Will Stimulus Funds Pave the Way to a Better Future?
“Overall, our outlook for aggregates demand in 2010 reflects an increase in highway and other infrastructure-related construction activity due primarily to stimulus-related funding. While we have assumed that regular federal funding will remain at an annualized level consistent with fiscal year 2009 under SAFETEA-LU, Congress will need to act quickly to restore fiscal year 2010 funding levels and contract authority prior to the start of the construction season,” said Vulcan’s James, noting that concerns regarding long-term highway funding, weakness in private non-residential construction, and increases in residential construction all impact the company’s forecast. “As a result, aggregates volumes are expected to be flat to up 5 percent from the 2009 levels,” he added. “For the full year 2010, we expect aggregates pricing to improve 2 to 3 percent.”
Nye predicted Martin Marietta aggregate volumes to increase by 2 to 4 percent, unless commercial construction declines more than anticipated. “Aggregates pricing for 2010 is also dependent on stability in overall aggregates demand. However, pricing increases will be more difficult to obtain due to the unprecedented decline in volume during this recession,” he said. “We currently expect flat to 2-percent increased aggregates pricing in 2010; however, geographic and/or product mix, as well as competitive dynamics, could further pressure pricing.”
“We continue to believe that 2010 will be the biggest year for stimulus-related highway construction,” says Don James, Vulcan Materials Co. chairman and CEO.
As with Vulcan, stimulus funding also plays a major factor in Martin Marietta’s 2010 outlook. “Our current view of 2010 is framed by the expectation of stability in overall aggregates demand in the corporation’s markets,” Nye said. “In particular, we expect volumes sold to the infrastructure construction market to increase since over 80 percent of infrastructure stimulus money in our top five states was obligated in 2009, but less than 15 percent was actually spent during the year.
“We believe federal highway authorization, and other jobs creations legislation, will restore state-level confidence, reduce budget pressures, and allow state Departments of Transportation to progress multi-year construction projects to the bid-and-award stage,” he added. “However, we expect that the federal highway bill reauthorization will likely occur too late in the year to meaningfully affect 2010 aggregates demand.”
A key point from both executives is the need for long-term infrastructure funding. AGC’s Simonson echoed that sentiment at the NSSGA roundtable. “Stimulus alone isn’t enough,” he said. “It has to be the opening act.” AM
Vulcan at a Glance
Cash earnings were $369 million from continuing operations and $12 million from discontinued operations.
Aggregates shipments declined 26 percent.
Aggregates pricing increased by 3 percent.
Capital spending was $110 million compared with $353 million in 2008.
Martin Marietta at a Glance
Annual net sales of $1.497 billion, compared with $1.860 for 2008.
Heritage aggregates product line volume decreased 23 percent.
Aggregates pricing increased by 2 percent.
Capital spending was $139.2 million, compared with $258 million in 2008.
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