As the cement sector continues to consolidate, the number of potential targets with values of more than US$1bn (EUR842m) will continue to fall and quite possibly, Summit Materials will see its position change from being an acquirer of companies - to being a target, reports the Sunday Independent.
Follwing, CRH's recent move to acquire US company Ash Grove Cement for US$3.5bn and Martin Marietta's US$1.6bn (EUR1.3bn) payment for Bluegrass Materials, a leading aggregates company, investors will be intrugued to see what Summit Materials next move is.
Summit Materials has made more than 57 acquisitions since 2009 and is well placed to continue to complete several deals every year. Summit now operates from 21 states, the most important being Texas, Utah, Kansas, Montana, and Virginia.
The management team has been selective in the assets it acquired, ensuring that the company is the number one market player in most areas that it operates in - and within the top three across the entire portfolio of companies it owns.
Summit's split between markets is 37 per cent public and 63 per centprivate, with most public spending related to infrastructure. The outlook for both market segments is positive over the next several years as infrastructure spending increases - coupled with increased private construction levels. While the building materials sector is cyclical, many of the indicators in the US suggest private sector construction is in the early stages of an upward cycle. The Trump administration is also likely to focus more attention on infrastructure spending increases in 2018.
As it is very difficult to get planning permission for cement production facilities in the US, there is limited new supply entering the market, supporting cement prices for the existing producers. With this positive market supply backdrop, Summit Materials boasts some of the strongest profit margins in the sector coupled with the strongest growth prospects, says the Sunday Independent.
With a market capitalisation of US$3.5bn (EUR2.9bn), the company offers the joint attractions of being a possible acquisition target in a consolidating sector - and a company that is the right size to double in value every five or six years if management continue to make accretive acquisitions.
