By Brian Krehbiel

GreatLakesAggregates 700x400In Q1 2016, average valuation multiples for the publicly traded aggregates industry declined 4.3 percent and average EBITDA margins during the period increased from 16.7 percent to 17.4 percent compared to Q4 2015 (Figure 1, includes the constituents of Headwaters Aggregates Materials Index). Year-over-year, valuation multiples increased by 4.7 percent while EBITDA margins widened to 17.4 percent from 16.8 percent. The publicly traded aggregates industry as a whole was trading at an average EBITDA multiple of 13.4x at the end of Q1 2016. However, the median multiple of 11.5x is the more relevant valuation metric for Q1 due to lackluster post-merger performance from LafargeHolcim that resulted in an inflated EBITDA multiple (36.2x) and skewed the averages upward.

FT Figure1

Source: S&P Capital IQ
Aggregate Materials Index - Company Spotlight

International and domestic aggregates providers experienced growth in revenue and margins in Q1 2016.

FT HeidelbergHeidelberg Cement reported impressive Q1 2016 results compared to the same period in 2015 including North American volume increases for cement (13.8 percent), aggregates (17.2 percent) and ready mix concrete (3.1 percent) while asphalt volume decreased 9.1 percent. Price increases were successfully implemented in all key markets in both the United States and Canada during the quarter. In Q1, Heidelberg acquired Rocla Quarry Products, an operator of 12 sand pits in Australia, for €98 million. And, in anticipation of funding the upcoming Italcementi acquisition, Heidelberg issued €1 billion of 7 year fixed coupon (2.25 percent) bonds on March 30, 2016.

FT EagleMaterialsEagle Materials recently reported results for its fiscal Q4 ended March 31, 2016. Cement revenues for Q4, including joint venture and intersegment revenues, totaled $100.1 million, a 10 percent increase. Cement sales volumes for the quarter were 879,000 tons, 6 percent higher than the same period last year. Concrete and aggregates revenue increased 37 percent compared to the prior year. Additionally, in Texas, increased demand for construction grade cement continues to offset much of the impact from lower oil well cement demand. During Q4, Eagle Materials repurchased 1 million shares of its common stock.

Select Merger and Acquisition Activity

Acquisition activity continued in Q1 2016 as aggregate producers acquired mineral reserves and completed strategic acquisitions to increase vertical integration and geographic expansion (Figure 2). Summit Materials, Martin Marietta, U.S. Concrete and Oldcastle were a few of the active consolidators during the quarter.

FT Figure2

Source: S&P Capital IQ
Private Equity Transaction Activity & 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 more than 200 private-equity firm contributors on the number of completed transactions. Figure 3 provides the number of completed transactions from GF Data contributors, the average EBITDA multiple and the average amount of debt utilized in the transaction computed as a multiple of EBITDA. The data, although not industry specific, does show valuations consistent with prior periods but the number of transactions were down substantially from the prior quarter.

Figure 3: Private Equity Valuations & Leverage
All Transactions Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
# of Transactions 65 54 44 66 42
TEV/EBITDA 7.0x 6.3x 7.0x 6.6x 6.7x
Total Debt/EBITDA 4.0x 3.9x 4.0x 3.9x 4.1x
Senior Debt/EBITDA 3.3x 2.9x 3.1x 2.7x 2.7x
Source: GF Data Resources         
Aggregates Performance

In 2016, publicly traded aggregates producers are outperforming the S&P 500 and the Dow Jones Industrial Average (DJIA) (Figure 4) with a greater than 10 percent return YTD. As seasonal construction picks up steam the gap between aggregate producer returns and the general market have widened. This trend is expected to continue through 2016 given the current robust construction cycle underway.

FT Figure4

Industry Spotlight

The Dodge Momentum Index (Figure 5) is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. In Q1 2016, the Dodge Momentum Index was flat compared to the same period in 2015. Institutional building grew 7.4 percent but contraction in commercial building nearly offset institutional gains. The index is a leading indicator and Q1 results imply nonresidential construction activity will continue at levels consistent with 2015.

Figure 5: Dodge Momentum Index
(Year 2000=100)
      Mar-15 Mar-16 % Change  
    Dodge Momentum Index 117.1 117.4 0.3%  
       Commercial Building 129.6 124.1 -4.2%  
       Institutional Building 101.6 109.1 7.4%  
Source: Dodge Data & Analytics      
Housing Starts

At the end of Q1 2016, seasonally adjusted annual housing starts were 1.17 million, down 1.7 percent in relation to the same period in 2015. The general consensus is that 1.5 million new homes are necessary on an annual basis to keep up with population growth and the replacement of old homes, given current homeownership rates of 63.5 percent.1 Housing starts will need to grow an additional 28 percent to reach sustainable levels and growth will drive land development and infrastructure expansion benefiting the aggregate industry.

Construction Materials Prices

Construction material prices rose 0.9 percent between February and March, but fell 3.4 percent year-over-year, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data. The monthly price gain was driven mainly by oil prices, which expanded 40.7 percent for the month. Additionally, six key materials prices rose on a monthly basis in March.

  • Concrete product prices grew by 0.8 percent.
  • Unprocessed energy material prices increased 6.1 percent.
  • Steel mill product prices increased 0.4 percent.
  • Nonferrous wire and cable prices expanded 2.2 percent.
  • Iron and steel prices rose 1.6 percent.

Several key materials prices declined in March including prepared asphalt, roofing and siding products, natural gas prices, fabricated structural metal and plumbing fixtures.

Aggregates Material Trends

Industry results in Q1 2016 showed quarterly increases in pricing and volume compared to the same period in 2015 for cement, crushed stone, and sand and gravel. The decline in asphalt prices related primarily to instability in oil prices.


The estimated portland cement consumption (16.9 million metric tons) increased by 14 percent in Q1 2016 compared to Q1 2015.

Ready-Mix Concrete

Ready-mix concrete (RMC) prices continued to rise in Q1 as measured by the average RMC net selling prices of U.S. Concrete, Vulcan Materials, Martin Marietta and Eagle Materials during the quarter. Quarterly RMC volume data is not reported.

Crushed Stone

An estimated 270 million metric tons of crushed stone was produced and shipped for consumption in the U.S. in Q1 2016, according to the USGS, an increase of 21 percent compared with the same period of 2015. The production of crushed stone increased in all nine geographic divisions and 37 of the 46 states that were estimated in Q1.

Sand and Gravel

The estimated U.S. output of construction sand and gravel produced and shipped for consumption in Q1 2016 was 173 million metric tons, an increase of 10 percent compared with the same period of 2015, according to the USGS. The production of sand and gravel increased in seven of the nine geographic divisions and 31 of the 45 states that were estimated in Q1.

FT USCement

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

Sources: NRMCA Industry Data Survey, Average RMC selling price of U.S. Concrete, Vulcan Materials, Martin Marietta Materials & Eagle Materials
FT USAsphalt

Sources: EAPA Asphalt in Figures, Vulcan Materials & Martin Marietta Materials average of net asphalt selling prices
FT USCrushedStone

Source: U.S. Geological Survey
FT USSandGravel

Source: U.S. Geological Survey

Headwaters MB is an independent, middle-market investment banking firm providing strategic merger and acquisition, corporate finance, and merchant banking services through proprietary sources of capital. Named “Investment Bank of the Year” by The M&A Atlas Awards in 2015, Headwaters MB is headquartered in Denver, with six regional offices across the United States and partnerships with 18 firms covering 30 countries. For more information, visit To discuss any information contained in this report, contact the Headwaters MB team: Darin Good, managing director, This email address is being protected from spambots. You need JavaScript enabled to view it., 303-549-5674; or Brian Krehbiel, vice president, This email address is being protected from spambots. You need JavaScript enabled to view it., 303-531-5008.