Building Products & Materials Group Overview
Introduction
Harris Williams is pleased to present our Building Products and Materials Industry Update for January 2019. This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global building products and materials industry.
We hope you find this edition helpful and encourage you to contact us directly if you would like to discuss our perspective on current industry trends and M&A opportunities or our relevant industry experience.
Building Products
Distribution & Services
Construction Materials
What We’re Reading
Single-Family Starts Drop in November as Builders Face Affordability Concerns1
National Association of Home Builders 12/18/2018
Rising housing affordability issues continue to hinder single-family production even as total housing starts increased in November. According to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department, overall housing starts rose 3.2% in November to a seasonally adjusted annual rate of 1.3 million units from a downwardly revised October reading. Year-to-date, new housing starts are 5.1% above their level over the same period last year.
“The decline in single-family production over the last few months makes sense given the drop in our builder confidence index,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Builders are cautious to add inventory as housing affordability concerns are causing consumers to pause on making a home purchase.”
Read the full article here.
Confidence Index Holding Steady, Despite Challenges Ahead2
Construction Dive 12/18/2018
Once again, the fourth-quarter Commercial Construction Index, conducted by USG Corp. and the U.S. Chamber of Commerce, found that contractor optimism and backlogs are high. But so are the challenges contractors face, as evidenced by seven straight quarters during which they’ve expressed concern about a still-tight labor pool. Rising material costs, as well as some other industry headwinds, are still a concern in the market.
Confidence was up two points from the third-quarter CCI to 76, with more contractors expecting new business opportunities to develop in the next 12 months. The number of contractors who expect to do some hiring in the next six months was up 4.0% quarter over quarter to 60.0%.
Read the full article here.
New Construction Starts in November Slip 7 Percent3
Associated Builders and Contractors 12/11/2018
Construction materials prices fell 1.8% in November, according to Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics data released today. Despite the monthly decline, materials prices are still 5.3% higher than they were on a year-over-year basis.
Nonresidential construction input prices fell 1.7% for the month and are up 5.8% compared to the same time last year. Prices declined in five of 11 subcategories, with crude petroleum (down 29.5%) and unprocessed energy materials (down 11.5%) experiencing the largest decreases. Only natural gas recorded a substantial increase in price: up 15.0% from October.
Read the full article here.
Price of Construction Materials Declines in November4
Associated Builders and Contractors 12/11/2018
Construction materials prices fell 1.8% in November, according to Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics data released today. Despite the monthly decline, materials prices are still 5.3% higher than they were on a year-over-year basis.
Nonresidential construction input prices fell 1.7% for the month and are up 5.8% compared to the same time last year. Prices declined in five of 11 subcategories, with crude petroleum (down 29.5%) and unprocessed energy materials (down 11.5%) experiencing the largest decreases. Only natural gas recorded a substantial increase in price: up 15.0% from October.
Read the full article here.
Apartment Construction Drives November Home Building5
The Wall Street Journal 12/18/2018
U.S. housing starts rose in November, reflecting a large climb in apartment building that masked weakness in single-family home construction. Housing starts increased 3.2% in November from the prior month to a seasonally adjusted annual rate of 1.256 million, the Commerce Department said Tuesday. Residential building permits, which can signal how much construction is in the pipeline, grew 5.0% from October to an annual pace of 1.328 million last month.
Danielle Hale, chief economist for realtor.com, said the strength in the multifamily sector points to factors preventing renters from becoming homeowners, such as rising prices and student loan burdens. Developers are likely building more rental properties as single-family demand faces headwinds.
Read the full article here.
Public Markets6
*Calculated as (EBITDA – Capex) / EBITDA
Public Comparables6
Building Products
As of December 31, 2018
Building Products Distributors
As of December 31, 2018
Construction Materials
As of December 31, 2018
Relevant Transactions6
Representative Building Products & Materials Transactions
1. NAHB
2. Construction Dive
3. Dodge Data & Analytics
4. Associated Builders & Contractors
5. The Wall Street Journal
6. FactSet
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