Building Products & Materials Group Overview

Introduction

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

Building Products

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Distribution & Services

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Construction Materials 

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What We’re Reading

ABC’s Construction Backlog Indicator Contracts in April1

Associated Builders & Contractors  6/18/2019

"Associated Builders and Contractors reported today that its Construction Backlog Indicator fell to 8.7 months in April 2019, down 0.8 months or 9.0% since March, when CBI stood at 9.5 months.

“Given the ongoing expressions of confidence regarding near-term prospects in the U.S. nonresidential construction industry, the reduction in backlog observed in April shouldn’t be cause for alarm—especially with construction backlog significantly higher than at the onset of 2019,” said ABC Chief Economist Anirban Basu.

“The backlog decline in April was due to the commercial/institutional category,” said Basu. “This can be attributed to construction spending trends, which show that growth in certain commercial segments is not nearly as robust as in prior years."

Read the full article here.

Construction Industry Confidence Makes a Comeback in Q2 Report2

Construction Dive  6/19/2019

Reported project backlogs reached record highs in the Q2 report as contractors realized increased confidence in their ability to secure new work during the next twelve month period.

Contractors participating in the survey reported a 10.3 month backlog, up 0.6 months from the first quarter. Over 50.0% of contractors in the latest report are confident that the next year will provide sufficient business opportunities, with that number increasing to more than 70.0% for those businesses earning more than $100 million in revenue. Moreover, 30.0% of respondents expected increased profit margins over the next twelve months, driven partially by a decrease in competition.

Read the full article here.

US New Home Sales Drop for Second Straight Month3

Reuters  6/25/2019

New home sales fell unexpectedly by 7.8% in May. Economists had previously forecasted a rise in new home sales of 1.9%, or 680,000 units. The housing market decline has hurt economic growth over the last five quarters and remains sluggish despite low mortgage rates and lower median prices. New home sales tend to be relatively volatile month-to-month, and the possibility of lower future mortgage rates due to rate cuts from the federal reserve may have an impact throughout the remainder of 2019.

Read the full article here.

The Offsite Tipping Point: What's Holding Builders Back?4

Builder Online  6/30/2019

Modular construction’s time may have finally come. Labor and housing shortages predict how this construction method can become pervasive throughout the world. A McKinsey & Co. study conducted years ago found that construction consistently lags broad manufacturing industry sectors.

One very practical solution may be offsite construction, which can lead to 20.0% cost savings if implemented correctly or 10.0% cost increases if logistics and materials costs aren’t addressed early in the transition. The rest of the world’s builders have began to adapt to this trend, and many industry participants will need to make major changes in order to resist competition.

Read the full article here.

Housing Starts Relatively Flat Off of Strength in Multifamily Sector5

NAHB  6/18/2019

"Total housing starts declined 0.9% in May to a seasonally adjusted annual rate of 1.27 million units from an upwardly revised reading in April, according to a report from the U.S. Housing and Urban Development and Commerce Department.

The May reading of 1.27 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts fell 6.4% to 820,000 units. The multifamily sector, which includes apartment buildings and condos, increased 10.9% to a 449,000 pace."

Read the full article here.

Public Markets6

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screen_shot_2019-07-26_at_12.27.06_pm.png*Calculated as (EBITDA – Capex) / EBITDA

Public Comparables6

Building Products

As of June 30, 2019

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Building Products Distributors

As of June 30, 2019

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Construction Materials

As of June 30, 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. Construction Dive

3. Reuters

4. Builder Online

5. NAHB

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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