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Retiring aggregates CEO looks back on rockiest year in career

Steve Zelnak, 65, became president of Martin Marietta Corp.’s aggregates division 27 years ago and led it through its spinoff and initial public offering as Martin Marietta Materials Inc. in 1994. The Raleigh-based company is among the nation’s three largest producers of construction aggregates — including crushed stone, sand and gravel. Zelnak hands over the CEO title to Ward Nye, 47, this month but will continue as executive chairman. Next summer, he’ll become nonexecutive chairman.

Can you put the past year into context?

This downturn is the most severe, in terms of percentage of volume decline, since the 1930s. When I came into the business in the early ’80s, that was the most severe downturn since the 1930s, and we’ve gone deeper this time.

You’ve stayed profitable — netting $176 million last year and $57 million in the third quarter — despite declining sales. How?

We began to pull in our cost structure in late 2006, a good year before most players in our industry. We pulled in discretionary expense. We reduced hours. We cut personnel, and we’ve been doing that steadily ever since. In December 2005, we had 5,757 employees. In September 2009, we had 4,643. We’ve never had to reduce employment like this, but those are the times we’re in, so we have to make the moves that keep us profitable.

Overall, your costs don’t seem to have changed much.

Some are freight-related, which are not controllable in the same way. It just depends on which customers were shipping. Our mix tilted toward higher costs simply because of the freight that was embedded in it. Also, we had a big spike in energy costs.

What parts of your business suffered most?

We’ve taken the toughest hit in the Southeast, in the Carolinas and Georgia. With the decline in housing and industrial/commercial construction and also problems the states had with their transportation budgets, we’ve seen very sharp retrenchment.

Where have you been strongest?

The farm belt in the Midwest. That economy has been much steadier. We had a record third-quarter profit there. Volume was down, but we did a good job on our costs.

Alternative-energy projects helped you?

Wind farms have played a major role for us. Iowa has become the second-largest wind-farm state in the country. We’re the largest producer in Iowa, so we’re a big beneficiary. Texas is the largest wind-farm state, and we’re a big player there. We saw some pullback on wind-farm projects, but with the stimulus money that is targeted toward alternative energy, we’re seeing some of those projects come forward again. We’re confident that wind-farm work is going to be robust over the next five to 10 years.

What about residential construction?

As we go into 2010 we’re going to see some pickup in residential, but it’s coming off a very low level.

What are some of the major problems your customers face?

They are very pressured. They’ve had to lay off large numbers of people. The ready-mix concrete industry has been hurt badly with home building and industrial/commercial pulling back. The asphalt producers have been hurt badly by the pullback in road construction, maintenance and repair — even with the stimulus money, which hasn’t come out as fast as we thought it would. But probably two-thirds of the stimulus money ought to hit in 2010, so that will be helpful.

2010 will be better than 2009?

We expect all of our demand sectors to be up — other than nonresidential, which is industrial/commercial construction primarily. That will be down.

Travelers like Raleigh-Durham International’s cheap fares. But RDU is nowhere as big as Atlanta’s airport — one reason the Triangle will lose 425 jobs, probably by mid-2010. Sony Ericsson Mobile Communications AB, a joint venture of Japanese electronics giant Sony and Swedish mobile-phone maker Ericsson, is moving its North American headquarters from Research Triangle Park and making the Georgia capital, where it employs 18, its base for both Americas — part of a consolidation that will cut 20% of its 10,000 employees worldwide. In addition to having all those international flights, Atlanta is home of AT&T, one of the wireless-telephone maker’s biggest customers.

CLAYTONTalecris Biotherapeutics, which makes medicine from blood plasma, plans to spend $268.7 million to expand its plant and add 259 jobs in seven years. The Research Triangle Park-based company employs more than 1,800 at the plant. The new jobs will pay an average of $51,066 a year.

SANFORDPfizer will lay off 100 researchers at the former Wyeth plant here late this year. The New York-based drug maker began consolidating research-and-development operations after it bought Madison, N.J.-based Wyeth in October. About 900 workers remain at the factory. Pfizer also will close a 70-employee lab in Morrisville.

DURHAM Cree, which makes light-emitting diodes, plans to expand production in China. The company purchased a factory in Huizhou but hasn’t said how many will work there. About half of its 3,500 employees are in China. It has about 1,775 at its headquarters here and plans to add 300 jobs locally by the end of 2012.

MORRISVILLECharles & Colvard, which makes moissanite gemstones, hired Randy N. McCullough, 56, as CEO — its fifth in 18 months. McCullough was chairman and CEO of Austin, Texas-based retailer Samuels Jewelers.

LOUISBURG — Israel’s Palziv will spend $7.8 million to open a factory and North American headquarters here in June. Salaries for the 72 jobs will average $34,167 a year. The plant will make foam for a variety of uses.