Fourth Quarter 2017 Market Report


In this quarterly report, prepared exclusively for Rock Products, Capstone Headwaters provides insight into merger & acquisitions (M&A), capital markets trends, aggregate production and pricing through Q4 2017.

Capstone Headwaters Building Products and Construction Services Team advises industry business owners, entrepreneurs, executives and investors in the areas of merger and acquisitions, capital raising and various special situations advisory. Due to our background and laser focus within the industry, Capstone Headwaters is uniquely qualified and has an unparalleled track record of successfully representing Building Products and Construction companies.




Figure 1 includes the constituents of Capstone Headwaters Aggregates Materials Index as of 12/31/2017. Average EBITDA multiples increased from 12.6x at 9/30/17 to 12.9x at year-end.

Our Aggregates Materials Index delivered a total return of 4.1% in 2017, substantially lagging the S&P 500 and DJIA total returns of 21.8% and 25.1%, respectively.


Preliminary estimates of total acquisition activity (Figure 3) in Q4 2017 demonstrate a decrease of 39.6% compared to the same period in 2016 in terms of the number of aggregates related transactions completed (29) in the U.S. and Canada. Conversely, transaction activity was up 16% compared to Q3 2017. It is common for transaction activity to accelerate in Q4 as many acquirers want to close prior to year-end. Publicly traded aggregates producers were notably active during the quarter including U.S. Concrete, CRH plc and Vulcan Materials.

Figure3Private Equity Transaction Activity & Valuations

GF Data Resources, a provider of detailed information on business transactions ranging in size from $10 million to $250 mil- lion, provides quarterly data from over 201 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 increasing to record levels during the quarter.



Cemex S.A.B. de C.V.

CemexOwnership: Publicly Traded (Ticker: CX) Headquarters: San Pedro Garza García, Mexico Markets: Construction Materials
FY 2017 Revenue: $13.7 Billion


Company Description:

Cemex experienced an increase of 4% in consolidated net sales for Q4 and a 3% increase for the full year 2017. The increase in sales is mainly attributable to higher product prices. But, despite the increase in sales, operating EBITDA on a like-to-like basis decreased by 6% for the year.

Fernando A. Gonzalez, Chief Executive Officer said, “Although 2017 was a challenging year, our two largest markets, Mexico and the United States, performed well with like-to-like increases in their EBITDA. We also generated free cash flow after maintenance capex of close to US$1.3 billion, with a 50% EBITDA-to-free-cash-flow conversion rate and which, together with our asset-divestment initiatives, resulted in pro-forma debt reduction of close to US$2.1 billion during the year. We had important headwinds during the year: underperformance in Columbia, Egypt and the Philippines as well as increased energy costs, mainly in Mexico. As we have done in the past, we focused on the variables we control to dampen these headwinds and we continued to deliver solid results.”

In the U.S., volume for Cemex’s three core products (domestic gray cement, ready-mix, aggregates) increased during Q4 on a like-to-like basis, despite notable precipitation and the aftermath of the hurricane in Florida. A great deal of the increase was due to accelerated activity in single-family construction and improvements. Cemex also reported an increase in the industrial- and-commercial sector, boosting total operating EBITDA in the U.S. on a like-to-like basis by 9%.1

HeidelbergCement Group

HeidelbergOwnership: Publicly Traded (Ticker: HEI.DE) Headquarters: Heidelberg, Germany Markets: Construction Materials
FY 2017 Revenue: $17.3 billion



Company Description:

HeidelbergCement completed a record year in 2017 with double digit growth in sales volume for cement (22.3%), aggregates (12.2%) and ready-mixed concrete (11%). Asphalt volume growth lagged but still outpaced 2016 with growth of 2.8%. Much of this growth was driven by the consolidation of Italcementi beginning on July 1, 2016. In 2016, Italcementi contributed to sales volumes, revenue and results only in the second half of the year, in 2017, for the full year. On a like-for-like basis, volume increased across the board but at a slower pace.

“We successfully completed the year 2017 despite a very challenging market environment and achieved our operational earnings target,” said Dr. Bernd Scheifele, Chairman of the Managing Board. “The challenges were numerous: energy cost inflation, increased competition in emerging markets, especially in Indonesia, uncertainties following the Brexit decision and bad weather, especially in the USA. Nevertheless, we were able to increase our result from current operations as guided. The consistent focus on efficiency and margin improvement and the successful integration of Italcementi that led to higher than expected synergies contributed to this success. Overall, 2017 was a record year for sales volumes, revenue and result from current operations.”

In 2017 HeidelbergCement finalized the acquisition of Cemex’s Pacific Northwest Materials Business consisting of aggregate, asphalt and ready mixed concrete operations in Oregon and Washington for a purchase price of approximately $150 million.2

Notable Transaction

Vulcan USAVulcan Materials Company acquired Aggregates USA (December 29, 2017)

Vulcan Materials Company has acquired Aggregates USA for $900 million. The transaction closed in late December and is expected to grow Vulcan’s market share in the Southeast.

The acquisition includes three granite quarries in Georgia and 16 rail distribution yards in Georgia, South Carolina, and Florida. Pursuant to its previously planned and announced agreement with the United States Department of Justice, Vulcan has divested certain former holdings of Aggregates USA, LLC relating to its operations in Tennessee and Virginia to Blue Water Industries LLC, for a sales price of $290 million. Aggregates USA, LLC produces construction aggregates including sand, gravel, limestone, and granite.


Construction input prices decreased slightly in December and are up 5.5% on a year-over-year basis, according to an Associated Builders and Contractors (ABC) analysis of data recently released by the US Bureau of Labor Statistics.

“Given stronger global and domestic economic growth, elevated liquidity in international financial markets, burgeoning trade disputes and efforts by certain energy producers to limit supply growth even as prices rise, one would have expected a sharper increase in construction materials prices in December,” said ABC Chief Economist Anirban Basu. “The fact that inflation remains contained should be viewed by most contractors as very good news. Not only are many contractors vulnerable to sudden increases in certain materials prices, but faster inflation can trigger higher interest rates, which ultimately reduce the demand for construction services.”3



Industry results in Q4 2017 showed increases in volume compared to the same period in 2016 for cement (3.3%), sand and gravel (9.9%) and crushed stone (3.7%). Ready-mix concrete volume increased 2.4% year-over-year in 2017.






Information for this report courtesy of Capstone Headwaters []. For more information contact:

Darin Good, managing director, 303-549-5674
[email protected]

Brian Krehbiel, senior vice president, 303-531-5008
[email protected]

Crista Gilmore, vice president, 303-531-5013
[email protected]


1. Cemex 2017 Fourth Quarter Results,, accessed March 7, 2018.
2. HeidelbergCement reports preliminary figures for Q4 and the full year 2017, 02-2018, accessed March 9, 2018.
3. Associated Builders and Contractors, Inc.,, accessed March 9, 2018.
4. US Geological Survey,, accessed March 15, 2018.


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