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Rating Action:

Moody's revises Martin Marietta's (CFR Ba1) rating outlook to positive from stable

03 May 2016

Approximately $1,355 million of rated debt securities affected

New York, May 03, 2016 -- Moody's Investors Service affirmed Martin Marietta Materials, Inc.'s ("Martin Marietta") Corporate Family Rating at Ba1 and revised the outlook to positive from stable. Moody's also affirmed Martin Marietta's senior unsecured ratings at Ba1, Probability of Default Rating at Ba1-PD, Speculative Grade Liquidity assessment at SGL-2 and commercial paper rating at Not Prime.

The positive outlook reflects our expectation that operating performance and key credit metrics will continue improve with the recovery in construction spending. The company's adjusted debt-to-EBITDA declined to 2.6x for the year-end 2015 from 3.3x at year-end 2014. Operating margin has also improved over the same period, increasing to 15.1% from 13.2%, respectively. The outlook also presumes that the company will carefully balance its financial policy including maintaining strong liquidity and conservative debt leverage against its growth strategies, which may include various "tuck-in" acquisitions.

The following ratings actions were taken:

Issuer: Martin Marietta Materials, Inc.:

Corporate Family Rating, affirmed at Ba1;

Probability of Default Rating, affirmed at Ba1-PD;

Senior unsecured notes, affirmed at Ba1 (LGD4);

Speculative Grade Liquidity assessment affirmed at SGL-2;

Commercial paper affirmed rating Not-Prime.

The rating outlook is positive.

RATINGS RATIONALE

Martin Marietta's Ba1 ratings benefit from the company's position as one of North America's leading aggregates producers and leading cement producer in Texas; expanded geographic footprint, product diversity and distribution network; typically stable operating performance in most, but not all, economic scenarios; and diverse end-markets including public, private residential and non-residential construction. The rating also benefits from a conservative balance sheet, solid operating margin, and strong free cash flow generation.

The ratings also incorporate the highly competitive nature of the industry and volatility from the cement and ready-mixed concrete businesses. Cement and ready-mixed concrete businesses are more volatile than aggregates business. The cement business is capital-intensive and prices can change dramatically even with minor changes to supply and demand. Ready-mixed concrete business has less pricing power and lower profitability than aggregates due to volatile input costs, competition and low barriers to entry. The rating also considers the company's lack of multinational diversity. Martin Marietta effectively derives all of its income from operations in North America, with a concentration of income from Texas, and is smaller in scale than investment-grade rated, multinational building materials companies.

The company's SGL-2 reflects good liquidity over the next 12 to 18 months. At December 31, 2015, the company's liquidity was supported by $168 million of cash on hand, availability of $350 million under its unsecured revolving credit facility, $250 million available under its trade receivable facility, and Moody's expectation that the company will remain free cash flow positive over the next twelve months. The company has approximately $300 million of debt maturities through 2017, which could be more than covered with cash and revolver availability as of December 31, 2015. The company's assets are largely unencumbered by liens, providing a significant amount of alternative financial flexibility if needed. The company's credit facility is governed by a debt-to-EBITDA ratio of 3.5x. We expect the company to be in compliance with this covenant over the next 12 to 18 months.

Martin Marietta's ratings could be upgraded should the company's adjusted operating margin remain over 15%, adjusted debt-to-EBITDA remain below 3.0x, EBIT-to-interest expense increase above 4.0x, and retained cash flow as a percentage of net debt exceed 25%, with the expectation that all metrics are sustainable. Continued improvement in operating performance, expanded margins and strong liquidity would also support a ratings upgrade.

The rating outlook could return to stable should construction end markets weaken, resulting in flat to negative growth in shipment volumes.

The ratings would likely be downgraded in the event that Martin Marietta's adjusted operating margins deteriorate below 11%, adjusted debt leverage increases above 4.0x and adjusted EBIT-to-interest expense coverage is below 3.0x over the intermediate-term. Additional rating pressures could emerge if construction fundamentals were to deteriorate materially or if the company pursues a materially levering transaction.

The principal methodology used in these ratings was Building Materials Industry published in September 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Martin Marietta Materials, Inc. ("Martin Marietta"), headquartered in Raleigh, North Carolina, is a leading producer of aggregates products and cement for the construction industry, including infrastructure nonresidential, residential, railroad ballast, agricultural, and chemical grade stone used in environmental applications. The Aggregates business also comprises downstream product lines including asphalt products, ready-mixed concrete and road paving construction services. The Aggregates business accounted for nearly 82% of the company's revenues for the year ended 2015. The Cement business and the Magnesia Specials business accounted for 11% and 7%, respectively. For the year ended 2015, Martin Marietta generated approximately $3.5 billion in revenues.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Karen Nickerson
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Glenn B. Eckert
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's revises Martin Marietta's (CFR Ba1) rating outlook to positive from stable
No Related Data.
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