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Aggregate top guns believe in recovery

Three credible sources offer a welcome follow up on the encouraging 2013 construction and concrete business outlook noted here last month. In investor guidance, the top U.S. aggregate producers—each with varying levels of integrated concrete, cement, asphalt and road building businesses—report slight 2012 sales or earnings improvement over the prior year, plus 2013 market confidence underpinned by MAP-21 highway bill funding, plus gains in residential and nonresidential building.

Vulcan Materials Co. ended 2012 with revenues just shy of $2.57 billion and slightly less than $3 million above its 2011 total. Against flat aggregate sales of about $1.7 billion in both years, the company reported growth in concrete and cement shipments from 2011 to 2012: $375 million to $406 million and $72 million to $85 million. “Earnings in each of our non-aggregates segments should improve. Concrete volumes and materials margin are improving as housing starts continue recovering in key states,” says Vulcan Chairman Don James of the 2013 outlook. “Cement earnings should improve due mostly to lower production costs. Full-year earnings from these segments are expected to contribute significantly to earnings growth.

“We believe economic and construction-related fundamentals that drive demand for our products are continuing to improve from the historically low levels created by the economic downturn.”

Martin Marietta reports 2012 sales just over $2 billion, a little more than $300 million above 2011 figures, owing mostly to increased aggregate, ready mixed, asphalt and road building volume gained from the Colorado Front Range operations anchoring a late-2011 asset swap with Lafarge North America. That transaction was reflected in 2011 to 2012 increases Martin Marietta saw in sales of ready mixed, from $33 million to $116 million; asphalt, $47 million to $80 million; and, road building services, $25 million to $136 million.

“We expect our vertically integrated businesses to generate between $350 million and $375 million of net sales and $20 million to $22 million of gross profit,” notes CEO Ward Nye in this year’s outlook. “We are encouraged by positive trends in our business and markets, especially as MAP-21 and other programs are implemented. For 2013, we currently expect shipments to the infrastructure end-use market to increase in the mid-single digits. We anticipate the nonresidential end-use market to increase in the high-single digits, [as] the Architectural Billings Index is reflecting the strongest growth at architecture firms since the end of 2007.

“Residential construction is experiencing a level of growth not seen since late 2005, with seasonally adjusted starts ahead of any period since 2008. We believe this trend in housing starts will continue and our residential end-use market will experience double-digit volume growth.”

Oldcastle Materials, the number three U.S. aggregate producer behind Vulcan and Martin Marietta—but with far greater integrated-business volume, and sales last year just below $5 billion—saw minimal gains from 2011 to 2012 in both ready mixed and stone, sand & gravel shipments. In 2012–2013 investor guidance, however, parent company CRH confirms: “We believe the fundamentals are in place for continued positive momentum in the U.S. [and] expect our Americas operations to show progress in 2013.”

As publicly traded companies, Vulcan Materials, Martin Marietta and CRH are bound by Securities and Exchange Commission rules when offering market outlook commentary. Their belief in construction activity and profit potential from integrated materials production is further cause for confidence in this year becoming a true turning point in industry fortunes.