Martin Marietta Materials
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Transcript of Martin Marietta Materials
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Martin Marietta MaterialsMartin Marietta Materials
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Where Are We…Where Are We…Current State of U.S. EconomyCurrent State of U.S. Economy
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Where Are We…Where Are We…Annual Aggregates ConsumptionAnnual Aggregates Consumption
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% represents aggregates consumption peak-to-trough and trough-to-peak change
Source: U.S. Geological Survey through Q1 2008; MLM data used for Q2 2008
- 17%
+ 23% + 57%
+ 60%
+ 15%
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Why Invest in the Why Invest in the
Aggregates IndustryAggregates Industry
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Aggregates Industry Fundamentals Aggregates Industry Fundamentals
• Barriers to entry
• Consolidation
• Scarcity of supply in the southern United States
• Limited transportation availability
• Limited distribution sites
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Why Invest inWhy Invest in
Martin Marietta MaterialsMartin Marietta Materials
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Key Factors – Key Factors – Martin Marietta MaterialsMartin Marietta Materials
• Superior locations
• Intrinsic value of mineral reserves
• Strong growth profile
• Margin improvement
• Track record of performance
• Investor focused
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Aggregates Business Profile - 2007Aggregates Business Profile - 2007
Mideast Group
Southeast Group
West Group
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74% of Aggregates Business’ 2007 net sales from
southern United States
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Scarcity of Aggregates SupplyScarcity of Aggregates Supply
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Outstanding Distribution Network –Outstanding Distribution Network –Rail & Water Markets Rail & Water Markets
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Aggregates SupplyAggregates Supply
U.S. consumption = 3.0B tons annually *
Additional volume predominantly in
southern U.S.
Barriers to entry can limit new quarry openings
Average quarry
produces
1M tons annually
3% GDP growth
100M additional tons required annually
* Per U.S. Geological Survey
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Valuable Mineral ReservesValuable Mineral Reserves
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At December 31, 2007Tons
(add 000)
Annual Production Tons
(add 000)
Number of years
production available
Mideast Group 4,874,000 63,420 76.9
Southeast Group 3,185,000 44,710 71.2
West Group 4,454,000 72,832 61.2
Total 12,513,000 180,962 69.1
Estimated Reserve Value ~ $9 B
Assumptions:• Owned reserves 52% / Leased reserves 48% as disclosed in Form 10-K for
year ended December 31, 2007.• Value of $1/ton for owned reserves and $0.40/ton for leased reserves.• Value is highly dependent on specific quarry location.
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Growth!!!Growth!!!
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Population GrowthPopulation Growth
Percentage of 2007 Aggregates business’ net sales
Rank of percent change - population from 2000 to 2030 (source: Census Bureau)
Rank – #3
Rank - #4
Rank – #7
Rank – #8
TX 19% GA 8%
NC 22%
FL 5%
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Growing Infrastructure DemandGrowing Infrastructure Demand
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Growing Infrastructure DemandGrowing Infrastructure Demand
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Demand SegmentsDemand Segments
Infrastructure48%
2007
Commercial30%
Estimated percentage of 2007 aggregates product line shipments
Note: These percentages do not vary significantly across markets, with the exception of Florida which is dominated by infrastructure demand.
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Aggregates BusinessAggregates BusinessOperating Margin ImprovementOperating Margin Improvement
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1,188 basis points (actual)
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Aggregates Scarcity = Increased PricingAggregates Scarcity = Increased Pricing
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Latest volume guidance of down 3% to 6%
Selling price is established locally at the point of sale and is subject to competitive and other factors at each locality. ASP increases reflect the average of the Corporation’s selling price across all markets, some of which may have already been implemented. Local prices can vary significantly from this average.
6% - 8%
20 yr average ASP
10 yr average ASP
ASP growth over next 10 yrs (5% - 7%)
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Cost Reduction InitiativesCost Reduction Initiatives
• Excellent Best Practices Program
• Increased Plant Automation
• Overhead Reduction
• Better Information Systems
• Effective Management of Benefits Cost
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Consolidated Headcount Reduction Consolidated Headcount Reduction
Earnings from operations per average number of employees up 206% over five-year period ended December 31, 2007
5,700 5,600 5,400
Hourly
6,000
Note: Headcount equal to average number of employees
6,400
Salaried
5,200
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Capital InitiativesCapital Initiatives
Bahama Rock
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Capital Spending PrioritiesCapital Spending Priorities
• Capital spending has been focused on the long-haul distribution network
• Current priority – expand key Southeast locations
• 2008 capital spending expected to be approximately $250 million
• 2009 capital spending ~ $200 million
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Capital ProjectsCapital Projects Production Capacity
Expansion (tons)Quarry/State Spend ($M) Timing From To
COMPLETEDLemon Springs, NC $20 2006 1.5M 3.5MNorth Troy, OK $40 2006 --- 5.0MThree Rivers, KY $50 2007 5.5M 8.0M+Weeping Water, NE $35 Q4 2007 2.0M 3.5M
UNDERWAYAugusta, GA $55 2008 2.0M 6.0M
FUTUREJunction City, GA $75 - $80 2009 - 2010 2.5M 8.0MColumbia, SC $40 - $50 2009 - 2010 2.0M 6.0MCamak, GA $45 - $55 2011 2.0M 6.0MMacon, GA $70 - $80 2011 - 2012 2.5M 8.0M
GREEN SITESFayetteville, NC $6 2008 --- 1.0M by 2011Selma, NC Unknown 2009 - 2010 --- 1.0M by 2013
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Capital ProjectsCapital Projects
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Performance – Return MetricsPerformance – Return Metrics
2007 2006
Return on Equity 23.9 % 20.2 %
Return on Invested Capital 15.1 % 14.2 %
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Performance - Shareholder ReturnPerformance - Shareholder Return
27Total return inclusive of dividends as of December 31, 2007
S&P Materials 10 year
return not available
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Specialty Products Financials ($M)Specialty Products Financials ($M)
Six Months Ended June 30,
2008 2007%
Change
Year Ended December 31,
2007 2006
Net sales $ 88 $ 78 13 % $ 154 $ 151
Operating Earnings $ 19 $ 15 22 % $ 33 $ 23
Operating Margin 21.4 % 19.8 % 21.3 % 14.9 %
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Consolidated Financial InformationConsolidated Financial Information
Pensacola Yard
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Consolidated Financials ($M)Consolidated Financials ($M)
Six Months Ended Percent June 30, Change
2008 2007
Net Sales(1) $ 924 $ 941 (2%)
Operating Earnings(1) $ 147 $ 194 (24%)
Net Earnings $ 85 $ 116 (27%)
Earnings per Diluted Share $ 2.02 $ 2.62 (23%)
(1) Net sales and operating earnings are from continuing operations as presented in the June 30, 2008 Form 10-Q.
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Consolidated Financials ($M)Consolidated Financials ($M)
Year Ended Percent December 31, Change
2007 2006
Net Sales(1) $1,968 $1,930 2%
Operating Earnings(1) $ 433 $ 391 11%
Net Earnings $ 263 $ 245 7%
Earnings per Diluted Share $ 6.06 $ 5.29 15%
(1)(1) Net sales and operating earnings are from continuing operations as presented in Net sales and operating earnings are from continuing operations as presented in 2007 Annual Report.2007 Annual Report.
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Capital Structure ObjectivesCapital Structure Objectives
• Leverage target of 2.0x – 2.5x Debt-to-EBITDA
2.55x at June 30, 2008
• Outside range due to financing for Vulcan transaction
• Use available free cash to pay down outstanding debt to move within targeted range by 12/31/08
• Maintain solid investment grade credit rating
• For outstanding debt, adjust fixed-to-floating ratio to 20% - 30% floating
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Uses of Cash ($M)Uses of Cash ($M)
Year Ended December 31, 2008 2007 2006
Capital investment $ 265 $ 266
Share repurchases $ 551 $ 173
Dividends $ 54 $ 46
Debt repayment $ 125 $ --
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Cash Returned to ShareholdersCash Returned to ShareholdersFive Years Ended December 31, 2007Five Years Ended December 31, 2007
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What Happens During the CycleWhat Happens During the Cycle
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$ p
er sh
are
Note: Net earnings and EPS excludes cumulative effects of changes in accounting principles.
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What Happens in the What Happens in the UP Phase of the CycleUP Phase of the Cycle
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$ per share
Assumptions:** 2008 base year ** Annual CAPEX $225M** 5%, 6% or 7% annual volume and price growth ** No share repurchases** 3% annual cost growth ** Cash pays down short-term debt then accumulates
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The document attached represents one part of a presentation being made. It is not a complete record of the presentation because it does not reflect the lengthy oral comments which will be part of the presentation. This document is not intended to be a substitute for our Form 10-K or other SEC filings. Further, while we may make presentations from time to time, please understand that we do not undertake any obligation to update any information contained in these materials. Finally, some of the statements in this presentation are forward-looking in nature. Any forward-looking statements are, by their nature, uncertain and dependent upon numerous contingencies, including the accuracy of the assumptions underlying the statements, which could cause actual results and events to differ materially from those indicated in such forward-looking statements. See the risk factors listed in the Corporation’s current annual report and Forms 10-K, 10-Q and 8-K reports filed with the Securities and Exchange Commission. Other factors besides those may also adversely affect the Corporation and may be material to the Corporation. If you have any questions or comments, please contact Investor Relations at 919-783-4540.
Thank you.