Building Products & Materials Group Overview

Introduction

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

screen_shot_2019-05-08_at_5.23.15_pm.png

What We’re Reading

Construction Input Prices Increase for the Second Straight Month1

Associated Builders & Contractors  4/11/2019

"Construction input prices rose 1.7% in March on a monthly basis, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics data released today. On a year-over-year basis, construction input prices are up 2.5%, and following a stretch of four consecutive months of input price decreases, March was the second straight month prices have risen in the aggregate. Inputs to nonresidential construction also increased 1.7% on a monthly basis and are up 3.2% compared to one year ago."

Read the full article here.

U.S. New-Home Sales Rose in March2

The Wall Street Journal  4/23/2019

"Purchases of new homes in the U.S. increased in March, driven by sales gains in most parts of the nation. Purchases of newly built single-family homes—a relatively narrow slice of all U.S. home sales—rose 4.5% to a seasonally adjusted annual rate of 692,000 in March, the Commerce Department said Tuesday. Economists surveyed by The Wall Street Journal had expected a 2.5% decline. Sales were up 3.0% in March from the prior year. The pace of new-home sales remains well below the elevated levels seen before the 2007-09 financial crisis and recession.

All U.S. regions but the Northeast saw new-home sales gains last month, with purchases in the South reaching the highest level in more than a decade. In the broader housing market, inventory has been tight, driving a run-up in home prices and keeping some potential buyers out of the market. Meantime, construction-labor shortages and rising input costs are pushing up the overall cost of buying new homes, though prices fell last month."

Read the full article here.

Housing Starts Fall to Slowest Pace Since 2017 Led by Flood-Ravaged Midwest3

Housing Wire  4/19/2019

"Housing starts in March fell to the slowest pace in almost two years, according to a report from the Department of Housing and Urban Development and the Department of Commerce. Residential starts slumped 0.3% to a 1.139 million annualized pace after a downwardly revised 1.142 million rate in the prior month, according to the report. The decrease was led by single-family starts while multifamily starts, a category including condominiums and apartments that tends to be more volatile, remained unchanged from the prior month. Permits, an indicator of future construction, fell 1.7% to a 1.27 million rate."

Read the full article here.

Builder Confidence Edges Higher in April4

National Association of Home Builders  4/16/2019

"Builder confidence in the market for newly-built single-family homes rose one point to 63 in April, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the low 60s for the past three months.

“Builders report solid demand for new single-family homes but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn."

Read the full article here.

Below-Average Remodeling Growth Expected by 20205

LBM Journal  4/18/2019

"Annual gains in improvement and repair spending on the owner-occupied housing stock are projected to continue decelerating through early next year, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA forecasts that year-over-year growth in homeowner remodeling expenditure will slow from about 7.0% today to 2.6% by the first quarter of 2020.

"Cooling house price gains, home sales activity, and remodeling permitting are lowering our expectations for home improvement and repair spending this year and next," says Chris Herbert, managing director of the Joint Center for Housing Studies. "Yet, more favorable mortgage rates could still give a boost to home sales and refinancing this spring and summer, which could help buoy remodeling activity.""

Read the full article here.

Public Markets6

screen_shot_2019-05-08_at_5.27.42_pm.png

Public Comparables6

screen_shot_2019-05-08_at_5.29.08_pm.png

screen_shot_2019-05-08_at_5.29.35_pm.png

screen_shot_2019-05-08_at_5.29.56_pm.png

*Calculated as (EBITDA – Capex) / EBITDA

Relevant Transactions7

picture1_297.png

picture1_298.png

picture1_299.png

Representative Building Products & Materials Transactions

screen_shot_2019-05-08_at_5.34.39_pm.png

1. Associated Builders & Contractors

2. The Wall Street Journal

3. Housing Wire

4. National Association of Home Builders

5. LBM Journal

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.

Harris Williams LLC is a registered broker-dealer and member of FINRA and SIPC. Harris Williams & Co. Ltd is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. Corporate Finance Advisors GmbH is registered in the commercial register of the local court of Frankfurt am Main, Germany, under HRB 107540. The registered address is Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany (email address: hwgermany@harriswilliams.com). Geschäftsführer/Directors: Jeffery H. Perkins, Paul Poggi. (VAT No. awaited). Harris Williams is a trade name under which Harris Williams LLC, Harris Williams & Co. Ltd and Harris Williams & Co. Corporate Finance Advisors GmbH conduct business.