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Martin Marietta Materials Inc (NYSE:MLM)
Q2 2020 Earnings Call
Jul 28, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Martin Marietta Second Quarter 2020 Earnings Conference Call. My name is Kevin, and I'll be your coordinator today. All participants are currently in a listen-only mode. A question-and-answer session will follow the Company's prepared remarks. 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. Suzanne Osberg, Martin Marietta's Vice President of Investor Relations. Suzanne, you may begin.

Suzanne Osberg -- Vice President, Investor Relations

Good morning, and thank you for joining Martin Marietta's second quarter 2020 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer; and Jim Nickolas, Senior Vice President and Chief Financial Officer.

As a reminder, today's discussion may include forward-looking statements as defined by the United States securities laws in connection with future events, future operating results or financial performance. Like other businesses, we are subject to risks and uncertainties that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC's website.

We have made available, during this webcast and on the Investor Relations section of our website, Q2 2020 supplemental information that summarizes our financial results and trends. In addition, any non-GAAP measures discussed today are defined and reconciled to the most directly comparable GAAP measure in our earnings release and SEC filings.

Today's earnings call will begin with Ward Nye, whose remarks will focus on our second quarter operating performance, as well as current and emerging market trends. Jim Nickolas will then review our financial results and liquidity position, and Ward will then provide some closing comments. A question-and-answer session will follow our prepared remarks.

I will now turn the call over to Ward.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Suzanne, and thank you all for joining today's teleconference. We sincerely hope that you and your families are remaining safe and healthy as we continue to manage through these unprecedented times. As highlighted in this morning's release, Martin Marietta delivered outstanding operational, financial and safety performance, notwithstanding some localized weather headwinds in the quarter and the broader uncertainties presented by the COVID-19 pandemic. This performance is a testament to our company's commitment to our values, the world-class attributes of our business and the disciplined execution of our strategic plan.

Martin Marietta established new profitability records for both the second quarter and the first half of the year, driven by favorable pricing and proactive cost management across the Building Materials business. For the second quarter specifically, consolidated gross margin expanded 200 basis points despite slightly lower revenues as compared with the prior year period. Selling, general and administrative, or SG&A, expenses as a percentage of total revenues improved 10 basis points to 5.6%. Adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, increased 7.5% to $407 million. And fully diluted earnings per share was $3.49, a 16% improvement.

In addition to record financial performance and despite the challenging conditions, we also achieved the best safety performance in our history. Companywide, both our lost time and total injury incident rates are better than world-class safety levels. These superior results are directly attributable to our dedicated and talented employees who've continued to demonstrate resiliency during these uncertain times. I'm extraordinarily proud of how our team has adapted to our new health protocols, while remaining steadfastly focused on caring for one another, working safely and efficiently, and seamlessly meeting our diverse stakeholders' needs.

Though Martin Marietta, along with many of our customers, has operated as a designated essential business throughout the COVID-19 shutdowns and subsequent phases, we still experienced impacts from the macroeconomic slowdown. Despite these challenges, second quarter product demand for our Building Materials business remained strong across a number of our key geographies, including North Texas and the Front Range of Colorado, two of our leading vertically integrated markets. Contractors continued construction on projects already under way and have, in some instances, benefited from jobs that were accelerated to better leverage lower traffic volumes during shelter-in-place orders and new projects.

In addition, we saw aggregate shipments growth in Georgia and Florida, despite above average rainfall in these states during the quarter, and in Indiana. Overall, quarterly aggregate shipments declined approximately 4% compared with near record prior year period volume. As a reminder, our second quarter 2019 results benefited from weather-deferred carryover work, sizable energy sector projects and Midwest flooding repair activity.

Aggregates pricing improved 3.3%. All divisions contributed to this growth, underscoring the health of our markets and the importance of our locally driven pricing strategy. By region, the West Group posted a 5.5% increase, reflecting favorable product mix. Pricing for the Mid-America Group improved 2%. The Central Division, which has selling prices below the corporate average, contributed a higher percentage of the Mid-America Group's shipments, consistent with the first quarter trends. Product mix limited Southeast Group's pricing growth, as a higher percentage of lower-priced fines and base stone were shipped.

Underlying demand for our Texas-based cement business remains largely stable. However, second quarter cement shipments decreased 3%, driven primarily by the decline in energy sector activity that has resulted from lower oil prices. West Texas oil well cement shipments were down over 75% from pre-COVID expectations, a trend expected to continue until oil prices stabilize at a level that fosters additional investment and drilling activity in the Permian Basin.

Throughout the quarter, we saw attractive and consistent pricing strength in our North and Central Texas cement operations. Specifically, cement prices in Dallas and San Antonio, the markets most proximate to our Midlothian and Hunter facilities, were up 4%. That said, notably, lower shipments of higher-priced oil well specialty cement products bound for West Texas limited overall pricing growth.

Turning to our targeted downstream businesses, the ready mixed concrete shipments increased nearly 9%, excluding prior year shipments from our Southwest Ready Mix Division's Arkansas, Louisiana and Eastern Texas business, known generally as ArkLaTex, which we divested earlier this year. Overall, concrete pricing increased modestly, but was hindered by unfavorable product mix.

Our Colorado asphalt and paving business established a new quarterly record for asphalt shipments. Shipments increased 35% to 1.1 million tons, benefiting from market strength and pent-up demand following a weather-challenged 2019. Asphalt pricing declined 1% as customer segmentation was weighted more heavily toward publicly bid municipal projects as opposed to negotiated private work.

The Company's Magnesia Specialties business experienced the most pronounced COVID-19 headwinds during the second quarter. Domestic and international chemicals demand declined as customers confronted COVID-19 related disruptions. Demand for our lime and periclase products also slowed significantly, as steel producing customers temporarily idled their facilities in response to the COVID-19 induced shutdown of certain domestic auto manufacturers.

Before discussing near-term and emerging trends, I'll now turn the call over to Jim for a review of our second quarter financial results and liquidity. Jim?

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Thank you, Ward, and good morning to everyone. It is worth highlighting that the Enterprise achieved a second quarter adjusted EBITDA margin of 32%. This is the highest EBITDA margin in the Company's history. The driving force behind this accomplishment was the Building Materials, which achieved record second quarter products and services revenues of $1.1 billion, a 1% increase from the prior year quarter, and gross profit of $359 million, a 9% increase. Notably, all of our Building Materials product lines contributed to this record profitability.

Solid pricing gains, production efficiencies and lower diesel fuel costs drove a 230 basis point improvement in aggregates product gross margin to 35.5%, also an all-time record. This was accomplished despite lower volumes, demonstrating the cost flexibility and resiliency of our aggregates-led business. Our Texas cement operations benefited from improved kiln reliability, as well as lower raw material and fuel costs. Product gross margin of 39.7% expanded 210 basis points despite a nearly 3% decline in cement revenues.

As Ward mentioned, our targeted downstream businesses delivered outstanding operational performance during the quarter. Ready mixed concrete product gross margin improved 270 basis point to 10.6%, driven by increased shipments, pricing improvement and lower delivery costs. Equally impressive, our Colorado asphalt and paving business established second quarter records for both revenues and gross profit.

Product revenues for the Magnesia Specialties business decreased 31% to $49 million, reflecting lower demand for chemicals and lime products. Lower revenues resulted in a 420 basis point reduction of product gross margin to 37.3%. While we expect this business will face similar headwinds in the third quarter, a gross margin in the high-30s is impressive and indicative of superb cost management.

Consolidated SG&A expenses included $3 million for COVID-19 related expense, which included enhancements to cleaning and safety protocols across our over 100 sites.

Turning now to capital allocation and liquidity. We continue to balance our long-standing disciplined capital allocation priorities to responsibly grow our business, while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value. Our priorities remain focused on value-enhancing acquisitions, prudent organic capital investment and a consistent return of capital to shareholders, while maintaining our investment-grade credit rating profile. Full year capital expenditures are now expected in the range of $350 million to $375 million, a slight upward revision from the guidance provided last quarter, as US businesses were in the early stages of responding to the pandemic. Our current prioritized projects are expected to improve efficiency, capacity and safety, all core principles and the foundation of our strong financial performance.

While we typically invest in the business, we also look for appropriate opportunities to divest non-operating assets to maximize value. In this regard, earlier this month, we entered into an agreement to sell a depleted sand and gravel location in Austin, Texas for nearly $100 million.

Since our repurchase authorization was announced in February 2015, we have returned nearly $1.8 billion to shareholders through a combination of share repurchases and meaningful sustainable dividends. Share repurchase activity remained temporarily paused during the quarter. However, repurchases can resume at management's discretion.

In May, we repaid $300 million of floating rate notes that matured using proceeds from our first quarter bond issuance. The Company has no additional bond maturities until July 2024.

We are confident in our balance sheet strength. We have ample liquidity and financial flexibility to continue to profitably growing our business. Net cash, combined with nearly $970 million available on our existing revolving facilities, provided total liquidity of $1 billion as of the end of the quarter. Additionally, at a net debt to EBITDA ratio of 2.2 times, we remain well within our target leverage range as of the end of the second quarter.

With that, I will turn the call back over to Ward for his market trends commentary.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thanks Jim. With the successful completion of an outstanding first half of 2020, we remain laser focused on managing our business through the macroeconomic upheaval from COVID-19 and related governmental responses. While July product demand and pricing trends across our markets remain broadly consistent with the second quarter, we feel it's premature to reinstate full year 2020 earnings guidance, given the uncertainty regarding the pandemic, potential Phase 4 stimulus and infrastructure reauthorization. Nonetheless, we remain highly confident in the fundamental strength and underlying drivers of our business, guided by our Strategic Operating Analysis and Review, or SOAR, plan.

We expect pricing resiliency and disciplined cost management to continue supporting the Company's near-term performance. As the economy resets from COVID-19, we believe favorable pricing trends for our products will continue, supported by our disciplined locally driven pricing strategy and attractive geographic footprint. For aggregates specifically, we anticipate full year 2020 pricing will increase 3% to 4% from the prior year. This range is slightly below our pre-COVID-19 expectations, given year-over-year geographic and product mix trends and slightly delayed price increases in certain markets.

Texas cement pricing is also expected to remain resilient due to the State's tight supply demand dynamics and the fact that our key markets are, by design, largely insulated from waterborne imports. Healthy aggregates and cement pricing trends should benefit our targeted downstream operations. Existing customer backlogs support the Company's shipment levels in the near term. In certain regions where we operate, this year's weather has been more disruptive of construction activity and project cadence than the pandemic. Yet, we believe the industry will likely see a gradual but not precipitous temporary slowing in product demand over the next few quarters, as businesses and governments address budget shortfalls resulting from COVID-19. That said, the degrees of decline and recovery will vary by end-use market and geography and will be influenced by future governmental actions.

Infrastructure construction, particularly for aggregates-intensive highways, roads and streets, is expected to be the most near-term resilient, as contractors advance projects that have been awarded and funded. However, state Departments of Transportation, or DOTs, may decrease the scale or postpone the timing of future construction as they balance lower revenue collections and other short-term funding needs relating to the COVID-19 impact, particularly if there is no near-term federal assistance. These impacts will vary by state. For example, Texas DOT scheduled lettings for fiscal year 2021, which began September 1, are currently planned at $7 billion, comparable to fiscal year 2020 lettings. Earlier this month, Texas DOT also reiterated its $77 billion 10-year unified transportation planned [Phonetic].

To ease funding shortfalls to its DOT budget, Colorado will issue certificates of participation to advance planned projects, the majority of which are concentrated along the megaregion, following the I-25 corridor, which has been the strategic focus of our Rocky Mountain business. Of our Top 10 states, North Carolina DOT faces the toughest near-term funding challenges. As a reminder, NCDOT temporarily suspended awards for certain projects in response to pre-COVID-19 funding issues and other factors. Since then, new contract advertisements have been further delayed. In the near term, NCDOT will benefit from $700 million in Build NC Bond revenues to fund existing transportation programs. Longer term, we anticipate additional transportation ballot initiatives, as well as new revenue-enhancing recommendations from the NC FIRST Commission, which is tasked with evaluating North Carolina's growing transportation investment needs and ensuring that critical financial resources are available.

Despite some near-term DOT headwinds, the passage of a reauthorized comprehensive federal infrastructure package will provide multi-year upside. While it's unlikely a successor bill will be agreed upon and signed into law prior to the Fixing America's Surface Transportation Act's expiration on September 30, we feel confident new legislation will be enacted and provide the first sizable increase in federal transportation funding in more than 15 years. When this occurs, it will be a big win for our industry and for Martin Marietta.

While nonresidential construction activity on existing projects has continued, some commercial and institutional projects in the design or planning stages are being delayed or canceled. The Dodge Momentum Index, or DMI, a monthly measure of the first report for nonresidential building projects in planning, which has historically led construction spending for nonresidential building by a full year, is down 20% from its most recent peak in July 2018. However, to contextualize the June reading, the Great Recession's peak to trough DMI decline was 62%. Importantly, since the Great Recession, Martin Marietta has purposefully shifted our nonresidential exposure to be more heavy industrial-focused as we've expanded our geographic footprint along major commerce corridors. Aggregates-intensive warehouses, distribution centers and data centers are expected to lead nonresidential activity as businesses increase capacity for e-commerce activity, secure regional supply chains and become more reliant on cloud and network services. Further, large liquefied natural gas, or LNG, projects along the Texas Gulf Coast that are actively under way have broadly continued. However, start dates for the next wave of projects have been postponed.

Longer term, we believe nonresidential construction activity could benefit from more companies streamlining their supply chains and repatriating manufacturing operations back to the United States, providing potential multi-year upside to heavy industrial construction.

Residential construction is rebounding more quickly than anticipated by homebuilders and third-party forecasters. After decline in April, the National Association of Home Builders Housing Market Index, a widely recognized survey designed to measure sentiment for the US single-family housing market, returned to pre-pandemic levels in July, signaling that residential growth may lead to an overall economic recovery.

Consistent with recent homebuilder commentary, activity has strengthened as Martin Marietta states have reopened, demonstrating pent-up housing demand following the COVID-19 related pause in the spring selling season. Nationally, housing starts remain below the 50-year annual average of 1.5 million despite notable population gains. Freddie Mac estimates the 2.5 million housing units are needed to address the current nationwide housing shortage. This situation is particularly evident in states with significant under-supply, including Texas, Colorado, North Carolina and Florida, which are all in our Top 10 states. These trends, along with historically low mortgage rates, bode well for future expansion in single-family housing activity, which is two to three times more aggregates-intensive than multi-family housing, given the typical ancillary nonresidential and infrastructure construction activity.

Also, longer term, we expect Martin Marietta to benefit across all three of our primary end-users from accelerated deurbanization trends, as stay-at-home orders and the shift to remote work encourage more prospective homebuyers to move to smaller metro or suburban locations. Our leading Southeastern and Southwestern footprint provides us a distinct competitive advantage in regions with diverse employment opportunities, land availability, favorable climates and a lower cost of living.

Moving forward, we are confident in Martin Marietta's opportunities to build on our successful track record of financial and operational outperformance. SOAR 2025, our strategic plan for the next five years, will be finalized this year and provides the framework to support our capital deployment, price discipline, cost management, sustainable practices, talent development and succession planning initiatives. We've already made great strides on these endeavors.

Earlier this month, we streamlined our business structure into five operating divisions: East, Central, Southwest, West and Magnesia Specialties. This new structure better aligns our business product offerings and geographies, provides experienced executives with increased responsibilities and opportunities, strengthens our ability to provide outstanding customer service, and further enhances our industry-leading cost profile.

In closing, we're all living an unprecedented and dynamic times, and that will likely persist as the pandemic continues unabated. Moving forward, our attractive underlying fundamentals, strategic priorities and world-class teams position Martin Marietta to responsibly navigate today's challenging environment and to drive sustainable long-term growth and shareholder value. Overall, we continue to feel confident about the future and our plan to continue building on Martin Marietta's long track record of success in delivering sustainable value creation and superior returns for investors.

If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.

Questions and Answers:

Operator

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

Trey Grooms -- Stephens Inc. -- Analyst

Hey, good morning, everyone.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Good Morning, Trey.

Trey Grooms -- Stephens Inc. -- Analyst

Okay. So, I guess first, I want to focus on margins. I guess, demand is going to be what it's going to be. But in the Materials business, you saw gross profit improvement across the board, and that's even with down revenue in most segments. And Jim touched on some of the benefit there. But can you talk about kind of the puts and takes there? And we understand diesel was your friend in the quarter. But even outside of diesel, where maybe you had some good guys that we could see continue going forward?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Trey, thanks for the question. You're right, diesel was a friend. But we managed our labor. We managed SG&A. We managed our efficiencies and other things that we believe have the capacity to endure actually quite well during the quarter. Trey, what we're endeavoring to do, and I think what you've seen in the quarter, is we are building a business that has the ability and should be expected to outperform as we go through cycles. So, to your point, volume is going to be what the volume is going to be, and volume was down 4% for the quarter. But we saw profitability go nicely up. But pricing is a big piece of that, and that has been something that Martin Marietta has demonstrated, I think, extraordinary skill around managing. We have a depleting resource. We want to make sure we're getting good value for it. We're also going to flex very carefully on the labor side.

And the other thing that I think you're seeing evidence of is, we've been very thoughtful in the way that we deploy capital. So, I think as we look at what capex has done relative to our ability to continue to gain efficiencies, that's been an important piece of it. One thing that I would call out to you in particular -- and really the comments I just gave you went [Phonetic] specifically to the aggregates business. But I think too, if we look at our cement business that also down volumes for the quarter, we're seeing much better reliability numbers relative to our Midlothian operation and Hunter facilities as well. So, what we're seeing across our footprint is improved reliability, improved efficiencies, improved cost in a number of dimensions. But we're also getting the price, Trey, and that's something that matters.

Trey Grooms -- Stephens Inc. -- Analyst

Got it, OK. That's helpful and encouraging, especially in the face of the volume that you're facing. And as just a follow-up, you mentioned you actually could see additional demand slowing in the couple -- in the next couple of quarters or in the coming quarters. But if you could dive in that a bit more because you were looking for something similar or had some similar comments during the last earnings call. So that doesn't -- it doesn't seem like a new outlook necessarily. But things have held in better than expected, and it sounds like July trends are still largely the same as the second quarter. So, just trying to understand maybe high level timing. And understanding you're not giving exact guidance, but if you look over your three primary businesses, infrastructure, non-res and resi, so how you rank your outlook for those and where you see some potential for relative strength or weakness?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah sure, Trey. Happy to try to do that. And I'm with you. I don't think what we're seeing today relative to outlook should be a surprise to anyone. I think it's actually a very consistent conversation to what we've been having. And if we look at it, volume is down 4% in aggregates for the quarter and profits were up. So, I think that gives you a sense of it. Here's how I would break down the end-users as you think of it. Look, infrastructure for the quarter was actually pretty steady. I think one of the questions is, what will Phase 4 stimulus look like? Because it's been well documented with gas taxes going down, states clearly have had some degree of revenue challenges with respect to that particular dimension. It's fascinating to me to see where AASHTO was today. AASHTO is making an ask that there would be about $37 billion in the Phase 4 stimulus that would go directly to state DOTs. If that happens, I have to tell you, state DOTs are going to probably be in a pretty good place.

What I tried to do in the prepared remarks too is give you a sense of where are our Top 3 state DOTs, even irrespective of what may come from some form of COVID stimulus. And I think what you heard is, Texas DOT is in a pretty good place. Colorado DOT is going to use certificates of participation to hold themselves up. And NCDOT, despite having more challenges than those other two, I would tell you, is the DOT we feel a lot better about today than we did when we were talking to you in the first quarter because now, FY '21 lettings are estimated there at $1.3 billion. That's really similar to 2016 level and well above what we had seen before is about a $600 million estimate. So, I think DOT and infrastructure is going to be relatively steady. I think a lot hinges on what Phase 4 looks like.

I think res is going to be up and I think res could be up relatively nicely in a number of markets. And I think the footprint that we have is going to help that pretty considerably. I think you're clearly going to see more single-family housing activity than we've seen for a while. And here an interesting trend, Trey, that's worth noting. Potential single-family housing activity, as we look at it at least prospectively, during the run from 1990 to 2009, single-family building comprised about 80% of what we were seeing in the housing market. Over the last several years, the last 10 years, it's been modestly less than 70% of that. So again, if we see single-family housing moving in a more normalized fashion, and we think we will, we think that's going to be a pretty attractive place.

Non-res is likely to be the area in which you're going to see a bit more near-term softness in portions of it and probably strength in others. So, as we think about non-res, what I would suggest is as follows. Heavy non-res is likely to perform relatively well. And what do I mean by that? Are we seeing more warehousing and data centers in the works? The answer is, yeah. Are we seeing more work with Facebook in places like Omaha and Des Moines? Yes. Are we seeing more work with Google? Yes. But are we seeing more work with Amazon and others? Yeah, we are. Do I think hospitality and retail shops may feel a little bit more near-term pressure? I think they probably will. But part of what you heard me say in the prepared commentary as well is, we've been very careful to build our business in ways that we feel like major commerce corridors will continue to grow in an outsized way. So, I think we're positioned well for there.

The other thing that I'll say is, the smallest piece of our business, ChemRock and Rail, actually had a pretty attractive quarter, and we saw a balanced volume, actually up. And we're not surprised by that. We saw that principally in the Western United States, and we see that as something that is likely to be relatively stable to flat going forward. So again, Trey, I'm trying to hit all four of those end-users, but of course, infrastructure, non-res and res are the three big ones.

Trey Grooms -- Stephens Inc. -- Analyst

Yeah, OK. That all makes sense. Thank you for taking my questions, Ward. Very helpful. I'll pass it on.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You bet. Take care, Trey.

Operator

Our next question comes from Kathryn Thompson with Thompson Research Group.

Kathryn Thompson -- Thompson Research Group. -- Analyst

Hi, thank you for taking my questions today. Just following on on the infrastructure piece, and appreciate the color that you had in your prepared commentary, looking at Phase 4 stimulus and the looming highway reauthorization. But if you could, for listeners, really filter the noise in terms of what T&I Committee and the House has presented versus EPW and the Senate and what that could mean, and really kind of a scenario analysis of what really happens to infrastructure volumes if something happened and if something doesn't happen. Thank you so much.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Kathryn, thanks for the question. So really, we're going to look at that in two different buckets. So, if you think about what reauthorization looks like, as I said in the prepared comments, we don't think that happens before September 30. So, we think they will probably issue a longer-term CR. That's nothing to be alarmed by, by the way. I don't think they're going to issue a longer-term continuing resolution because I think it's going to last for a long time. I think they may put in place optically what would be a longer-term continuing resolution simply to continue giving states the confidence to keep letting projects. I don't think it means they slow down on coming up with the reauthorize bill.

So, to your point, there are two different starting points, Kathryn. Last July, the Senate EPW came out with unanimity around a $287 billion plan, and that's basically a very nice percentage increase off where we were relative to the FAST Act. Now, to your more recent issues, House T&I released their plan. That was $319 billion. That was a 41% increase over the FAST Act. And nearer term, this is at least worth considering, and that is the House Appropriations Subcommittee on Transportation, Housing and Urban Development passed legislation that will provide about $107 billion in resources for US DOT for FY '21, including almost $62 billion for the core highway programs. That's up 33%. So, one of the questions I think that's a fair one is, what does a CR look like? And so, I think minimally, you're looking at a CR that's probably flat for some period of time as they work toward what I think inevitably will likely be an increased multi-year highway bill.

So Kathryn, to your point, worst case, you have a CR that's flat. Best case, you have a CR that actually has some growth to it. I think expected case, if you get a bill next year, that's a nice increase over where the FAST Act is. And I equally think the conversations that had been had recently relative to Phase 4 stimulus have led us to feel like the likelihood of seeing some very direct assistance going to state DOTs is actually better than we would have thought probably when we were having this conversation three months ago. And again, the AASHTO ask there is around $30 billion. So I tried to outline what I think the steps are, and I've tried to handicap where I think they sit.

Kathryn Thompson -- Thompson Research Group. -- Analyst

Okay, that's helpful. And then, shifting gears to the pricing commentary, and you went through a few puts and takes in terms of what impacted pricing for the quarter. But when you look at the bigger secular trends that are going to be coming up importantly on the residential housing, what and how should we think about pricing from a geographic and a mix standpoint if there ends up being a bigger mix of residential versus non-res in market exposure?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You know what, I don't think end-use is going to be a big driver on what we see relative to price increases. It's fascinating. For example, if you got a single homebuilder and they're coming, they're probably buying stone at a list price, which is frankly a pretty high price as things go generally. But I would think if you're seeing just standard growth along those different end-uses, and you're seeing in Southeast and Southwest, and clearly you've got higher ASPs in the Southeast right now than we do in the Southwest, so you might have some geographic mix issues that could come from that. But from a margin perspective or from a pricing increase perspective, I wouldn't expect to see anything that would be particularly notable in any of that. I think the primary thing that you're going to continue to see is good, steady price increases because I think that's something that we just recognize the value of, and we have locations that put us in a position that we can get the value that we need for our shareholders.

Kathryn Thompson -- Thompson Research Group. -- Analyst

Thank you for taking my questions today.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Kathryn.

Operator

Our next question comes from Anthony Pettinari with Citi.

Anthony Pettinari -- Citi -- Analyst

Hi, good morning. Just following up on pricing, Ward, you discussed 2020 aggs pricing up 3% to 4%, which was maybe slightly below your pre-COVID expectations. And you talked about mix just now. But you also [Technical Issues] slightly delayed price increases in certain markets. I'm just wondering if those were purely a function of slack demand or maybe some increased competitive intensity. Or if there's any kind of other color you can give there?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah, I guess, I'd say several things. The primary driver so far has really been product mix and geographic mix, just to be clear on that. And when we are talking about delays, we're not talking about delays that were more than in the 45-day or 60-day range. And typically the delay in the number -- you had to delay -- you didn't have to delay in the number. And it happened really quite sporadically. I want to say it happened in probably two or three different sub-markets. So, I didn't view it as anything that made me feel remarkably different about the way the pricing situation works. The primary people who I've observed pushed to at least see some deferment. If you recall, in the earliest early stages of COVID, homebuilders in some instances were just walking away from subdivisions and taking about a 60-day to 90-day time out. I think in some of those instances, they were really afraid and looking for some just immediate help. And I think some competitors in some instances did that. I think in some instances too, you had some ready mixed concrete producers, who were looking for some lower inputs, frankly, we were not inclined to meet those and we probably lost some modest share in some places. We've certainly done that before in cement. But again, we very much have a value over volume philosophy that we bring to this. So, from our perspective, Anthony, the delays were immaterial. But at the same time, we tried to be resilient this.

Anthony Pettinari -- Citi -- Analyst

Okay, that's very helpful. And you talked about kind of gradual but not precipitous decline in second half demand. And I'm wondering if you could distinguish just directionally between cement, ready mixed and asphalt in terms of where second half volumes might hold up a little bit better or maybe see some incremental pressure just based on what you saw in 2Q and into July?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You know what, I think in many respects, if you look at the commentary that I gave on geography in the prepared remarks, that's probably a pretty fair way to think of it in the second half as well. What's interesting to me, Anthony, is we put up a record first half and a record second quarter. And actually one of the areas that had a tougher quarter was actually our Mid-Atlantic Division, and our Mid-Atlantic Division has both higher average selling prices and higher profitability. So, it tells me that the balance of the business is actually performing extraordinarily well. We see good business right now in Texas. We see good business in Colorado. We see good business in portions of the Central United States. We're seeing I think good solid business in Florida. And we think all of those will persist for the balance of the year. We're actually seeing very good business in cement in Texas right now as well. The first states I was giving you really were more geared toward aggregates. Obviously, the only hot mix business we have is in Colorado. It had a very, very good first half. We think it's going to have a good second half as well. And then, Magnesia Specialties, it's fascinating when we say that business is hitting an air pocket right now. I think that's all it is. We think steel found bottom actually in June. We think it's going to slowly get better. We're not seeing a huge bounce back in Magnesia Specialties in the second half of the year. But even in a challenged first half, it had margins of 37%. So, I think that gives you a pretty good snapshot of aggs, cement, the downstream business and then Mag Specialties as well.

Anthony Pettinari -- Citi -- Analyst

Okay, that's very helpful. I'll turn it over.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Anthony.

Operator

Our next question comes from Jerry Revich with Goldman Sachs.

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

Good morning, everyone.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Good morning, Jerry. How are you?

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

Doing well, thanks. How are you, Ward?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Good. When I tell you you're coming through loud and clear, you really are.

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

Excellent. Well, really nice quarter. And I'm just wondering, can you just expand on the discussion of what went right this quarter? Normal seasonality would have you at about 27% gross margins, and you folks did about 10% better than that. And I appreciate the comments about operating efficiencies. Can you just expand on those? Because volumes were obviously weaker than normal seasonality but margin is stronger. It's just really notable. And I'm just wondering, can you just provide a little bit more context on the drivers of the sequential improvement? And I realize you bridged the year-over-year, but the sequential improvement really stands out to me.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Happy to try to do that. Look, obviously, energy was a piece of that. It wasn't everything but it was a nice piece of it. I think controlling labor was a piece of it. I still think we can do that with greater efficiencies in some place. I do think overall efficiencies, by the way, were a piece of it. And we talked about the fact that we're seeing much higher efficiencies in our cement business all by itself. We've seen nice improvement over time at both Midlothian and Hunter. So, that's certainly going to help.

The other thing that I'll say, Jerry, and I mentioned it in the prepared comments and it's in our release today as well, that this was an extraordinarily safe quarter. And I think safety, and you've heard us speak to that as a core value of this business, drives increased efficiencies and simply makes your business better and makes your people better. And when we're sitting here at half year with total injury incident rates and lost time incident rates both exceeding world-class standards, I think that really speaks to how teams are operating. The other thing that I'll say relative to efficiencies is, we've been very careful with how we've looked at capital allocation and capex over the last several years. I think we're starting to see some of the efficiencies from that as well, which is one reason that we're not at all shy, for example, to take the midpoint of the guidance that we've given relative to capex this year, and as I think you saw, we've taken that up by about $25 million.

So, Jerry, I wish I could point to one thing and say, this is it. I think it was a series of things. And I think when we go back to the notion that our aim is to continue to build an increasingly better business that can go through cycles and outperform in any of those, I think that's what we're seeing. Okay. So it sounds like a number of sustainable pieces are there.

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

Okay, good. And then, in terms of asphalt pricing, paving pricing, concrete, can you just talk about your competitive position in your key markets? And whether with the volume drawdown that you're looking for over the next couple of quarters, what's your degree of confidence in being able to hold the line on pricing in those downstream businesses? Obviously, we know what you're going to do in aggregates. But can you comment on the downstream marketplace?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Sure, I can. If we think about asphalt and paving, Jerry, the nice thing from our perspective is, the only we have that business is in Colorado. And last year, as you recall, Jerry, they had a very weather-impacted year. So, they came into the year with very attractive backlogs. But again, we're seeing very good efficiencies. The asphalt and paving we have is really running from Northern Colorado through Denver, down to Southern Colorado. We've actually seen bidding opportunities accelerated and outpacing here in June after a slow first half relative to bidding activity. What's odd in many respects is, if we're looking out farther, I think generally, we feel better about the business today, for example, than we did even after Q1. So, if we're looking at asphalt pricing, liquid itself is about $420. That's down about 5% per ton. We think liquid is going to remain in that range. We think our bidding opportunities are going to stay attractive. We think we've got a very good business in Colorado. And of course, one of the tricky finished in Colorado is making sure that you're in a position to get good quality specification stone, and we're in a position to self supply with that. So, we feel good about that asphalt and paving business. And of course, it had a very attractive first half.

With respect to ready mixed concrete, yeah, they had a good first half too. The downstream businesses performed really quite well. If you're looking like-for-like volumes, ready mixed was up 8.7%, keeping in mind that's really pulling that ArkLaTex business out. If you're trying to look at it geographically, in Colorado where we have ready mixed, those volumes were up a little bit more than 14%. If we're looking in Texas, which is the other place that we have that particular business, they were up around 6.2%. And again part of what we're seeing is much better efficiencies in that business. Delivery, costs and efficiencies are better. And again, these are not big surprises to us. And we think many of these, to your point, are sustainable as well, Jerry.

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

And Ward, in concrete, do you think you can hold the line on price with the volume outlook that you laid out?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Part of what I think is helping on that is aggregates and cement in those markets. Aggregates and cement in Texas and aggregates in Colorado, which obviously we self supply, are going up. And when you're seeing the input costs, at least in my experience, in ready mixed going up, those tend to be very helpful actually to the downstream businesses, and we're very mindful of that.

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

Okay. Terrific. Thank you.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Jerry.

Operator

Our next question comes from Paul Roger with Exane BNP Paribas.

Paul Roger -- Exane BNP Paribas -- Analyst

Yeah. Hi there. Good afternoon from London, guys. Nice quarter.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Paul.

Paul Roger -- Exane BNP Paribas -- Analyst

Let's just -- yeah, just moving, Ward, on to -- maybe away from the trade and the outlook maybe on to capital allocation. Obviously, Jim mentioned the priorities, which you've talked about before. But you clearly you do have a strong balance sheet. When do you think you could start to deploy some of that again, either by resuming a buyback or maybe by doing some distressed M&A? And what's deal pipeline looking like right now?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Paul, thanks for the question. That's a good one because if you look at our capital allocation priorities, we've long said the right deal is our number one priority. And I'll say several things. One, I think our teams do an extraordinary job on transaction identification. I think they also do an extraordinary job on going through the transaction and looking at where we can get synergies. And then, our operating teams, If you go back and look at whether it's TXI or Bluegrass or the transactions in Colorado or otherwise, have outperformed relative to synergies. That's a long way of saying that we remain very focused on growing our business. When we look at growing our business, we're focused on two things in particular. What is the geography and what are the end-uses? It's an aggregates-led business. But we are keenly focused on the player because the player really dictates how our business is going to perform. And a good example of that is, we've had very good performance in Texas. You also saw very good performance in Colorado. But equally, we're having great performance in the Central, which is pure stone. So, we're seeing great performance all the way across.

Relative to share buybacks and otherwise, I think the primary thing that we're waiting for right now, Paul, is just some modest visibility forward on what's going to happen, particularly with respect to some of these governmental actions. I think we'll have a much better sense very soon of what's going to happen with Phase 4. I think with what happens with Phase 4 is going to give us a much better sense of how the infrastructure piece is going to look. So, I think we're just a couple of pieces of information away from being able to really look more at buybacks and otherwise. But please remember, our primary aim is the right transaction going forward; number two, assuring that we're investing in the business in a responsible way, and you've actually seen us take capex midpoint up $25 million; and then, returning cash to shareholders through two different ways, a meaningful and sustainable dividend, and our Board will obviously look at our dividend in August, so they will be here next month and they will look at that. And then, relative to share buybacks, I think we've touch based on that, Paul.

Paul Roger -- Exane BNP Paribas -- Analyst

And in terms of the deal pipeline, Ward, are you seeing some distressed opportunities come on the radar? Or is it all very quiet for the minute?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

There are not a lot of distressed opportunities per se out there because particularly in the aggregates business, they tend to have pretty healthy balance sheets today. The family businesses are in pretty good shape. Our view has long been that succession tends to be a bigger driver of potential transactions in aggregates than not. So, I don't want to give you a sense that there are people who are in trouble and they're knocking down our doors right now. That would not be accurate. But there are plenty of ordinary, typical and sensible transactions that we are looking at right now, Paul.

Paul Roger -- Exane BNP Paribas -- Analyst

That's great. Thanks a lot.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Phil Ng with Jefferies.

Phil Ng -- Jefferies -- Analyst

Hey, guys. Impressive quarter. Great execution. Ward, I guess, you noted backlog should carry through the near term, but the industry will see some decline in product demand. Can you kind of help parse that commentary a little more? Does that imply that you're expecting the year-over-year decline in the back half to accelerate from 2Q levels? And when you think about 2021, appreciate a lot of moving pieces, especially on the policy front. How are you thinking about '21 playing out on the demand side?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah. Look, as we think about the back half of '20, I think to your point, a lot can hinge on what does Q4 look like frankly from a weather perspective. It's interesting, if we look at our commentary, much of what happened in the first half, was some of that COVID-related? Sure, it was. Was more of that in half one weather-related than COVID? Probably so. If we look at backlogs, it's interesting to me, if we look at Mid-Atlantic customer backlogs, they are actually up around 17%. If we look in Southwest, customer backlogs are up around 30%. If we look in cement, and this is the big one, they're up around 43%. At the same time, if we look at ready mixed, those were down in the low-double digits. But at the same time, we're seeing those backlogs improve in Q3, particularly related to infrastructure. And if we look in the West, we're seeing backlogs down in the low-double digits, off very high backlogs coming into the year because of the way the weather had been last year. So, I think in many respects, we're sensitive to where will states be with their state funding and their revenues as we enter half two. And they're feeling, potentially in some respects, more COVID pressure than they felt so far, number one. Number two, what's going to happen to portions of non-res, meaning particularly what happens to that lighter piece of it. Look, obviously, if we see some stimulus come through, infrastructure is going to be in a pretty good place. But if we look at Q2 with volume down 4%, that to me feels like modest volumes down. That feels like a normal typical cyclical reaction to something. And I think as we're looking at three and we're looking at four, four can obviously weather-affected. But again, I think if we're just looking overall at what's happening in the United States and what's happening globally, for us to put our heads in the sand and say that there is not at least an opportunity for something, that does not at all feel like the cycle did in the Great Recession, not at all, but could feel a bit like this quarter did, particularly as we go into Q3, which last year, as you recall, Phil, was a really big quarter for us. So you've got a tough compare. I think the commentary that you've offered is probably right.

Phil Ng -- Jefferies -- Analyst

Got it. And that's really helpful color. And when you talked about non-res, you obviously framed up some puts and takes. Can you remind us what your exposure is, if you have any, on the high-rise side? And in office, hospitality and retail, that might be a little weaker. And some of the strength that you're seeing on heavy. Is that enough to kind of offset some of those potential headwinds? Thanks a lot, and good luck in the quarter.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Hey, thank you so much, Phil. The fact is, we're a Southeast-Southwest driven business. We're not in downtown Chicago. We're not in downtown Manhattan. So the cities that we are in that are growing tend to grow out. They don't tend as much to grow up, if you know what I mean. And the other thing that I'll say and we said it in the prepared remarks is, we have been very focused on moving our business intentionally over the last decade so that we're more focused on these heavy non-res projects. If we look at the way non-res has held up, it's been in the high 30% of our business. If we look at really what that ought to look like over a longer term, it ought to be closer to 30%. That's where it's been. Infrastructure should be more as a percentage than we've seen over the last several years. Non-res candidly should be modestly less. We think we may see some of that. But equally, as we look at the heavy projects that are really taking up a good bit of our time right now, we're seeing very attractive increasing bidding in that respect. I'm not sure that it totally offsets what the light side of it could be. But I think it's a nice counterbalance to it.

Phil Ng -- Jefferies -- Analyst

Great, thanks. Thanks for the call.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You bet, Phil.

Operator

Our next question comes from Seldon Clarke with Deutsche Bank.

Seldon Clarke -- Deutsche Bank Research -- Analyst

Hey, thanks for the question. I know you referenced 60% incrementals on aggregates gross profit in the past. But given what we did in the second quarter and the divergence between volume and pricing that we're seeing, is there any way to break down decrementals or incrementals as it relates to volume and price and how we should think about cost inflation? Or is there a level where pricing can't necessarily offset volumes where you wouldn't see aggregates gross profit -- gross margin expansion?

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Well, I think theoretically, it's possible. We don't anticipate that to be the case. So, the pricing is one thing we can bank on. We get it every quarter. It's sustainable, and it does flow to the bottom line. So, that's the most powerful weapon in our quiver. And so, we've got that going for us. Additionally, this quarter and for the foreseeable few quarters, we've got lower diesel prices. So, that's going to -- that benefited this year, this quarter. It will benefit next quarter and for the rest of this year, I think. So, those are the things that we're expecting. Otherwise, it's blocking and tackling with watching your variable costs, making sure you're flexing. The theoretical question you're posing, if volumes drop tremendously, of course, fixed costs, the absorption isn't there where you need it to be. And that's where you're running into some headwinds. But we don't see that happening quite frankly.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

In fact, Seldon, one thing just from a color perspective I'll add to that, and I think it's really important to underscore this. The recovery that ended with COVID was not a construction-led recovery. And we've not seen that before in your lifetime or mine. And the fact is, as we look particularly where housing is and what the growth economy is required, we actually see a lot of things that lead us to believe that the post-COVID recovery can and likely should be building-led. The other thing that I'd point out on Jim's commentary that was just entirely correct is, we're seeing nice price with volume down and with energy down. Oftentimes, when we see energy going up, we actually see that as something that helps push ASPs up as well. So, I wanted to make sure that we share that with you.

Seldon Clarke -- Deutsche Bank Research -- Analyst

Okay. That's helpful. And then, just piggybacking on an earlier question on volumes, how should we think about the dispersion on a relative basis across the various product categories for volumes in the back half?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Well, I think primarily, as I mentioned before, cement is being really resilient right now. I think we anticipate ready mix continuing to be quite resilient. I think asphalt is going to have a good year. And the primary thing that we're speaking of in most of our commentary tends to be around aggregates and where that's going to be near term and over the next few quarters. So, that's how I would ask you to think about it right now, Seldon.

Seldon Clarke -- Deutsche Bank Research -- Analyst

Okay. I appreciate it. Thanks.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You bet.

Operator

Our next question comes from Garik Shmois with Loop Capital.

Garik Shmois -- Loop Capital -- Analyst

Great, thanks. Just one more question on aggregates margins in the second half of the year. You're painting a picture of volumes down kind of in this 3% to 4% range, assuming no major kind of change in trend or deceleration in markets. Pricing up low-single digits. It seems like diesel is going to be a tailwind. Is there anything that you can see be -- from a comp perspective or stripping costs or inventories, that could preclude margin expansion in the second half of the year? Or is it really just kind of a function of how do volumes look?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah, I think it's two things, Garik. I think it's one, how do volumes look and where do volumes look, right? And I think part of what you're probably looking at that you are pleased with and I know I'm looking at it and I'm pleased with it, is to see margin expansion despite the fact Mid-Atlantic had volumes down pretty considerably. So, I think part of what I would ask you to keep in mind is Mid-Atlantic, particularly with some of the headwinds that NCDOT has right now, will probably have a more challenged year-over-year volume than other parts of the business. And again, that's a very high margin part of our business. So, what you're seeing is great improvement in other parts of the business. We're seeing DOT in North Carolina putting itself in a position that really as we start getting into next year, it's going to look and feel a lot more normal relative to what history has been. But I do think that geographic mix issue is one that you understand and it's worth noting.

Garik Shmois -- Loop Capital -- Analyst

Great, thank you. Follow-up question is on cement. How much of the cement volume goes into a West Texas oil and gas markets? And the headwind to cement pricing in Texas, is this mostly a function of mix? Or are you seeing more competitive landscape in the West Texas region that's impacting things?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah. Actually that's a great question, Garik [Phonetic], and here's what I would say. We don't send significant volumes to West Texas. Clearly, the biggest volumes that we have will be in DFW and in San Antonio and in those related markets. So, if we go back and look, I want to say, for full year last year, you're probably looking at 30,000 tons to 40,000 tons that would have gone into West Texas. Those would not have been notable numbers. If you look purely at pricing though, here is what's worth noting, ASPs in West Texas are $200. And if we look at really what the numbers looked like in North Texas and Central, we were seeing price increases in the range of around 4%, Garik. So, if you're seeing a 4% price there, you're getting back to the numbers that you would have expected. It's not the $8 going into the year. But if we're looking at overall same on same 4% price up in cement in Texas with down volumes, that's a pretty good number. So, if you look at more profitability, volumes down, price up, actually much better efficiencies -- and the other thing to keep in mind, Garik, is we actually anticipate having less kiln downtime and maintenance spend on kilns this year than we did last year. We think it's probably going to be about $7 million less in '20 than it was in 2019. So, when you really stack up the issues relative to the cement business, we think it's pretty attractive. And Garik, you were there at the time too, you'll remember that one of the things that we thought was possible was to have particular pricing in cement in Texas look over time, at least relative to a stability perspective, more like aggregates pricing did, and I think that's exactly what we saw in this quarter. And as you also know, we've been willing, when we needed to, to give up share in that marketplace to continue to be resilient in pricing. So, if we go back to 2014, we had a 22% share in that market. If we look at it today, based on controller [Phonetic] numbers, we're at about 19%. But pricing is behaving and profitability is going up. Garik, did that help?

Garik Shmois -- Loop Capital -- Analyst

It sure did. Thanks for the help there, and best of luck.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You bet.

Operator

Our next question comes from Adam Thalhimer with Thompson Davis.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Hey, good morning, Ward and team.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Hey, Adam.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Hey, Hayward, how is private demand in North Carolina? Is that helping to offset weak DOT?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah, part of the demand is pretty good. Look, housing is good in the state and it's going to be good in the state. Private non-res is good in the state. It varies by geography. Charlotte is actually having a pretty good year. Raleigh, Durham is having a pretty good year. Greensboro is not having the year that Raleigh, Durham, Chapel Hill is having. It's not having the year that Charlotte is having. And Greensboro is, actually from an ASP perspective, a very attractive market for us. But private is holding up pretty well, in part because jobs have held up reasonably well here, Adam. And look, at the end of the day, you got a lot of people moving to North Carolina, and population is always going to be your single biggest driver of aggregates consumption.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Okay. And then, in Texas, how do your backlogs look in Texas? And the -- Austin, I guess I was a little surprised to see you peel off some aggregates exposure in Austin. Can you talk about that sale?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Actually, we didn't peel off any aggregates exposure in Austin. We sold some businesses called ArkLaTex. And so, the only thing we did in Austin is, we sold a depleted sand and gravel location. So, that was purely an excess property. And that's what Jim was referencing. We entered into a purchase and sale agreement to sell a depleted site for $100 million. So, actually I ought to tell you, from the way we look at that, that's a really nice win. So, we did not get rid of any aggregates that were there.

And again, back to your point, if we're looking at backlogs, and you asked specifically about Texas, Southwest backlogs are up about 30%. And if we look in cement, they're up about 43%. And if we look in ready mix, they are down low-double digits, but actually somewhat recovering right now due to some Q3 bidding activity.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Okay. Thanks, Ward.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Stanley Elliott with Stifel.

Stanley S. Elliott -- Stifel Nicolaus -- Analyst

Hey, good morning, everybody. Thank you all for fitting me in. Ward, when you talk about the infrastructure piece, it sounds like the states are doing better than what we would have guessed, kind of given the initial shock. There are some discussions around the federal government providing monies to states. We're also talking about a CR kind of worst-case scenario being flat. Will that keep infrastructure volumes pretty consistent into next year? Like in the past, we've had CRs just been up and down, up and down and hard to get a gauge. But it just feels different this time around, given all of those things I've mentioned, plus just a general higher level of funding coming in from the state side.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah, I think two things, Stanley. One, I think if you really get some significant Phase 4 stimulus that's anywhere in the zip code of what AASHTO is looking for in that $37 billion, and it's going directly to state DOTs, I think that's actually a really important amount of money that would fill a hole. So, we'll begin with that. I think to your second point, relative to the CR, I think you raised a really good point. And I think part of what happened in the last downturn, and you'll remember it well, Stanley, because you're watching it, the CRs in that ended up oftentimes being very short term. And that's why I made the comment earlier, people shouldn't be surprised if you see out of the box, a long-term CR. And a long-term CR does not mean it's going to be in place for a long term. It's simply done to make sure states continue to know that they can plan longer term as Congress goes about the process of probably having a conference and then coming out with a new infrastructure bill. So I think, to your point, yes, I think this does feel better than last time because I think whatever CR that will go in will be longer. I think whatever highway bill we get out will be larger. And I think one of your swing factors is, what does Phase 4 look like relative to aid to the states. And I think we'll know that in the next -- I think by the end of August, we'll have a pretty good feel for what that's going to look like.

Stanley S. Elliott -- Stifel Nicolaus -- Analyst

Yeah. And I think, I guess, good news is, we haven't seen a whole lot of wholesale project cancellations. But can you talk about how you all and really the rest of the industry have been able to manage inventory levels? How do you feel about them going into the back half of the year? And I think about that kind of in the context of pricing and then as we look out.

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Hey, Stanley, it's Jim. Our inventory levels have been relatively constant, slightly up from a year ago and sequentially from Q1, but no outsized moves there. And so, that's just roughly steady. It's good for steady production levels to offset these shipment levels. So, that's pretty even keeled. There is no shortages in sight. So, everything is quite well balanced at the moment.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

We don't see that affecting -- we don't see that having an effect, good, better, otherwise, on ASP. We think ASP is just always going to behave well.

Stanley S. Elliott -- Stifel Nicolaus -- Analyst

Yeah. No, I agree. I was just trying to make sure that others within this space are as being as diligent as you guys are. So, appreciate the commentary. Talk to you soon.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thanks Stanley.

Operator

Our next question comes from David MacGregor with Longbow Research.

David MacGregor -- Longbow Research -- Analyst

Yeah. Good morning, everyone, and thanks for squeezing me in here.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You bet, David.

David MacGregor -- Longbow Research -- Analyst

Yeah. Ward, congratulations on a strong quarter. 35.5% gross margins with that volume number is fantastic. And I guess, I wanted to explore a little further. Maybe a question was asked earlier, and let me come at it from a slightly different angle. And that is, you talked about infrastructure, non-res and res and what your longer-term target percentages or proportions might be within the business, the mid-40s for the infrastructure and 30% for non-res and so on. I guess the question is, against that type of a proportional mix right now, what would be the variance from that 35.5% gross margin this quarter?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You know what, I don't think you'd see a big movement in that, to tell you the truth, David. The only thing that I think that may be different in that, I think housing might fill a bigger piece of our pie maybe for the foreseeable future than it would have historically. So, if you think about it, David, if we looked at those numbers a decade plus ago, they'd be numbers very similar to what you just said. Probably 45% infrastructure, 30% non-res, probably low-teens residential, and then the rest would be ChemRock and Rail. Yeah, I think res can stay elevated for a while. I think that's actually going to be good for us because I do think, depending on the type of res, that could actually be good for ASPs. And I think the more single-family housing that we see, that's going to be helpful. But again, I think that might help a little bit on the margin side. But overall, I think the margins that you've seen are -- I don't think that was going to be end-use driven.

David MacGregor -- Longbow Research -- Analyst

Okay. Just my second question, I guess, on the pricing. If we were to adjust out Bluegrass' impact from a year ago, what would have -- would your pricing have been this quarter?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

I don't know that we have that per se. One thing that I'm happy to tell you is, we saw pricing in Maryland up around 6.4%. So, if you're looking to glean [Phonetic], are we getting some nice synergies from that in Bluegrass? We are. But I'd really rather not go back and break out what that looks like because it's so integrated into our business, particularly in places like Georgia today. But that gives you a good snapshot of what the Maryland business that really had very little synergy brought together operationally has done relative to pricing.

David MacGregor -- Longbow Research -- Analyst

Right. That makes sense. Well, thanks very much, and good luck.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you so much, David.

Operator

Next question comes from Rohit Seth with SunTrust.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Hey, Ward. Thanks for taking my question. I just noticed, in your CEO commentary, you talked about sort of 2025. And I was just curious, in SOAR 2025, do you have any plans to rebalance the footprint? The footprint performed very well this cycle. [Indecipherable] to acquisitions. But the organic growth was only up in maybe one of the past five years. So just curious, as we think in the context of an infrastructure bill, highway bill -- Texas has clearly had a very good run over the last seven years. How are you think about the portfolio and where the opportunities are?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Yeah. I guess what I would say is this, Rohit. We've got two opportunities. We've got the opportunity to keep doing just what you saw in this quarter, and that is, make the Martin Marietta that we have better. And I think that's what you saw in the quarter from performance perspective. I think the other piece is, we've got quite space on the map that we can continue to move toward. And what I mean by that is, we've talked a lot, weather it was in SOAR 2020 and you'll hear it in SOAR 2025, where people are going is going to be what drives aggregates consumption. And the megaregions across the United States is where people are going to be living. And we've demonstrated that obviously, in an aggregates-led business, we can continue to expand margin. So, part of what I like about the Martin Marietta story is, we've turned this business into one of a great aggregate companies I think in the world. I think it's one of the great building materials companies in the world. We can continue to make it better and we can continue to grow it, and that's something that, if I'm you, I would continue to expect Martin Marietta to do. And I would just say go back and look at SOAR 2020, and we've given you a pretty good road map of places that we would like to grow.

The other thing that I would say relative to rebalancing, when you look at a decade that went from one or two in 65% of our markets at the beginning of the decade to one or two in 90% of our markets by the end of the decade. We've long said we were looking for that leading position in markets that we find attractive. So, we don't feel like in our heritage footprint that there is an enormous amount of work to be done. There is some careful work to be done on occasion. And an example of that would be what we discussed earlier, and that is the sale of the ArkLaTex ready mix business. We didn't find that particularly a great fit for our aggregates-led business in Texas, and so we pruned that. But that's the type of work you should expect on the heritage portfolio and you should expect us to continue to look to grow in new markets where we can find our way to one or two.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

All right. Thanks. That's all I have.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

All right. Thank you, Rohit.

Operator

Our next question comes from Michael Dudas with Vertical Research.

Michael Dudas -- Vertical Research Partners -- Analyst

Good morning [Indecipherable]. Just quickly, Ward, in your prepared remarks, you talked about a -- in early this month, a restructuring internally. Maybe you can share a little more of the construct on that. Is that something toward your SOAR 2025 campaign? And is there just more efficiencies driven by that or different strategies on the pricing or business front? Just how you think through that as you're moving ahead toward your restructuring [Indecipherable]?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Mike, that's a great question. Thank you for it. Yeah, it's funny how timing works. We started talking to our Board literally last August about the restructuring that was announced. That was effective on July 1 of this year. And what we did is, we just -- we skinny [Phonetic] down some of our aggregate divisions. So, what we have now is a Western Division that's run out of Denver. We have a Southwest Division that's run out of Dallas. We have an East Division that's run here in Raleigh. And we have a Central Division that's run out of Indianapolis. And then we have our Magnesia Specialties business as well. So, were retirements a part of that? They were. Were efficiencies a part of that? They were. And is the ability for that structure to endure to give people, whether they're Division Presidents, VP, GM or otherwise, expanded responsibilities and growth in their careers. All of those things helped drive the decision. The nice thing is, a corollary benefit is, you get efficiencies from it. And if -- we were very fortuitous to be in a spot that this is what we were looking to do even in a pre-COVID world, and then COVID comes along. And the very thoughtful planning that we had, to your point, is a part of SOAR 2020 and is a part of SOAR 2025, coalesced very nicely with the timing need, and it simply could not have worked better.

Michael Dudas -- Vertical Research Partners -- Analyst

And just a final follow-up would be, as you're speaking of COVID, have you noticed anything with the lockdowns and restarts in your important states, the tenor, the thought process from your private customers, from the governments of maybe some slowing in the pace of activity or bidding or letting because of some of the fears we seem to hear constantly from the media? Thank you.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Mike, again, thanks for that question. The fact is, as I tried to mention, weather at least for the quarter was probably more impactful than COVID was. But we would be naive to say that there wasn't a COVID effect out there. So was NCDOT feeling some degree of duress pre-COVID? Sure, they were. Are they feeling a little bit more post COVID? Yeah, they are. And so, has that affected volumes with that particular department? It has. Has it affected some other DOTs in modest rates to be sure? It has. It's clearly affected some private businesses too. It's tough to wholly quantify exactly what that is. But I do think people have recognized how to live and how to work with this. Part of what's been interesting to me is, we've operated all the way through this as an essential business. In our nearly 9,000 employee count, we've had about 90 positive cases, the vast majority of which have gone home, recovered at home and come back to work. And we have only had literally a handful of what we've been able to identify as employee to employee COVID spread cases. So, I think businesses, governments and others have learned how to work with this. It's clearly had an effect. It's going to have an effect for a period of time. I think the actual field effect will become less, not more. And we'll have to watch and see what the physical effects are and how governmental stimulus works.

Michael Dudas -- Vertical Research Partners -- Analyst

That's encouraging. Thank you.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Mike.

Operator

Our next question comes from Zane Karimi with D.A. Davidson.

Zane Karimi -- D.A. Davidson & Co. -- Analyst

Hey, good morning or afternoon, and hope everyone is healthy and well.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Thank you, Zane.

Zane Karimi -- D.A. Davidson & Co. -- Analyst

So first off, on the cement side of things, Do you have any commentary around the timing of planned maintenance expenses for cement this year, as well as any thoughts around a potential for another cement price increase?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Well, what I would say is, cement price increases will come out again next year. So, our intention is to come out typically once a year and put the price increases. And so, there shouldn't be any more on price increases this year. If we're looking at what cadence is going to be, right now, we're forecasting probably about $3.5 million or $3.6 million worth of outage costs. So, these are outage costs, and I think that's what you're asking about, in Q3. We're looking at probably around $0.5 million of those in Q4. And if you tally what we did in Q1 and Q2, that means our total kiln outage costs for the year will be in the zip code of around $19.5 million, and that's about $6.9 million less than we saw in 2019.

Zane Karimi -- D.A. Davidson & Co. -- Analyst

Okay, thank you. And then, also on SOAR 2025, are you guys thinking about providing some more specific parameters of financial aspirations related to that this fiscal year?

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

The short answer is, yeah, we will. But we've got one important step that we need to do before we do them. That is, we need to present it to our Board of Directors, and that's exactly what management is going to do when the Board is here next month or here in just a few weeks. And I'm sure, as we come out later in the year and early next year, we can give you a much clearer picture of what our goals and intentions are under SOAR 2025.

Zane Karimi -- D.A. Davidson & Co. -- Analyst

Appreciate it. Thank you, guys.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

You bet, Zane.

Operator

And I'm not showing any further questions at this time.

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

Well, thank you for joining our second quarter 2020 earnings conference call. With our steadfast commitment to safety, cost discipline and operational excellence, Martin Marietta has the right strategic priorities and best-in-class teams to responsibly navigate through these challenging times and drive sustainable long-term growth and shareholder value. We're moving forward with confidence and determination. We look forward to discussing our third quarter 2020 results in just a few months. As always, we're available for any follow-up questions. Thank you again for your time and your continued support of Martin Marietta. Please stay safe and healthy.

Operator

[Operator Closing Remarks]

Duration: 82 minutes

Call participants:

Suzanne Osberg -- Vice President, Investor Relations

C. Howard Nye -- Chairman of the Board, President and Chief Executive Officer

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Trey Grooms -- Stephens Inc. -- Analyst

Kathryn Thompson -- Thompson Research Group. -- Analyst

Anthony Pettinari -- Citi -- Analyst

Jerry Revich -- Goldman Sachs & Company, Inc. -- Analyst

Paul Roger -- Exane BNP Paribas -- Analyst

Phil Ng -- Jefferies -- Analyst

Seldon Clarke -- Deutsche Bank Research -- Analyst

Garik Shmois -- Loop Capital -- Analyst

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Stanley S. Elliott -- Stifel Nicolaus -- Analyst

David MacGregor -- Longbow Research -- Analyst

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Michael Dudas -- Vertical Research Partners -- Analyst

Zane Karimi -- D.A. Davidson & Co. -- Analyst

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