Page 160 - Martin Marietta - 2023 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The principal end‐use markets of the Building Materials business are public infrastructure (i.e., highways; streets; roads;
bridges; and schools); nonresidential construction (i.e., manufacturing and distribution facilities; industrial complexes; office
buildings; large retailers and wholesalers; healthcare; hospitality; and energy‐related activity); and residential construction (i.e.,
subdivision development; and single‐ and multi‐family housing). Aggregates are also used in agricultural, utility and
environmental applications and as railroad ballast, collectively comprising the ChemRock/Rail market.
Public infrastructure projects can require several years to complete, while residential and nonresidential construction projects
are usually completed within one year. Generally, customer purchase orders do not contain firm quantity commitments,
regardless of end‐use market. Therefore, management does not utilize a Company backlog in managing its business.

Infrastructure
The public infrastructure market accounted for 35% of the Company’s aggregates shipments in 2022, a 5% volume increase
from 2021 as a result of solid demand spurred by accelerating federal and state level investment. The Company’s shipments
to this end‐use market remain below the most recent five‐year average of 36% and ten‐year average of 39%.
Public construction projects, once awarded, are typically seen through to completion. Thus, delays from weather or other
factors can serve to extend the duration of the construction cycle. While construction spending in the public and private market
sectors is affected by economic cycles, public infrastructure spending has been comparatively more stable due to the
predictability offunding from federal, state and local governments. The Infrastructure Investments and Jobs Act (IIJ Act) was
signed into law on November 15, 2021 and contains a five‐year surface transportation reauthorization plus $110 billion in new
funding for roads, bridges and other hard infrastructure projects.
State and local initiatives that support infrastructure funding, including gas tax increases and other ballot initiatives, are
increasing in size and number as these governments recognize the need for their expanded role in public infrastructure funding.
In November 2022, 411 state and local ballot initiatives, or 87% of all infrastructure funding measures up for vote, were
approved. These approved infrastructure initiatives are estimated to generate nearly $23 billion in one‐time and recurring
revenues, with initiatives in Texas, the Company’s largest revenue‐generating state, accounting for over $15 billion of this total.

Nonresidential

The nonresidential construction market accounted for 36% of the Company’s aggregates shipments in 2022, a 3% volume
increase over 2021, reflecting several large warehouse projects. Large industrial projects of scale led by energy, onshore
manufacturing and data centers continue to lead the segment, accounting for the majority of total nonresidential shipments.
Over the medium term, the Company expects enhanced federal investment from the Inflation Reduction Act and Creating
Helpful Incentives to Produce Semiconductors Act will further support and accelerate post‐pandemic secular growth trends,
including restructured manufacturing and energy supply chains, electric vehicle transition and continued adoption of digital
and cloud‐based technologies, resulting in robust demand within the heavy nonresidential sector. The Dodge Momentum
Index, a twelve‐month leading indicator of construction spending for nonresidential building compiled by Dodge Construction
Network, was 222.2 in December 2022, where the year 2000 serves as an index basis of 100. This represented an increase of
40% from December 2021, further suggesting positive momentum in the nonresidential construction sector at the onset of
2023.

Residential
The residential construction market accounted for 24% of the Company’s aggregates shipments in 2022 and was flat compared
with strong 2021 activity. This end use typically moves in direct correlation with economic cycles. The Company’s exposure to
residential construction is split between aggregates used in the construction of subdivisions (including streets, sidewalks,
utilities and storm and sewage drainage), single‐family homes and multi‐family units. Construction of both subdivisions and
single‐family homes is nearly three times more aggregates intensive than construction of multi‐family units. Therefore, the
level of new subdivision starts, as well as new single‐family housing permits, is a strong leading indicator of residential volumes.
For the year ended December 31, 2022, not seasonally adjusted national housing starts decreased 3% to 1.55 million units
compared with 2021 and not seasonally adjusted national housing permits decreased 5% versus 2021. Despite overall
underbuilt conditions, several of the Company's markets experienced a slowdown in single‐family demand due to affordability
concerns, increased interest rates and logistical challenges.

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