Capstone Headwaters Aggregate Industry Market Report

In This Exclusive Analysis Prepared ForRock Products, Capstone Headwaters Looks At Current Market Trends Such As Mergers And Acquisitions, Aggregate Production And Pricing.

It has been a busy quarter for the nation’s aggregates producers. Figure 1 includes the constituents of Headwaters Aggregates Materials Index as of 9/30/2017.

Public Valuation Commentary
  • Average trailing 12 months (TTM) EBITDA margins decreased from 19.8 percent to 19.7 percent from the prior quarter while average EBITDA multiples were largely flat over the same period.
  • TTM EBITDA margins remained relatively flat or declined for all constituents of the Headwaters Aggregates Materials index in Q3 except Summit Materials which increased 80 basis points from 20.3 percent to 21.1 percent.

Aggregates Performance

2017 YTD Total Returns (Figure 2):

  • Aggregate Materials Index – (5.8) percent.
  • S&P 500 – 20.5 percent.
  • Dow Jones Industrial Average – 22.8 percent.

During Q3 2017, tax reform has taken the focus in Washington and few updates on the $1 trillion Trump infrastructure plan have been given this quarter. Trump has promised to unveil details of the plan after Congress passes an overhaul of the tax code.

Select Merger and Acquisition Activity

Preliminary estimates of total acquisition activity (Figure 3) in Q3 2017 demonstrate a decrease of 13.8 percent compared to the same period in 2016 in terms of the number of aggregates related transactions completed (25) in the U.S. and Canada. Conversely, transaction activity was down 32.4 percent compared to Q2 2017 but generally several transactions are identified and added before figures are finalized which will result in less, but still significant, overall decline. Publicly traded aggregates producers were notably active during the quarter including U.S. Concrete, CRH plc and Summit Materials.

Private Equity Transaction Activity and Valuations

GF Data Resources, a provider of detailed information on business transactions ranging in size from $10 million to $250 million, provides quarterly data from over 200 private equity firm contributors on the number of completed transactions. Figure 4 provides the number of completed transactions from GF Data contributors, the average Total Enterprise Value (TEV)/EBITDA multiple and the average amount of debt utilized in the transaction computed as a multiple of EBITDA. The data, although not industry specific, shows valuations and debt levels increasing to record levels during the quarter.

Figure 4: Private Equity Valuations & Leverage

All Transactions

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

# of Transactions




















Total Debt/EBITDA










Senior Debt/EBITDA










Source: GF Data Resources

Company Spotlight

Image result for u.s. concrete logo

U.S. Concrete Q3 2017 results reflected new quarterly highs for both revenue and Adjusted EBITDA. Revenue from the company’s largest division, ready-mixed concrete increased 8.6 percent compared to the same quarter in 2016. Despite three significant hurricanes and one of the wettest summers on record in Texas, the company’s strength as a market leader were validated by Q3 performance.

William Sandbrook, president and CEO, said, “Our market strategy continues to prove successful and has enabled us to achieve our 27th straight quarter of year-over-year revenue growth and 26th straight quarter of ready-mixed concrete pricing growth. We remain very optimistic for the future as the economic fundamentals across all of our markets continue to indicate a very positive outlook. Our ready-mixed concrete backlog has grown 7.7 percent since the beginning of the year and we are optimistic about the growth prospects in our markets with construction spending expected to outpace the national average for the next 12-18 months in the San Francisco Bay area, the Dallas-Ft. Worth metroplex and the five boroughs of New York City.”

At the end of Q3 2017, U.S. Concrete announced the acquisition of Polaris Materials, an aggregate supplier in the Western U.S. At the beginning of Q4 2017, U.S. Concrete announced two acquisitions in Northern California and one in Philadelphia to expand its ready-mixed concrete operations.

CRH plc reports on a semi-annual basis and reported interim results in August 2017. The company is 2 percent ahead of 2016 sales, 5 percent ahead of 2016 EBITDA, and 29 percent ahead of 2016 EPS.

During the first half of 2017, CRH spent approximately $720 million on 13 acquisitions. Eleven of the acquisitions were in the Americas, eight of which were bolt-on acquisitions including one of the largest privately held aggregate producers in the U.S., Mulzer Crushed Stone Inc., an operator of six quarries, five sand and gravel operations, 14 aggregates yards, four ready-mixed concrete plants and three asphalt plants.

In August 2017, CRH divested Beacon Roofing Supply for total consideration of $2.63 billion in line with the company’s strategy to divest the Americas distribution business. The company quickly redeployed the capital for the purchase of Ash Grove Cement Co. in September 2017.

Transaction Spotlight

CRH plc and Ash Grove Cement Co. announced that they have entered into a definitive agreement under which CRH will acquire Ash Grove for $3.5 billion. The transaction is expected to close in late 2017 or early 2018.

Ash Grove is the fifth largest cement manufacturer in the U.S. and operates eight cement plants located throughout the Midwest, Texas and the Western U.S. Additionally, Ash Grove operates 52 ready-mixed concrete plants, 25 sand and gravel plants, 20 limestone quarries, and nine packaged products plants.

CRH and Ash Grove have maintained a four-decade long business relationship, and CRH represents Ash Grove’s largest customer. This acquisition further boosts CRH’s dominance in concrete and aggregates in the U.S and the deal has significant potential for realized synergies.

Construction Materials

Construction input prices remained unchanged in October and are up 4.3 percent on a year-over-year basis, according to an Associated Builders and Contractors (ABC) analysis of data recently released by the U.S. Bureau of Labor Statistics.

“The construction industry benefited from a one-month reprieve in materials price increases in October, based on today’s release. The fact that materials prices have stabilized should be viewed as good news to the U.S. construction industry,” said ABC Chief Economist Anirban Basu. “Most stakeholders agree that labor costs will continue to rise as America hurtles toward full employment. Significant increases in materials prices would further squeeze construction firms’ profits margins, or alternatively would make it less likely that planned construction projects would move forward.”


Sources: U.S. Geological Survey, Average of Vulcan Materials, Martin Marietta and Eagle Materials average net selling price
Aggregates Materials

Industry results in Q3 2017 showed slight increases in volume compared to the same period in 2016 for cement (1.6 percent) and sand & gravel (2.7 percent) while crushed stone volume was down 1.3 percent. Asphalt prices continued to increase in Q3 and climbed 4.5 percent compared to Q3 2016 prices.


Sources: U.S. Geological Survey, Average of Vulcan Materials, Martin Marietta and Eagle Materials average net selling price
  • Portland cement consumption (23.6 million metric tons [Mt]) increased by 1.6 percent in Q3 2017 compared to 2016.
  • The average net selling price per ton for Vulcan Materials, Martin Marietta and Eagle Materials in Q2 was $107.00, an increase of 0.4 percent over the prior quarter and a 5.4 percent increase over the same period in 2016.
  • YTD volume (63.2 Mt) through Q3 was up 1.6 percent over 2016.

Sources: NRMCA Industry Data Survey, Average RMC selling price of U.S. Concrete, Vulcan Materials, Martin Marietta Materials & Eagle Materials
Ready-Mix Concrete (RMC)
  • RMC prices increased 2.1 percent in Q3 2017 and were up 4.6 percent when compared to Q3 2016. Price data is computed from the average RMC net selling prices of U.S. Concrete, Vulcan Materials, Martin Marietta and Eagle Materials.
  • Ready-mix concrete volume is not tracked on a quarterly basis.

Sources: EAPA Asphalt in Figures, NAPA, Vulcan Materials & Martin Marietta Materials average of net asphalt selling prices
  • Asphalt prices increased 2.5 percent in Q3 2017 as measured by the average net asphalt selling prices of Vulcan Materials and Martin Marietta. This is the second consecutive quarter that asphalt prices have increased following a string of declines in five of the past six quarters prior to that.
  • Asphalt volume is not tracked on a quarterly basis.

Source: U.S. Geological Survey
Crushed Stone
  • An estimated 387 Mt of crushed stone was produced and shipped for consumption in the U.S. in Q3 2017.
  • YTD volume (1,013 Mt) through Q3 2017 was down 1.9 percent from 2016 but quarterly volume increased 6.0 percent compared to Q2 2017.

Source: U.S. Geological Survey
Sand and Gravel
  • Sand and gravel production in Q3 2017 was flat compared Q3 2016 and YTD volume of 673 Mt is 1.0 percent lower compared to 2016.

Capstone Headwaters is an independent, middle market investment banking firm providing strategic merger and acquisition advice, capital raising and special situations advisory. To discuss any information contained in this report, contact the Headwaters MB team: Darin Good, managing director,[email protected], 303-549-5674; Brian Krehbiel, senior vice president,[email protected], 303-531-5008.

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