Martin Marietta Materials : MLM Q2 2021 Earnings Release

MARTIN MARIETTA REPORTS SECOND-QUARTER 2021 RESULTS

Record Second-Quarter Consolidated Revenues, Gross Profit and Earnings per Diluted Share

Strengthening Product Demand Masked by Precipitation

Pricing Gains Achieved Across All Product Lines

Magnesia Specialties Delivered Double-Digit Growth in Revenues and Gross Profit

Company Successfully Advances SOAR 2025;

Expects to Close Lehigh West Region Acquisition in Second Half 2021

RALEIGH, N.C. (July 29, 2021) - Martin Marietta Materials, Inc. (NYSE: MLM) ("Martin Marietta" or the "Company"), a leading national supplier of aggregates and heavy building materials, today reported results for the second quarter ended June 30, 2021.

Second-Quarter Highlights

			Quarter Ended June 30,
($ in millions, except per share)			2021				2020
Products and services revenues 1		$	1,295.3			$	1,189.5
Building Materials business	$	1,225.3			$	1,140.6
Magnesia Specialties		$	70.0			$	48.9
Total revenues 2	$	1,377.9			$	1,270.6
Gross profit		$	385.1			$	380.5
Adjusted gross profit 3	$	392.7			$	380.5
Earnings from operations		$	307.5			$	306.4
Adjusted earnings from operations 4	$	324.4			$	306.4
Net earnings attributable to Martin Marietta		$	225.8			$	217.6
Adjusted EBITDA 5	$	439.2			$	407.0
Earnings per diluted share		$	3.61			$	3.49
Adjusted earnings per diluted share 6	$	3.81			$	3.49

1. Products and services revenues include the sales of aggregates, cement, ready mixed concrete, asphalt and Magnesia Specialties products, and paving services to customers, and exclude related freight revenues.
2. Total revenues include the sales of products and services to customers (net of any discounts or allowances) and freight revenues.
3. 2021 adjusted gross profit excludes an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. See Appendix to this earnings release for a reconciliation to reported gross profit under generally accepted accounting principles (GAAP).
4. 2021 adjusted earnings from operations exclude an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting and acquisition-related expenses. See Appendix to this earnings release for a reconciliation to reported earnings from operations under GAAP.
5. Earnings before interest; income taxes; depreciation, depletion and amortization; the earnings/loss from nonconsolidated equity affiliates; acquisition-related expenses; and an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting, or Adjusted EBITDA, is a non-GAAP financial measure. See Appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.
6. 2021 adjusted earnings per diluted share excludes charges for the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting and acquisition-related expenses. See appendix to this earnings release for a reconciliation to reported earnings per diluted share under GAAP.
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Ward Nye, Chairman and CEO of Martin Marietta, stated, "Our second-quarter results demonstrate Martin Marietta's strong execution of our proven Strategic Operating Analysis and Review (SOAR) plan and the benefit of strengthening product demand, pricing gains across all product lines and targeted growth initiatives. The Company established new quarterly records for revenues, profits and safety, notwithstanding significant rainfall that adversely impacted operations in several of our key geographies, most notably Texas and Colorado, our two largest revenue states. Importantly, Martin Marietta is poised to capitalize on long-term secular demand trends that are expected to support growing construction activity and contribute to favorable pricing dynamics across our footprint. We remain on track to once again deliver record revenues and Adjusted EBITDA for the full year.

"As we responsibly and sustainably grow our business, we continue to advance SOAR 2025 and enhance our geographic footprint and product offerings. In May, we announced an agreement to acquire Lehigh Hanson, Inc.'s West Region business ("Lehigh West Region"), which provides the Company with a new upstream materials-led growth platform across several of the nation's largest and fastest growing megaregions in California and Arizona. We expect the transaction to be accretive to earnings per diluted share in the first full year following closing, and are confident in our ability to quickly drive shareholder value using the time-tested integration approach we took with our River for the Rockies, TXI and Bluegrass acquisitions."

Mr. Nye concluded, "As we SOAR to a Sustainable Future, Martin Marietta will continue to build on our foundation that has proven successful - an aggregates-led growth platform, a steadfast commitment to employee safety, disciplined pricing, operational excellence and solid execution of our strategy. We are confident in Martin Marietta's outlook for the balance of the year and beyond and remain committed to delivering sustainable growth and superior shareholder value."

Mr. Nye's CEO Commentary and Market Perspective can be found on the Investors section of the Company's website.

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Second-Quarter Operating and Financial Results

(All comparisons are versus the prior-year second quarter unless noted otherwise)

Building Materials Business

The Building Materials business achieved products and services revenues of $1.2 billion, a 7.4 percent increase, and product gross profit of $356.9 million.

The Building Materials business benefitted from solid product demand driven by single-family housing growth, infrastructure investment and notable heavy industrial projects of scale. The aggregates, cement and ready mixed concrete operations in Texas experienced project delays as the state marked its eleventh-wettest second quarter in 127 years. Additionally, the aggregates and downstream operations in Colorado faced a difficult comparison versus second-quarter 2020, which benefitted from unseasonably favorable weather conditions.

As previously announced, the Company completed the acquisition of Minnesota-based Tiller Corporation ("Tiller") on April 30, 2021. Tiller's aggregates and asphalt operations are reported as part of the East Group.

Aggregates

Second-quarter organic aggregates shipments and pricing increased 1.5 percent and 3.4 percent, respectively. Total aggregates shipments and pricing increased 3.3 percent and 2.9 percent, respectively.

By segment:

• East Group total shipments increased 7.0 percent reflecting strong construction activity in the Carolinas, Georgia, Florida and Maryland across all three primary end-use markets and shipments from the recently acquired Tiller operations. This growth more than offset weather-induced project delays in the Midwest. Pricing increased 3.6 percent, reflecting favorable geographic mix.
• West Group shipments decreased 3.6 percent, as significant rainfall in Texas and Colorado hindered robust construction activity. Pricing increased 0.7 percent, reflecting a lower percentage of higher-priced commercial rail-shipped volumes. On a mix-adjusted basis, West Group pricing increased 2.4 percent.

Second-quarter aggregates product gross margin decreased 150 basis points to 34.0 percent, driven by higher diesel costs and a $6.1 million increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. Excluding the impact of acquisition accounting, adjusted aggregates product gross margin was 34.8 percent.

Cement

Cement shipments decreased 1.9 percent, despite robust demand and construction activity throughout the Texas Triangle, resulting from extreme precipitation from late April through mid-June. Pricing improved 6.8 percent, or 4.2 percent on a mix-adjusted basis, following annual price increases that went into effect on April 1, 2021.

Cement product gross margin declined 870 basis points to 31.0 percent, driven by the timing of planned outages at the Company's Hunter plant as well as higher energy and raw materials costs that more than offset pricing gains.

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Downstream businesses

Ready mixed concrete shipments increased 8.2 percent, or 2.3 percent organically, as incremental volume from large projects and operations acquired in August 2020 more than offset weather headwinds. Pricing increased 1.2 percent, reflecting geographic mix from a lower percentage of higher-priced Colorado shipments. Product gross margin decreased 350 basis points to 7.1 percent, driven primarily by higher raw material and diesel costs.

Asphalt shipments increased 67.6 percent as incremental volume from the acquired Tiller operations more than offset weather-related shipment declines in Colorado. Additionally, pricing increased 4.9 percent. Asphalt and paving products and services gross margin improved 80 basis points, driven in part by the Tiller business.

Magnesia Specialties Business

Magnesia Specialties second-quarter product revenues increased 43.2 percent to $70.0 million versus a COVID- 19-challengedprior-year quarter. Higher revenues, combined with disciplined cost control, resulted in product gross margin of 39.9 percent, a 260-basis-point improvement.

Consolidated

Second-quarter 2021 other operating income, net, included a $12.3 million nonrecurring gain on the sale of property.

Cash Generation, Capital Allocation and Liquidity

Cash provided by operating activities for the six months ended June 30, 2021 was $441.2 million compared with $373.2 million for the prior-year period.

Cash paid for property, plant and equipment additions for the six months ended June 30, 2021 was $213.0 million. For the full-year, capital expenditures are expected to range from $450 million to $500 million.

Through dividend payments and share repurchases, the Company returned $71.8 million to shareholders in the first six months of 2021 and $1.9 billion since announcing a 20 million share repurchase authorization in February 2015.

The Company had $70.3 million of cash, cash equivalents and restricted cash on hand and $857.4 million of unused borrowing capacity on its existing credit facilities as of June 30, 2021.

In July 2021, the Company issued $2.5 billion of debt in anticipation of closing the Lehigh West Region acquisition in the second half of 2021. The acquisition remains subject to customary closing conditions. The newly-issued debt reflects a weighted-average interest rate of 2.2 percent.

Full-Year Outlook

Martin Marietta remains confident that favorable pricing dynamics will continue, supported by the Company's locally-driven pricing strategy. Additionally, the Company anticipates single-family housing growth, expanded infrastructure investment and notable heavy industrial projects of scale will drive increased shipment levels. Martin Marietta expects these demand drivers, combined with the ancillary construction necessary for housing community buildouts and the potential for increased infrastructure investment from a comprehensive federal surface transportation package, to result in sustained, multi-year growth in product demand.

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The Company has updated its full-year 2021 guidance to reflect recent trends and the contribution of the Tiller acquisition. This guidance excludes any benefit from additional fiscal stimulus, relief funds beyond those already enacted or a potential successor federal surface transportation bill.

2021 GUIDANCE

($ in millions, except per ton)		Low *		High *
Consolidated
Products and services revenues 1	$	4,705		$	4,850
Gross profit	$	1,310		$	1,380
Adjusted gross profit 2	$	1,325		$	1,395
Selling, general and administrative expenses (SG&A)	$	330		$	335
Interest expense	$	140		$	145
Estimated tax rate (excluding discrete events)		20	%		22	%
Net earnings attributable to Martin Marietta	$	675		$	750
Adjusted EBITDA 3	$	1,465		$	1,535
Capital expenditures	$	450		$	500
Building Materials Business
Aggregates
Organic volume % growth 4		1.0%		3.0%
Total volume % growth 5		3.0	%		5.0	%
Organic average selling price per ton (ASP) % growth 6		3.0%		5.0%
Total ASP growth 6		2.0	%		4.0	%
Products and services revenues	$	2,930		$	3,000
Gross profit	$	900		$	940
Adjusted gross profit 2	$	910		$	950
Cement
Products and services revenues	$	465		$	495
Gross profit	$	160		$	170
Ready Mixed Concrete and Asphalt and Paving
Products and services revenues	$	1,425		$	1,470
Gross profit	$	150		$	165
Adjusted gross profit 2	$	155		$	170
Magnesia Specialties Business
Products and services revenues	$	250		$	260
Gross profit	$	100		$	105

* Guidance range represents the low end and high end of the respective line items provided above.

1. Consolidated products and services revenues exclude $365 million to $375 million related to estimated interproduct sales and exclude freight revenues.
2. Adjusted gross profit is a non-GAAP financial measure and, in each case, excludes an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting.
3. Adjusted EBITDA is a non-GAAP financial measure. See Appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.
4. Organic volume % growth range is for organic aggregates shipments, inclusive of internal tons, and is in comparison with organic 2020 shipments of 185.7 million tons.
5. Total volume % growth range is for total aggregates shipments, inclusive of internal tons, and is in comparison with total 2020 shipments of 186.5 million tons.
6. ASP % growth range is in comparison with 2020 ASP of $14.77 per ton.
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