Martin Marietta expects volume growth in 2011
The expected volume gains in infrastructure are due to the continued spending from the stimulus package passed last year, and in particular from the $27.5 billion in additional highway and bridge funding.
All of the stimulus funds have been obligated and about 27 percent of the funds are estimated to have been spent through second quarter of 2010.
The company continued to report higher aggregates pricing during most of this construction downcycle despite significantly lower aggregates shipments. Heritage aggregates pricing increased 1.9 percent in 2009, 6.6 percent in 2008 and 10.2 percent in 2007.
However, this trend reversed during the fourth quarter of 2009 when the company reported a 1.1 percent year-over-year pricing decline. This new trend persisted through the second quarter of 2010 (aggregates pricing fell 3.1 percent during the first quarter and 3.8 percent during the second quarter) and is anticipated to continue for the remainder of 2010 and into 2011.
Aggregates pricing has been negatively affected by geographic and product mix as well as by a higher percentage of shipments to stimulus-related projects, wherein pricing is estimated to be 10-percent below the company’s average price. The company currently forecasts aggregates pricing will decline 1 percent 3 percet in 2010. Fitch also expects aggregates pricing to fall in the low-single digits next year.
Cash flow from operations for Martin Marietta has so far been relatively stable despite the cyclical nature of the construction industry. The company derives about 55 percent of its aggregates shipments from public infrastructure projects, which have been less volatile than commercial and residential construction.
For the latest 12 months (LTM) ended June 30, 2010, Martin Marietta generated $288.1 million of cash flow from operations. This compares to $318.4 million for fiscal 2009 and $341.7 million for fiscal 2008.
Martin Marietta continues to have solid liquidity, with cash of $32.1 million and roughly $398 million of borrowing availability under its revolving and accounts receivable credit facilities as of June 30, 2010. Martin Marietta has sufficient liquidity to deal with $250 million of senior notes maturing in April 2011. The company’s next debt maturity is in April 2012, when its $111.8 million term loan facility becomes due. Martin Marietta remains in compliance with the leverage ratio under its various credit agreements. The company ended the second quarter with a debt-to-EBITDA ratio of 2.84 times (x) compared to the maximum required ratio of 3.50x.
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