Page 162 - Martin Marietta - 2024 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Typically, diesel fuel represents the single‐largest component of energy costs for the Building Materials business. The average cost
per gallon was $3.25 and $4.01 in 2023 and 2022, respectively. Changes in energy costs also affect the prices that the Company
pays for related supplies, including explosives, conveyor belting and tires. Further, the Company’s contracts for shipping products
on its rail and waterborne distribution network typically include provisions for escalations or reductions in the amounts paid by
the Company if the price offuel moves outside a stated range.

Building Materials Business’ Key Considerations

Growth markets with limited supply of indigenous stone must be served via a long‐haul distribution
network
The U.S. Department of the Interior identified possible sources of indigenous rock and documented its limited supply in certain
areas of the United States, including the coastal areas fromVirginia to Texas. Further, certain interior United States markets may
experience limited availability of locally sourced aggregates resulting from increasingly restrictive zoning, permitting and/or
environmental laws and regulations. The Company’s long‐haul distribution network is used to supplement, or in many cases, wholly
supply, the local crushed stone needs of these areas and provides the Company with the flexibility to effectively serve customers
primarily in the Southwest and Southeast coastal markets.

The long‐haul distribution network can also diversify market risk for locations that engage in long‐haul transportation of aggregates
products. This is particularly true where a producing quarry serves a local market and transports products via rail, water and/or
truck to be sold in other markets. The risk of a downturn in one market may be somewhat mitigated by other markets served by
the location.

Product shipments are moved by rail, water and truck through the Company’s long‐haul distribution network. The Company’s rail
network primarily serves its Texas, Florida, North Carolina, Colorado and GulfCoast markets, while the Company’s Bahamas and
Nova Scotia locations transport materials via oceangoing ships. The Company’s strategic focus includes expanding inland and
offshore capacity and acquiring distribution yards and port locations to offload transported material. As of December 31, 2023,
the Company's distribution network consisted of76 aggregates yards and 5 cement terminals.

The Company’s rail shipments result in continued reliance on railroad operations, including track congestion, crew and locomotive
availability, the effects of adverse weather conditions and the ability to negotiate favorable railroad shipping contracts. Further,
changes in the operating strategy of rail transportation providers can create operational inefficiencies and increased costs from
the Company’s rail network.

Page 60 ♦ 2023 Annual Report