Martin Marietta's Lhoist Deal Lifts Revenue 28% To A Record, Yet Adjusted Earnings Per Share Fall 11%
Acquisitions lifted sales and adjusted EBITDA in the third quarter, while falling aggregates prices and higher costs cut per-share earnings.
Martin Marietta Materials, which supplies crushed stone, sand, gravel and other building materials, reported record third-quarter revenue of $2,369 million, up 28%, as its newly closed Lhoist North America purchase more than offset inflation. Adjusted earnings per share still fell 11% to $5.47 from $6.12, and the company reset full-year guidance.
Sales up, per-share profit down
Net earnings from continuing operations fell 29% to $256 million, or $3.94 per diluted share against $5.97 a year earlier. Adjusted EBITDA, an earnings measure that excludes interest, taxes, depreciation and certain deal-related items, climbed 21% to $808 million, the company said in its earnings release.
Quarterly interest expense rose to $138 million from $59 million. In June-quarter terms the company financed the Lhoist cash payment with a $1.5 billion three-year term loan and $5.5 billion of senior notes across five tranches. Charges tied to acquisitions and related items cost $1.53 per diluted share in the quarter.
CEO Ward Nye said strong performance from recent acquisitions "more than offset the effects of expanding inflationary pressures and a dynamic macroeconomic environment."
Record tons, lower price per ton
Aggregates shipments hit a record 67.1 million tons, up 16%, but the average selling price fell 4% to $22.41 a ton because acquired operations sell below the company average. Organic average price rose 1.0%, and organic mix-adjusted price rose 2.7%.
Aggregates gross profit declined 4% to $512 million, which the company attributed mainly to higher depreciation, depletion and amortization and energy costs. Aggregates cash gross profit, which adds back noncash charges, reached an all-time quarterly record of $696 million.
Specialties, which makes magnesia-based products and lime, saw revenue jump 176% to $362 million and gross profit rise to $88 million from $34 million.
Lhoist adds $216 million of revenue
The company closed the Lhoist North America combination on August 21 for total consideration of $12.9 billion: $7.0 billion in cash and about $5.9 billion of Martin Marietta stock. Since closing, Lhoist contributed revenue of $216 million, gross profit of $51 million and cash gross profit of $115 million. The business runs 20 quarries and production facilities and 45 distribution terminals.
Nye said that on January 1 pricing actions should produce mid- to high-single-digit aggregates pricing on a mix-adjusted basis in 2027. He said inventory discipline and lower capital spending alone added over $290 million of year-to-date cash flow improvement.
Guidance midpoints now stand at $7.80 billion of revenue and $2.475 billion of adjusted EBITDA, with acquisitions expected to more than offset "lower near-term expectations for our heritage operations." Nine-month operating cash flow was $896 million, down from $1,156 million, a period that includes $250 million of cash taxes on the February QUIKRETE asset exchange. At September 30, the company held $140 million of cash and $1.4 billion of unused borrowing capacity.
Management hosts its earnings call at 10:00 a.m. Eastern on Wednesday.
