Building Products & Materials Update - April 2019

Introduction

Harris Williams is pleased to present our Building Products and Materials Industry Update for April 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.

Our Practice

Harris Williams is a leading advisor to the building products and materials industry. Our significant experience covers a broad range of end markets, industries, and business models. 

Building Products

  • Building Envelope
  • Cabinets and Countertops
  • Decking and Siding
  • Drywall and Ceiling Tiles
  • Flooring
  • HVAC and Electrical
  • Insulation
  • Lighting
  • Lumber
  • Plumbing Fixtures
  • PVF and Water Management
  • Roofing
  • Tools and Hardware
  • Windows and Doors

Distribution & Services 

  • Architectural and Engineering
  • Contracting
  • Distribution
  • Infrastructure Services
  • Installation
  • Site Development

Construction Materials

  • Aggregates
  • Asphalt
  • Brick
  • Concrete (Precast / Ready-Mix)
  • Glass
  • Industrial Minerals
  • Metals
  • Stone

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What We’re Reading

Construction Input Prices Rise for First Time Since October

Associated Builders & Contractors   3/13/2019

"According to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics data released today, construction input prices rose 0.9% monthly in February and 1.8% in the past 12 months. Inputs to nonresidential construction were up 1.0% on a monthly basis and 2.7% on a yearly basis. This is the first time that input prices have risen on a monthly basis since October 2018, when prices increased by 0.5%.

Of the 11 construction subcategories, seven experienced price declines for the month, with the largest decreases in natural gas (-25.8%) and unprocessed energy materials (-10.7%). The largest monthly increases in prices were seen in softwood lumber (+4.8%) and crude petroleum (+2.6%)."

Read the full article here.

Home Building, New-Home Permits Have Softened This Year

The Wall Street Journal   3/26/2019

"A gauge of home construction and queued up projects declined in February and are pulling back this year overall, with a slew of factors, including the government shutdown and housing affordability, potentially impacting the data. So-called housing starts fell 8.7% in February from the prior month, the Commerce Department said Tuesday. This largely reversed solid gains seen in January. Meanwhile, residential building permits, which can signal how much construction is in the pipeline, dropped 1.6% in February after declining in January too. Taken together, the two gauges signal construction and authorized building projects are hiccuping at the start of the year."

Read the full article here.

Labor Will Be Contractors' Top Challenge in 20193

ForConstructionPros.com   3/18/2019

"Building material prices topped the list of problems builders faced in 2018, but cost and availability of labor is expected to return to the number one spot in 2019, according to special questions on the January survey for the NAHB/Wells Fargo Housing Market Index. The survey results showed that material prices were a significant issue for 87.0% of builders last year. In 2019, however, “only” 69.0% of the builders expect them to continue being a problem. The second most widespread problem in 2018 was cost/availability of Labor cited by 82.0% of builders. Unlike building materials, the share of builders expecting cost and availability of labor to be a problem this year is the same as share reporting it a problem last year, making labor shortages the most widespread challenge builders expect to face in 2019."

Read the full article here.

Builder Confidence Holds Steady in March4

National Association of Home Builders   3/18/2019

"Builder confidence in the market for newly-built single-family homes held steady at 62 in March, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. 'Builders report the market is stabilizing following the slowdown at the end of 2018 and they anticipate a solid spring home buying season,' said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

'In a healthy sign for the housing market, more builders are saying that lower price points are selling well, and this was reflected in the government’s new home sales report released last week,' said NAHB Chief Economist Robert Dietz. 'Increased inventory of affordably priced homes – in markets where government policies support such construction - will enable more entry-level buyers to enter the market.'”

Read the full article here.

Are You a Homeowner? Here's How Much Richer You Are Now5

CNBC   3/8/2019

"Strong demand for housing last year kept home prices surging, and that means more homeowners are now sitting on more cash in the form of home equity. Collectively, homeowners with mortgages saw their equity increase by just over 8 percent in 2018, according to CoreLogic. That is from a combination of home value gains and borrowers paying down their mortgages. It adds up to roughly $678 billion in additional wealth over the last year — or about $9,700 per homeowner. Rising equity usually fuels the remodeling market, as people tap that extra cash to do home remodels or upgrades. Home remodeling was very strong last year, not just because of rising equity, but because homebuilders are putting up fewer homes, meaning more people are staying in older homes longer and repairing or upgrading."

Read the full article here.

Public Markets6

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Public Comparables6

Building Products

As of March 31, 2019

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Building Products Distributors

As of March 31, 2019

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Construction Materials

As of March 31, 2019

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Relevant Transactions7

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Representative Building Products & Materials Transactions

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1. Associated Builders & Contractors

2. The Wall Street Journal

3. ForConstructionPros.com

4. National Association of Home Builders

5. CNBC

6. FactSet

7. Mergermarket

 

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.

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