Page 67 - 2019 Annual Report

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The Company is diligent in its focus on land opportunities, including potential new sites (greensites) and expanding locations.
Land purchases are usually opportunistic and require the Company to be flexible in its ability to secure land. Land purchases
can include contiguous property around existing quarry locations. Such property can serve as buffer property or additional
mineral reserve capacity, assuming regulatory hurdles can be cleared and the underlying geology supports economical
aggregates mining. In either instance, the acquisition of additional property around an existing quarry allows the expansion of
the quarry footprint and an extension of quarry life.

Magnesia Specialties Business

The Magnesia Specialties business manufactures magnesia-
based chemicals products for industrial, agricultural and
environmental applications at its Manistee, Michigan
facility. The Magnesia Specialties business produces and
sells dolomitic lime from its Woodville, Ohio facility. Of
2019 total revenues, 69% were attributable to chemicals
products, 30% were attributable to lime and 1% was
attributable to stone.

In 2019, 81% of the lime produced was sold to third-
party customers, while the remaining 19% was used
internally as a raw material for the business’ manufacturing
of chemicals products. Dolomitic lime products sold to
external customers are primarily used by the steel
industry, and overall, 35% of Magnesia Specialties’ 2019
total revenues related to products used in the steel
industry. Accordingly, a portion of the segment’s revenues
and profits is affected by production and inventory trends within the steel industry, which are guided by the rate of consumer
consumption, the flow of offshore imports and other economic factors. Steel production in 2019 increased 1.8% compared
with 2018. The dolomitic lime business runs most profitably at 70% or greater steel capacity utilization; domestic capacity
utilization averaged 80% in 2019. The chemical products business focuses on higher-margin specialty chemicals that can be
produced at volumes that support efficient operations.
Total revenues of the Magnesia Specialties business in 2019 were predominantly derived from domestic customers, and no
single foreign country accounted for 10% or more of the total revenues for the Company. Financial results can be affected by
foreign currency exchange rates, increasing transportation
costs or weak economic conditions in foreign markets. To
mitigate the short-term effect of currency exchange rates,
foreign transactions are denominated in United States
dollars. However, the current strength of the United States
dollar in foreign markets is affecting the overall price of
Magnesia Specialties’ products when compared to foreign-
domiciled competitors.
A significant portion of the Magnesia Specialties business’
costs is of a fixed or semi-fixed nature. The production
process requires the use of natural gas, coal and
petroleum coke. Therefore, fluctuations in their pricing
directly affect operating results. To help mitigate this risk,
the Company has fixed-price agreements for approximately
62% of its 2020 energy needs for coal, natural gas and
petroleum coke. For 2019, the segment’s average cost per
MCF (thousand cubic feet) of natural gas decreased 4.7%
versus 2018. Given high fixed costs, low capacity utilization
can negatively affect the segment’s results of operations.

Celebrating 25 Years as a Public Company Annual Report ♦ Page 65