Pit & Quarry, December 2016
MARKET INSIGHTS anything but finalized FMI expects several transactions to follow in the wake of these deals as larger companies come to grips with new production capacity distribution routes and changing competitive pressures As we have discussed in prior articles the LafargeHolcim merger and the Heidelberg Italcementi merger have driven more than two dozen cement plants to new or merged owners in the United States Also in the third quarter Cemex agreed to sell its Fairborn Ohio cement plant and a terminal in Columbus Ohio to Eagle Materials for about 400 million The Cemex deal is the companys second in the U S over the past six months conducted in an effort to cut its debt by more than 3 billion over the next two years In October the company announced it was considering the sale of its 23 percent stake in Grupo Cementos de Chihuahua SAB GCC and in May the company announced a sale of its Odessa Texas cement plant two cement terminals and a building materials business to GCC Both the Cemex and Heidelberg transactions are driven by longstanding trends within the global materials market In the mid 2000s many international firms dramatically expanded through the use of debt and were subsequently challenged when the financial crisis struck in 2008 Debt fueled expansion coupled with recession is anything but a recipe for success and large international players have spent the years following the recession reworking their balance sheets and executing large mergers that have eliminated redundant overhead costs and maximized other synergies PUBLIC COMPANY PERFORMANCE While larger international players have focused their efforts on right sizing their balance sheets and executing megadeals FMIs Construction Materials Index CMI companies with a U S focus have performed exceptionally well Since the first quarter of 2013 the U S CMI companies have seen average aggregate revenue growth of about 28 percent annually while aggregate earnings before interest taxes depreciations and amortization EBITDA has improved by an average of 69 percent annually Martin Marietta and Vulcan Materials have been the largest contributors to this trend but Summit Materials U S Concrete Eagle Materials and Granite Construction have all generated strong Figure 2 U S CMI Companies Consolidated 2500 2000 1500 1000 500 0 Q1 2012 LTM EBITDA Performance Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 In Millions of USD Vulcan Materials Co Eagle Materials Inc Granite Construction Inc Martin Marietta Materials Inc Summit Materials Inc U S Concrete Inc Source Capital IQ FMI 48 PIT QUARRY December 2016 pitandquarry com
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