Building Products & Materials Group Overview

Introduction

Harris Williams is pleased to present our Building Products & Materials Industry Update for February 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

Construcction Materials

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

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What We’re Reading

Nonresidential Construction Employment Up in December1

The American Surveyor  1/10/2020

The construction industry added 20,000 net new jobs during the final month of the year. On a year-over-year basis, employment has expanded by 151,000 jobs in the industry, an increase of 2.0%. All three major nonresidential segments experienced job gains, including nonresidential specialty trade contractors, nonresidential building, and heavy and civil engineering.

While this was another positive jobs report, the results were slightly below consensus estimates, and wage growth on a year-over-year basis was softer than expected. The primary challenge in today’s market continues to be the search for high-quality workers, especially as many nonresidential contractors seek to increase staffing levels over the next few months.

Read the full article here.

Monthly Construction Input Prices Rise Slightly in December2

Associated Builders & Contractors  1/15/2020

Construction input prices finished the year up 1.0% after rising 0.2% in December. Contractors should expect continued gradual price increases as the global economy continues to firm and demand for materials in the U.S. remains elevated.

“While input costs appear to be stabilizing after declining for much of the past two years, contractors face little risk of a spike in prices,” said ABC Chief Economist Anirban Basu. “This is especially true with respect to energy prices, which continue to remain stable even in the context of geopolitical turbulence. U.S. energy production continues to trend higher, helping to support historically low prices, especially for natural gas.”

Read the full article here.

U.S. New Home Sales Drop for Third Straight Month in December3

Reuters  1/27/2020

U.S. single-family home sales fell unexpectedly in December, likely driven by a shortage of affordable homes. Sales in the South also dropped to more than a one-year low.

Economists had originally predicted new home sales would increase 1.5% in December. These sales tend to be volatile month-to-month; however, the market continues to be supported by low mortgage rates. Overall new home sales increased 10.3% to 681,000 units in  2019, the highest level since 2007.

Read the full article here.

Builder Confidence in the 55+ Housing Market Drops Slightly4

National Association of Home Builders  1/30/2020

Builder confidence in the single-family 55+ market dropped four points to 68 in the last quarter of 2019, according to the NAHB 55+ Housing Market Index (HMI).

“Overall, builder and developer sentiment in the 55+ housing market remains positive,” said Harry Miller III, chairman of NAHB’s 55+ Housing Industry Council and president of Regal Builders LLC in Dover, Delaware. “However, development costs and lack of labor are contributing to affordability concerns and preventing even more robust growth in the market.”

Read the full article here.

Dodge Report: Modular and Prefabricated Construction Boosts Quality and Client Satisfaction, Reduces Costs5

Construction Dive  1/31/2020

The majority of respondents in a recent Dodge Data & Analytics study said modular building and prefabricated single-trade assemblies improve productivity, quality, and scheduling compared to traditional construction. Additionally, they have seen higher cost predictability, greater client satisfaction, and reduced waste.

“The lack of adequate housing and the shortage of skilled labor, coupled with chronic cost and schedule overruns, are leading more people toward this process,” said Tom Hardiman, executive director of the Modular Building Institute, in a statement about the survey. 

Read the full article here.

Public Markets6

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*Calculated as (EBITDA – Capex) / EBITDA

Public Comparables6

Building Products

As of January 31, 2020

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Building Products Distributors

As of January 31, 2020

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Construction Materials

As of January 31, 2020

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Relevant Transactions7

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Representative Building Products & Materials Transactions

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1. The American Surveyor

2. Associated Builders & Contractors

3. Reuters

4. National Association of Home Builders

5. Construction Dive

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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