Construction Materials

Key Trends in the Sector

The 2022 operating year really began in November 2021 with the passage of the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), which will fund public works projects through 2026. Construction material producers and suppliers continued to see strong demand, despite increasing inflation and other economic challenges. Most U.S. construction materials producers turned in excellent financial performance in 2022. Inflation remains high throughout the materials supply chain. While absorbing double-digit increases in costs, strong demand allowed companies to recover these costs through higher pricing.

Moving into 2023, the outlook is mixed. Residential construction is paring back as home sales have fallen dramatically since the third quarter of 2022 due to higher interest rates. Infrastructure spending remains elevated in the wake of IIJA. State highway trust funds are also in excellent shape, though some states have temporarily scaled back their quantities in response to the number of bids coming in above engineers’ estimates. Nonresidential building construction remains strong, though some larger projects are being delayed due to financing challenges and hopes that the massive increases in construction costs will moderate later in the year.

Mergers and acquisitions activity is continuing at a strong pace, roughly on par with deal flow in 2022. Privately held regional producers are outpacing their publicly traded counterparts in the number of transactions completed. Notable large deals over the past year include SRM Concrete’s acquisition of the former U.S. Concrete ready-mix assets in New York City, northern New Jersey and Philadelphia from Vulcan Materials (Nov. 2022); Vulcan acquiring Syar Industries in northern California (Aug. 2022); CRH acquiring Hinkle Contracting in Kentucky from Summit Materials (May 2022); Eagle Materials acquiring Varra Cos. on the Colorado Front Range (Apr. 2022); and Martin Marietta divesting to CalPortland most of the California cement and ready-mix plants that were among the assets it acquired from Lehigh Hanson in May 2021.

A distinctive feature of the materials industry is that due to the limited transportation radius of most products, the markets are fundamentally local. Vertical integration also varies widely between geographies. To be successful, business plans must be built on a solid understanding of these dynamics, with intelligent, local market strategies rolling into a broader corporate strategy.

How We Help
 

Our construction materials team brings deep sector expertise and unparalleled knowledge of local construction materials markets in North America.

• Strategic Planning and Performance Improvement: FMI’s construction materials team has worked across North America with producers of cement, aggregates, ready-mixed concrete, concrete products, liquid asphalt, hot-mixed asphalt, lime and industrial minerals. From family-owned businesses to multinationals, we bring our wealth of experience to your specific situation to make you a stronger, better managed, more focused and more profitable company. We’ll help you develop a thoughtful strategic plan, complete with a tactical implementation process that ensures your plan doesn’t sit on the shelf and gather dust.


• Market Research: Whether you need help evaluating a local market for a pending acquisition or are seeking to expand your company’s presence in a particular geographic region, FMI’s materials research team has unparalleled capabilities, combining data and street intel to forecast future demand in a local market, pinpoint and assess key supply-side issues, and identify potential sellers or joint venture partners that can provide a platform entry into a new market or help you grow in an existing one.


• Feasibility Studies: In today’s restrictive permitting environment, building a new plant or opening a new avenue of distribution requires a significant investment of time and capital. Before making that investment, bring your proposition to FMI. Our experts will study the market while maintaining your confidentiality and give you the vital information you need to make the right decision.


• Market Perception Surveys: Our surveys and focus interviews of existing and potential customers provide deep insight into how the market perceives your company and your competitors, enabling you to capitalize on your company’s strengths and correct its weaknesses.


• Succession Planning and Ownership Transition: We can help you navigate the challenging process of transitioning your business to the next generation. If you’re positioning your company for eventual sale to a third party, we can help you build a plan to maximize the exit value.


• Investment Banking: Our team of expert bankers can help with mergers and acquisitions.

Benefits

• Gain a thorough understanding of the market before acquiring or starting a greenfield project in a new geography.
• Learn how your company compares to best practices in the materials industry.
• Build a solid strategic plan based on a deep understanding of the market.
• Successfully transition your business to the next generation.