SAZUN BLOG
February 5, 2020

Industry Insight Building Materials

“Welcome to our new Construction Materials Insight, giving you a birds-eye market view especially from an M&A perspective. Consolidation is actively pursued and key drivers include, among others, improved supply chains and the need for growth in a sector where organic growth has become challenging to achieve.”

 

 

Market Size

Global Industry Split
by Geography (%)

Global Forecast 2018 – 2023
by Geography (USD b)

Europe Industry Split
by Segment (%)

  • Asia Pacific accounts for almost 80% of the world’s construction materials. The Chinese and Indian industries have mainly contributed to this growth, as well as other Asian developing economies characterized by rapidly growing urbanization and rising income.
  • Markets across Europe have been supported by demand from residential construction activities. The improving macroeconomic environment, especially in Spain and Russia, has increased spending on infrastructure.
  • Cement and aggregates are the most valuable segments for the market, especially as basic materials for concrete, mortar etc.; as a result, those two materials are the most important for any kind of construction around the world.

Major Trends

Due to high M&A activity, the market has been further consolidated resulting in increasing company sizes and rising complexity of many players. In contrast, industry leaders typically concentrate on high-demand markets, thereby creating opportunities for smaller players, allowing them to serve niche and lower-demand markets.

European markets tend towards multifamily houses which require fewer materials per unit. Also some changes in materials used can be observed – such as stronger growth in flat roof components than in tiles.

Sustainable production requires new processes as complexity increases because of the regulation of carbon-emissions trading. Companies are under pressure to integrate circular-economy thinking into building materials production in order to compensate for the waste generated in construction and demolition.

Digitalization has reached the construction materials industry, which is still among the least digitized industries in the modern world. New operational tools offer management better options to evaluate performance and control processes.

Sources: Market Line (2019), S&P Global Ratings (2018); Sazun Research

Key Performance Indicators

EV/EBITDA (NTM)

EV/Sales (NTM)

  • The Peer Group consists of internationally-listed companies throughout the construction materials sector, differing in product portfolio, size and relative competitive advantage in order to present a comprehensive picture.
  • EV/EBITDA (NTM) multiples stay within a stable range of 6.5x to 8.5x EBITDA and leveled at 7.3x EBITDA by the end of 2019. For EV/Sales (NTM) multiples we observe a similar stable picture, indicating a steady market outlook.
  • The construction-materials sector presents interesting M&A opportunities due to its high profitability combined with moderate levels of indebtedness and attractive growth rates.

Sources: Infront Analytics

Selected Transactions

Want to know more?
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If you would like to learn more about the valuations and deals of your industry, the transaction mentioned above or generally our way of working, we would certainly be happy to demonstrate our m&a PLUS® principle in a confidential meeting.
Just get in touch and we will share our experience on how to grow businesses with long-lasting partnerships.

With passion for M&A,
Your SAZUN Team