Concrete Products

SEP 2015

Concrete Products covers the issues that attract producers of ready mixed and manufactured concrete focusing on equipment and material technology, market development and management topics.

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Page 13 of 59

12 • September 2015 NEWS SCOPE PRODUCERS With stakes in some of the strongest cement, concrete and aggregate markets, the industry's top bellwether operators sent investors par- allel messages on year-to-date financial performance: Heavy spring rains, especially in Texas, had limited effect on overall sales and profitability improvements compared to the first six months of 2014. Upbeat second quarter 2015 earning reports, plus solid sales, pric- ing and profit projections, sent Martin Marietta Materials and Vulcan materials stock toward all-time and eight-year highs, respectively. Martin Marietta cited National Oceanic and Atmospheric Admin- istration figures indicating the U.S. experienced the second wettest second quarter in more than a century. In Texas, where the producer holds much sway on the heels of its 2014 merger with TXI, agency fig- ures show 2015 bringing the wettest January–June for the 121 years rainfall data has been tracked. "These highly unusual factors resulted in nearly $100 million in deferred net sales across all product lines, which lowered gross profit by an estimated $27 million," said Martin Marietta CEO Ward Nye. "Assuming normal levels of precipitation, we expect exceptional per- formance from our businesses in response to strong demand that was delayed during the first half of the year … As we look at the remainder of 2015 and into 2016, contractor backlogs and other macroeconomic indicators underscore the pent-up demand for our products, and that should allow us to capture delayed shipments in future quarters. "Texas ranks second in the nation in job growth and has added almost one million jobs during the last three years. This coincides with all major Texas metropolitan areas reporting their highest growth rate in overall economic activity in more than 30 years." A July 2015 Fed- eral Reserve Bank of Dallas report, he added, notes Houston's "refin- ing, petrochemicals and service industries are managing to offset oil- producer woes," while the Texas Department of Transportation's fiscal year 2015 lettings budget of nearly $7.5 billion reflects major project activity acceleration and augments a multiyear backlog. Despite extremely wet weather in Texas and other markets, Vulcan Materials logged second quarter revenue and gross profit increases of 13 percent and 34 percent, respectively, from the prior year, while existing aggregate sites' shipments climbed 5 percent and freight-ad- justed aggregates prices rose 6 percent against comparable 2014 fig- ures. "The continuing recovery in construction activity across most of our markets was masked by extremely wet weather, particularly in April and May," said CEO Tom Hill. Customer confidence and the over- all demand outlook continue to improve, and, as expected, pricing momentum continues to strengthen." Historic weather impacts a blip on Martin Marietta, Vulcan Materials radar A window of record precipitation across Texas challenged scheduling for the Archer Western, Granite and Lane joint venture handling a major expansion of Interstate 35, north of Dallas. Weather did not ham- per the early-May National Fall Preven- tion Stand-Down, which AGL marked with a message from a suitably perched icon, King Kongcrete. TXI ASSETS CALPORTLAND-BOUND A $420 million asset deal with Martin Marietta Materials Inc., anchored by the former TXI Oro Grande plant and scheduled for third quarter closing, will enable Glendora, Calif.-based CalPortland Co. to replace capacity from its idled Colton mill—about 35 miles south—and strengthen a home state, integrated cement and con- crete platform. Coupled with Stockton and San Diego terminals, the plant will contribute to what CalPortland parent Taiheiyo Cement Corp. reports is "a steady improvement in sales volume and profit in [the] Group's U.S. operations." TXI, with whom Martin Marietta merged in July 2014, completed a $400 million-plus Oro Grande upgrade in 2009, bringing capacity to 2 million tons per year. The operation will support optimized cement production and logistics across CalPortland's Mojave and Rillito plants in California and Arizona. The Mojave plant is about 75 miles to the northwest of Oro Grande. "While we believe the California cement plant is one of the most up-to-date plants in the region, it is not in close proximity to oth- er core assets and, unlike other marketplace competitors, is not vertically integrated with ready mixed concrete production," noted Martin Marietta CEO Ward Nye in a second quarter earnings review referencing the CalPortland agreement.

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