마틴 마리에타(MLM) 2026년 3분기 실적 발표 컨퍼런스 콜: LNA, 가이던스 상향

핵심 요약

• 마틴 마리에타는 2026년 전체 연간 실적 가이던스 중간값을 매출 78억 달러 및 조정 EBITDA 24억 8,000만 달러로 상향 조정했으며, 이는 기존 사업부의 출하량 약세와 단기적인 불리한 가격-원가 동향으로 인한 일부 상쇄에도 불구하고 인수 효과에 따른 기여가 확대된 점을 반영한 결과입니다.
• 핵심 골재 사업은 사상 최대인 17억 달러의 매출을 기록했으며, 이는 전년 동기 대비 14% 증가한 수치입니다. 한편 현금 매출총이익은 6% 증가한 6억 9,600만 달러를 기록했습니다. 총 출하량은 15.9% 증가한 6,710만 톤을 기록했으나, 자체 출하량은 1.1% 감소했습니다.
• LNA는 2억 1,600만 달러의 매출과 1억 1,500만 달러의 현금 매출총이익을 8월 21일부터 9월 30일까지 기여했습니다. 경영진은 약 2027년 8억 2,000만 달러의 LNA 조정 EBITDA를 예상하고 있습니다.
• 3분기 잉여현금흐름은 사상 최대인 4억 2,600만 달러로, 전년 동기 대비 18% 증가했습니다. 재고 관리와 설비투자 절감으로 연초 대비 2억 9,000만 달러 이상의 잉여현금흐름 개선을 이뤄냈습니다.
• 2027년에 대해 경영진은 제품 믹스 조정 기준 골재 가격의 한 자릿수 중후반대 성장과 보고 기준 평균판매가격의 한 자릿수 중반대 성장을 예상하고 있습니다. 상반기에는 인수합병 믹스가 보고 가격에 계속 부담을 줄 전망입니다.
• 인프라, 데이터 센터, 발전 및 창고 부문이 여전히 가장 강력한 수요 영역으로 남아 있습니다. 주거용 및 경공업 비주거용 건설은 금리 상승에 따라 약세를 보였습니다.

주요 재무 데이터

사업 및 영업 실적

인수가 보고된 골재 출하량 및 매출 증가를 견인했습니다. 뉴프론티어의 평균 판매 가격은 약 50% 낮아 마틴 마리에타 기존 사업부의 판매 가격을 밑돌면서 보고된 가격 산정에 상당한 믹스 악재로 작용했습니다.

비용 인플레이션은 디젤 및 기타 에너지 부문에 집중되었습니다. 디젤을 제외하면 톤당 자체 매출원가는 2.6% 상승했으며, 연초 이후 누계 기준으로는 2.2% 상승했습니다. 톤당 자체 인건비는 이번 분기 소폭 감소했으며 연초 이후 누계 기준으로는 보합세를 나타냈습니다.

LNA의 초기 실적은 인수의 전략적 타당성을 입증했습니다. 인수 완료 후 약 40일 동안 LNA는 1억 400만 달러의 조정 EBITDA를 기록했으며, 이익률은 48%%를 상회했습니다. 경영진은 통합 작업과 시너지 창출, 영업팀 간 협력이 차질 없이 진행되고 있다고 밝혔습니다.

수요 동향은 엇갈렸습니다. 3분기 데이터센터 출하량은 전년 동기 대비 2배 이상 증가한 반면, 창고 및 물류 시설 건설 물량은 연초 이후 누계 기준 약 51% 증가했습니다. 인프라 자금 지원 역시 견조하게 유지되었으며, 경영진은 40%의 인프라 투자 및 일자리법 자금이 아직 집행되지 않았다고 밝혔다.

반면, 9월과 10월에는 단독 주택 및 경공업용 비주거용 건설 활동이 약화되었다. 경영진은 주택 구입 능력과 자금 조달 여건이 개선되지 않는 한 단기적인 회복을 기대하기 어렵다고 보고 있다.

현재 마틴 마리에타 사업부의 대략 절반에 네트워크 최적화가 적용되었다. 이 프로그램에는 일부 사업장의 가동 중단, 인원 및 외주 서비스 축소, 장비 지출 절감, 재고 자산 매각이 포함된다. 회사는 수요가 개선될 경우 사업장을 재가동할 수 있는 역량을 유지하고 있다.

경영진 가이던스

마틴 마리에타는 2026년 가이던스를 다음과 같은 중간값으로 수정 발표했다:

수정된 전망치에는 LNA의 기여분, 연초 대비 누적 실적, 10월 출하량 동향 및 평년 수준의 겨울 날씨 가정이 반영되어 있다. 또한 지속적인 디젤 및 에너지 인플레이션, 기존 사업의 출하량 둔화, 보고된 출하량 및 가격 결정력에 미친 인수 관련 영향도 반영되었다.

경영진은 4분기 전망치에 자체 사업 골재 출하량이 한 자릿수 후반대의 하락률을 기록하고, 자체 가격은 약 2%% 상승할 것이라는 가정이 포함되어 있다고 밝혔다. 가격-원가 스프레드는 4분기에도 음수 상태를 유지한 후 2027년 초부터 자체적으로 양수 전환될 것으로 예상된다.

2027년에 대해 경영진은 다음과 같이 전망한다:

• 제품 구성 조정 기준 골재 가격의 한 자릿수 중후반대 성장.
• 보고 기준 평균판매가격(ASP)의 한 자릿수 중반대 성장.
• 약 8억 2,000만 달러의 LNA 조정 EBITDA.
• 설비투자(CAPEX)는 조정 EBITDA의 약 25% 수준(인수 사업부 포함).
• 가격 정책, 네트워크 최적화, 비용 통제 및 LNA의 연간 실적 전면 반영에 힘입은 마진 확대.

경영진은 LNA의 연간 이익 기여도가 비교적 안정적일 것으로 예상하며, 1분기와 4분기에 각각 약 23%%, 2분기와 3분기에 각각 약 27%%가 발생할 것으로 전망하고 있다.

회사는 순레버리지를 조정 EBITDA의 2.0배~2.5배 수준으로 낮추는 데 주력하고 있다. 경영진은 4분기 중 약 5억 달러의 부채를 상환하는 동시에 선별적인 소규모 인수(bolt-on)를 위한 여력을 유지할 것으로 예상하고 있다.

리스크 및 주시 영역

• 디젤 가격은 추정 분기당 2,500만 달러의 역풍(인수 사업부 포함)을 일으키고 있다. 경영진은 2027년 1분기에 이러한 가격 상승 효과가 기저로 작용하기 전까지는 실적 비교가 계속 불리할 것으로 예상한다.
• 고금리가 주거용 및 경공업용 비주거용 수요를 압박하고 있다. 경영진은 모기지 금리가 7%를 웃도는 동안에는 단독 주택 시장이 강세를 보이기 어려울 것이라고 언급했다.
• 2026년 초 예년과 달리 유호했던 날씨가 서부 및 중부 사업부의 활발한 영업 활동을 뒷받침했기 때문에, 2027년 1분기 출하량의 전년 동기 대비 비교는 기저 부담이 클 것으로 보인다.
• 인수 효과에 대한 기저 비교가 일단락될 때까지 New Frontier와 Quikrete는 보고되는 골재 가격 상승폭을 계속 희석시킬 것이다. New Frontier 인수 1주년 시점은 2027년 5월 중순이다.
• 2026년 전망은 평년 수준의 겨울을 가정하고 있어, 출하량 수준은 기상 조건에 민감하게 반응할 여지가 있다.

애널리스트 질의응답(Q&A) 하이라이트

2027년 가격 책정: 경영진의 예비 전망에는 1월 1일 자 가격 인상 조치, 신규 견적 프로젝트의 단가 인상, 인수한 사업장의 연중 인상에 따른 이월 효과가 반영되어 있습니다. 인수한 사업장의 가격을 마틴 마리에타의 기존 가격 수준으로 올리는 데는 보통 약 36개월이 소요됩니다.

레미콘 고객사: 콘크리트 고객사는 2027년에 한 차례의 주요 가격 인상이 적용될 것으로 예상되며, 시기는 지역에 따라 1월 1일에서 4월 1일 사이입니다. 경영진은 현재 이들 고객사를 대상으로 한 2차 연중 인상은 계획하지 않고 있습니다.

LNA 교차 판매: 영업팀은 토양 안정화를 위해 골재와 석회가 모두 필요할 수 있는 운송, 데이터 센터 및 중공업 비주거용 프로젝트를 공동으로 추진하고 있습니다. 경영진은 2026년 말 일부 활동이 시작되어 2027년에 교차 판매 혜택이 가시화될 것으로 예상합니다.

인프라 자금 조달: 경영진은 주요 시장 전반에서 주 정부의 프로젝트 발주 지연이 없다고 보고했습니다. 주요 주들은 운송 투자를 유지하거나 확대하고 있으며, 연방 육상 운송 프로그램은 2026년 12월 11일까지 연장되었습니다.

현금 흐름: 경영진은 2분기 실적 발표 통화에서 논의된 3억 5,000만 달러 규모의 추가 현금 흐름 창출 목표를 재확인했습니다. 2027년에 동일한 규모의 재고자산 관련 현금 유입을 기대하지는 않지만, 유의미한 유출로 반전되지도 않을 것으로 보고 있습니다.

실적 발표 전화회의 전문

---

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Welcome to Martin Marietta's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded and will be available for replay on the company's website. I will now turn the call over to your host, Ms. Jacklyn Rooker, Martin Marietta's Vice President of Investor Relations. Jacklyn, you may begin.

Jacklyn Rooker

Good morning, and thank you for joining Martin Marietta's Third Quarter 2026 Earnings Call. With me are Ward Nye, Chair, President and Chief Executive Officer; Michael Petro, Executive Vice President and Chief Financial Officer; and Chris Samborski, Executive Vice President and Chief Operating Officer. As a reminder, today's discussion may include forward-looking statements as defined by United States securities laws.

These statements relate to future events, operating results or financial performance, and are subject to risks and uncertainties that could cause actual results to differ materially

from those expressed or implied by such statements. Martin Marietta undertakes no obligation to publicly update or revise any forward-looking statements, except as legally required, whether due to new information, future developments or otherwise.

For additional details, please refer to the legal disclaimers contained in today's earnings release and other public filings, which are available on both our own and the Securities and Exchange Commission's website. Supplemental information summarizing our financial results and trends is available during this webcast and in the Investors section of our website.

Definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measures are provided in the appendix to the supplemental information in our SEC filings and on our website. Today's earnings call will begin with Ward Nye, who will discuss our third quarter results and updated 2026 and preliminary 2027 outlook.

Michael Pietro will then review our financial results. after which Ward will provide closing remarks. Please note that all comparisons are to the prior year's corresponding period. A question-and-answer session will follow these prepared remarks. Please limit your Q&A participation to one question. I will now turn the call over to Ward.

C. Nye

Thank you, Jacklyn. Good morning, and thank you for joining today's earnings call. Martin Marietta delivered record financial performance in the third quarter while advancing the transformation of our portfolio. .

Importantly, we achieved these results in a more challenging macroeconomic environment as strong acquisition performance more than offset elevated diesel and other energy-related cost inflation. The completion of our combination with Lease North America or LNA, marked a defining milestone in our company's evolution. Meaningfully expanding our differentiated upstream specialties platform and further diversifying our nitrate cash flow profile.

LNA's performance since closing has provided early validation of the strategic and financial rationale for the transaction. For the August 21 through September 30 period the business generated revenues and cash gross profit of $216 million and $115 million, respectively, well ahead of our initial expectations.

75 days since closing, integration is progressing well, and we remain focused on capturing the synergy benefits of the combination, while maintaining the business' operating momentum. I thank our teams for their tremendous dedication and hard work in supporting the successful closing and ongoing integration.

Turning to our 2026 outlook. As announced in today's release, we're updating our full year revenue and adjusted EBITDA guidance midpoints to $7.8 billion and $2.48 billion, respectively. This updated guidance reflects stronger acquisition contributions partially offset by lower near-term expectations for our heritage operations, where softer shipment trends and current price cost dynamics are anticipated to persist through the fourth quarter.

Looking toward 2027, our preliminary outlook anticipates mid- to high single-digit mix adjusted aggregates pricing growth, reflecting already communicated January 1 pricing actions for fixed-based customers fourth quarter 2026 pricing actions on new quoted work and the midyear pricing carryover across acquired businesses.

Since the acquired operations have lower average selling prices in our heritage business, acquisition mix will temper our headline reported price and growth in the first half of 2027, particularly through May 15 and the 1-year anniversary of the New Frontier Materials acquisition.

We thus expect full year reported ASP growth in the mid-single-digit range. Importantly, these part operations provide meaningful opportunity for continued pricing growth over time as we apply our commercial practices across the expanded network.

Turning to the end market trends. Infrastructure remains our most resilient and aggregates intensive end market. At the federal level, current surface transportation programs have been extended through December 11, 2026, and while work continues toward a longer-term extension and ultimately, the next surface transportation authorization.

We continue to see broad bipartisan support for infrastructure investment. Importantly, 40% of the infrastructure investment in JobStack funding remains to be spent, providing a multiyear runway for transportation investment. At the same time, state department of transportation budgets across many of our key markets remain at historically elevated levels.

More than 60% of funding across our top states is derived from state and other nonfederal sources, providing a more stable funding base. Private construction presents a more mixed outlook with Dodge Construction network forecasting nonresidential square footage starts of approximately 1.2 billion square feet in 2027, approximately 24% below the 2022 peak.

While interest rate sensitive private nonresidential construction remains soft, data centers, power generation and warehouse development remain areas of relative strength. Data center project shipments more than doubled in the third quarter versus the prior year's comparable period.

Our extensive distribution network, particularly in Texas and Louisiana, positions us well to serve the scale and logistical complexity of these often geographically remote projects with both construction aggregates and lime for soil stabilization.

Power generation also represents a compelling longer-term opportunity, supported in part by the rapidly growing energy requirements associated with data centers and broader electrification. The U.S. Energy and Administration projects U.S. electricity demand to increase 25% to 50% by 2050 and requiring substantial additional generating capacity and related infrastructure.

We're also encouraged by the ongoing recovery in warehouse construction, building on the inflection that began in last year's third quarter. Recently reported investments, including Amazon's project Mercury, which contemplates expanding its same-day fulfillment network to more than 1,000 facilities by 2031, underscore the longer-term warehouse opportunity.

Infrastructure, together with data centers, power generation and warehouses account for approximately 50% of our aggregate shipments, providing meaningful exposure to end markets supported by multiyear demand drivers. Single-family residential and light nonresidential construction, however, softened in September and October following the notable higher move in interest rates.

We do not anticipate a near-term recovery in these rate sensitive end markets, absent a meaningful improvement in affordability and financing conditions. Heading into 2027, we remain confident and enthusiastic in Martin Marietta's positioning and future.

The strategic actions completed in 2026 have strengthened our portfolio, enhanced our industry-leading margin profile and increased the contributions from our Resilient Central division and Specialties businesses, providing better earnings durability through economic cycles.

I'll now turn the call over to Michael to discuss our financial results. Michael?

Michael Petro

Thank you, Ward, and good morning, everyone. Our core aggregates business generated record revenues of $1.7 billion, an increase of 14% and cash gross profit of $696 million, an increase of 6% and driven by acquisition contributions that more than offset a $25 million decline in the organic business.

Aggregate shipments increased 15.9% to 67.1 million tons, as acquisition contributions were partially offset by an organic shipment decline of 1.1%. With respect to pricing, as expected, acquisition-related mix had a more pronounced impact on headline pricing due to a full quarter contribution from New Frontier which carries approximately 50% lower average selling prices than our heritage business.

Excluding acquisition and geographic mix, our organic pricing increased 2.7%. Turning to cost. Cost of goods sold per ton, excluding external pass-through freight increased 5.6% or 5.1% on an organic basis primarily reflecting higher cash costs, including diesel and other energy-related expenses.

Incremental depreciation, depletion and amortization expenses represented an additional $0.52 per ton. Excluding the diesel headwind, cost of goods sold per ton would have increased 3% or 2.6% on an organic basis, reflecting disciplined controllable cost management by our operating teams.

Most notably, organic labor cost per ton, our single largest cost category, declined modestly in the quarter and was roughly flat year-to-date. Our Specialties business delivered record quarterly revenues and cash gross profit of $362 million and $163 million, respectively. LNA's $216 million revenue and $115 million cash gross profit contribution since the August 21 closing date further demonstrates the resilience of lime and the transaction's margin accretion to the enterprise.

In a year characterized by significant acquisition and divestiture activity, related purchase accounting and comparability impacts on reported results, our record third quarter free cash flow of $426 million, an increase of 18% demonstrates the strong underlying financial performance of the business.

On a year-to-date basis, disciplined inventory management has unlocked $135 million, while capital expenditures were $157 million lower than the prior year period. These actions alone have contributed over $290 million of free cash flow improvement. Together with our strong year-to-date organic labor cost control, ongoing network optimization efforts, and other structural cost actions, we reaffirm our confidence in achieving the $350 million incremental cash flow target discussed during the second quarter call.

Turning now to our updated 2026 guidance and preliminary 2027 outlook. Our revised 2026 adjusted EBITDA guidance midpoint of $2.48 billion includes expected contributions from LNA and reflects year-to-date performance, October shipment trends and an assumed normal winter.

The outlook also incorporates continued inflationary pressure across diesel and other energy-related cost categories as well as new frontiers impact on reported volume and headline pricing. In 2027, we expect margin expansion driven primarily by mid- to high single-digit mix adjusted aggregates pricing growth.

Combined with ongoing network optimization, disciplined cost management and a full year contribution from LNA, we expect these benefits to more than offset continued inflationary pressure. Turning now to the balance sheet. We funded the cash consideration for the LNA transaction with a $1.5 billion prepayable term loan and $5.5 billion of senior notes issued across several maturities with a weighted average coupon rate of approximately 5.5%.

As discussed when announcing the transaction, we are committed to deleveraging to our targeted range of 2x to 2.5x net debt to adjusted EBITDA and retaining our investment-grade credit ratings with deleveraging supported by the significantly enhanced free cash flow generation of the combined business. Ward, back to you.

C. Nye

Thank you, Michael. What distinguishes Martin Marietta today is the deliberate reshaping of our earnings profile. Through portfolio optimization, we have built a more resilient and diversified business with increased contributions from our Central division and our higher margin specialties platform.

At the same time, we're optimizing our aggregates network and aligning production with current demand conditions creating a leaner cost structure and a more efficient operating platform. Combined with the pricing discipline that has long been a hallmark of Martin Marietta, these actions position us to expand margins while continuing to grow earnings and cash flow.

Operator, please provide the required instructions as we're now ready to take questions.

Operator

[Operator Instructions] Our first question comes from Trey Grooms from Stephens.

질의응답

Trey Grooms

So Ward, could you give us a little bit more detail on the puts and takes behind your preliminary '27 pricing view of mid- to high single digits mix adjusted. And what's your end-market outlook could imply for organic aggregates volumes next year?

And with this, maybe what your outlook is for the gross profit contribution from ags or cash gross profit contribution, given your outlook for continued higher costs in '27?

C. Nye

Thanks for the question Trey, I'll take you through several puts and takes on that. So let's start your question with pricing. So currently, we see a nice path to mid- to high single-digit mix adjusted aggregates growth in '27 and I think there are several reasons for that.

Number one, what we think we're going to see on January 1 price realization. I think that's important. Number two, what we're already seeing in quoting work that we're doing now in Q4 and on the 27 projects that were coming next year.

And then lastly, the carryover pricing on acquired volumes at the midyear price increases that we saw in the acquired businesses. As I indicated in the prepared remarks, those markets tend to be 50% or 25% below Heritage Martin Marietta. So that's important that we got those in midyear, but equally, it gives us a nice track record going forward.

What I'll say relative to pricing, and I mentioned it briefly in the prepared remarks, cadence is going to matter because obviously, as we anniversary both the [ Quikrete ] transaction in February and the New Frontier acquisition in May, you'll see a nice bump when those 2 anniversaries roll by.

But keep in mind, if we're really thinking about the business in 2 different chunks, I would say this, the heritage business, about half of the shipments are fixed base and about half are quoted work so again, if we're seeing nice quoted work pull-through right now, I think that's important.

Relative to the other part of your question with respect to volumes, I guess I'd say several things. Number one, the backlogs actually look very similar to what they did coming into this year. I think that's a really good place to start. At the same time, as you and I have discussed before, it's a dynamic market right now.

So we're really just waiting to see the end of the year and have a much better feel on the precision of what volumes are going to look like. The thing that's important to remember relative to volume is we're going to have a really tough Q1 compare because keep in mind, as we said last year, when [ Vail ] is having a bad when or me, they have no snow. We're having a great winter.

So keep in mind, the West and the Central divisions came out of the box early in 2026 very, very aggressively. We don't anticipate that happening. Again, that goes back to Michael's comment we're really looking for more normalized weather.

With respect to the other part of your question on end market outlook, I would say several things. One, I think the best way to think about that is it continues to be relatively bifurcated and what I mean by that residential and like nonres simply remain pressured because of what's going on with interest rates.

And as we saw those rates move here in the second half of the year, we saw both of those hit a bit of an air pocket, not a big surprise. You would have expected it. I expected it to. And frankly, as long as mortgage rates remain above 7% single-family housing is just not going to be in a terribly robust place.

Now the converse of that is what we see going on in infrastructure on a we see in heavy nonres. So if we're looking at that, keep in mind, those areas account for about half of our aggregates business. So when we're going into the new year with those performing well, I think that's important.

So if we're looking at data centers, they remain an especially attractive opportunity. And what we're seeing is year-over-year our data shipped volumes more than doubled year-over-year in the third quarter. And again, Texas is expected to represent approximately 30% of projected U.S. data center capacity by 2028.

In our leading position in Texas, not just in stone, but in line today, it's going to put us in a really attractive place for those multiyear projects. But we've also discussed what's been happening relative to warehouse, and we expect that recovery to continue.

Again, if we're looking at warehouse and distribution construction, that's up approximately in our world, about 51% year-to-date. And again, I mentioned what Amazon is doing between now and 2031, adding more than 1,000 facilities. We think, again, that gives nice momentum going into the new year. And the last one I'll mention train in response to your question, then I'll ask Michael to come back and talk specifically about the profit numbers that you referenced is power generation.

And we are seeing that move in very considerable ways both relative to LNG and what's happening in portions of the Texas market. But more broadly, what's happening in data and data warehousing as well because we're seeing increasingly amounts of that going in behind the meter. So I'll try to give you a sense of what do I think is happening with price?

What do things happening with volume? How are the end markets behaving that I think lead up to those? And then, Michael, I'll let ask you to come back and respond to the other portion of this question.

Michael Petro

Yes, Trey, we'll come back certainly with more specifics relative to our profit guide for next year, we're just given the preliminary pricing now. But as you know, pricing is the disproportionate lever for profit growth. As Ward mentioned, we feel very confident about what we're going to be able to achieve January 1 there.

So the mid- to high single digits on a mix-adjusted basis is definitely what you should be baking in. What I would say is inflation, we expect to continue. Certainly, with diesel, where it is today, I think you can model a flat line there. We're seeing all-in with acquisitions, about a $25 million headwind per quarter for diesel.

So we will lap that in Q1 of next year. So we'll have an incremental headwind going into next year in the first quarter until we start having same on same diesel comps. So think elevated inflation mid- to high single-digit pricing and some of the commentary that Ward provided on volume ought to be able to get you to a preliminary profit number.

Operator

Our next question comes from Adam Thalhimer from Thompson Davis.

Adam Thalhimer

Nice job and a tough environment. Can you update us on how the LNA integration is going? And why did they get off to such a fast start in Q3?

C. Nye

Adam, thanks for the question. And look, that's obviously a bright spot in almost any circumstance. The integration is going just fine, is quick response. The work streams are well underway, the performance so far, to your point, has exceeded our initial expectations.

The integration remains totally on track. I mean, so if you're really looking at what's happened in the 40 days since closing, Cash gross profit was $115 million, adjusted EBITDA at $104 million at a 48-plus percent margin. I mean part of what I think people are now seeing is what we had long seen in that business and why we found it to be so compelling.

And keep in mind, we haven't even started to get the additional contributions that we believe we're going to see as we continue to integrate this because we think the additional value creation that's going to come from cross-selling in hot mix or Texas mega projects or otherwise is going to be pretty considerable.

So to your point, are we really remain focused on capturing those synergies just as quickly and thoughtfully as we can, we are. But here's the other piece that we're really focused on. It's a great business. So the last thing that we want to do is do anything that takes a really good business, a high-performing business and puts it off track, but the integration is going well.

The synergy realization is going well. The cultures have come together actually very nicely. Their safety culture and ours aligned the way that we would hope, Adam. So there's nothing that we're seeing in this that has been a negative surprise to us at all.

And again, I think we'll continue to have results that -- the Street will see and they will like. And the merits of this transaction will simply become solvent.

Operator

Next question comes from Kathryn Thompson from Thompson Research Group.

Kathryn Thompson

I appreciate your color on '27 outlook and also for LNA, congratulations again on closing that. I think the next big subject are elections. So we wrapped up elections yesterday and we're looking forward to, hopefully, a reauthorization at the Federal Highway bill next year.

I would like to get your thoughts in terms of how the elections may or may not impact this process? What you're seeing right now with states in terms of their spending and some of the inevitable things that happen, such as holding up lettings in advance of a highway bill? And are you seeing that in the states in which you operate?

C. Nye

Kathryn, thanks so much for the question. I would say several things. One, to your point, if we're really looking at states in the first instance and the fact that in our world, given the fact that we've tried to build our business in states that have really good fiscal conditions, the state budget circumstances matter disproportionately.

And what we're seeing right now is very good, consistent expected performance from the states. And what I mean by that is if I go in and look at states are important to us, which means now California, Texas, Georgia, Missouri, South Carolina, Colorado, Iowa, they're all maintaining or increasing transportation investment.

If we're looking at North Carolina and Florida, again, their funding is going to be perfectly adequate for what we're looking to do next year. So as we're going into '27, I don't see anything in the States that are disproportionately important to us that lead us to believe that there are going to be any issues there.

And to your point, have we seen any delay in lettings, the short answer is no, we have not. If we're looking on the other part of your question relative to what's going on from the federal level, keep in mind when Build America 250 came out of the Congress, it came up with a 62 to 2 vote.

I mean, that tells us from the outset that this is a bipartisan build. So look, I think it's still possible that we could see something in [indiscernible] Maybe. Do I think that's relatively unlikely probably? And do I think a Democratic Senate might push even harder relative to highways, bridges, roads and streets and overall transportation, I think so.

So long story short, do I think we should go ahead and plan for seeing probably a continuing resolution or 2 as the Congress goes through that process. I think that's probably realistic. Is that something that concerns me, I would suggest to you frankly, not at all.

Again, I think this is largely bipartisan. I think we've got a group likely coming in who want to invest perhaps even more. So again, I'm not seeing anything from the state that's concerning to me. I see a process going forward at the federal government that I think we've seen before, and it's very inevitable.

And the last thing that I would say, and I think this is important, if we go back and look at the last peak in aggregate shipments several years ago, what that was in the middle of a continuing resolution. And I think what happens is people oftentimes sit back, look at a CR and wonder what is this going to mean for this very fundamental product that rolls out.

And the fact is we simply go through these ebbs and flows, I think, in a very steady, very constructive way. And I don't see anything at the federal level or the state level that makes me think otherwise Kathryn. So I hope that's responsive.

Operator

Our next question comes from Phil Ng from Jefferies.

Philip Ng

I guess my question is for 2027 perhaps for Michael. If diesel prices and costs at these levels, is 3% to 4% cost per ton increased reasonable when we think about and then is been really noisy this year. Outside of M&A, any callouts on mix? And does the loss ratio in terms of that number as well? And I know they produce some construction grade aggregates as well.

Michael Petro

Yes. No, thanks, Phil, for the question. I think the short answer to your COGS per ton inflation estimate is probably in the general ZIP code. The best way to think about it for us on diesel is we'll consume in the aggregates business all in with Quikrete and New Frontier, about 50 million gallons at current spot rates of about $4.70 a gallon. .

That's going to be the diesel comp that we'll be looking at next year, and we're assuming for planning purposes internally and for what we're doing relative to price, that type of diesel level for the balance of 2024. No, you were breaking up a little bit. Can you repeat the rest of the question?

Philip Ng

Sure. From your -- from a mix standpoint for pricing 2 -- any call outs outside of M&A that could create some noise for 2027. I appreciate new frontier and Quikrete. And then [indiscernible] I believe they have some construction grade aggregates. I don't believe it's part of that equation, but does that have an impact in terms of how we think about mix for 2027?

Michael Petro

Yes. No. So the lost aggregates are certainly out of that. From a mix perspective, you will have the acquisition mix of New Frontier and 2 months of Quikrete. So on a reported basis, that will continue to be impacted by those tons flowing through. Of course, you get the benefit of the tonnage on volume in the Q1 comp on an as-reported basis.

Then in Q2, you have about 45 days of New Frontier. So we begin to lap the acquisition comps midway through Q2, and -- and that's, generally speaking, the mix from an acquisition perspective. The other mix that we've had a lot of this year is the geographic mix on the organic business. That could very well turn in to be a mix tailwind next year.

As Ward mentioned, we don't expect -- or we're expecting more of a normal winter. So what we don't expect is for the Central division and Colorado to come out of the gates with the volume growth that we saw those 2 divisions do this year. So that means more contribution from the East and the Southwest, which tend to have higher average selling prices.

That said, that's why we're guiding preliminarily to a mix-adjusted price metric of mid- to high single digits. That would effectively capture all mix, whether it be organic and/or acquisition.

C. Nye

Phil, let me come back and add one more thing, too, because the price conversation is really important. And thank you for the question. The other thing that I want to make sure we don't drive by this quarter without talking about has been the cost performance of the business because I think our teams have done that in my view, extraordinarily well.

So if we're looking at organic cost of goods sold, and I'm going to exclude for these purposes, external freight, it increased 5.1% in the quarter and 3.8% year-to-date. But excluding the diesel spike, and the corresponding increases were limited to 2.6% and 2.2%, respectively.

And one thing that I think is really important is if we're looking at labor cost per ton, which is our single largest cost category, that was flat for both the quarter and year-to-date.

So I think your point is a good one and that is making sure you have your head around puts that pricing cadence next year. But keep in mind, the thing that we can really control within our gates is what's happening with respect to cost.

And I like the setup relative to pricing, but I also like what I'm already seeing relative to cost. So forgive me for parsing that in Phil, but I think that's an important one to get out.

Operator

Our next question comes from Angel Castillo from Morgan Stanley.

Esther Osinaiya

This is Esther on for Angel. I just had a question on the aggregates sold to ready-mix customers is mainly moved to April 1 increases. So do you see any changes in the ability to get price for ready-mix customers in 2027, like that time line shifting to possibly twice a year versus that onetime April 1.

C. Nye

Esther, thank you for the question. I'd say several things. No, I don't. And what I think we're broadly seeing from ready-mix customers is as follows. I think some will be January 1. I think some will be April 1. I think there's going to be a primary difference in geographies.

I think in geographies that are code-based, you'll see April, I think in more base, you'll see a January 1 price increase. And here's what we've heard very clearly from our concrete customers this year. It was very difficult for them, given what was happening in private nonres and res markets to take a midyear price increase this year.

And I think that's part of the pressure that you've seen this year. Their response has been I'm seeing the same input issues you are. I know you're going to have to go up in the new year. do this for me, give me one price increase at the beginning of the year and don't plan for midyear next year.

I think that actually helps them in their planning. Frankly, from our perspective, moving that forward is very helpful as well. So I think your question relative to concrete is particularly well placed because I think that has been really one of the more challenging aspects of this year.

But again, I think the answer is, yes, we will see increases in some markets in January. Yes, we will see increases in some markets in April and we're going to treat both of those relative to concrete as if that's going to be the only one during the course of the year. So Esther, I hope that's helpful.

Operator

Next question comes from Anthony Pettinari from Citigroup.

Anthony Pettinari

In the quarter, you saw ags organic shipments decline and organic pricing up, I think, 2.7%. Now I'm just wondering how that kind of compared with your expectations going into the quarter? And if there were any factors in terms of weather, I mean you talked about geographic mix that you'd call out when we look at 3Q and maybe think about 4Q.

C. Nye

Yes. I would say the primary thing that changed, Anthony, is, number one, the concrete guys could not take me years this year and just talk with Ester about that. So I think that's one thing. I don't see that persisting.

I think the other issue was, as interest rates moved, we simply saw the private work slowdown. And again, not a big surprise. I think you've across the heavy side space. I'd be surprised if that's not a pretty consistent answer. And part of what I think we're doing is we're looking at what happened with volumes because of that interest rate increase in September and then what we've seen in October on a days effective basis.

That's what's informed the way that we've looked at the balance of the year, particularly going into Q4. And again, last year, for example, we had a November that was a pretty heavy November from a volume perspective. So again, I think we're trying to just be very thoughtful maybe with a touch of conservatism as we're looking at Q4 this year.

Operator

Our next question comes from Keith Hughes from Truist.

Keith Hughes

When you were talking about '27, you called out the dates specifically anniversarying New Frontier, and I guess, quick Cree and getting their prices up towards the Martin Marietta average I assume you're not going to get it all the way. Do you have any feel for how much of the gap between the 2 entities pricing you will be able to realize as we hit the second half of next year?

C. Nye

Keith, that's a great question. So thank you for that. So I'd say several things. One, did we see midyears at the Quikrete operations and New Frontier this year, even though we closed new Frontier after the midyear. And the answer is yes, we did. .

Do I anticipate that those will likely be markets in which we will look for midyears again next year? The answer is yes. I think we probably will. I think to answer your question more directly, typically, what we've seen, Steve, is probably a 36-month runway from the time that we buy a business until the time that we can get it closer to something that looks like a Martin Marietta average.

I don't think these are going to be dramatically different. And 1 reason I would say that in many respects is the markets that are really hitting at the hardest right now tend to be those markets in the center part of the country.

So if we're looking in markets in Missouri and Kansas City or others, those are markets that, from a volume perspective, have done very, very well this year. And again, back to the notion on backlog, our backlogs in those markets also look attractive.

So I think I've given you, a, where they sit today. be the time frame that we think we're likely to see that gap close and what I think will happen in those markets with mid-years in 2027.

Operator

Next question comes from Avi Jaroslawicz from UBS.

Avinatan Jaroslawicz

I know you're expecting positive price/cost for the year next year, but should we expect that the organic price cost is going to turn positive early in 2027? Or should we continue to see some headwinds there for some time into next year, maybe until we lap some of the higher cost pumps from this year?

Michael Petro

No, we would think on an organic basis, so ex the reported mix impacts from the acquisitions, we should see price costs coming out of the gate next year.

Avinatan Jaroslawicz

Okay. Got it. And just quickly, maybe, what are you expecting on that front for Q4? Should it look similar to Q3 or any differences?

David S. MacGregor

Yes. So on an organic basis, for Q4. What we're seeing is implied in the guide down high single-digit volume, up on a reported organic basis, about 2% and pricing. So that's a step up from the 1% that we saw in Q3.

So we're starting to see a little bit of momentum from the quoting work flowing through. But we expect to continue to have the elevated COGS inflation in Q4. So we think Q4 is certainly still price/cost negative, but the inflection point being what we're going to do on January 1.

Operator

Our next question comes from Garrett Greenblatt from JPMorgan.

Garrett Samuel Greenblatt

I just wanted to touch back on the last transaction and talk about some medications between '27 there. In terms of that, what's the cadence of when we should expect to see some of this cross-selling volumes start flowing through on the aggregate side?

Maybe if you could talk about the timing of the royalty contracts you have? And then just on the price side of things, what are the dynamics of expectations you see for LNA?

C. Nye

Well, look, we'll deal with the aggregate side and the fullness of time. I mean those are contracts that are in place with companies that we and LNA have good relationships with, and we want to be very thoughtful about those. .

If we start looking at really what we expect from LNA next year, and part of what's going to be attractive about that business, we're anticipating about $820 million worth of EBITDA for 2027. And part of what's really a feeling about that business is how steady we think that's going to look across the year.

And I think that's one of the things that we spoke of when we did the transaction because it adds such nice, stable, consistent predictable earnings.

So if we think about what that's going to look like, I mean, this is a pretty easy way to measure it. Probably 23% of profits will come through in Q1, 27%-ish in Q2 and in Q3 and then back to 23% in Q4.

So really, you've got a book ended with 23%, you got 27% in the middle, which means you're getting about a 50-50 split during the course of the year. I think to the other part of your question, we're already having our sales teams working very collaboratively looking at either DOT jobs, data center jobs, et cetera.

Because keep in mind, part of what's going to happen now on either public works or big, heavy private nonres works is we can look at those jobs together. And in some instances, they're going to want base stone, clean stone, et cetera.

In other instances, they may want the lime, particularly as they're working through, in some respects, unsuitable or challenging soils or in some instances, we may want to push them 1 way or another.

For various reasons that are to the customer's benefit. So you will clearly see the benefits of cross-selling coming through as we get into 2027. Frankly, I think we'll start seeing some of that even here in the lander part of 2026. So again, I hope that answers your question.

Operator

Our next question comes from Ivan Yi from Wolfe Research.

Ivan Yi

You didn't break out specific the volumes and the pricing for the live business, but can you speak directionally about how LNA tonnage and pricing trended in 3Q? And also, what are you seeing thus far in 4Q?

Michael Petro

Yes. No, we're still looking at ultimately what's going to be the level of disclosure for the specialties business as we balance providing appropriate visibility so that the investing community can make informed decisions versus disclosing anything competitively sensitive.

So I think it's all part of the evaluation that we're taking a look at. But what I can say on volume and price just on a percentage basis, both were up nicely with revenue in the period that we owned in September was up about double digits. And I would say the trend in October on one less shipping day look similar.

Operator

Our next question comes from Michael Dudas from Vertical Research.

Michael Dudas

Jacklyn, Michael, Ward. Maybe this one for Michael. You highlighted some positive operating and free cash flow metrics in the quarter and your outlook year. Maybe you could early look on '27 on CapEx. Are you going to continue to get some working capital tailwinds as we move to 2027?

And looking at relative to what free cash flow generation could be versus what you had thought coming into the [indiscernible] acquisition, how to play through?

Michael Petro

Yes. So the Laos business, as you know, is just a cash generation machine because it doesn't require a lot of CapEx given back to a question that we were talking about earlier, they largely outsource a lot of the mining. So crushing rock that wears down crushers, conveyors, mobile equipment, et cetera, is on a third party is done.

So extremely good cash flow conversion from EBITDA generated from L&A given the limited CapEx requirements. But I would say for next year, our CapEx guide when we do come out with it will include CapEx all-in, inclusive of acquisitions.

But we still expect that to be within that guide that we provided at the Capital Markets Day, which would suggest about 25% of EBITDA. So we don't see any difference in that. Relative to working capital, we are getting a lot of the benefits this year in terms of working capital inflows relative to inventory.

What we're going to look to do is stabilize that so that we don't have it swinging the other way into a working capital outflow moving forward. So I wouldn't expect the same quantum of cash flow impact as a result of inventory management, but I wouldn't expect it to reverse and go the other way.

Michael Dudas

And Ward, looking at some tuck-in acquisitions you made, you announced close of one in September. How does that play out in the next 12, 18 months, given the deleveraging focus on top of what sure is a pretty interesting pipeline still for additions for your business?

C. Nye

It is. And Michael, thank you for the question on that. Actually, the way that we structure the transaction between cash and equity, was very purposeful because we didn't want to have ourselves on the sidelines if we saw attractive bolt-on acquisitions.

Now that said, the delevering process is going to be important. And we're going to start that here in the fourth quarter with approximately $500 million of debt repayment coming up over the coming weeks. So I think you'll see a nice blend. Will we invest in the business, to Michael's point, from a CapEx perspective that we think is appropriate Absolutely.

Will we be paying down debt to be sure. And will we continue to be in the bolt-on business on the aggregate side, just as you saw with the Fraser transaction that was announced. We will continue to do that, and we have the ability to do it. So thank you for the question.

Operator

Our next question comes from Brent Thielman from Oppenheimer.

Brent Thielman

Ward, maybe just on LNA, it looks like you were low 40% gross margin ex the markup on a shortened quarter. Can you just talk about your ability to protect those margins or even expand on those margins in a kind of a dynamic cost environment?

C. Nye

The nice thing about that business is a big piece of their cost is energy. They have looked at that from a very different lens than we have historically in aggregates.

We looked at it to a degree in this you mentioned in cement because there is some hedging that goes on with that. So again, it tends to be very, very predictable. The pricing in that space tends to be pretty constructive as new work comes up.

And keep in mind, the other thing that's different about that business is, in many respects, we've got contracts going forward that we know are in place that have built-in inflators in them. So again, it's a business that we talked about before from a quarter-to-quarter from a year to year and otherwise, you can actually model really very, very well.

And yes, I think having the business positioned in the southern half of the United States, where we continue to see remanufacturing where we continue to see significant energy work where as I indicated in my prepared remarks, Texas is going to have 30% of the data center activity over the coming years.

We see something in that business that we believe is highly durable and highly resilient and that was one of the reasons that we were so attracted to it, frankly, for the last decade.

Again, we've been watching that space. And keep in mind, even if we look at our heritage [ Woodville ] plant, mean that was the business that we're seeing nice growth at the mid-single digits range for 20 years. And again, we love that business. But where that sits geographically does not have the same dynamism that the lost business that we've acquired one.

So I think when we look at the history of the line business that we've had, and how durable that margin has been and then what this new business looks like in a more southern climate and importantly, what those businesses can now do together under one roof I think that leads us rent to the overall durability of what we have. So I don't look at that and lose any sleep overage in any respect.

Operator

Next question comes from David MacGregor from Longbow Research.

David S. MacGregor

Kind of late in the call here, but I wanted to just tap your thoughts on the M&A market, and you kind of responded a little bit to this to Michael's question earlier.

But I'm just wondering to what extent you're seeing valuations maybe being impacted by higher rates or narrower price cost performances and cost inflation. What are you seeing from selling right now?

C. Nye

It's interesting. My view has long been that once sellers determine what they think of businesses work, they usually reside there for an extended period of time. .

So I'm not seeing a lot of degrees of change in that right now. It may mean something on how receptive the market is to it in some respects, David. But I haven't seen any notable change.

The other thing that happens is on occasion in those circumstances rather than having a change in value, they just have a change in timing. So again, from my perspective, I don't see a change in the way soar thinking about value. We may see a degree of what they're thinking and timing.

And all of that is fine. We're playing this in a very long ball fashion and we want to grow our business really responsibly. We think we have and our track record indicates that, and I think we'll continue to do so. But I hope that helps, David.

Operator

Our next question comes from Brian Brophy from Stifel.

Brian Brophy

Just a follow-up on the 2027 pricing discussion. Obviously, the cost outlook remains pretty fluid here. If we see any diesel inflation or inflation between now and year-end. To what extent does that change the outlook for genuine price increases, just given the timing of pricing letters and customer discussions?

C. Nye

Brian, it's a great question. I would say probably several things. One, I think what changes in a more immediate circumstance is what overall bidding looks like. So keep in mind, about half of it is going to be fixed base, half of it is going to be some form of bidding. .

And with the precise tool that we have, part of what we're able to do is move that algorithm very, very quickly to make sure that we're taking into account what we're seeing change in the marketplace. So to your point, do we recognize this dynamic? Yes. Do our customers recognize it's dynamic. The answer to that is yes as well.

And have we put in tools in the last 18 months that, in my view, allow us to navigate that with even greater agility going into 2027 to be sure we have. So I think that's how we see that playing out, Brian.

Operator

Our next question comes from Garik Shmois from D.A. Davidson.

Garik Shmois

Wondering if you can update us on where you are in your aggregates network optimization program. And just for clarification, maybe I missed it, but can you identify how much LNA EBITDA is in your 2026 revised guidance?

C. Nye

So yes, I'll do a couple of things. Yes, we did talk about LNA EBITDA. Mike, do you want to come back and?

Michael Petro

Yes. Just quickly before I turn it over to Chris Samborski for the network optimization, about $290 million of EBITDA is the stub period contribution to Q3 and then the balance of Q4.

C. Nye

And we're looking for about [ $20 million ] next year, Garik, that might have been your question as well. And then, Garik, on the other part of your question relative to network optimization. As you heard in Jackman's opening comments, Chris Samborski joining us on this call today as well. And keep in mind, part of what Chris is doing is overseeing that network optimization in large measure, following up on what he did in the Colorado business when he was West Division President. So I'll turn it over to Chris to give you a snapshot of how that process is going and what we anticipate.

Christopher Samborski

Garik, thanks for the question. As you know. We started that network optimization work in the West division last year. And since that time, we've executed similar actions in roughly half of our divisions, and we continue to look for opportunities to do that across the remainder of the footprint.

As we think about the benefits of network optimization, I'd say really 3 things. One, there's the reduced operational expenses associated with headcount reduction, elimination of contract services, et cetera. But there's also free cash flow benefits, and that comes twofold.

One, from use capital expenditures related to plant and equipment and also from the reduced inventory as we're able to sell down the stockpiles at those idled locations. I do think it's important just to highlight that network optimization is one tool in our toolkit, and we deploy it when the demand supply environment is conducive to it.

But equally, we maintain the ability to restart those sites. And when the markets necessitate that, we'll certainly do so. So our teams continue to execute from a cost perspective very well. We mentioned earlier, disciplined inventory management CapEx reductions this year of yielded $290 million in cash flow.

And as Ward said earlier, unitary labor cost this year is really down to flat on a year-over-year basis. So we're certainly seeing the benefits of that network optimization work come through. Thank you, Gary.

Operator

Our last question today comes from Timna Tanners from Wells Fargo.

Timna Tanners

I wanted to -- if I could just follow up on 2 quick items. One is the [indiscernible] legacy business was kind of flat year-over-year but down quarter-over-quarter. So just wondering if there's anything you can call out there that we might have missed? And also just on the fourth quarter guidance, is it just weather that drives the low end or high end or anything else that we can watch?

Michael Petro

Relative to the Legacy Magnesia business, nothing of particular note to call out. I think you saw the cash gross profit kind of remaining flat. That was driven by stability in the lime business and we do have the magnesia-based business, both from Premier and from our legacy Magnesia business. So those are the 2 components of that. .

But what I would say is heritage line and, of course, LNA, Timna, and you know the line business better than most, given your coverage relative to steel is performing much better than initial expectations for us coming out of the gate. So we're very pleased with the combo of Heritage Woodville and LNA.

Operator

We have no further questions. I would like to turn the call back over to Ward Nye for closing remarks.

C. Nye

Again, thank you for joining today's earnings conference call. As we look toward 2027, we believe the actions we've taken to strengthen our portfolio and operating platform have created a structurally stronger Martin Marietta with a more balanced earnings profile than at comparable points in prior cycles. .

We're continuing to proactively align cost, production and capital with evolving market demand while remaining focused on disciplined execution and pursuing attractive opportunities across our business.

Our differentiated portfolio and proven track record of navigating dynamic macroeconomic environments reinforce our confidence in Martin Marietta's long-term prospects and ability to create compelling value for shareholders.

We look forward to sharing our fourth quarter and full year 2026 results in February. As always, we're available for follow-up questions. Thank you for your time and continued support of Martin Marietta.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. RECONNECT