Aggregates success is driving Martin Marietta into fast forward

MLM (Martin Marietta Materials) is anticipating good results from its aggregates business this year, as well as positive returns from “robust underlying construction market fundamentals, higher demand for public sector infrastructure and acquisition synergies.”

MLM’s recent 2019 earnings results marked the most profitable year in its history. “Improved shipments, pricing and profitability across the building materials business helped (us) achieve the eighth consecutive year of growth in revenues, gross profit, adjusted EBITDA and earnings per share,” says the company.

Shares of the company have also outperformed other in the sector in the past year.

“Strong underlying demand is likely to boost its sales and profits of the aggregates business in the forthcoming quarters,” says MLM.

The group is a leading supplier of construction aggregates in the United States, with a network of quarries and distribution centers throughout the southern United States.

It also operates in the Bahamas and Canada, and has distribution centers along the Gulf of Mexico and Atlantic coasts.

In 2020, MLM says that it “expects infrastructure shipments to grow meaningfully, driven by healthy state Department of Transportation (DOT) budgets and an expected extension or replacement for the Fixing America’s Surface Transportation (FAST) Act.”

Increased commercial and heavy industrial construction activities are likely to aid aggregate shipments to the non-residential market (which represented 36% of 2019 aggregate shipments) too.

The company expects large energy-sector projects, particularly along the Gulf Coast, to continue driving growth and boosting aggregates demand in the next three years or so.

MLM has completed more than 90 acquisitions since 1994, enabling it to enhance and expand its aggregates-led presence in the building materials marketplace.

There are some storm clouds ahead though: “Weather-related challenges, higher costs, and lower margin aggregates-related downstream operations are concerns,” says MLM.

These lower gross margins, says the group, are “due to highly competitive market dynamics, lower barriers to entry and volatility in fuel costs. Any further expansion of the segment will be a major hurdle for the company.”

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