Building Products & Materials Group Overview

Introduction

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

Homebuilder Sentiment Jumps to Record High, but Soaring Lumber Prices Could Dampen Momentum1

CNBC  8/17/2020

Builders are feeling better about the newly built, single-family housing market than they have at any time in over the past 20 years, with the National Association of Home Builders / Wells Fargo Housing Market Index rising 6 points to 78 in August. The index sits at its highest level in the 35-year history of the monthly series and matches a record high set back in December of 1998.

A new focus on housing coupled with low interest rates has fueled this recent demand. The index has quickly recovered from its COVID low of 30 in April; however, rising lumber prices remain a legitimate concern that could stall momentum.

Read the full article here.

U.S. Home Construction Surges 22.6%, Third Monthly Increase2

AP News  8/18/2020

The Commerce Department reported that new homes were started at an annual pace of nearly 1.5 million in July, a surge of 22.6% from the prior month and well ahead of economists’ expectations. Housing starts have now climbed for three consecutive months after plunging at the onset of the pandemic.

“U.S. housing starts blew the roof off of expectations in July ... these are the kind of gains seen after storms/hurricanes,” Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research note.

Read the full article here.

Home Prices Continued to Rise in June, Case-Shiller Index Finds – As Americans Face a Growing Affordability Crunch3

Market Watch  8/25/2020

Home price appreciation continued at a steady rate in June with the S&P CoreLogic Case-Shiller 20-City Price Index rising 3.5% YoY. A separate national index released indicated a gain of 4.3% YoY.

Record low interest rates are not only boosting demand for homes but are also driving higher home prices. Since June, home price growth has only increased as buyers’ desire to own a home has clashed with a historically low supply of homes.

Read the full article here.

July Sales of New Homes Surge 13.9%, Far More than Thought4

ABC News  8/25/2020

Sales of new homes increased 13.9% in July as the housing market remained resilient. The Commerce Department reported that July’s gains spiked new home sales to a seasonally adjusted annual rate of 901,000. Additionally, the National Association of Realtors reported that sales of existing homes rose by a record 24.7% in July.

Mortgage rates dropped below 3% for a 30-year fixed mortgage for the first time in nearly 50 years. These historically low rates and changes in home preferences brought on by the pandemic help support future sales gains as well.

Read the full article here.

Severe Lumber Shortage is Adding $14,000 to the Cost of a New Home5

Fortune  8/31/2020

State lockdowns due to the COVID-19 pandemic caused sawmills across the nation to close, while consumers increasingly focused on home renovations and DIY projects. This mismatch in supply and demand has sent lumber prices soaring, increasing 134% on a YoY basis. “This is a severe lumber shortage. … Demand is hot and continues to be strong. In the next month or two it’s going to continue to be elevated,” said Dustin Jalbert, senior economist at Fastmarkets RISI.

Around 40% of all lumber goes to home repair and renovations. The shortage could continue for months to come.

Read the full article here.

Public Markets6

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*Calculated as (EBITDA – Capex) / EBITDA

Public Comparables6

Building Products

As of August 31, 2020

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Building Products Distributors

As of August 31, 2020

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Construction Materials

As of August 31, 2020

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Relevant Transactions7

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Representative Building Products & Materials Transactions

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1. CNBC

2. AP News

3. Market Watch

4. ABC News

5. Fortune

6. Capital IQ

7. Mergermarket