The operator welcomes participants to Martin Marietta's first quarter 2024 earnings call and reminds them that the call is being recorded and will be available for replay. The call will be hosted by Jacklyn Rooker, the company's Director of Investor Relations, and will include forward-looking statements. The company is subject to risks and uncertainties and will update any forward-looking statements as legally required. Supplemental financial information is available on the company's website. Non-GAAP measures will also be discussed and are defined and reconciled in the appendix to the supplemental information and SEC filings.

Howard Nye, CEO of Martin Marietta, will begin the earnings call with a discussion of the company's first quarter performance and recent transactions. He will also touch on market trends and the company's adherence to its Strategic Operating Analysis and Review plan. Jim Nickolas will then review the financial results and capital allocation, followed by Howard's concluding remarks. A question-and-answer session will follow, limited to one question per participant. Martin Marietta has raised their full-year 2024 adjusted EBITDA guidance and executed $4.5 billion in portfolio-enhancing transactions, positioning the company for continued growth and outperformance.

In the first quarter of the year, Martin Marietta completed two acquisitions in the aggregates industry, adding 17 million tons of annual shipments and $180 million of annualized EBITDA. Despite a decline in aggregate shipments due to weather and softening demand in certain areas, the company's pricing fundamentals remain strong. Martin Marietta is optimistic about the future of the aggregates market in the public works, non-residential, and residential construction sectors.

Martin Marietta expects continued growth in their chosen markets, including public infrastructure, US-based manufacturing, energy projects, and data center construction. They also anticipate a housing recovery in the future. The Infrastructure Investment and Jobs Act is expected to drive further growth in infrastructure projects. The American Road and Transportation Builders Association predicts a 16% increase in public highway construction in 2024. This, along with state and local government investments, will lead to sustained demand for aggregates. Manufacturing projects also continue to be supported by reshoring efforts.

The article discusses the positive trend in construction spending for domestic manufacturing and data center construction, driven by the increasing demand for cloud-based services and artificial intelligence. However, the non-residential market is expected to face challenges due to higher interest rates and office vacancy rates. On the other hand, the residential market is showing positive trends in single-family housing starts, indicating a recovery from the previous year. The company expects to benefit from new home construction once interest rates moderate. The first-quarter financial results showed an increase in adjusted EBITDA and aggregates gross profit guidance for the full year.

The updated guidance for aggregates gross profit includes a one-time non-cash impact related to the Blue Water acquisition. The Building Materials business saw a decrease in revenues and gross profit due to the divestiture of a business and adverse weather conditions. However, aggregates gross profit increased and gross margin improved due to effective commercial discipline and cost management. The Texas Cement and downstream businesses also saw a decline in revenues and gross profit, primarily due to the divestiture of a cement plant and wet weather. A new finish mill is expected to be operational in the third quarter of 2024. The asphalt and paving business experienced a gross loss due to seasonal shutdowns and unfavorable weather conditions.

Magnesia Specialties had a strong first quarter with record gross profits despite a decrease in revenues. The company's focus remains on responsible growth, returning capital to shareholders, and maintaining a strong balance sheet. Martin Marietta is well-positioned to benefit from infrastructure growth and has a resilient and successful business model.

The operator has given instructions for the question-and-answer session, and the first question comes from Kathryn Thompson, but she is on mute. The next question is from Trey Grooms about the integration of AFS and BWI and the company's view of the demand environment. Howard Nye answers by saying that the integration has gone well and the transactions closed smoothly. He also mentions that the team is experienced and that the operations are now under Martin Marrietta.

The integration of blocking, tackling, and people has been completed successfully. The early closing of Blue Water has allowed for quick wins in commercial and operational excellence, such as favorable supplier contracts. There may be some CapEx in the future for plant upgrades and fleet modernization. BWI did not come with any corporate SG&A. Overall, volume is expected to be between -2 and +2 due to weather impacts.

The speaker discusses the factors that contributed to a decrease in shipping volume in the first quarter, including fewer shipping days, slower private business, weather, and a focus on value over volume. They also mention that the company's acquisition of Blue Water has positively impacted their EBITDA and that they are seeing improvement in their Heritage business as well. The company's new EBITDA mid-point is 11% higher than last year.

The company has raised its aggregate pricing to 12%, which includes some mid-year pricing. Despite the headwinds from new businesses, the pricing is still above that of Heritage Martin Marietta. The company had a good quarter for its Magnesia Specialties segment, which could be a positive sign for the broader macro perspective.

The company has recently acquired Blue Water and has already promised mid-year increases to customers in California. These increases have been factored into the current numbers, but more mid-year increases are expected. The chemical markets are still difficult, but Mag Specialties had its best quarter ever. The steel industry is doing well, and TPO roofing is expected to see growth due to the increase in manufacturing in the United States.

The speaker discusses the end markets for the company and notes that infrastructure is their largest end-use, with expected growth due to the bipartisan infrastructure law and healthy budgets in their chosen geographies. They also mention an increase in highway bridge and tunnel awards over the past 12 months.

The speaker discusses the current state of infrastructure and non-residential construction, mentioning the $7 billion of transportation funding approved in 2023 and predicting a mid-single digit decrease in non-residential construction. They also mention the breakdown of their business between heavy and light non-residential construction and the demand for heavy non-residential products in industries such as energy and domestic manufacturing. The speaker also notes the potential growth in AI and data centers, particularly in the Midwest where they have a strong presence. They predict that light non-residential construction will be impacted by high interest rates and office vacancy rates.

The speaker discusses the current state of the housing market and predicts that there will be continued softness in the single-family housing sector due to higher mortgage rates. However, they also mention encouraging trends in single-family housing starts and predict long-term attractiveness in the sector. They also mention the potential impact of infrastructure and non-residential construction on the company's portfolio mix.

The speaker is asked about the long-term target percentage for the company's aggregates and cement assets. He responds by saying that the company is primarily focused on being an aggregates-led company, and their recent moves are consistent with that. They will continue to invest in their strategic cement assets, such as the Midlothian plant, and the Magnesia Specialties business is a highly profitable one that they will continue to grow responsibly. Overall, the company's focus remains on being an aggregates-led company.

During the conference call, the speaker discussed the company's focus on its three main upstream businesses – aggregates, cement, and Mag Specialties – which are responsible for the majority of its revenues and profits. They expect the percentage of gross profit from aggregates to continue to increase. The company also mentioned their strategy for growth through M&A, focusing on markets where they can grow and taking advantage of their strong balance sheet. They have been making smart and prudent transactions in this regard.

The company has identified potential businesses to buy in new markets and believes they are uniquely positioned to do so. Their team is skilled at identifying, contracting, and integrating these businesses, and shareholders have been satisfied with their M&A strategy. The company's capital priorities remain the same, with the first call being the right deal, followed by responsible investment in the business and returning cash to shareholders through dividends and share repurchases. These priorities are expected to continue for the foreseeable future.

The speaker is asked about the company's valuation and opportunities for growth through mergers and acquisitions (M&A) or greenfield projects. They explain that the company is able to bring down the perceived high multiples of M&A deals through synergies and efficiency improvements. They also mention the company's expertise in land use and planning, but believe that future growth will come more from expanding adjacent to existing operations rather than starting new greenfield projects. They also note that a four-year timeframe for a greenfield project is ambitious.

The speaker believes that a more realistic timeframe for meaningful profit in buying a business is 7-10 years. They also mention that their current reserves can last for nearly 70 years at current extraction rates, so there is no urgent need for greenfield locations. They plan to focus on M&A and adding reserves to existing locations, while also making opportunistic land purchases. The speaker also mentions that they are seeing a 7% COGS per ton inflation for the full year.

The speaker believes that the inflation rate will be higher in the first half of the year and lower in the second half, with an overall average of 7%. They attribute this to tailwinds in the first quarter that will fade as the year goes on. They also mention a potential offset in the non-residential sector, but believe that the heavy side will remain strong. However, they expect softness in the light, non-residential, and residential sectors due to higher interest rates and potential loss of market share. This leads them to predict lower organic volume in aggregates for the year.

The speaker, Howard Nye, responds to a question about the Texas cement market after the company's divestiture. He mentions that the weather was wet at the beginning of the year and that April's cement increase is going well. He also talks about the company's increased grinding capacity in Midloadian and their plans for a potential price increase in September. Nye notes that the North Texas market is healthy and the pricing environment is good, and that the company treats their own business in the same way as other customers. He also mentions that the ready mix business is performing well despite weather challenges, and that the overall gross profit for ready mix has increased.

Howard Nye, CEO of Martin Marietta, was asked about the progress of the company's legacy Heidelberg assets, specifically in California. Nye stated that they are still in the early stages of optimizing pricing in California and are focused on growing their aggregates business in the state. He also mentioned that the Frei and Blue Water businesses, which are in Southeastern markets, may see a similar timeline for improvement as California.

During a discussion about data centers, Howard Nye, CEO of Martin Marietta, mentions that the company is being cautious about the market due to potential roadblocks such as land availability and energy supply. However, he also notes that Martin Marietta has an advantage due to their presence in the central United States, where they have four data centers under construction. Nye believes that this will be a differentiator for the company in the near term, with potential for growth in the Southeast, Texas, and the Southwest in the future.

Howard Nye, CEO of a company, discusses their value over volume strategy with an analyst. He believes their products have been underpriced and that they offer a valuable service in the construction industry. Despite a decrease in volume, their prices have increased, leading to margin expansion. Nye believes it is important to emphasize value to their customers and that it has been well received by them.

Howard Nye, CEO of the company, responds to a question about the impact of weather on the company's pricing strategy. He believes that the company is in a different economic cycle and that pricing should not be based on the way it was four to five years ago. He also mentions that the company has made progress in portfolio management. He does not think that there will be any pressure on pricing in the second quarter and expects to see growth in the mid-year and beyond.

The speaker, Howard Nye, is responding to a question about the weather and its impact on pricing. He explains that the weather in Texas had a significant effect on pricing, particularly in terms of cement. He also mentions that the company has been introducing a new pricing strategy over the past 18-24 months, and that the weather did not put undue pressure on the company's pricing for the rest of the year. He also mentions that they may consider price increases in cement in September. The next question is about the data center and its comparison to a warehouse. Nye confirms that the data center mentioned in their presentation is normal in terms of size, and he also mentions that the company is cautious about this area.

Howard Nye is discussing the size and construction of a large warehousing project. He believes that the amount of base and concrete needed is consistent with other similar projects and that the use of concrete tilt-up walls and TPO roofing is typical. He also mentions the advantage of being close to market centers due to the location above their underground mine.

During the Q&A portion of the earnings conference call, Timna Tanners expressed appreciation for the company's commitment to safety, commercial and operational excellence, and sustainable business practices. Howard Nye, the presenter, thanked her and reiterated the company's confidence in its best-in-class teams, strategic plan, and growth opportunities. He also mentioned that they will share their second quarter results in the summer and are available for follow-up questions. The operator then thanked the presenters and concluded the call.

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