Building Products & Materials Group Overview

Introduction

Harris Williams is pleased to present our Building Products & Materials Industry Update for April 2020. 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

U.S. Construction Spending Increases to Record High1

CNBC  3/2/2020

U.S. construction spending increased 1.8% (6.8% YoY) to a record high of $1.37 trillion, the highest increase in nearly two years. This positive news, however, has been overshadowed by the recent market turmoil and fast-spreading fear surrounding the coronavirus. 

Residential construction has been supported by low mortgage rates and a recent surge in homebuilding spending. Investment in public construction projects also increased 2.6% in January, driven by an increase in outlays on federal government construction projects of nearly 10% as well as a small uptick in state and local government projects.

Read the full article here.

Monthly Construction Input Prices Drop in February2

Associated Builders and Contractors  3/12/2020

Construction input prices fell 0.6% in February yet are up slightly on a year-over-year basis according to the U.S. Bureau of Labor Statistic’s Producer Price Index.

“If concerns regarding rising materials prices had been subdued, they are virtually nonexistent now,” ABC Chief Economist Anirban Basu said. “While there may be anecdotal shortages of certain inputs as the global supply chain buckles, in the aggregate, materials prices are set to decline. The global economy is either in or approaching a period of recession, which is helping to drive down the price of oil, natural gas and other key inputs. With a growing number of companies temporarily shuttering factories, demand for other key inputs like steel will also be suppressed.”

Read the full article here.

Construction Contractor Confidence Robust to Start 2020, Says ABC3

Construction Citizen  3/23/2020

According to ABC’s Construction Confidence Index, confidence amongst U.S. construction leaders improved in January. However, with recent developments relating to the coronavirus pandemic, much has changed since January. 

“At this moment, business confidence in America is ratcheting lower as travel, hospitality, entertainment and other segments of the economy are rocked by COVID-19. Interruptions to the global supply chain, a crash in oil prices and other phenomena are also putting more pressure on significant parts of the economy, which is likely already in recession. The good news is that preexisting backlog, as indicated by ABC’s Construction Backlog Indicator, insulates many contractors from near-term dislocations,”  ABC Chief Economist AnirbanBasu said.

Read the full article here.

Sales Data Shows Housing on Strong Footing Prior to Virus Concerns4

National Association of Home Builders  3/24/2020

Following a sharp upward revision in January, sales of newly built single-family homes fell 4.4% to a seasonally adjusted rate of 765,000 units. That number represents a 14.3% increase from the year prior, and the January and February figures denote the highest sales pace since July 2007. 

This pace will most likely slow over the coming months, given the impact of COVID-19; however, the industry may draw on this momentum and help lead the economy during the eventual recovery period.

Read the full article here.

The CARES Act is a Critical Lifeline for Construction Industry, Small Business Community, Says ABC5

The American Surveyor  3/27/2020

The government recently passed the Coronavirus Aid, Relief, and Economic Security Act, which is aimed to mitigate the negative impact to the economy during the pandemic.

ABC’s VP of Legislative and Political Affairs Kristen Swearingen believes, “The CARES Act provides a critical lifeline for our nation’s construction companies as they work hard to maintain their businesses, keep employees on payroll and provide paid leave and essential health benefits to those affected by the coronavirus. As the majority of the U.S. construction sector is made up of small businesses, the nearly $350 billion for small business loans will help ensure that many of our construction businesses are able to weather this storm.”

Read the full article here.

Public Markets6

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*Calculated as (EBITDA – Capex) / EBITDA

Public Comparables6

Building Products

As of March 31, 2020

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Building Products Distributors

As of March 31, 2020

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Construction Materials

As of March 31, 2020

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Relevant Transactions7

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Representative Building Products & Materials Transactions

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1. CNBC

2. Associated Builders and Contractors

3. Construction Citizen

4. National Association of Home Builders

5. The American Surveyor

6. Capital IQ

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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