Martin Marietta Materials, Inc.

Hello, and welcome to Martin Marietta's full year and fourth quarter 2022 earnings conference call. All participants are now in a listening 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 call over to your host, Ms. Jennifer Park, Martin Marietta's Vice President of Investor Relations. Jennifer, you may begin.

Good morning. It's my pleasure to welcome you to our full year and fourth quarter 2022 earnings call. Joining me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas, Senior 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. 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 investor section of our website supplemental information that summarizes our financial results, trends, and 2023 guidance. 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 amounts in the appendix to the supplemental information, as well as our filings with the SEC, and are also available on our website. Ward and I will begin today's call with a discussion of our operating performance. Jim Nicholas will then review our financial results and capital allocation, after which Ward will conclude with market trends and our 2023 outlook. A question and answer session will follow. Please limit your Q&A participation to one question. I will now turn the call over to Ward.

Thank you, Jenny. Good morning, everyone, and thank you for joining today's teleconference. I'm pleased to report that in 2022, Martin Marietta delivered our most profitable year and our 11th consecutive year of growth for consolidated products and services revenues, gross profit, and adjusted EBITDA. Martin Marietta also achieved a world-class total entry incident rate for the second year in a row and a world-class lost time incident rate for the sixth consecutive year. We delivered these record results along with platform M&A integration and multiple portfolio optimization actions amid a challenging macroeconomic setting that included a housing slowdown, monetary tightening, and 40-year high inflation. Martin Marietta's accomplishments are a testament to our team's steadfast commitments to the disciplined execution of our strategic plan. Most importantly, the company is well positioned to deliver another record year in 2023. Before discussing our four-year results, I'll briefly highlight a few takeaways from the fourth quarter. While price and growth significantly accelerated, product shipments were adversely affected by inclement weather in a number of key Marietta geographies. As a reminder, we're comparing 2022 results against the fourth quarter of 2021 when we benefited from unseasonably warm and dry weather that extended the construction season late into the year. With this context, aggregate shipments decreased 12% against the prior year quarter, Yet, as we begin 2023, aggregates customers backlogs remain healthy and shipment trends thus far are ahead of planned levels. Aggregates pricing in the fourth quarter of 2022 increased a robust 16.5%, a quarterly record, or 5.6% sequentially, providing attractive tailwinds into 2023. Further, despite the weather impacts on operating leverage and acceleration of certain operating expenses, Price and growth drove aggregates gross margin expansion and improved gross profit per ton shift by 25% over the prior year quarter. In summary, for the final quarter of 2022, poor weather was a literal headwind, but 2023's stage has been set both operationally and commercially. Now let's turn to our full year 2022 results and the new financial records we set for an 11th consecutive year in each of the following year-over-year metrics. Consolidated products and services revenues of $5.7 billion, a 13% increase. Consolidated gross profit of $1.4 billion, a 6% increase. And adjusted EBITDA of $1.6 billion, a 5% increase. These results underscore the success of our value over volume commercial strategy through which we successfully implemented multiple pricing actions in 2022. As a result, we achieved double digit pricing growth across all building materials product lines. However, we were not immune to the rapid and significant inflationary pressures that impacted our operating costs and affected our product gross margin, which declined 160 basis points to 24.9% for the year. As an example, 2022's results included $178 million of energy cost headwinds, an over 55% increase compared with 2021. It bears repeating that inflation supports a constructive pricing environment for our upstream materials, the benefits of which long endure after inflationary pressures abate. We believe our multiple commercial actions enacted in 2022 coupled with broad customer support of our January 1st, 2023 price increases will drive meaningful pricing acceleration and margin expansion in 2023. Let's now turn to our full year operating performance, beginning with aggregates. We experienced solid aggregates demand across our geographic footprint with total aggregate shipments increasing 3.3% to 208 million tons. Aggregate pricing fundamentals remain very attractive as pricing increased 10.6% or 10% on a mixed adjusted basis. The Texas cement market continues to experience robust demand and tight supply amid near sold out conditions. Against that backdrop, and combined with our cement team's focused execution on commercial and operational excellence, we delivered record yearly shipments of 4.2 million tons and price and growth of 16.9%. We expect favorable Texas cement commercial dynamics will continue for the foreseeable future based on market trends and the success of our January 1st price increases. Shifting to our targeted downstream businesses, prior year shipment comparability for ready mix concrete is notably impacted by last April's divestiture of our Colorado and Central Texas operations and only partially offset by our Arizona acquisition. Cumulatively, concrete shipments decreased 25.4% and pricing increased 11.3%, reflecting multiple pricing actions in the year, including fuel surcharges in order to pass through raw material and other inflationary cost increases. Asphalt shipments increased 28.4%, driven by contributions from our acquired California and Arizona operations which also impacts the prior year comparability. Pricing improved 23.6% following the increase in raw material costs, principally liquid asphalt or bitumen. Before discussing our 2023 outlook, I'll turn the call over to Jim to conclude our 2022 discussion with a review of the company's financial results. Jim?