Data Mining September 2010

Brooke Wisdom

September 1, 2010

AggMan Index: Signs of Life, but Short of Expectations

John Neuner is the managing director at Harris Williams & Co. He can be reached at 804-648-0072 or

The overall equity markets continue to trade sideways as investors look to synthesize the mixed economic, financial, and industry data. For the month, the S&P 500 ended up 3.4 to 100.6 but only after hitting an intra-month low of 92.3. Similarly, the AggMan Index moved slightly from 100.7 to 100.1 and to remain essentially unchanged despite spending the majority of the month in the low to mid-90s. With second quarter earnings being released by most of the industry players, the reports coming out show some signs of life in volumes driven by public construction projects in many areas of the country — some driven by stimulus funding and some by the extension of the Federal Highway bill. Furthermore, there are signs of life in the future as the U.S. House of Representatives passed a transportation bill providing $45 billion in federal funding for highways in 2011, a 10-percent increase from 2010. Despite these positive funding dynamics, several industry players have fallen short of expectations for second quarter revenue and earnings, which has weighed on stock prices. Additionally, the broader economic data has been showing signs of slower recovery, and this has placed a cloud over market valuations. Unfortunately, this cloud is likely to linger until more of the broader economic indicators reflect a clearer picture of the rate of recovery.

Divestitures and Private Equity Drive M&A

Acquisitions continue at a modest pace with divestitures and private equity activity continuing to lead the way. Second quarter results indicate that the sector is continuing to bump along the bottom. The major strategic players remain focused on balance sheet management and capital raising activities, while the private equity players are actively looking for opportunities to deploy their committed capital.

Recent transactions

Martin Marietta Materials, Inc. acquired three quarries and the remaining 49-percent interest in Granite Canyon Quarry from Cemex for $65 million in June. Granite Canyon is located in Wyoming and the three quarries are located in Fort Calhoun, Neb., Guernsey, Wyo., and Milford, Utah.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at

Cemex announced in July that it has reached an agreement to sell seven aggregates quarries, three resale aggregate distribution centers, and one concrete block manufacturing facility in Kentucky to Bluegrass Materials Co., LLC for $90 million. Bluegrass Materials Co., LLC is a wholly owned subsidiary of Panadero Aggregates Holdings, LLC, which was formed in 2010 by John D. Baker II and Edward L. Baker II, formerly of Florida Rock Industries, to invest in aggregates and other construction materials businesses.

Boral Industries Inc. is acquiring the remaining 50-percent stake in MonierLifetile LLC from Monier Group GmbH for $75 million. MonierLifetile LLC manufactures concrete roof tiles in the United States. It offers lightweight tiles, roof system components, standard weight tiles, energy efficient roof systems, and cool roof tiles. MonierLifetile LLC was founded in 1997 as a joint venture between Lafarge and Boral and is headquartered in Irvine, Calif.

Other financial news

U.S. Concrete, Inc. announced that the U.S. Bankruptcy Court granted the company’s request to confirm its plan of reorganization, paving the way for the company’s emergence from Chapter 11 proceedings. The plan provides for the conversion of approximately $285 million of senior subordinated notes into equity of the reorganized company. At Aggregates Manager press time, the company expected to emerge from Chapter 11 by the end of August 2010.

Moody’s Investors Service and Standard and Poor’s are considering a cut to Lafarge’s credit rating, which is one notch above speculative grade, as the company is facing challenges to meet leverage ratios. HeidelbergCement, rated three notches below investment grade, recently issued EUR 650 million of eurobonds.

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