Martin Marietta Materials Q4 2024 Earnings Call Transcript

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Provided by Quartr
February 12, 2025
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Operator

Welcome to Martin Marietta's Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All participants are now in a listen only mode. A question and answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for replay on the company's website. I will now turn the conference over to your host, Ms. Jacqueline Rooker Martin Marietta's Director of Investor Relations. Jacqueline, you may begin.

Jacklyn Rooker
Jacklyn Rooker
Director of Investor Relations at Martin Marietta Materials

Good morning. It's my pleasure to welcome you to Martin Marietta's fourth quarter and full year twenty twenty four earnings call. Joining me today are Ward Nye, Chair and Chief Executive Officer and Jim Nicholas, Executive Vice President and Chief Financial Officer. Today's discussion may include forward looking statements as defined by United States securities laws in connection with future events, future operating results or financial performance. Like other businesses, Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially.

Jacklyn Rooker
Jacklyn Rooker
Director of Investor Relations at Martin Marietta Materials

We undertake no obligation, except as legally required, to publicly update or revise any forward looking statements, whether resulting from new information, future developments or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other public filings, which are available on both our own and the Securities and Exchange Commission's websites. We have made available during this webcast and on the Investors section of our website supplemental information that summarizes our financial results and trends. As a reminder, all financial and operating results discussed today are for continuing operations. In addition, non GAAP measures are defined and reconciled to the most directly comparable GAAP measure in the appendix to the supplemental information as well as our filings with the SEC and are also available on our website.

Jacklyn Rooker
Jacklyn Rooker
Director of Investor Relations at Martin Marietta Materials

Ward Nye will begin today's earnings call with a discussion of our full year operating performance, 2025 outlook and supporting market trends. Jim Nicholas will then review our financial results and capital allocation, after which Ward will provide closing comments. A question and answer session will follow. Please limit your Q and A participation to one question. I will now turn the call over to Ward.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you, Jacqueline. Good morning and thank you all for joining today's teleconference. Over the years, the disciplined execution of our proven strategic operating analysis and review or SOAR plan has significantly transformed our company by providing Martin Marietta with a coast to coast footprint with the majority of our products and services going to areas exhibiting the highest growth potential by demonstrating our ability to manage through uncontrollable circumstances, by adhering to our value over volume approach to meet customers' needs without discounting the value of our own assets and generating a higher return on those assets and by showing the resiliency of our business model no matter the macroeconomic backdrop. As a result, our business is superbly positioned for near, medium and long term success. 2024 was no exception to those themes as we once again delivered record aggregates financial performance and successfully completed nearly $6,000,000,000 of portfolio enhancing transactions.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Operationally, our team successfully managed many exogenous factors, including persistent inclement weather, tighter than expected monetary policy and a related modest private construction slowdown. The team's steadfast commitment to managing what they could control, namely commercial excellence, cost management and portfolio optimization enabled the fourth quarter delivery of record profits, margin expansion and record cash flow from operations. Before discussing our full year results in 2025 outlook, I'll highlight a few notable takeaways from twenty twenty four's fourth quarter. With the weather better cooperating in fourth quarter, earnings growth and margin expansion resumed, evidenced by a record fourth quarter consolidated gross profit of $489,000,000 consolidated adjusted EBITDA of $545,000,000 reflecting an increase of 8% and consolidated adjusted EBITDA margin of 33%, an improvement of two ten basis points. Pricing gains more than offset the impact of inventory management efforts driving fourth quarter record aggregates gross profit per ton of $7.92 an increase of 12% and aggregates gross margin of 33% an improvement of 120 basis points.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

In addition to our impressive financial results, we successfully completed three aggregates bolt on acquisitions in Southwest Florida, Southern California and West Texas, all of which are attractive SOAR identified geographies. Our full year results were notable given the year's extreme weather and a difficult macro economy. Despite these headwinds, we established new aggregates and Magnesia Specialties records specifically. Aggregates revenues and gross profit both increased 5% to 4,500,000,000 and $1,400,000,000 respectively. Aggregates gross profit per ton increased over 9% to $7.58 Magnesia Specialties revenues increased 2% to $320,000,000 and Magnesia Specialties gross profit increased 10% to $107,000,000 Martin Marietta's safety and enterprise excellence culture have long underpinned our financial results.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I'm pleased to report we achieved our best full year safety incident rates in our company's history, inclusive of our newly acquired businesses. Notably, this marks our eighth consecutive year of a world class lost time incident rate and fourth consecutive year of world class total injury incident rate. 2024 surpassed 2021 as our most active M and A year ever with nearly $4,000,000,000 of aggregates led acquisitions and over $2,000,000,000 of non core asset divestitures. We selectively pruned cyclical and non strategic cement and ready mix concrete operations and redeployed the proceeds into pure aggregate assets in attractive markets adding nearly 1,000,000,000 tons of aggregate reserves to our footprint. These proactive portfolio actions created a more durable business, increased the gross profit contribution from our core aggregates product line and enhanced our margin profile all while maintaining a strong balance sheet for continued acquisitive growth.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Looking ahead, we expect the ReShape portfolio together with our fourth quarter results will provide a solid foundation for profitable growth in 2025 and beyond. Specifically, our full year 2025 aggregate shipment guidance of 4% growth at the midpoint assumes that strong infrastructure and data center demand, a full year of 2024 acquisition contributions and normalized weather patterns will all more than offset the slowdown in private construction, which is primarily interest rate driven. Our full year 2025 pricing guidance of 6.5% growth at the midpoint, while lower than the last three years of double digit growth remains notably higher than the long term industry average of 3% to 4%. These revenue drivers combined with moderating cost inflation, contributions from our cement and downstream businesses, Magnesia Specialties and the full year of contributions from our 2024 acquisitions underpin our 2025 full year adjusted EBITDA guidance of $2,250,000,000 at the midpoint, a 9% improvement compared with prior year. Moving now to end markets, we'll start with infrastructure, our most aggregates intensive and often countercyclical end market.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Both building and maintaining our nation's heavy Both building and maintaining our nation's heavy infrastructure remains a bipartisan national strategic priority. Three years into the five year Infrastructure and Investment and Jobs Act or IIJA, nearly 70% of highway and bridge funds remain to be invested indicating robust multi year tailwinds. Importantly, according to the American Road and Transportation Builders Association or ARTBAM, public highway, pavement and street construction is expected to continue to grow reaching 128,400,000,000 in 2025 compared with $119,100,000,000 in 2024, an 8% increase. Notably, based on recent state and government contract awards, ARPA's twenty twenty five transportation construction market outlook shows Texas, Florida, North Carolina and South Carolina key Martin Marietta states are among the largest markets expected to show growth. Moving now to non residential construction, artificial intelligence or AI continues to drive unprecedented demand for digital and energy infrastructure as evidenced by recent announcements from Microsoft and the new administration in Washington.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Microsoft expects to invest $80,000,000,000 in fiscal twenty twenty five on the construction of data centers that can handle AI workloads with over half of that spend in The United States. Moreover, the new administration recently announced Stargate, which aims to simplify permitting and significantly boost data center construction in The U. S. Through a massive investment of up to $500,000,000,000 The build out is already underway with the data center in Aveline, Texas that Martin Marietta is supplying from its December acquisition of R. E.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Janes Gravel Company. Moreover, Dodge Construction Networks warehouse where footage starts for the twelve months ended November 2024 inflected positively for the first time since December 2022 and Martin Marietta was recently awarded the material supply for two large Amazon warehouse projects in North Texas and Fort Myers, Florida respectively. Shifting to residential activity, affordability and availability remain key issues impacting single family demand. Neither is expected to resolve in the near term given the higher for longer interest rate environment. Relative to the availability issue alone, Realtor.com recently estimated that The U.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

S. Housing market is underserved by approximately 7,000,000 homes. That said, when single family residential construction inevitably rebounds, Martin Marietta's leading positions in key Sunbelt MSAs provide attractive opportunities to capitalize on structurally under built markets with pent up demand. In summary, record state and federal investments, reshoring, the artificial intelligence infrastructure build out and the long awaited single family housing recovery should provide multi year shipment stability and provide a healthy pricing environment for years to come. I'll now turn the call over to Jim to discuss our full year financial results and liquidity. Jim?

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Thank you, Ward, and good morning, everyone. The Building Materials business generated full year twenty twenty four revenues of $6,200,000,000 a 4% decrease and gross profit of $1,800,000,000 a 6% decrease. The decline in both metrics which are comparing year over year results is due to the February 2024 divestiture of our South Texas cement and related concrete businesses along with shipment declines in all product lines, partially offset by acquisition contributions. Our aggregates product line achieved all time record revenues, gross profit, gross margin and unit profitability in 2024. Contributions from acquired operations and strong pricing more than offset lower shipments.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Importantly, this was the second consecutive year of margin expansion and the fourth year in the last six experiencing a price cost widening. Over those six years, margins have expanded eight seventy basis points. In 2024, aggregate's gross profit per ton improved 9% to full year record of $7.58 per tonne. Cement and concrete revenues decreased 29% to $1,100,000,000 and gross profit decreased 40% to $260,000,000 again driven primarily by the divestiture of our South Texas cement plant and its related concrete operations. While cement margins held up nicely, the ready mix business experienced margin compression from Q2 through year end due to higher input costs including aggregates and cement outpacing pricing growth.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Ashfall and paving revenues decreased 2% to $869,000,000 due to slower market demand. Gross profit decreased 7% to $101,000,000 due to lower revenues and higher aggregates input costs, partially offset by lower liquid asphalt costs. Magnesium Specialties established all time records for revenues and gross profit of $320,000,000 and $107,000,000 respectively as benefits from strong pricing more than offset lower chemical and lime shipments. Turning now to capital allocation and liquidity. We achieved record fourth quarter cash flows from operations of $685,000,000 an increase of 23% compared with the prior year quarter driven by improvements in working capital and deferred income tax payments due to the Internal Revenue Service providing disaster tax relief for North Carolina businesses affected by hurricanes Debbie and Helene.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Our capital allocation priorities remain focused on prioritizing value enhancing acquisitions, re measurement in our business and returning capital to shareholders. In 2024, we returned $639,000,000 to shareholders through dividend payments and share repurchases. Even with significant M and A activity, we ended the year with a net debt to EBITDA ratio of 2.3 times, well within our targeted range of two times to 2.5 times. Our strong balance sheet offers ample flexibility to execute on our active M and A pipeline and pursue value enhancing investment opportunities. Finally, I will close my prepared remarks with some views on tariffs.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

The depth, breadth and duration of tariffs actually levied remains highly uncertain. As a result, our 2025 guidance assumes no impact from tariffs. There are some situations where tariffs might enhance the company's profitability and others which may lower it. The vast majority of our supply chain is sourced from U. S.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Locations. The company was served well by that during the supply chain shocks of the COVID era and should serve us well going forward. With that, I'll turn the call back over to Ward. Thank you, Jim.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

To conclude, we're proud of our strong fourth quarter financial results and industry leading safety performance. Thanks to our team's collective commitment to Martin Marietta's vision and strategic priorities, we have deliberately built an increasingly resilient, highly productive coast to coast aggregates led business positioned to grow unit profitability through various in market demand environments. We are enthusiastic about Martin Marietta's prospects in 2025 and beyond. The fundamental strength and underlying drivers of our differentiated business, proven strategic plan, strong balance sheet with significant opportunities for growth and long history of successfully managing through economic cycles provide us great confidence in our ability to continue delivering strong financial, operational and safety performance. If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Trey Grooms with Stephens. Please go ahead.

Trey Grooms
Managing Director at Stephens Inc

Thanks and good morning Ward and Jim.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Hi Jim. Trey, how are you?

Trey Grooms
Managing Director at Stephens Inc

Doing well. Thank you. Good. As we look at the '25 guide, Ward, could you walk us through any of the puts and takes around the overall guidance for the year, including your aggregates price and volume outlook?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I'm happy to, Trey.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thanks for the question. Look, at the outset, I'd say we're taking a pretty measured approach to the guide this year. Look, there's uncertainty relative to monetary policy and whatever the other policy fluctuations may be during the course of the year. Look, if the guidance proves conservative and frankly, I hope that it is, we can come back and adjust for upside later. Relative to volume in the first instance, obviously, we're looking at low single digits and that includes, by the way, Trey, a full year of acquisition contributions.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So if you think about what that's going to look like, BWI closed last April, so we'll see that fully in the first quarter. If we're looking at the transactions that we did in West Florida, in Southern California and Texas, those will clearly be additive to quarters one through three. So again, if you're just thinking about the cadence on that. But if we think about end uses right now, I mean, overall, I think we should expect mid to high single digits growth in infrastructure. I think we're probably looking at low single digits at least right now relative to both non res and res.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And if we think about what the builders are under those, look, I do think infrastructure should stay strong. I mean, there's 70% of the dollars from IIJA that are still yet to come in our sector. And as a practical matter, that has to roll out in 'twenty five and 'twenty six. So that should be pretty constructive. The other thing that we're seeing is nice, steady, consistent and frankly growing activity relative to data centers.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I know there was some concern, there was a blip the other week relative to DeepSeq. We've actually seen most AI and others come back and double down since then. So we think that should be very healthy this year. Frankly, we're not planning for notable residential recovery in 2025 given the higher for longer mortgage rates that we're seeing because we think that will just continue to affect monthly affordability. That said, in some instances, we are seeing that homebuyers are simply getting accustomed to this higher interest rate environment.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So we're going to see how that plays out. But here's something that I think is notable and I've mentioned it in my prepared remarks. I mean, clearly, we're seeing green shoots in warehousing. The Claiborne, Texas facility that we have, the Fort Myers facility that we have are both large jobs and that's not the type of activity that you would have seen for the majority of last year. So we've been waiting for warehousing to find bottom, we think it has.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

The other thing that I think is important to keep in mind is as we go throughout the year, we're going to start lapping some pretty weather impacted quarters last year. I mean, if you think about it, Q2 was really a washout in our Southwest division, particularly in Dallas Fort Worth, which is the company's largest marketplace. And Q3 was a real challenge for us in portions of the East, including The Carolinas, which is a notable marketplace for us as well. So if you think about the way it rolls up, I mean, the gross profit guidance shows double digit unit profitability growth and nice gross margin expansion and it's going to be driven by pricing and what we think will be moderating inflation. Now relative to price, price is going to be a little bit different this year as you simply think about the cadence, because particularly in the cement market, we saw most cement producers roll their first price increases back to April 1, which meant as a practical matter of lot of ready mix players who are looking for that.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So what we've seen in our world is most hot mix and others had price increases effective January 1, as you become accustomed to. There are portions of the ready mix community, in fact, most of it that are seeing April 1 price increases. So the price increases will be outsized relative to what history has been. Pricing, I'm convinced, is still very solid, will be attractive for the year, but your cadence this year is likely to be a little bit different. So don't expect to see that same degree of pop in Q1 that we've seen in the last several years, you'll start seeing it building in '2 and '3, etcetera.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So I hope that gives you a sense of it. One last thing I'd say is if we think about the estimated carryover effect from last year's pricing, it's about 80 bps coming into the year, Trey. So I tried to give you a sense of end markets, I tried to give you a sense of volume, I tried to give you a sense of pricing and how I think that's going to play relative to margins. So I hope that helped.

Trey Grooms
Managing Director at Stephens Inc

Yes, that's extremely helpful. Thanks for the additional color. But just for some clarity, and correct me if I'm wrong, that pricing in April movement there for aggregates, if I remember going back historically, that's but with the exception of last few years, that's not unusual for the industry. It seems like that was kind of a normal kind of timing that maybe had kind of shifted a little bit more to January just in more recent years. Is that the right way to think about it?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

That is the right way to think of it, Trey. I mean, you've been around this industry for a long time and I have too. And that's the way that has typically worked. So, yes, I don't see anything there that's causing me any angst. But again, if you're looking at it and modeling as I know you are, I just wanted to make sure that I was giving you and your colleagues the ability to model that with degrees of precision.

Trey Grooms
Managing Director at Stephens Inc

Yes. Well, that was super helpful. Thank you. I'll pass it on. Thank

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

you, Trey.

Operator

Your next question comes from the line of Catherine Thompson with Thompson Research Group. Please go ahead.

Kathryn Thompson
Founding Partner & CEO at Thompson Research Group

Hi. Thank you for taking my question today. Appreciated your color on the tariff impact in your prepared commentary, but wanted to follow-up on that in a two part way. One, just pull the string on what could be impacted from tariffs from your perspective. We certainly had some metals tariffs announced yesterday.

Kathryn Thompson
Founding Partner & CEO at Thompson Research Group

But also two, what did Martin Marietta do to diversify its supply chain in the wake of the first Trump administration? And how are you a little bit better prepared today versus say 2016? Thank you.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Good morning, Catherine. Thanks for the question. I'll take the last part first and say this. If we go back to the COVID years when really supply chains were a mess, we actually came through that pretty well. I mean, we were having record years during that period of time and we were not running into supply chain issues, largely because as Jim noted in his prepared remarks, most of our supply chain is domestic.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

There were some outliers where we had things coming in from overseas. And to your point, we have moved very carefully in the intervening period of time to make sure that we can look primarily to domestic production. And I think that served us well before. I think if we see something that's amped up from a tariff perspective, we'll be even better served right now. To the second part of your question, what are some of the specifics?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Look, obviously steel is something that we're going to watch. Steel tariffs, very frankly, could be pretty helpful to our Magnesia Specialties business. And we're supplying a lot of that material to domestic steel producers. So if they see steel production ramp up in The United States, that's going to help us a lot on volume. And if we think about the Magnesia Specialties business, look, they just had a record year and they had a record year with chemical and steel markets, frankly, in pretty low spots.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So again, I think tariffs very selfishly for us on that could be helpful. Equally, if we think about tariffs potentially on cement, look, we're domestic cement producer, we're a long way away from water. But again, I think that would be helpful to our North Texas position. By the way, that business continues to perform extraordinarily well. So I think it would just get that business even more upside.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Imports or tariffs relative to stone has a twofold effect. Number one, I think it actually adds value to what we're doing with our long haul network, particularly relative to rail. So keep in mind, we're shipping more rail more stone by rail than anybody else in The United States. That's about 30,000,000 tons a year. It's going into coastal areas, principally of The United States.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

We think that could be helpful. To be perfectly transparent about it, we do have an operation in Canada that's coming into The United States by boat. So that would be one of the headwinds that we could potentially see from that. But again, it's not going to be a material issue to the company. But again, just in full disclosure, I think that's fair to say.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

If we think about more indirect impacts from tariffs, I mean, we could certainly see it drive more reshoring and more domestic manufacturing demand. And I think that goes back to your question relative to supply chain. And it could impact inflation in some degrees and that could lead to maybe higher for longer and that could have a negative impact on real estate or residential as we look at it. I think it goes back to the observation that I shared with Trey. I think we have given a very measured guidance approach today.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And the fact is if we come back and adjust this, I sure would like to adjust it up. And I hope we put ourselves in the position that that's exactly what we can do, Catherine.

Kathryn Thompson
Founding Partner & CEO at Thompson Research Group

Great. Thank you very much. Good luck.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

You're welcome. Thank you.

Operator

Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Yes. Hi, good morning, everyone.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Hi, Jerry.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Hi. Ward, Jim, I wonder if you could just talk about the per ton cost cadence that you expect. Obviously, mix is moving around. And Ward, you spoke about timing of price increases normally. Price cost spread is pretty consistent.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Do you expect similar gross profit per ton growth in the first quarter as the full year? Can you just give us a bit of color on the cost side of the equation?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Yes. I'll ask Jim to come back and give you some color relative to cadence. I want to come back to the very first notion that you raised and that is, let's talk about what's happening with respect to cost per ton, because I think this quarter was a really good example of what you can and you should expect going forward. And if you look at it, I thought we had good cost management. If we're looking frankly at organic COGS, they were flat despite revenue being up nicely in the organization.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

But what I like, Jerry, is when I go back and look at it, I mean, clearly energy was down and energy was down because diesel was better and a host of things. But what I'm moved by as I go through the different cost buckets, whether it was supplies or whether it was repairs or whether it was contract services or otherwise, they're all in the green for the quarter. So I like the way that that's shaping up. And the fact is we can continue to make these businesses that we bought increasingly efficient relative to ASP, but also relative to the cost profile. Now the other part of your question was relative to cadence.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And so for that, let me turn it over to Jim.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Yes. Thanks, Ward. Hey, Jerry. The cadence is going to be there's two dynamics. One is the P and L effects, the temporary P and L effects of our inventory reduction, that will continue through the first half.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

So that it's already built into our guide, but that will show up more in first half, not in the second half really as much. Aside from that dynamic, the underlying COGS inflation are going to be pretty consistent throughout the quarters. So that will be pretty evenly balanced Q1, Q2, Q3, Q4. We're not anticipating anything changing dramatically on the underlying inflation piece. But again, the inventory work down, the temporary P and L effects from that, we'll see in the first half and then that should abate thereafter. Does that answer the question?

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

It does. So just to make sure we're on the same page with you, Jim, so it sounds like you're thinking of of gross profit per ton up low single digits maybe in the first half and then in the back half maybe mid teens given the comps on the inventory destock point. Is that the range of expectations?

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Probably lower variation than what you just described. I would say low teens kind of consistently, maybe a little bit lower up plus or minus a couple hundred basis points, but low teens growth, I'd say pretty consistently quarter over quarter.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And Jerry, let me add one more footnote to that because Jim mentioned the inventory reduction or management efforts that we've been going through. I mean for the quarter, that was about a $20,000,000 P and L impact. And my point with that is if you think about overall cost control and if you think about pricing and you think about the margin expansion that we had in the quarter, given that $20,000,000 headwind on inventory, that's my point. That was a pretty impressive quarter relative to cost control.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Thank you.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Thank you, Gary.

Operator

Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Anthony Pettinari
Anthony Pettinari
Analyst at Citigroup

Good morning.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Good morning, Anthony.

Anthony Pettinari
Anthony Pettinari
Analyst at Citigroup

Hey, you referenced the recent acquisitions and I'm wondering if it's possible to put a finer point on the volume benefit that you expect in 2025 either in terms of tons or percentage volume benefit or however you'd be able to frame it?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

No, happy to, Anthony. As a practical matter, if you're looking just at what would have been organic, it's probably up 1%. And then if you're looking at the balance of it, it's largely acquisition driven. So I think on a percentage basis, that's probably not a bad way to think about

Anthony Pettinari
Anthony Pettinari
Analyst at Citigroup

it. Got it. Thank you.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you.

Operator

Your next question comes from the line of Phil Ng with Jefferies. Please go ahead.

Phil Ng
Phil Ng
Managing Director at Jefferies

Hey guys. I guess since Trump has stepped into office, certainly a lot of noise on the funding front on the public side, but seems to be more centered around EV charging stations and some of these IRA projects. So So my question to you, Ward, have you seen any pause in projects and any slowdown in bidding activity for new projects? Just kind of help us kind of think through any choppiness and noise on the public side when we look up to 25?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

No, I appreciate the question. We've not seen any slowdown in that. And in fact, we think that's probably going to continue to be pretty constructive. And I would say for several reasons. One, if we just look at what we think is going to happen relative to non res square footage starts, I mean, we're projecting 2025 recovery of somewhere between 89%.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

But to contextualize that, that's still down 19% from twenty twenty two's peak and still below a 2021 level. And if we're looking at what we're seeing right now relative to Stargate that I mentioned in my opening comments at the investments that Amazon is making, we're simply not seeing a slowdown in those sectors right now. If we look in our footprint more specifically, I mean Google has activity right now both in Kansas City, which is an important market for us as well as in South Carolina. Microsoft, we talked about how much investment they have ahead of them, but they've already got projects underway in North Carolina. And obviously, I've already mentioned the Amazon projects in both Claiborne, Texas and in Fort Myers.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

But part of what I'm moved by as we think about the non res sector is we think industrial construction is going to be pretty healthy. We think healthcare and education is going to be pretty healthy. And we think the broad commercial real estate sector is going to be the one that's going to come behind that single family sector that we said is under built by around 7,000,000 homes today, at least according to realtor.com. So we're not seeing a slowdown in that. We're actually seeing a nice steady pickup in that.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And again, so much of what's going to happen in our business is going to be driven by the locations that we have and the states in which we've built leading positions we believe are going to be in the front end of much of this development.

Phil Ng
Phil Ng
Managing Director at Jefferies

Ward, a lot of that commentary was more around private, but I guess in the public side, you haven't seen any choppiness in terms of funding being paused or any of that stuff. And then the RIA piece, you just don't have as great of appreciation. How much of a good guy has it been and what kind of impact you could add on the road?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Yes. We're not seeing anything choppy on the public side. We think public is actually going to be really constructive and expect it to stay that way for a period of time. I mean, the fact is if we're looking in Texas this year, TxDOT lettings are going to be really robust. They were $13,500,000,000 last year and they're expected to be in that same range again this year.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Again, as you recall, Colorado actually has an approved budget of nearly $2,100,000,000 North Carolina's budget is going to increase to I think it's about $7,600,000,000 dollars And part of that's driven by the fact that now we're seeing about 6% of sales taxes going into NCDOT today. So we think that's going to be attractive. Equally, if we go to Georgia, I mean their budget is up 7%. Florida is at record levels if you take out one time supplements that they've had. So if we're looking at our state DOT budgets in our top 10 states on a same on same basis, eight of the 10 year over year are up.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So that's why when we're looking at the heavy side non res and on big infrastructure, we don't anticipate choppiness there. We expect pretty healthy, good, steady diets of work.

Phil Ng
Phil Ng
Managing Director at Jefferies

Okay. Really helpful, Ward. Appreciate it.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you.

Operator

Your next question comes from the line of Garrick Shmois with Loop Capital. Please go ahead.

Garik Shmois
Managing Director at Loop Capital Markets LLC

Hi. Thank you. Just a follow-up question and a new one for me. Just a follow-up just on the inventory drawdown. I was wondering if you could perhaps quantify how much you still have remaining in the first half of the year.

Garik Shmois
Managing Director at Loop Capital Markets LLC

And then just broadly on the volume outlook, recognizing that it's you're looking for low single digit growth, has any of the components changed either for the better or for the worst since you provided the preliminary outlook back after the third quarter?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So So a couple of things. So I would say relative to the inventory drawdown, if you think about it, so about a $30,000,000 headwind in Q3, a $20,000,000 headwind in Q4. We do think we're going to be done with that by the time we get to half year. And what that Garrick, if you think about bookends, that's probably not a bad way to think about bookending it. And the other part of your question, repeat that again for me Garrick.

Garik Shmois
Managing Director at Loop Capital Markets LLC

Yes. I was wondering if the volume outlook has changed at all since last quarter, recognizing you're still speaking to low single digit growth, but has any component gotten better or worse, maybe infrastructure sounds maybe to my ears, it might have been better. Got it. Is there any other color there?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So what I would say is, I think people generally have felt like interest is higher for longer. So I think overall, there's a sense that degrees of public are probably going to be a little bit more muted now than we would have thought several months ago. I mean, I'm sorry, private. And but at the same time, I think we feel like public is going to be pretty healthy. And I think we feel like it has to be for several reasons, Garrick.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Number one, you have to assume this administration is going to be looking at a reauthorization at the end of 'twenty six and having 70% of those dollars still hanging around the hoop doesn't sound like a really good idea. So our sense is that's probably going to be a pretty aggressive play that we're going to see on public in 2025 and 2026. So I think that probably feels honestly a little bit more robust and I think portions of private probably feels modestly slower for something that feels something like a wash.

Garik Shmois
Managing Director at Loop Capital Markets LLC

Got it. Thanks for that. I'll pass it on. Best of luck.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you, Garrett.

Operator

Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Hi. Thanks for taking my question. And sorry to be a dead horse here, but just wanted to clarify on the organic growth side, you talked about maybe 1% and the rest is on the volume side was maybe driven by the M and A front. But when you walk through your end markets, you highlighted high single digit for infra and then low single digit growth in resi, non resi. So it seems to imply that the end markets themselves are maybe growing closer to above that 1% if you kind of put that all together.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

So just curious, is that just conservatism or is there anything that we should kind of consider there as to why maybe that organic growth is only 1%?

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Yes, that was not organic. That was meant to be kind of a year over year view inclusive of the acquisitions.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Sorry, the 1% on volume?

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

No, no. The slides that show mid single digits for infra and etcetera, low single digits for the other categories, those were inclusive of acquisitions.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And I think to your point, look, as I said in my comments, we're trying to be really measured in this guide right now. So if we come back to you, we'd like to be guiding up, not sideways or down.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Got it. Understood. That's helpful. And then just wanted to go back to your comments around the industry pricing and in some pockets perhaps you're turning to April 1 and maybe a little bit more of a smooth cadence through the first half. Should we take that to mean that mid years we're kind of moving as an industry away from mid years or do you still expect to see mid years in aggregates?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I would say a couple of things. One, the guide that we've given you does not assume mid years, but we believe that there will be degrees of mid years, just as there were last year. And keep in mind, where we saw them mostly last year were in the new acquisitions. We think we will likely see that again this year. And part of what we'll just have to watch for next year is to see again how does cement rollout next year because what that did as this year came into play is it really made that January 1 more challenging, specifically relative to ready mix concrete.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So again, the January 1 price increases are broadly in for products going into hot mix. So it's really more of a basically a ready mix issue and a cement issue than anything else. But yes, it does not include mid years in the guide. We do think there will be some mid years. We'll be back to you to talk more about that.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Thank you.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you.

Operator

Your next question comes from the line of Tyler Brown with Raymond James. Please go ahead.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Hey, good morning.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Good morning, Tom.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Hey, Ward. Hey, as it relates to capital allocation priorities, can you guys talk a little bit about the M and A pipeline? Does a change in the regulatory environment impact anything there? And if that were not to materialize, what's the appetite on debt pay down versus the buyback just given the balance sheet health?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So number one, if you think about it, Tyler, dollars six billion worth of transactions last year, we ended the year at 2.3 times debt to EBITDA ratio. So we're in a very attractive place to continue growing our business, number one. Number two, there's still a lot of work to be done in this industry relative to M and A. And look, I'm going to see it for the rest of my career, my successor will see it for the rest of their career. And my bet is my successor's successor will see that for a good part of their career as well.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

As we've indicated before, we've firmly identified over 200,000,000 tons of businesses on a per annum basis that are in geographies in which we would have an interest in being and then to your point that we believe we can get cleared regulatorily. Look, do I think this is going to be a $6,000,000,000 year? No, probably not. If a few things break, could it be? I suppose it always could because it tends to be opportunistic.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

But my sense is, Tyler, we're looking just in a year in, year out circumstance that we're doing around $1,000,000,000 a year of transactions. And we think that's a good steady number. And there are going to be instances where you may well see it above that because you might have something opportunistically that comes along. But if we think back to it as well relative to different administrations, etcetera, one thing that Martin Marietta has always been very consistent in doing is being in a position that we look at the markets very thoughtfully and we understand businesses that we believe we can buy regulatory, ones that we can't. And we tend to move very purposefully on the ones that we can.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Now relative to other uses of cash, let me turn it over to Jim, so he can talk to you a little bit about that.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Yes, good question Tyler. We do have a bond coming due in December of this year. It's quite small. Whether that's repaid cash on the balance sheet or refinance, we'll see going forward, but it's relatively small and I would anticipate share buybacks to outstrip any kind of debt reduction, if there's any debt reduction at all. So we've been in the market last year, bought a fair bit of shares.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

We'll be in the market again this year as we are every year buying back stock, but that would come before debt pay down.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Yes.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Okay. And then super quick, Jim, it sounds like there's a few dynamics in first half versus second half FIFO pricing cadence M and A etcetera. Can you just shape first half and second half EBITDA mix? Will it slightly skew second half? Just any help would be very helpful for the model. Thanks.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Yes, I think it will skew second half as it traditionally does, perhaps less so this year than last year though.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Okay. Okay. That's helpful. Okay. Thank you. Thank you, Tom.

Operator

Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Good morning, gentlemen. Jacqueline.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

How are you?

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Yes, I'm great. A little chilly here in the Northeast, but we're suffering through it. It's all good.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I would expect nothing else.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Yes. Thank you. You have the residential market, just a little bit more thought on it's been frustrating, I think, for most of the industry that we've seen the affordability and the rate issues. Is it is there sensitivity on like if the economy picks up or rates fall just a little bit that there's this pent up demand will flow through? Are you anticipating that?

Michael Dudas
Equity Research Analyst at Vertical Research Partners

And is there any shift in say multi versus single that you might portray say heading in, I know you're going to have to longer term numbers, but certainly as things normalize, what kind of a benefit that could be in the regions that you're in?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Yes, Michael, it's a great question. I would say several things. As we talk to customers, when we talk to builders right now, they're focused on buying and entitling land. So number one, I think that's a really good sign. Number two, that tends to be a really good sign relative to single family residential.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And selfishly, we'd like to skew toward that because that's two to three times more aggregates intensive than is multifamily. The other thing that strikes me is while it's been a long slog, builder confidence in places like Texas, Colorado, North Carolina and Georgia is clearly getting better. So we think that's a very good sign. I think they believe starts and permits are expected to pick up more broadly across the marketplace today. And the other thing that I think is worth noting and I said it in the earlier response as well, I do think two degrees buyers are adjusting to higher rates.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And so I think to your point, I think cuts could actually see a pretty significant surge in demand. It's all going to be a matter of timing because it's not going to turn on with immediacy. But when we go back to the notion of 7,000,000 homes that are under built and a disproportionate number of them in states in which or MSAs in which we have a leading position, that's a pretty attractive place to be. So I hope that helps.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Sure does. Thank you.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

You as well.

Operator

Your next question comes from the line of David MacRaeger with Longbow Research. Please go ahead.

David Macgregor
President at Longbow Research

Yes. Good morning, everyone. Thanks for taking the questions. So I apologize for that. I'm in an airport here.

David Macgregor
President at Longbow Research

So, Ward, I guess on infrastructure, I hear you when you say that you're not seeing any interruption in orders right now, but I guess kind of the elephant in the room is how safe is federal funding for infrastructure construction projects. And I just wanted you to share with us how you would characterize the risk of federal government de obligating funds for state DOT projects.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

David, it's a perfectly good question and I don't see that as a big threat and here's one of the reasons why. I mean, if you think about the overall IIJA, dollars one point two trillion, right, but $350,000,000,000 to highways, bridges, roads and streets, the things that you and I look at as hard core construction. And if we think back to when IIJA was going through its debate process in the Senate and in the House, Then former President Trump was not in favor of IJA because he did not think enough of it was going toward what he would refer to as real infrastructure. So if we look at what's going on with that and we think about what I believe his marching orders have been to Secretary Duffy, and that is to build big. And build big in this context, I think means highways, bridges, roads, streets, airports and big heavy infrastructure in The United States.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So I think if they do anything with that, I'm not sure that they will, I think it will be nuanced and I think if it's nuanced, it's not going to be in those areas that you and I think about as being nicely aggregates intensive and oftentimes countercyclical. So I think if we think of IIJA through that lens, I think that's probably the right place to be. If we think about IRA, so many of those funds have already been obligated, obviously a much smaller program anyway. So as I'm sitting here measuring risk and thinking about the way the administration may be thinking about a reauthorization, I just view bad things happening there as having a relatively low likelihood. So David, I hope that helps.

David Macgregor
President at Longbow Research

It does. Thanks very much, Ward.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

You're welcome.

Operator

Your next question comes from the line of Adam Thalhimer with Thompson Davis. Please go ahead.

Adam Thalhimer
Director of Research at Thompson Davis & Co

Hey, good morning guys. Congrats on the Q4, Pete.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you, Adam. Good to hear your voice.

Adam Thalhimer
Director of Research at Thompson Davis & Co

Two things. I have some confused clients on pricing. And I think you said aggregates pricing up a little bit sequentially in Q1 with a bigger pop in Q2.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Yes.

Adam Thalhimer
Director of Research at Thompson Davis & Co

And then my other question was vis a vis what somebody else said about the weather, it's been a pretty tough winter. Just curious if we should bake in a conservative Q1?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I wouldn't go over your skis on baking in a conservative Q1. I think Q1 is going to be just fine. So I wouldn't lean too hard there. And look, I think you nailed it on the pricing. I'm not at all worried about pricing as Trey indicated in his question too.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

I mean, an April price increase for some portions of a marketplace is where this industry has resided for a long time. And my only commentary around pricing was I'm trying to make sure from a modeling perspective. To your same point, I'm not wanting people to get over their skis on certain components as to go through on a month by month basis. But if I break yours down, no, I don't think you need to build anything draconian at all into Q1. And I do think if you've got price increases layering in a more robust way post Q1, your model will hold together in a better fashion.

Adam Thalhimer
Director of Research at Thompson Davis & Co

Perfect. Thanks, Ward.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you, Adam.

Operator

Your next question comes from the line of Avi Yaroslavlovich with UBS. Please go ahead.

Avi Jaroslawicz
Avi Jaroslawicz
Equity Research Associate at UBS Group

Hi, good morning.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Good morning.

Avi Jaroslawicz
Avi Jaroslawicz
Equity Research Associate at UBS Group

Given all the volatility and fluctuations with policymaking these days, just curious how that's affecting your own capital planning and strategic decision making?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

The nice thing about this industry is I can tell you this company has always been profitable. This company has never cut a dividend.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And at history and let some of the history dictate how we look at at history and let some of the history dictate how we look at the future going ahead, look, there are going to be some policy things that will move around. I think the policy issues that I believe we'll see from this administration relative to public and infrastructure will be constructive to what we're doing. I think the policy decisions we may or may not see from this administration relative to tariffs, whether it be cement, steel or otherwise, will probably be constructive to what we're doing. When I think about where I think this administration would like to see interest rates and what that can do to single family housing, I think that ought to be constructive to what we're doing. When I think about a company that has proven itself to be actually very capable at M and A, I think we're likely to be in a time with availability of potential transactions and administration that's frankly going to be will look more favorably upon transactions going forward than we've seen in the more recent past.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So are we watching carefully? Yes. Are we going to remain agile? Yes. But as we look at it and really start thinking about what are going to be potential pluses here, what are going to be potential minuses here, we see a lot of pluses here.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

And we see that relative to what M and A will look like. We see that relative to what we think monetary policy is going to look like. And frankly, I think we're likely to see it in the way a reauthorization works. And the way that I think about that is I think this administration, while they have control of a House of Representatives and the United States Senate, are likely to want to get a reauthorization done before midterms. Because it passes prologue, usually midterms don't work terribly well for the party that's in the White House.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So the current administration is looking at having the White House and the Senate and the House of Representatives and is consistent with telling Secretary Duffy to build big. Again, as we're watching the policy decisions that have been announced and policy decisions that we anticipate, I think on a whole, we feel like they're going to be pretty positive for Martin Marietta.

Avi Jaroslawicz
Avi Jaroslawicz
Equity Research Associate at UBS Group

All right. Very helpful. Thank you.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

You bet. Thank you.

Operator

Your next question comes from the line of Michael Feniger with Bank of America. Please go ahead.

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Great. Thanks for squeezing me in guys. Of course. Jim, you mentioned price versus cost spread has widened in recent years. I'm just curious, Ward, if we are in a higher for longer rate environment and that private side is still somewhat under pressure, Is it inevitable that as you turn the page to 2026 that pricing comes back down to that long term 3% to 4% average? Or just qualitatively, do you think that price versus cost spread remains wider than maybe what we historically have seen outside of just the last three years?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So I'm going to answer your last question first. Look, I think the price cost spread continues to work in our favor. And I think for a couple of reasons, I think actually twofold in the sense. One, and Jim can talk to what we're seeing broadly on inflation. I think inflation is moderating, inflation is coming down.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So that's going to help. But I think the bigger driver is pricing is going to remain in a fundamentally better place going forward than pricing was, at least in my view, for all the years up until, let's call it, the last two or three. And I think that's a fundamental change. I don't see that changing. Look, if you're looking to face some financial statements as I am, you're seeing ASPs around $22 a tonne for aggregates.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

That's had a nice run. But Michael, I'm going to say again, what you've heard me say in the past, there are very few things that you want in your life that you can buy for $22 a ton except our product. And I continue to believe that we're going to be in a position that we can get appropriate value for our product going forward. I think we'll see that spread continue. I'll ask Jim to give you a little bit of color relative to what we're seeing with respect to inflation.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

Yes. So as we indicated late last year, we're still of the same view, COGS per ton inflation is mid single digits, and then trailing by a fair bit the ASP growth we're expecting. So based on our guidance, I would say we would expect gross margins to widen that spread by another 100 basis points. In 2025 over 2024, that's even after overcoming the temporary P and L effects of the inventory reduction. So I think that bodes well for 2025, bodes well for 2026 and beyond.

James Nickolas
James Nickolas
Executive VP & CFO at Martin Marietta Materials

So over the arc of history, we've widened the price cost spread. It's not a straight line, but it's pretty consistent over time and I don't see why that would end.

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Great, Jim. And Ward, maybe just to one of your earlier comments, I think you said on Q4, the cement margin was healthier relative to what you saw in ready mix. Just how is that evolving in 2025? I mean, I think nat gas prices are a bit higher. Just kind of curious how we should kind of think about that cement versus ready mix in 2025?

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Well, I would tell you, I think considerably better about cement than about ready mix in 2025, even as we're looking at cement for the quarter. I mean, pricing was constructive. The fact is the business really performed well despite pretty significant headwinds from a weather perspective in both November and December. We saw nice revenues in cement. We saw good gross profit.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

We saw good gross margins, good EBITDA. Importantly, that FM seven operation that we opened, it was running at greater than 90% of availability there in the fourth quarter after we opened that up. So again, we're not going to be cement every place, we're going to be cement where it's really strategic to us and in Dallas Fort Worth that it's really strategic and Midlothian is a fantastic cement plant. Now if you think about what's happening relative to ready mix, volume is relatively flat there. The dilemma that ready mix has is ready mix is taking significant aggregate price increases, it's taking cement price increases and it's hard for ready mix to keep pricing ahead of that.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

So if we think about what the combination is going to look like, you're going to see some margin compression in ready mix. But again, if we think about ready mix, it's so much of a shock absorber for our company. We have it in very select markets. It's important to us in places like Dallas Fort Worth and Arizona. But your question really was geared around cement and I wanted to make sure I gave you a good robust snapshot of the way cement is performing because if you could really see it at a granular basis, you'd be very comfortable with it as are we.

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Thank you.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

You're most welcome.

Operator

And that concludes our question and answer session. And I will now turn the conference back over to Ward Nye for closing comments.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

Thank you, Kristen. Thank you all for joining today's earnings conference call. As we close the chapter on our thirtieth year as a public company and look forward to the next thirty years, you should expect Martin Marietta to continue building on its solid foundation of past successes. With our world class teams and proven strategic priorities underpinned by our resilient aggregates led business in unparalleled markets, Martin Marietta is well poised to deliver sustainable growth and shareholder value for years to come. We look forward to sharing our first quarter twenty twenty five results in a few months.

Howard Nye
Howard Nye
CEO, President & Chair of the Board at Martin Marietta Materials

As always, we're available for any follow-up questions you may have. Thank you again for your time and continued support of Martin Marietta.

Operator

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

Executives
    • Jacklyn Rooker
      Jacklyn Rooker
      Director of Investor Relations
    • Howard Nye
      Howard Nye
      CEO, President & Chair of the Board
    • James Nickolas
      James Nickolas
      Executive VP & CFO
Analysts
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Key Takeaways

  • Record Q4 aggregates performance: Consolidated gross profit of $489 million, adjusted EBITDA of $545 million (up 8%), and aggregates gross profit per ton at $7.92 (up 12%).
  • $6 billion of transactions in 2024: Nearly $4 billion of aggregate acquisitions and over $2 billion of non-core divestitures added 1 billion tons of reserves and sharpened the portfolio.
  • 2025 outlook: Full-year aggregate shipments up ~4%, pricing growth of 6.5%, and adjusted EBITDA guidance of $2.25 billion (up 9%) backed by infrastructure, data centers, and full-year acquisition contributions.
  • Infrastructure tailwinds: With 70% of IIJA highway and bridge funds yet to be spent, public highway construction is projected to grow 8% to $128.4 billion in 2025, bolstered by AI-driven data center build-out.
  • Strong financial and safety metrics: Q4 operating cash flow of $685 million (up 23%), net debt/EBITDA at 2.3x, $639 million returned to shareholders, and best safety incident rates in company history.
AI Generated. May Contain Errors.
Earnings Conference Call
Martin Marietta Materials Q4 2024
00:00 / 00:00

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