Martin Marietta Materials, Inc.

Hello, welcome to Martin Marietta's third quarter 2024 earnings conference call. All participants are now in a listen-only 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. Jacqueline Rooker, Martin Marietta's Director of Investor Relations. Jacqueline, you may begin.

Good morning and thank you for joining Martin Marietta's third quarter 2024 earnings call. With me today are Ward Nye, Chair and Chief Executive Officer, and Jim Nicklaus, Executive 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 Investors section of our website, supplemental information that summarizes our financial results and trends. 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 measure in the appendix to the supplemental information, as well as our filings with the SEC and are also available on our website. Today's earnings call will begin with Ward Nye, who will discuss our third quarter operating performance, our preliminary view for 2025, and supporting market trends. Jim Nicholas will then review our financial results in capital allocation, after which Ward will provide closing comments. 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, Jacqueline, and thank you all for joining this teleconference. During the third quarter, we experienced a series of well-chronicled extreme weather events, including significant July precipitation together with Tropical Storm Debbie in North Carolina, Hurricane Barrel in Texas, and Hurricane Helene across much of our southeast footprint. First and foremost, we're grateful that our employees and their families are safe. Our thoughts, prayers, and ongoing support remain focused on those who have suffered so disproportionately during these natural disasters. We're particularly mindful of our neighbors in western North Carolina as they begin the long process of rebuilding. Aside from the human cost of these events, we and a host of other businesses were affected by the storms. In our specific case, project delays and inefficiencies negatively impacted our financial results and as a consequence, we revised our full-year 2024 adjusted EPIDOT guidance to $2.07 billion at the midpoint. To help better demonstrate the severity of these weather events during the last two quarters to our upstream product shipments, we provided two case studies on page 8 of our supplemental information. The first case study is particularly revealing relative to cement. As you'll recall, the second quarter's significant precipitation was particularly notable in Dallas-Fort Worth, our company's single largest market area, resulting in an 18% decline in our Midlothian cement shipments. Encouragingly, as the weather improved, so did Midlothian's third quarter shipments. Shifting now to aggregates, our implied fourth quarter shipment guide reflects a 5% increase in shipments, a notable improvement relative to the third quarter's 4% decline. Our fourth quarter view is primarily based on October's trends and reasonable expectations for the remainder of the year. These statistics demonstrate the important irony of disruptive and destructive weather. Planned shipments are not generally canceled, they're delayed, and depending on seasonality and severity, resumption of planned shipments usually occurs in the following months and or quarters. Despite these weather-related events, I'm pleased to highlight some of our team's accomplishments. First, we achieved the best -to-date safety incident rates in our company's history, inclusive of our newly acquired businesses. Operationally, our teams achieved record quarterly aggregates gross profit per ton of $8.16, record third quarter cash flows from operations, and record third quarter revenues and gross profit in our Magnesia Specialties business. Given the totality of the quarter's uncontrollable and exigent circumstances, these are notable records upon which we intend to build. With respect to continuing to build, in October, we acquired pure aggregate assets in South Florida and Southern California, both attractive and growing Martin Marietta Markets. Consistent with our strategic operating analysis and review, or SOAR plan, these bolt-on acquisitions further enhance our gross profit contribution from the aggregates product line and improve the long-term durability of our business. Together, these accomplishments reflect our team's focus on matters we can control, while underscoring the resiliency of our aggregates-led business, which is strategically positioned in the country's fastest growing markets. Importantly, these results reinforce our expectation that our aggregates' price-cost spread will continue to expand over time, driving improvement in unit profitability through macroeconomic cycles. As we look toward 2025, we remain focused on the long-term aspects of our business that we can significantly impact. World-class safety, the consistent and disciplined execution of our strategic plan, resolute adherence to our leading commercial strategy, and prudent cost management through ongoing operational excellence efforts. Equally, we expect product shipments will recover due to more normal weather patterns and an expected improvement in warehouse and residential construction. Preliminarily, we expect that 2025 overall aggregate shipments will increase by low single digits and aggregates' pricing will increase by mid to high single digits. Moving now to end market trends, regardless of the outcome of the upcoming elections, both rebuilding and maintaining our nation's infrastructure remains a bipartisan national strategic priority. Record levels of state and federal investment through the Infrastructure Investment and Jobs Act, or IIJA, continue to support attractive demand for highways and streets construction. And while growth rates and contract awards have predictably flattened as reflected in the value of contract awards for the 12-month period ending August 31, 2024, the baseline for highway and street spending is well above historical levels. Looking ahead, funding certainty at the state and federal level will provide volume stability and support a healthy pricing environment in this aggregates' intensive, often counter-cyclical, end market for years to come. Relative to heavy non-residential construction, the buildout of artificial intelligence infrastructure supports emerging growth trends in both data centers and related energy requirements. Moreover, aggregates' intensive warehouse construction appears to be cyclically bottoming in select markets, as indicated by recent project announcements. For example, Amazon is planning to build one of its largest North American distribution centers in the Dallas-Fort Worth Metroplex. With our leading aggregates' position, strategic and large capacity cement plant, and affiliated ready-mix presence in this dynamic market, Martin Marietta is uniquely positioned to supply materials to this project, which is expected to begin later this year. Shifting now to light non-residential and residential activity, housing availability and affordability remain key issues impacting single-family demand. While a correction of these issues will not be immediate, we believe that loosening monetary policy is an important first step. It passed its prologue, and we believe that to be the case. As residential construction recovers, light non-residential activity typically follows. In summary, we believe multi-year public construction activity, reshoring, the artificial intelligence infrastructure buildout, and the long-awaited single-family housing-led residential recovery all coalesce to support durable aggregate shipment growth and continued attractive pricing momentum for years ahead. I'll now turn the call over to Jim to discuss our third quarter financial results. Jim? Thank you, Ward.

And good morning, everyone. For the third quarter, the building materials business generated revenues of $1.8 billion, a 6% decrease, and gross profit of $588 million, a 9% decrease. The decline in both metrics is due to the February divestiture of our South Texas cement and related concrete businesses, along with shipment declines in all product lines, partially offset by acquisition contributions. Aggregates gross profit per ton improved 3% to a quarterly record of $8.16, notwithstanding lower shipment volumes, highlighting the efficacy of our value over volume commercial strategy. Aggregates pricing increased .7% or .9% on an organic, mix-adjusted basis. Cement and concrete revenues decreased 30% to $296 million, and gross profit decreased 37% to $89 million, again driven primarily by the divestiture of our South Texas cement plant and its related concrete operations. I am pleased to report the construction of our new finish mill at Midlothian is Complete, which will provide us with approximately 450,000 tons of incremental high margin annual production capacity in the attractive North Texas market. Asphalt and paving revenues decreased 5% to $343 million, and gross profit decreased 8% to $61 million. Wet weather, project delays, and a softer non-residential market drove the shipment decline, while lower revenues and higher aggregates cost negatively impacted profitability. Magnesia specialties posted record third quarter revenues and gross profit of $82 million and $29 million respectively, as benefits from strong pricing and improved lime shipments more than offset lower chemical shipments. Turning now to capital allocation and liquidity. As Ward mentioned, we achieved record third quarter cash flows from operations of $601 million, an increase of 32% as compared to the prior year quarter, due primarily to working capital improvements that more than offset lower net earnings. Consistent with our longstanding capital allocation priorities for the nine months ended September 30th, 2024, we deployed over $2.5 billion on pure play accurate assets, invested $622 million to capital back into our business, and returned $591 million to shareholders through dividend payments and share purchases. In our 30 years as a publicly traded company, we have steadily maintained or increased our dividend, and this year is no exception. During the quarter, our board of directors approved a 7% increase to the quarterly cash dividend paid in September, reaffirming our confidence in the durability and sustainability of our company's future growth and free cash flow generation. We have now returned a total of $3.2 billion to shareholders through both dividends and share repurchases since the announcement of our share repurchase program in February 2015. Our net debt to EBITDA ratio was 2.0 times for the trailing 12 months ended September 30th, at the low end of our targeted range of 2 to 2.5 times, preserving financial flexibility to continue actively pursuing value enhancing, high quality, accurate acquisitions, and prudently reinvesting in our business, all while returning capital to mark merited shareholders through dividend growth and opportunistic share repurchases. With that, I will turn the call back over to Ward.

Thanks, Jim. As

our third

quarter and year to date results demonstrate, Martin Marietta remains focused on matters we can control, an unwavering commitment to safety and the environment, commercial and operational excellence, and the disciplined execution of our strategic priorities. We have thoughtfully shaped and expanded our aggregates led portfolio and liberally built our business with leading positions in the nation's fastest growing markets, making Martin Marietta an increasingly resilient, efficient, and cash flow generative business that can consistently drive shareholder value creation. With these attractive underlying fundamentals, our best in class teams, unparalleled growth opportunities, and proven strategic priorities, we're excited about the prospects in 2025 and beyond. If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from the line of Catherine Thompson with TRG. Please go ahead.

Hi, thank you for taking my questions today. You bet. Really, a primary question is on weather and then looking forward. So, how does weather impact Q3 results, both from a volume and a pricing optic standpoint? And could you give color on how shipments have trended into October and are really looking at post storms? Thank you.

Catherine, thanks for the question. It's a good one because that really does highlight much of what happened in the quarter. Several things that I would say. Number one, as we discussed before, Q2 in its own way was a washout and Q3 was as well from a weather perspective, which is why we put that supplemental slide on page eight in the deck today because I think it does give good color relative to how significant the weather events were to our shipments. So, as you can see, if you look at that slide, Q2 was really severe in DFW and as Q3 rolled around, it wasn't as bad in DFW and you saw a really nice snap back in volumes at Midlothian. Now, Q3 was just tough across the southeast and much of the east. Look, here's your takeaway. We literally had a hurricane every two and a half weeks in Q3 and they were coming through and disproportionately hitting our eastern business and a lot of it, frankly, our southeastern business. To your point, Catherine, if we're looking at businesses that have our highest ASPs, if we're looking at businesses that have our highest margins, that's the sweet spot and that's the part that really was hit hard, hard, hard in the quarter. If we're looking at it overall, did it affect the shipments, I think notably? Disproportioned drivers shipments down? Absolutely. Was a disproportioned driver of what happened to profitability because of the wear. And then the other piece of it is it made it more difficult in some instances to get the same degree of mid-year price increases this year that we saw last year. So you really had almost a trifecta of issues that went through. Now, to the second part of your question, it's a good one. I was reading the Wall Street Journal this morning and was talking about much of the country being in some degree of a drought in October. And the fact is October has been much more normal. And what we've seen in October is really what is driving what you've seen relative to our aggregate forecast going forward. Because if you look at it, what it's basically saying is we're anticipating aggregates to be up 5% in Q4. And that's really on the back of what we're seeing in October. So several things I would note as I think about the durability and how real that is. One, we're seeing the tonnage. Two, we're seeing our customers continue to add to their backlogs. So we're seeing nice sequential build in customer backlogs. And the other thing to me that's telling is our customers are hiring right now too. So when you're seeing good activity that we're seeing in October, when we've seen dry weather, when we're seeing good activity from backlogs from a customer perspective, and we're seeing contractors hiring right now, we think all of those together give a nice picture of what's to come. But when you step back from it too, it answers I think the essence of your question. How much did weather matter? Answer, it mattered a lot. How much did it matter relative to volume? A lot. How much did it matter relative to profitability? Frankly, even more than it did relative to volume. So, Catherine, I hope that helps.

It does.

Thank you.

Thank you, Catherine.

Your next question comes from the line of trade grooms with Stevens. Your line is open.

Hey, good morning, Ward and Jim. I hope you're all well.

Yes, yes.

So kind of a follow on to that, you know, clearly the Carolinas, particularly western North Carolina, which is right in you guys backyard, were unfortunately devastated by Helene. And, you know, there's other areas as well, you know, that have seen pretty serious issues as a result of the extreme weather. If you could maybe talk about, you know, some of the recovery efforts that are going on there and what that could mean for Martin Marietta, you know, given that it is right here in your backyard.

Yes, Trey, it is in our backyard, and you're right. And western North Carolina did feel it. The words that I gave in the prepared remarks were disproportionately. So we are trying to make sure that we're doing all we can to help that part of the state rebuild. I mean, here's some data points for you. NCDOT estimates that the Helene recovery expenses will be between $5 and $6 billion, just relative to NCDOT. Now, to put some other color to that, typically the federal government reimbursement rate for that's between 60 and 65%, which means as a practical matter, North Carolina's share of that burden is going to be about $2 billion. Now, as we think about how we're positioned to help rebuild that part of the state, several things I would point to. Number one, we have operations in North Carolina that go nicely west of Hickory. So we're getting into the foothills, getting into the Appalachians with our North Carolina operations. It's important to remember, too, that with the Blue Water transaction, we actually acquired a number of sites in eastern Tennessee. So that now puts us in the position that we can come into those areas, both from eastern Tennessee and western North Carolina, to make sure we're providing the work and the support that that area is going to need. Now, importantly, too, NCDOT has said it's going to be business as usual in terms of construction and maintenance activity outside of the work for Helene. So we're not going to see other parts of the state not continuing to advance. North Carolina can do that and take care of what's happening relative to Helene. And I think this is an important piece of it, too, Dre, because when we talk about SOAR and where we have built our business and why, one of the areas that we've long set is we want to be in states that are in a good physical condition because when these type things happen, we need to be in places that states can manage that. And it was interesting. I was reading a piece in the Pew Trust last week, and it outlined that North Carolina was only one of a handful of states, literally, that use a budget stress test to determine how much should be set aside in its rainy day fund. And the state currently has a surplus of $6 billion in that. And if you're keeping score at home, that's about $4.25 billion more than we saw in the last budget. So will there be rebuilding? Yes. Is it going to be extensive? Yes. Will it take not months or years, but probably the better part of a decade? My guess is that it will. And will we be there to help? Absolutely.

Great. Thank you for all the color on that. I'll pass it on. Good luck. You bet. Thank you,

Dre. Your next question comes from the line of Garak Schmois with Loop Capital. Your line is open.

Oh, hi. Thanks for having me on. I was wondering if you can go over the acquisitions that you made in a little bit more detail in South Florida and California. Any more color on the size of the acquisitions, the volume contribution, how pricing looks in these markets, and maybe help us think about if there's any either benefit or any related headwind as you integrate and what the outlook for 2025 looks like.

Garak, thanks for the question. I can help you with that a little bit. So number one, both these transactions are totally consistent with SOAR. And what I mean by that is you've seen us historically go into relatively new markets for Marietta like we did in California or Florida in this instance. And we basically do platform transactions, and then we come behind them with series of bolt-ons where we can augment our position. That's exactly what you're seeing in both of these deals. So I would tell you several things. One, both are complementary. They're both pure aggregate bolt-ons. So again, one in Lehigh West in Southern California, one where we bought Bluewater. Equally, and I think this is important, both are percentage margin and unit margin accretives. So these are attractive purestone businesses. The combined reserves are over 150 million tons in areas with notable reserve shortages. So again, we continue to augment our reserve position in those markets. Integration is going to be complete very, very quickly. New pricing will be effective on January 1. What's important is doing all of these together, and with both these transactions, it's still sub a billion dollars on what we've done. Our leverage remains completely within our target range, and the pipeline of aggregates acquisitions remains active. So we think there's more to come on that. Relative to the guide for the rest of this year, we've effectively put nothing in the guide for the rest of this year for these businesses, because as you recall, the tyranny of purchase price accounting, and this means that we have to take all of the inventory there and mark it up to fair market value. So what you anticipate after transaction is for those early months, you're not going to see that much from a P&L perspective, but these transactions, and frankly, Garak, like so much of this year, has been a setup for 2025. This puts us in better positions in markets where we want to have these leading positions. These are attractive pure stone transactions, and again, we believe the commercial trends that we will see at these operations will continue to be very attractive. And part of what I think is worth noting as well, if we go back and take a look at even the Blue Water transactions that we've done and what we've done relative to getting those businesses back up to something that looks more like Martin Marietta market pricing, when you and I had this conversation at Q2, there was about a $5 a ton delta on ASP between the acquired operations and heritage at that point. Now, that's about $3 a ton. So I think if you take the overall philosophy that we have, look at the geographies in which we've made these transactions, what the reserve base looks like and what it can mean to our heritage business and acquired businesses, we're, as you can tell probably from my tone and words, we're pretty excited about these deals.

Yeah, sounds like it. Thanks again.

Thanks, Garak.

Your next question comes from the line of Jerry Revich with Goldman Sachs. Your line is open.

Yes, hi. Good morning, everyone.

Hi, Jerry. Ward,

I'm wondering if you could just talk about the pricing revision and guidance. So normally, mid-year sets you folks up for pricing the following year. So can you just expand on the drivers of the negative revisions to the pricing outlook this year? And then as we think about the outlook for mid to high single digits in 25, you folks have previously spoken about moving to higher sustainable pricing than what we've seen in the past, which would essentially be the mid-single digit part of the range. So I don't know if that's a mix of M&A that's driving that or other factors. But can I trouble you to expand in those areas, please?

No, happy to. So several things. Answering the back part of your question first, I just think we're going to see good, steady, durable pricing going forward. Look, I think that mid to high, probably with an emphasis on high, is probably the right way to think of it for next year. Because one, we're just going to see more price in our heritage businesses. Number two, we're going to continue to see the acquisitions move up nicely. If we think about what happened just here in the last three months, I mean several things very candidly. One, did weather-impacted delays from a geographic mix perspective cause some headwinds? You bet. If we're looking also at what some of the geographic mix has been, meaning we're selling more fines or other lower-priced materials, that was a piece of it as well. And when you take the weather-impacted delays and the other issues faced with the year, we did see a lower percentage of mid-year price increases this year than we saw last year. That's nothing that causes me any concern. As I look at it, I think this year was faced with some very challenging near-term dynamics that helped drive that, which means the carryover next year is smaller than it was this year. So we're only looking at about 80 basis points that are a carryover for next year. So I think that gives you a sense as we think about the build, the type of resolve we have around a very good marketplace next year with respect to pricing. And again, what I'm taking by Jerry is it's hard to produce what we produce on a spec market basis and put it out there and sell it for what we sell it for. I continue to believe that the value of what we're putting on the ground and the value that we add to overall construction is still something that has some running room ahead of it for all the right reasons. But I hope that answers your question.

It does. Thank you.

Thank you, Jerry.

Your next question comes from the line of Anthony Pettenary with Citi. Your line is open.

Good morning.

Good morning.

Hey, you know, understanding the impact of the weather on 3Q and 24, as you look to 25, can you just talk about how backlogs have trended and if there's anything from either an end market perspective or a geographic perspective? And then just given the outsized weather impact this year, does that give you maybe a little bit more visibility or confidence in volumes for the following year, given we may be seeing kind of a catch up or rebound year?

Thank you for the question, Anthony. I think it certainly does. And if we're looking at current backlogs, they are up very nicely relative to the prior year quarter and sequentially as well, both in the mid single digits range right now. So when you're sitting there at this point of the year with that degree of up with what I think is a lot of upside ahead of us, that's what starts to give us a sense that next year clearly is going to be a much improved year relative to volume. If we think about end uses all by themselves, there's no reason from my perspective that we shouldn't expect public to be better, frankly, for the next couple of years, at least. If we look at the IIJA funds that are actually in the system today, what's been obligated is one thing. What's actually been spent and what's been reimbursed is actually considerably lower. And frankly, it's in the 20% range right now. So there's so much more of that to come. And then when we tackle that together with state DOT budgets that are actually in a very good position, I gave a little bit of color a few minutes ago and where North Carolina is just in a host of different perspectives. But again, if we're looking at our top 10 states, 80 plus percent of those actually see their budgets up for next year. Equally, if we look at RESI, we believe clearly RESI is not going to be something that's going to turn on a dime, but we are seeing that we believe beginning to turn with some green shoots in a series of markets. And frankly, we almost have to see it. The population dynamic trends have been so significant in the states in which we have leading positions that the single family housing market is in dire need of greater activity. But I think importantly, too, and you heard me mention the prepared remarks, when we're seeing things like suddenly warehousing showing some degrees of green shoots, obviously that has been a sector of heavy non-res that has been looking for bottom for a while. We think it's really finding bottom. And now when we're seeing Amazon put in the Dallas-Fort Worth Metroplex, one of its largest facilities in North America, we think that's a moment. But equally, as we start thinking about and what that's going to mean and energy and what that's going to mean and the reshoring that we know is coming, these to me underscore what I believe will be a nice, steady, sequential multi-year build. It should be that. And then relative to the light non-res, keep in mind, that's actually been better over the last couple of quarters on a percentage basis of our volume than heavy non-res has been. And that tells me as we see a res recovery, we're likely to see a more quickly than usual recovery in light non-res. So I think those things as we build them together, Anthony, is what gives us a high degree of confidence next year in what we're talking about on volumes. I do think as a company, I do think as an industry, we're usually pretty good at having a good feel for what's happening commercially. I'm not sure that we're always great on knowing precision what's going to happen with volumes. I think if we've done anything, we probably aired to the side of being relatively cautious with respect to our volume outlook next year. And that still has us up.

Okay. That's very helpful. Caller, I'll turn it over.

Thank you, Anthony.

Your next question comes from the line of Angel Castillo with Morgan Stanley. Your line is open.

Hi, good morning. Thanks for taking my question. Thanks for all that, that was very helpful. I just maybe wanted to switch over to the cost side or the kind of price cost dynamic and just you could give us a little bit more color on what you're kind of anticipating there as we head into 2025.

I'm happy to. I'll ask Jim to take you through what we're seeing from inflation perspective and otherwise.

So the underlying inflation for this quarter was actually coming close to where we expected about mid single digits, call it 5%. The additional cogs per ton inflation we saw was largely due to our inventory drawdown for the quarter. And that will continue probably a little bit into next quarter. But for 2025 in total, I'm still sticking with my mid single digit cost inflation view overall, which would be obviously well below where Ward clearly enunciated our ASB expectations are mid to high single digits. So the price cost spread should continue to be trend favorably. And again, inflation, it seems to be trending down. So more to come on that next year. We'll come up with after Q4 earnings.

Okay, thank you.

Thank

you,

Andrew. Your next question comes from the line of Philip Ing with Jeffries. Your line is open.

Hey guys, Ward, great to hear that, you know, agri-s volumes are turning up 5% in the fourth quarter. Now that weather is cleared out. Does that number include some of the recent acquisitions you've just announced? I know from a piano pack, it doesn't have much. And when we look at the 2025, I think the low single digit volume framework, is that on an organic basis as well? Just trying to get a better handle what you're actually seeing out there?

No, look, great question, St. Charles. Thank you so much for that. So short answer is no, no, no. Q4 is not taking into account anything from the new acquisitions. And again, we talked a little bit about the purchase, price accounting, I'm sorry, Phil. And so it doesn't have anything in there for Q4. And again, we'll come back and really factor those into the guide when we come back to you in February, Phil, and give you a better feel for what we think 2025 will look like. And that's where you will see the Southern California and South Florida transactions factored into it. I hope that helps.

Okay, so fourth quarter volume up 5% and next year up low single digits, largely organic. Okay, that's really encouraging to see. That's correct.

Yeah, Phil, you got

it.

Appreciate

it. Thank you.

You bet.

Take care.

Next question comes from the line of Tyler Brown with Raymond James. Your line is open.

Hey, good morning, everyone. Hey, good morning, Tyler. Hey, lots of good color on the call. But hey, Jim, if I look at CapEx, I think it's up to $875 million at the midpoint from $700 at the midpoint, I think last quarter seems like a pretty big jump. And I'm just curious if there was some opportunistic land purchases or was that midlobian? Any colors there and any early thoughts on CapEx into 2025?

Yeah, so it's largely a function of the two acquisitions that Ward mentioned. One of those is structured in a way that's being treated as CapEx and that is an operational acquisition. So that bump up in CapEx guide for the year is almost solely attributable to that deal. And next year, we typically guide to 9, .5% revenues. So probably not a bad way to think about it to start for next year. We'll have more detail next year,

though. Okay, perfect. That answers my question. Thank you. You're welcome. Take care, Tyler.

Your next question comes from the line of Brent Thielman with D.A. Davidson. Your line is open.

Hey, thanks. Good morning. Ward or Jim, just with respect to the midlobian expansion, I guess when you think about supply-demand dynamics in that region, would you expect to sell out that incremental capacity next year or is there a ramp-up period with that new capacity we need to consider?

Thanks for the question. The short answer is there's going to be a ramp-up period for that. Look, that's an important marketplace to us. We want to go about that in a very thoughtful way. Midlobian is performing actually very well right now. I mean, it's been interesting that we actually saw improved gross profit per ton at mid-low. We've seen very constructive pricing at mid-low, which tells you what a different marketplace North Texas is from many others. And so we will be very thoughtful, we'll be very careful, and we'll be very methodical about how we go about that at mid-lobian. So short answer is don't expect all of that next year. Expect that over a period of time, and yes, it will ramp.

Thank you.

Thank you.

Your next question comes from the line of David McGregor with Longbow Research. Your line is open.

Yes, good morning, everyone. Thanks for taking my question. Hi, David. Hi, good morning. I guess I want to start with just a clarification on Garrick's question, and then I have a question for you. But on the clarification, you had talked about the Delta going from $5 to $3 a ton. I guess how many tons would you say just approximately that $3 a ton would apply to? And then I don't know the question.

Yeah, no, I don't know that we've ever come out with precise tonnage on that, but what I would refer you back to, take a look at Blue Water and take a look at Frye, because those are really the two different transactions to which that metric applies. So it's really going to mean Denver, in one instance, central and eastern Tennessee, and another, and primarily portions of northern Alabama. Obviously, the Blue Water transaction covered more states than that, but from a gravity perspective, that's most of it, David.

So you're caught up in California now.

We are largely caught up in California. That's exactly right.

Right. Okay. And I guess my question was more regarding tariffs and cement, and just mindful that in Midlothia, you're quite removed from the import market influence down in Houston. There's probably a $40 to $50 a ton price discrepancy between those two markets, which you alluded to a moment ago. How much would DFW benefit from cement tariffs?

You know, that's a great question. I mean, there's just not a lot of import activity that goes into DFW to begin with, because the transportation logistics becomes so complicated, getting it there by some form of either river or ocean going vessel, then offloading, then going through the ports, then putting it on trucks, and then sending it a long way. So look, I think Dallas-Wort Worth, simply because of its location that far from water, is different. I think Dallas-Wort Worth, because of the overall economy in DFW, I mean, when we bought TXI, we bought it in large measure, not exclusively thinking that Dallas-Wort Worth would probably be the best looking heavy side building materials market in the United States for the next 25 or 30 years. And we've been right on that. And I don't see anything that makes us change our view on it. So is it already a good market? Yes. Do we anticipate it's going to stay a good market? Yes. Would I answer your question? Look, if tariffs come in, does it make a really good market look even better? The answer is, yeah, I think it does.

Good.

Thanks very much.

Thank you, David. Your next

question comes from the line of Mike Dudas with Vertical Research. Your line is open.

Good morning, Jacqueline, Jim Ward.

Hi, Mike.

Again, appreciate all the observations looking towards your business in 2025. Maybe you can maybe look at it from a geographic basis as you look at your volume and pricing guidance. Is there areas of your East versus Western business that you feel more comfortable with? Is there any upside surprises in some of the regions that we might typically not think about? Also, I assume it may impact the mix in your ability to grow gross profit per ton in 2025.

Mike, thanks for the question. I would say several things. One, as we discussed earlier in the call, the pricing dynamic that we needed to address in California has largely been addressed. And now we have a more formidable business there with the M&A that we've done. So I would continue to think in particular that Southern California would be a marketplace that should be a relatively bright spot for us. Number two, I would say Texas is going to continue to be a bright spot for us. Clearly, North Texas, as I look at the markets, I really think of it, North Texas, Central Texas, South Texas, in those three buckets. I think North Texas is going to continue to be the strongest of those markets. I think Central Texas is going to be absolutely fine as well. And again, the TxDOT program there shows growth going into next year. Again, Florida will continue to be an important market for us for two different reasons. One, we've historically been the largest importer of granite into that market. So we've had a disproportionate infrastructure view in that marketplace. Now, though, that we're getting in-state operations that can really start feeding more concrete and feed more private work, we're going to see continuing attractive work in Florida. If we think about North Carolina, we've gone through that. One, the DOT program is up year year. Number two, we've talked about what would be of necessity a significant rebuild in the western part of the state, and we think that will continue to be attractive. But equally, if we look at Indiana, their budget's up next year. If we look at Georgia, their budget's up almost, it's over 7% next year. Colorado's budget is up 14%. Arizona's budget is equally up double digits next year. So if I'm thinking about overall end uses, that clearly addresses it relative to the public side. And I've said earlier, that ought to be good for at least a couple of years. Equally, as we think about private in those states, those are all fast-growing states that have seen significant population trends. So my view is the long-term and medium-term and near-term volume picture ought to be increasingly attractive. And long-term, medium and short-term, the commercial side and the pricing piece of it ought to out-kick whatever historical coverage is. That's going to continue to perform in ways that I will think will be a differentiator relative to other industrial sectors. Excellent word. Thank you. You're most welcome.

Your next question comes from the line of Timna Tanners with Wolf Research. Your line is open.

Hey, good morning. I wanted to dig a little bit more into the end market outlook on slide 7 of your supplemental information. So specifically, I guess, starting with the non-res private sector piece, the data centers are generally pretty low single digits of total percent. The other pieces tend to be a lot bigger. What do you see in data centers? Is there something specific to your geographies where you know of some big lumpy projects coming through? Yeah, go ahead. I'm

sorry, Timna. I didn't mean to interrupt. Was there more, Timna? I didn't mean to interrupt you.

Well, I was just hoping for a little more color, like on why you might have been more neutral on warehouses and manufacturing given some of the IRA projects. So just a little more color on that segment.

Thanks. That's very helpful. Thank you. So look, if we're looking at data centers and what's coming from the build out of AI in particular, I can look at a big Google project in Kansas City that has got significant tonnage with it. I can look at actually Microsoft data centers, oddly enough, in western North Carolina near Hickory and our Quarries and Maiden. Google, again, is establishing two new data centers, campuses in South Carolina. Those have a combined investment of about $3.3 billion. So again, it's one thing to see that group of data centers going in. It's another to see the AI coming with or somewhere behind it. But the energy piece of this is going to be real. And the energy piece of it is going to be very, very aggregates intensive. And to your point, I'm shifting going from data warehousing to just warehousing. I mentioned before, I do believe that warehouse construction does appear to be cyclically bottoming right now. I mean, we talked about that Amazon facility that's being built in Claiborne, Texas. Again, if we just look at the quantum of aggregates and cement and concrete that will go into that, it's going to be really very, very significant. And then when we start thinking about the other light non-res demand that will likely come behind that, at least some of those are some of the specifics. Temna, if you're just looking really from a micro perspective, what does some of the markets look like? And what are we seeing from data that gives us a good sense of confidence around that? That's part of what we're looking at.

Okay, thanks. And then on the structure side, I wanted to ask kind of high level, I guess, I don't want to make you go through all the different state budgets again, but there has been disappointment, as you know, since the 2021 passage of IIJA, there's been kind of a trickle or a slow processing of some of those dollars. What is it about 2025 that's really going to kick into gear? And how does that offset some of the cost inflation that's accumulated since it was passed? Thanks. Thank

you, Tim. I would say a lot of the data is coming from the first year that we've seen significant or frankly, any federal IIJA dollars coming through. So if you think about what that means as a practical matter, you're seeing it for the very first year in 2024. And you're going to have some of that carry over into 2025. Then you're going to have new work that's being bid in 2025 as well. So I think the states are moving forward. And of course, the dialogue you and I were having a few minutes ago was largely built around those state budgets. At the same time, I think here's the big surprise, I think in some respects, I think if somebody had said to us in 2021, hey, by the time you're in the last quarter of 2024, do you think you will have only seen 20 some percent of those dollars that had been authorized moving through the system? I think the answer would have been, God, that feels a little bit slow. But we know the dollars are there. We know the dollars are coming. And that's why I have this sense that, look, if we're looking at the public side of it, should that be almost irrefutably better in 25 and 24 and continue to build in 26? Frankly, Tim, I think it almost has to when we look at the federal dollars and we look at the state budgets and the geography in which we're operating. So that's the way that we've looked at that and basically handicapped it in our minds.

Okay, very helpful. Thanks again.

You're most welcome.

Your next question comes from the line of Michael Feniger with Bank of America. Your line is open.

Great. Thank you, everyone, for squeezing me in. Just a clarification question, Ward. Yeah. Your full year 24 shipment guide, obviously down two and a half to four percent. If it was flat, if underlying demand was flat, how much weather do you think 24 versus 23 weighed on growth? Was it 1%, 2%? I guess the genesis of the question, Ward, is if you're growing low single digit growth in 2025, that's organic. Is the volume growth actually a little bit higher next year, barring whether it just isn't a disaster?

Michael, I think it certainly could be. And I think if we've done anything, I think we've taken a relatively thoughtful, cautious view of next year. Because I think if we go to it, I don't want to give percentages on what I think weather has done this year, but it would not be a small percentage on what weather has done this year. And keep in mind, last year we had a weather year that was maybe normal to dry. This year we've had one that has been epically wet. If we just hit something next year that feels normal, particularly in geographies that are disproportionately important to us, like the southeast, look, I think there are a lot of moving parts that point to attractive trends and growth for next year.

That's really helpful, Ward, and just to follow up on the pricing. Let's say, you know, close to the high single digit range potentially. Is that relatively even through year? Does that not include mid-years? Is that more second half-weighted? Just any kind of, you know, anecdotal kind of commentary we like to think about how we think about that preliminary 25 as that kind of moves through the year. Thank you.

Thank you. As you said, it is preliminary. No, it does not take into account mid-years for next year. And that's typically the way that we do that. Even when we'll come back to you and give you more precision in February, it's usually not taking into account mid-years. So that simply gives it some degree of tailwind as well. So that's how I would encourage you to think about that.

This concludes the question and answer session. I'll turn the call to Ward for closing remarks.

Thank you again for joining our third quarter 2024 earnings call. Martin Marietta's future is bright thanks to the consistent and thoughtful execution of our strategic priorities by our class teams. Looking ahead, we're confident in our ability to continue delivering leading financial, safety, and operational performance while extending our long track record of delivering sustainable growth and superior shareholder value. We look forward to sharing our fourth quarter in full year 2024 results in February. As always, we're available for any follow-up questions. Thank you again for your time and your support of Martin Marietta.

This concludes today's conference call. Thank you for joining. You may now disconnect.