Martin Marietta Materials : Investor Day FAQs

MARTIN MARIETTA 2021 INVESTOR DAY FAQs

Questions Specifically Addressed During Investor Day Q&A Session

When you evaluate and rank M&A by attractiveness and availability, do you see more opportunities in existing markets or in platform markets, such as California or the Pacific Northwest, where the Company currently does not have a presence?

With over 1,700 closely-held family businesses operating in more than 3,600 active quarries in the United States, industry consolidation will continue over the coming years and decades. Martin Marietta's M&A strategy includes ongoing evaluation of aggregates-led expansion through acquisitions that complement existing operations (i.e., bolt-on acquisitions) as well as opportunities of scale in new domestic markets (i.e., platform acquisitions). We believe ample room exists to strengthen our existing footprint and expand product offerings, including in key markets in Texas, Colorado and North Carolina, our top three revenue-generating states.

Equally, we are interested in growing our business through potential large-scale platform acquisitions. We refer you to Slide 6 in the 2021 Investor Day presentation, which outlines the eleven megaregions across the United States, and Slide 39, to better understand the geographic areas we consider to be attractive high-growth markets with sustainable long-term construction activity. As part of our growth strategy, it's important to remember that we do not endeavor to be in megaregions simply for the sake of being in megaregions. We evaluate M&A opportunities thoughtfully so as to be an aggregates-led business where we can sustain or achieve a leading market position.

From an availability perspective, we expect a healthy mix of bolt-on and platform acquisition opportunities in the near-term and over the next decade.

Looking at Martin Marietta's targeted expansion markets on Slide 39 of the 2021 Investor Day presentation, California has been circled. As part of the TXI acquisition, the Company was in California with the Oro Grande cement plant several years ago. These assets were subsequently divested and Martin Marietta exited California. What has changed your view of California now and what types of assets would you be interested in there?

When Martin Marietta acquired TXI in 2014, TXI had three cement facilities - Midlothian (located in Dallas, Texas), Hunter (located in San Antonio, Texas), and Oro Grande (located in southern California). This transaction expanded and strengthened our market position as an aggregates leader, in addition to providing us a strategic cement business, within the Texas Triangle megaregion. In contrast, there was no leadingaggregates position or downstream business to pair with Oro Grande, TXI's sole cement plant in California. This meant Martin Marietta was the last cement producer to be effectively sold out and the first one that customers pivoted from when they opted to self-supply. We recognized that while the California market had potential for operators with the right portfolio of businesses, without a downstream business in that vertically-integrated market, Martin Marietta was not the best owner of that stranded cement asset.

Going forward, there is considerable white space to expand our business in megaregions in the western United States. We would be interested in doing so if there are viable opportunities to grow in that region with an aggregates-led footprint similar to what we did when we entered Colorado a decade ago. As a reminder, we swapped our pure-play aggregates Mississippi River business in 2011 for a vertically-integrated platform position along Colorado's Front Range, a footprint that we did not have at the time. Today, we have a leading market position along the I-25 corridor due to this asset swap, as well as subsequent transactions since the swap.

As you pursue M&A opportunities, particularly in new markets where you don't have any facilities, how will Martin Marietta create value without any synergies?

As successfully demonstrated through past M&A transactions, we create value in a three-fold manner by implementing our operating and commercial efficiencies, applying our cost discipline and achieving "found" synergies. The 2018 Bluegrass acquisition provides a good example. This transaction moved the Company into Maryland where, prior to that acquisition, we did not have scale with only two small aggregates operations in the western part of the state. As highlighted on Slide 32 in the 2021 Investor Day presentation, we have demonstrated what can be done relative to pricing in a new marketplace when applying our value over volume strategy. By pursuing appropriate value for our aggregates products, combined with a leaner cost profile, we have significantly improved the performance of that business. Equally important, safety performance has dramatically improved (nearly 75 percent better today). Inevitably, we also find synergies, such as sharing maintenance crews to reduce reliance on contractors or equipment sharing to avoid rental costs. Martin Marietta's approach to commercial excellence, operational excellence and found synergies are the types of synergies that we will bring to future investments as well.

What have been the barriers in lower-priced aggregates markets historically? And what specific strategies does Martin Marietta have in place to drive pricing in these markets to narrow the gap to the corporate average price and to the $18.50 aspirational goal?

The best two markets to specifically address this question are Texas and Colorado. While the Texas marketplace does not have the same high barriers to entry seen in Colorado, aggregates pricing in Texas has moved up nicely in that market since we acquired TXI in 2014. Pricing has increased at an even faster rate in our Colorado market. We believe our disciplined adherence to our value over volume philosophy has provided and can continue to provide benefits in different types of markets.

More specifically, both the Texas and Colorado markets were pricing aggregates below our corporate average prior to our ownership of TXI and our River for the Rockies swap, respectively. When we expanded our presence in Texas, average selling prices were 60 percent of our then-current corporate average and, in Colorado, it was well below the corporate average. Both markets have increased average selling prices at rates that are higher than our corporate average increases since those acquisitions were completed. In addition,building critical mass, depletion scenarios and continued consolidation will be important in these western markets and in markets where we are continuing to consolidate our business.

We currently sell aggregates, on average, for $14.77 per ton. While $18.50 seems to be an aspirational goal, we already have average selling prices that exceed $25 per ton in certain parts of the United States. Importantly, these higher prices do not have any negative impact on construction in those markets. We believe Martin Marietta's value over volume strategy will continue to drive attractive aggregates pricing in the near- to long-term future.

Will you describe important macro datasets and their respective correlation to aggregates consumption?

We've looked at various statistics over time to assess future aggregates consumption, including things like employment and population trends. We believe the statistics we shared in the 2021 Investor Day presentation relative to single-family housing starts and the importance of size and scale of projects (square footage) are driven by the strong correlations between those data sets and aggregates demand over short-, medium- and long-term periods. We used the medium-term period of 2000 to 2019 to provide a "through-the-cycle" view of the single-family-led housing boom, subsequent Great Recession and multi-family-housing-led recovery that frames our view that we are at the inflection point of private aggregates demand (~60 percent of our shipments) driven by the recent acceleration of single-family housing development that we haven't seen since the early 2000's.

Specifically, the 2000 to 2019 correlation data sets used to frame our bullish outlook are further described in more detail below:

• 1) The 99 percent relationship between United States Census Bureau single-family housing starts and aggregates volume per capita (USGS aggregates volume divided by US population) on a one-year lag basis considers the drag-along effects of new suburban community buildout including nonresidential and infrastructure construction needs. This drag-along effect drives significantly higher demand for aggregates relative to urban, mixed-used multifamily construction, which led the Great Recession's recovery. Of note, the relationship between single-family starts and aggregates volume per capita on a same year basis is still a strong 92 percent.

• 2) The nonresidential drag-along effects are supported by the 93 percent correlation between single-family housing starts and Dodge Data and Analytics' nonresidential square footage. We use nonresidential square footage as opposed to dollar value given there is no discernible relationship between aggregates per capita demand and construction dollar values.

• 3) Relative to historical Dodge data, we found a 96 percent correlation on a one-year lag basis between total residential and nonresidential square footage and aggregates volume per capita as project size and scale are important determinants of aggregates demand.

We fully expect that as single-family residential construction momentum continues and nonresidential construction follows as it has historically, aggregates demand will recover to more normalized levels.

We appreciate you manage the business for the long term. However, recent winter weather has been top of mind for most investors. How is Martin Marietta faring so far in February, specifically in Texas? Any distinctions to be drawn between aggregates and cement relative to potential disruptions?

In mid-February, the Texas economy was broadly shut down for modestly over a week due to extreme precipitation and temperatures. Construction activity was paused during that time - we believe this work does not go away, it is only temporarily deferred. Our aggregates operations were able to resume normal shipping and production activity relatively quickly. Our cement operations also fared relatively well given our proactive actions in advance of the winter storm - i.e., winterizing the plants and taking them offline until electricity grid stabilization occurred. Remember, cement is a 24/7 operation, so when a cement kiln goes down, it takes more time to equally bring it back up.

While these weather disruptions will provide transient headwinds to our first-quarter results, particularly for our single-largest-revenue-generating state, we believe it portends well for cement fundamentals for the remainder of the year. Cement demand exceeds statewide capacity and this weather disruption may actually enhance the tightness of the Texas market. This could potentially bode well for commercial cement opportunities.

SOAR 2025 includes an objective to grow aggregates average selling price by a four percent CAGR (compound annual growth rate) and to maintain costs at or below an inflationary rate to drive best-in-class aggregates unit profitability. Some of your peers have put out targets relative to their unit margins when shipments reach some type of normalized level. What is Martin Marietta targeting for aggregates unit profitability by 2025?

We have not provided any specific targets on unit profitability. Rather, we have provided our expectations relative to commercial and operational excellence, two components of our business that we can control, and our view of shipment trends over the next few years to allow you to calculate your own "what-if" scenarios.

It is also important to remember that we perform very well in managing our costs. We've previously indicated that we expect diesel headwinds in 2021, which are part of the ordinary course of our business. Overall, our cost structure has been relatively constant, growing in a very measured way, and we are able to stay ahead of inflation with our steady growth in average selling prices. Historically, in periods where inflation was accelerated or heightened, growth in our average selling price outpaced inflation as well. We are quite comfortable under both a low inflationary environment or a high inflationary environment and believe we will continue to grow our unit profitability.

What is Martin Marietta's overarching SOAR aim between now and 2025?

As highlighted in our 2021 Investor Day presentation, Martin Marietta has effectively doubled its market capitalization during each of the previous SOAR periods (i.e., 2010 to 2015 and 2015 to 2020). We have thoughtfully developed and evaluated our SOAR 2025 plan and the ways we will continue to build value for our business and stakeholders. Our overarching aim would be to once again double our market capitalization by the end of 2025.