Kathryn Thompson: Hi, thank you for taking my question today. I guess some good color on guidance, but just a couple of clarifications on the updated EBITDA guidance. pricing is improving, but volumes are adjusted given today’s results, they can step back. How much does pricing versus lower costs for certain categories playing the change? And what are you seeing in key end markets? We know Texas and North Carolina are key states that are doing quite well, but are there other end markets from a geographic standpoint that are contributing to the change in guidance? Thank you.
Ward Nye: Good morning, Kathryn, thanks for the question, too. So look, if we’re looking at really what the drivers are, clearly, what we’re seeing relative to average selling price is the single largest driver that we have right now. If we’re looking at Q2 in aggregates up 18.6%, a really nice performance, obviously, in cement. We talked about that over 20% ready-mix, tracking the same thing. These are all important points relative to the revised EBITDA guidance. And it does give you a sense that in today’s world, pricing is actually considerably more powerful than volume is. And I think that’s, to me, in so many respects, part of what’s important to underline. To that end, if we’re looking at the volume and we’re seeing what some of the differences are several things are worth noting.
One, relative to volume, we think in the quarter, we lost about 1 million tons simply due to weather. If you were here in the Mid-Atlantic, what you saw is the second half of June was, frankly, a washout. It rained nearly every day. So when the Carolinas and Georgia are feeling that we feel that on volume. I think importantly, too, if we’re looking at value over volume and what we think that cost us relative to volume for the quarter, we think that was probably about 1 million tons. And by the way, we think that was probably a pretty good trade. Equally, if we’re looking at what Jim and I both spoke to in our prepared comments and that is with respect to the residential market. Again, we think housing itself has found bottom, but we tend to lag in that on the stone finds us waiting new subdivisions.
So we think we’re actually troughing in that as we sit here probably today going into the third quarter, we think that probably cost us about 0.5 million tons. So again, if you’re looking at what the drivers are going to be, will price be the disproportionate driver? Yes. Have we given up some volume on occasion intentionally and purposely because we feel like really holding firm on some of the pricing that we feel like is fair, is the right thing to do relative to our shareholders? We do. And then to the last part of your question relative to how different markets look, here’s what I would tell you. The Southeast remains strong. If we’re looking at the Carolinas, if we’re looking at Atlanta, if we’re looking at coastal markets in the East, they continue to be quite good.
If we’re looking in Texas, in many respects, the results speak for themselves. But in particular, Dallas-Fort Worth in the North and Austin are strong. San Antonio and Houston are feeling degrees of residential weakness. I don’t think that’s a surprise any place. If we’re looking at Colorado, Colorado had a very wet June, as I mentioned, it was the wettest June on record. But if we’re looking in California and Arizona, here’s where we see really strong demand in Phoenix. We see strong demand in Southern California. The places that are a little bit weaker, it’s a little bit weaker in San Francisco Bay Area. We thought it would be coming into the year. It’s a little bit weaker in portions of the Midwest. Again, that’s a cold weather market that in many respects, it’s just starting to hit its stride right now.
But modestly weaker there. But overall, if we’re doing a heat map across our markets in the United States, given how intentional we’ve been in building our business in areas that continue to have good population inflows, very good public spending and good private growth. We’re seeing better markets than not. And again, that’s not a big surprise to us, Kathryn. So again, I think I hit the points that you wanted to be raised, but I hope that helps.
Kathryn Thompson: Yes. Thanks very much.
Ward Nye: Thank you, Kathryn.
Operator: Thank you. The next question comes from David MacGregor of Longbow Research. Please go ahead.
David MacGregor: Yes. Good morning, everyone. Ward, I just wanted to maybe build on Kathryn’s question there about the time you walk through 1.5 million tons of displaced business that related to weather and other I guess I just wanted to get your assessment of maybe the totality of what you might be behind in terms of tonnage here just because of disruptive weather and construction projects generally running behind at this point of the year? And how much of that can realistically be captured in the second half of ‘23? And I guess just secondly, how much availability is there in the current transportation and handling infrastructure capacity to support the fourth quarter volume surge in seasonal markets if that’s an option, if that’s a possibility?
Ward Nye: David, good morning. Thanks for the question. Again, if I go through and telling them look, I think weather was 1 million. I think value over volume is another 1 million. I think residential market softening was probably 500,000. I think in some instances, frankly, just having availability of certain sizes was probably somewhere north of 500,000. So again, you start telling those up, you’re getting a lot closer to 3 million than 2 million by just some quick math. If I think about really what it looks like for the rest of the year, we did our best to try to capture in the revised guidance, how we thought that was going to play I do think it’s important to reemphasize what I said in the commentary. Look, I think we’re likely because of housing and the timing on housing defined volume in Q3, the most challenged of the year.
I think so. Do I think we’re likely to see an inflection in 4. I do in large measure because last year’s 4 was not a particularly compelling fourth quarter. And again, as we see the build go through 3, I think we’ve taken a very measured view. And of course, it’s easier to do it in late July than it is in late February on how the year is going. So I think we’ve captured pretty well how we think volume is going to play out for the rest of the year. And the other thing that I think is worth keeping in mind, David, is the way pricing is working now and how we see that working for the rest of the year. Because keep in mind, part of what happens at this time of year, as we report Q2 is the central part of the United States that tend to be cold weather markets, but equally don’t tend to be as high priced markets as some of the ones that we have on the East Coast simply rolled in.
So what do I mean by that? Aggregates cost more in Charlotte than they do in Cincinnati. So remember, you’re always going to have a little bit of an optical headwind relative to pricing at half year. So again, as we think about volume, we feel like we’re in a perfectly good place on volume, and we think it’s going to build going into 4. We really like the way pricing has worked. And keep in mind, we took so much of our pricing and accelerated that first price increase from January and April, almost exclusively to January. So you had a number of different themes that are in play that in some respects, the market is seen for the very first time in this quarter, at least through an annual snapshot. But David, what I try to do is give you a sense of how we think volumes will build, how we think the pricing is going to come back to support that.
And I think it’s important to note that we saw midyear price increases in over half of our markets. And I think if somebody had thought that’s what Martin Marietta is going to see when we came out with our guidance in February, I think they would have been very pleased with that. an I know we are as a management team.
David MacGregor: And just on that Ward, normally, your mid-year pricing would be mid to high 20s traction. In this environment, are we likely to see higher traction rates on these mid-years this year?
Ward Nye: I think the traction rate will actually be good on the midyears. And as I’m sitting here looking at the guide, honestly, if I’m wondering if there is some place that we might be a little bit light on it, it may be on that pricing guide. I think the pricing is going to actually look really good for the year. And I think we can exit the year probably in some instances, pretty close to a 20 figure this year, David.
David MacGregor: Great. Thanks very much.
Ward Nye: Thank you.
Operator: Thank you. The next question comes from Jerry Revich of Goldman Sachs. Please go ahead.
Jerry Revich: Thank you. Hi, good morning, everyone.
Ward Nye: Good morning, Jerry.
