Pit & Quarry, January 2018

DEERE CO COMPLETES ACQUISITION OF WIRTGEN GROUP D eere Co completed its acquisition of the Wirtgen Group a worldwide manufacturer of road construction equipment The Wirtgen Group has a global footprint with about 8200 employees and sells products in more than 100 countries According to Deere Co the Wirtgen Groups product portfolio is complementary AGGREGATE FORECAST By David Chereb TAX CUTS WOULD IMPROVE INDUSTRYS OUTLOOK B ecause of the new lower taxes and the extra incentives for business expansion and investment the near term outlook is much improved Aggregate demand should go up by 130 million metric tons in 2018 compared to not having a tax cut Unfortunately the passage of the tax bill makes a large infrastructure bill less likely Worries about increasing the deficit will probably make the size of the infrastructure package smaller Even so 2018 and 2019 will now be growth years with GDP growth approaching 4 percent per year for both years One aspect of capitalism that is often underappreciated is the power of incentives Lower taxes less regulation and a business friendly government attitude are strong pro growth drivers They work alongside demographic and innovation changes to raise the potential GDP growth rate of a nation UPDATE to its existing construction equipment The Wirtgen Group provides equipment for a range of construction applications including milling processing mixing pacing compaction and rehabilitation The Wirtgen Group will enhance the size scale and stature of our construction Most of the improved growth comes from higher infrastructure spending Faster GDP growth adds to tax receipts at all levels of government Since the prior three years have also been good tax receipt years it will translate into substantial gains in infrastructure spending at all levels of government at Deere Co The acquisition aligns with Deere Co s long term strategy to expand both in agriculture and construction Allen adds We expect infrastructure demand for aggregate to grow by 18 percent between 2017 and the end of 2019 The nonbuilding component accounts for all the growth in aggregate demand over the next two years Private building aggregate demand will be flat as it has already grown by substantial amounts over equipment business and will help Deere continue its global growth says Samuel Allen chairman and chief executive officer Dr David Chereb has many years of experience forecasting construction materials and his webbased forecasting models have captured every major turning point in materials demand for more than 15 years Chereb received his Ph D in economics from the University of Southern California He can be reached at david chereb@ sc marketanalytics com the past four years Now we are at full employment and wages inflation and interest rates will all begin to increase modestly With housing prices near record levels and mortgage rates about to increase the pool of qualified buyers will be flat For nonresidential demand the low gains in employment and the slowdown in retail investment along with higher financing costs will also result in flat demand over the next two years Total aggregate demand will increase by 38 percent in 2018 and 24 percent in 2019 Our baseline now assumes a new tax reduction bill will be implemented in January 2018 If it is not passed or it is delayed until 2019 our prior lower baseline applies 2015 2016 2017 2018 2019 265 255 245 235 225 215 No Tax Cut Baseline Billion metric tons U S Aggregate Demand Using New Higher Baseline Scenario DCG Inc U S Aggregate Forecast billions of metric tons 2013 2014 2015 2016 2017est 2018est 2019est RESIDENTIAL 039 048 052 058 060 056 058 NON RESIDENTIAL 060 065 069 072 075 076 073 NON BUILDING 106 106 105 104 105 117 124 TOTAL 205 219 226 234 240 249 255 Yr Yr Ch 15 68 32 35 26 38 24 54 PIT QUARRY January 2018 pitandquarry com