Building Products & Materials Group Overview

Introduction

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

Optimism High Amid Uncertainty1

Construction Dive  8/26/2019

The June 2019 Contractor Confidence Index (CCI) report found that the confidence level amongst nonresidential contractors has fallen slightly from May to June, yet most construction companies remain optimistic about the future.

The ongoing trade war, geopolitical concerns, and uncertain economic indicators have given some a reason to believe a recession is on the horizon. However, the surveys reveal that contractor project backlogs remain extremely high, and these contractors continue to remain confident in their ability to win new work. The lack of skilled labor in the contractor market has partly driven this outcome, maintaining a balance between labor supply and market demand.

Read the full article here.

U.S. Housing Starts Drop for Third Straight Month2

CNBC  8/16/2019

U.S. homebuilding fell for the third straight month, driven primarily by a steep decline in multi-family housing unit construction. Housing starts were down 4% to an annual rate of 1.191 million as of last month. This is well below the 1.257 unit projection of economists polled by Reuters. Despite lower mortgage rates, the housing market has been constrained by both land and labor shortages.

Building permits, however, did surge 8.4% in July, their largest jump in over a year, to 1.336 units. Moreover, the potential for future rate cuts from the Federal Reserve provides additional hope for the struggling housing market.

Read the full article here.

July Construction Unemployment Rates Remain Low, Though Not as Low as a Year Ago3

Associated Builders & Contractors  8/28/2019

In July, construction unemployment rates rose nationally in 38 states, fell in eight, and remained unchanged in four on a year-over-year basis. All 50 states posted construction unemployment rates below 10% for the third consecutive month. The industry employed 201,000 more workers nationally compared to a year ago, despite a rise in the unemployment rate from 3.4% to 3.8%.

“In July, most of the East experienced above-average temperatures, making outdoor construction more difficult,” said Bernard M. Markstein, Ph.D., president and chief economist of Markstein Advisors, who conducted the analysis. “At the same time, major parts of the Midwest, particularly around the Mississippi and Missouri rivers, had above-average rainfall, which hampered construction.”

Read the full article here.

Construction Input Prices Rebound in July4

The American Surveyor  8/9/2019

Construction input prices expanded 0.8% in July but are still down 0.6% year-over-year. Much of the decline can be attributed to plummeting energy prices, such as crude petroleum, natural gas, and unprocessed energy materials.

Absent of any major geopolitical conflagration, economist Anirban Basu believes materials prices are poised to continued to drift lower in the coming months as the pace of global growth subsides.

Read the full article here.

General Contractors are Suffering Under Trump’s New Tariffs on Chinese Goods5

The Real Deal  8/14/2019

President Trump ordered an increase in tariffs from 10 to 25 percent on $200B in Chinese imports in May. The National Association of Home Builders estimates that the goods impacted by these tariffs include more than 400 items commonly used in the construction industry.

Although some of these tariffs have recently been delayed or eliminated, the ongoing trade dispute has created higher materials costs and uncertainty surrounding existing contracts. Moreover, contract renegotiation remains difficult due to the lack of uncertainty on both sides and the inability to put an exact value on the impact of these tariffs.

Read the full article here.

Public Markets6

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*Calculated as (EBITDA – Capex) / EBITDA

Public Comparables6

Building Products

As of August 31, 2019

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Building Products Distributors

As of August 31, 2019

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Construction Materials

As of August 31, 2019

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Relevant Transactions7

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Representative Building Products & Materials Transactions

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1. Construction Dive

2. CNBC

3. Associated Builders & Contractors

4. The American Surveyor

5. The Real Deal

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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