Sources: Martin Marietta Materials, Inc.; CP staff
Results from the first financial reporting period to follow the Martin Marietta–Texas Industries Inc. merger, consummated July 1, underscore the potential that three strategic cement and 100-plus ready mixed operations afford the industry’s second largest aggregate producer. Martin Marietta reports third quarter sales of $918 million, existing or heritage businesses accounting for $644 million—a 7.3 percent gain over 2013 Q3 figures.
“The acquisition of TXI added $274 million of net sales and, even in advance of full integration and realization of significant synergies, contributed $44.5 million of gross profit, excluding the one-time increase in cost of sales for acquired inventory,” says Martin Marietta CEO Ward Nye. “Based on our evaluation to date, we expect to surpass our stated target of $70 million in annual synergies prior to 2017. This transformational acquisition, when combined with our solid heritage business, creates a strong and broad foundation for dynamic revenue and profit growth in 2015 and beyond.
“In addition to aggregates and ready mixed operations, the TXI acquisition provide[s] a leading position in the Texas cement markets as well as a state-of-the-art, rail-located cement plant in southern California. Driven by a sold-out Texas market, cement made a solid contribution to our quarterly earnings, as volumes increased 16 percent in the third quarter compared with the three months ended August 31, 2013, when Martin Marietta did not yet own the business.”
TXI’s Midlothian and Hunter mills in Texas, and Oro Grande mill near Los Angeles, contributed $110 million in 2014 Q3 sales, with adjusted gross profit of nearly $28 million—a 64 percent gain compared to 2013 Q3 figures TXI reported for the three plants. Reviewing merger integration activities three months on, Martin Marietta notes: “The Cement group leadership team, in collaboration with aggregates and ready mixed teams, developed strategic plans, regarding interplant efficiencies, as well as tactical plans addressing plant utilization and efficiency, providing a road map for significantly improved profitability for 2015 and beyond.”
A cement demand/supply imbalance appears likely for the next several years in the Lone Star State, the company tells investors. “Job growth continues as a significant catalyst for construction activity, and Texas leads the nation in employment gains,” affirms Nye. “Texas’ strong Department of Transportation budget is supporting investment in multiyear construction projects … Numerous state-level major projects have provided for continued stability in public-sector construction activity.”