Martin Marietta expects volume growth in 2011
Martin Marietta’s operating results have been negatively affected by the weak aggregates demand across most of the company’s end-markets.
Martin Marietta’s EBITDA declined from $603 million in 2007 to $379.8 million for the LTM period as of June 30, 2010. As a result, the company’s leverage (as measured by debt to EBITDA) has been higher than its normalized target ratio of 2.0x-2.5x. Fitch expects Martin Marietta’s leverage ratio will remain slightly above its target level during 2010 and anticipates the company will be within its leverage target range by the end of 2011
The company has taken a more cautious stance on share repurchases during the past year. Management has committed to suspend share repurchases and indicated that it will only buy back shares if it is within its leverage target. The company has not repurchased any stock since 2007.
Martin Marietta currently has 5.04 million shares remaining under its repurchase authorization.
In the past, the company had regularly made acquisitions and Fitch believes this strategy will continue, although the company has now reached significant scale and may be less likely to do larger acquisitions going forward. In 2008, the company spent $218.5 million on acquisitions, including a $192 million cash payment for the purchase of six quarries in Georgia and Tennessee from Vulcan Materials. (In addition to the cash payment, Martin Marietta also divested several assets to Vulcan.) The company spent $139.2 million on acquisitions during 2009 and $28.1 million through the first half of 2010.
Martin Marietta’s aggregates division (about 90 percent of 2009 sales) markets its products primarily to the construction industry, with about 55 percent of its shipments made to contractors in connection with highway and other public infrastructure projects, 25 percent to commercial construction contractors, 7 percent to contractors of residential construction projects, with the balance of its shipments to chemical, railroad ballast and other projects.
The company’s exposure to fluctuations in commercial and residential construction is somewhat lessened by the company’s mix of public-sector-related shipments, which is typically less volatile than commercial and residential construction due to funding from federal, state and local governments.
Its small magnesia specialties operation (roughly 10 percent of 2009 sales) manufactures and markets magnesia-based chemicals products for industrial, agricultural and environmental applications and dolomitic lime for use primarily in the steel industry.
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