased volumes in 2025. The company also expects a strong infrastructure market, with an 11% CAGR in highway contract awards and an average increase of 10% in DoT budgets, with some states seeing even higher increases.

The speaker discusses the growth of their business in Minnesota and the potential for increased volumes in the second half of the year. They also mention the growth in manufacturing, energy, and data centers in various locations across their geographic footprint. They believe that the second, third, and fourth quarters could be strong, but they also acknowledge the strong performance in the fourth quarter of the previous year. The speaker then addresses a question about their CapEx guide.

The speaker asks about the high CapEx number and if there was any significant spending in land acquisition. The CFO responds that there are a couple of large projects contributing to the higher number, including the finished mill seven project and an upgrade to the Beckman plant. The CEO adds that they have also been taking advantage of opportunistic real estate purchases. Another question is asked about the recent M&A and divestiture activity.

The speaker discusses the changes in capital expenditure and allocation due to the divestment of some cement assets and focus on aggregates. They mention the importance of finding the right transactions, reinvesting in the business, and returning cash to shareholders through dividends and share buybacks. They also mention that the company's capital allocation priorities remain consistent and that the changes in the portfolio will not affect their approach to CapEx.

The speaker expects the company's CapEx to remain consistent with historical levels, with a heavier focus in Q1 and Q4 and lighter in Q2 and Q3. However, opportunistic land purchases may disrupt this pattern. The company has the ability to adjust CapEx as needed and has seen improved cash flow and conversion ratios.

The speaker discusses the positive impact of the IIJA and provides details on the expected benefits, including increased funding for roads, railroad maintenance, and airport infrastructure. They also mention the increase in infrastructure funding by NC DoT and the potential for federal money to flow through.

The paragraph discusses the flow of transportation funds in various states, including Texas, Florida, and California, and how they are expected to increase in the future due to federal funds. The company's infrastructure volumes were also up, indicating the potential impact of these funds. The company also mentions their appetite for bolt-on acquisitions and their potential willingness to tap into the capital markets for the right deal.

Ward Nye, CEO of Martin Marietta, answers a question about the company's acquisition strategy during a conference call. He states that the company would be open to the right acquisitions, as they have the capacity to bring down leverage quickly. He also mentions that the company's pro forma gross profit mix for 2024 will be 77% aggregates, but they expect this number to continue to grow. Nye also mentions the successful divestment of their South Texas business and hints at potential sell-side opportunities in the future.

Ward Nye, the CEO of a company, discusses their business strategy and growth plans. They are the largest aggregates and cement producer in Dallas and have high margins in the cement business. They plan to continue growing their aggregates business and have a value over volume philosophy. The company is not able to provide specific details about their cement business due to competitive reasons.

During a conference call, Jim Nickolas, a representative from a cement company, discusses their business strategy and outlook for the upcoming year. They plan to maintain margins and increase pricing in North Texas, with a focus on maintaining relationships with customers. The discussion also touches on aggregates pricing and the impact of location and relationships on negotiations.

The speaker discusses the potential impact of midyear price declines on the company's performance, noting that they have already announced a $2 per ton increase in California. They also mention that their customers are typically not the owners and are cost-plus, and that the price of stone is not the main factor in project selection. The speaker believes that the company's performance will likely trend towards the norm set by Martin Marietta, but does not expect to see the same level of price performance as in 2023. They also mention the challenges of replacing reserves and building new quarries in urban areas.

The company is not expecting any disruptions or inefficiencies in cement margins due to the gradual implementation of a new finishing process. They believe the market demand will fit nicely with the new process and enhance margins. The company expects a 2% decrease in aggregate volumes, with the value over volume strategy playing a role in this decrease. However, this strategy has shown to have a positive impact on shareholder returns.

The speaker discusses the company's decision to keep reserves in the ground or in stockpiles in order to sell them at a higher price later. They also mention the positive impact of infrastructure and residential projects on their business, as well as the potential for large non-residential projects to greatly impact their volumes. The speaker clarifies that data center weakness in Q4 was not as significant for their company as it was for others.

The speaker discusses the current state of the warehousing and data center market, noting that some areas are experiencing moderation due to high comparisons, but others are remaining resilient. They also mention the potential benefits of the IIJA and state that it is still in its early stages. The speaker concludes by thanking the audience for joining the call.

Martin Marietta has reported impressive results for 2023, which demonstrates the strength of their aggregate flood business and their value over volume market approach. They are confident in their ability to continue delivering strong performance through their strategic priorities and commitment to excellence. With their solid foundation, experienced teams, and positive outlook, they anticipate continued growth and value creation for shareholders. They look forward to sharing their first quarter 2024 results and are available for any follow-up questions. The conference has now ended.

This summary was generated with AI and may contain some inaccuracies.