Page 166 - Martin Marietta - 2023 Proxy Statement

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

dolomitic lime business runs most profitably at 70% or greater steel capacity utilization. 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 were predominantly derived from domestic customers in 2022. Financial
results can be affected byforeign 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.
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 39% of its 2023 energy needs for coal
and natural gas. For 2022, the segment’s average cost per MMBtu (1,000,000 British thermal units) of natural gas increased
47% versus 2021. Given high fixed costs, low capacity utilization can negatively affect the segment’s results of operations.
Management expects future organic profitability growth to result from increased pricing, rationalization of the current product
portfolio and/or further cost reductions.

The Magnesia Specialties business is highly dependent on rail transportation, particularlyfor movement of dolomitic lime from
Woodville to Manistee and direct customer shipments of dolomitic lime and magnesia chemicals products from both Woodville
and Manistee. The segment can be affected by the risks mentioned in the long‐haul distribution discussion in the Building
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Materials Business’ Key Considerations section.
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Environmental Regulation and Litigation
The expansion and growth of the aggregates industry is subject to increasing challenges from environmental and political
advocates aiming to control the pace and direction offuture development. Certain environmental groups have published lists
of targeted municipal areas, including areas within the Company’s marketplace, for environmental and suburban growth
control. The effect of these initiatives on the Company’s growth is typically localized. Further challenges are expected as the
momentum of these initiatives ebb and flow across the United States. Rail and other transportation alternatives are being
heralded by these special‐interest groups as solutions to mitigate road traffic congestion and overcrowding.
The Company’s operations are subject to and affected by federal, state and local laws, rules and regulations relating to the
environment, health and safety and other regulatory matters. Certain of the Company’s operations may occasionally use
substances classified as toxic or hazardous. The Company regularly monitors and reviews its operations, procedures and policies
for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in
the operation of the Company’s businesses, as it is with other companies engaged in similar businesses.

Page 62 ♦ Annual Report