US Outlook: Further Strong Growth to Come, Particularly in California

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  • The 11 aggregate and cement-based business where we are able to obtain the data had EBIT returns on total assets of between 1.8% and 14.4% in 2016.
  • The previous levels of returns at Cemex and LafargeHolcim are unlikely to be achieved again due to the carrying value of their assets.
  • The recovery in US aggregate volumes has slowed in 2016 and 2017, partly due to poor weather, particularly this year. Following hurricanes Harvey in Texas and Irma in Florida, both Vulcan and Martin Marietta’s full-year 2017 guidance now look slightly too optimistic.
  • Prospects are better longer-term. Volumes are still lower than they were 20 years ago. Recovery prospects are particularly strong in many Southern states. Stone volumes in 2016 were 47% lower than in 2006 in Georgia, 45% less in Florida and 34% lower in California.
  • In California, the passing in April 2017 of the state’s Road Repair and Accountability Act is budgeted to increase highway spending by an average of 70% during the next 10 years. Its needed with current highway spending on capital projects only one-third of the US average.
  • Growth may be restricted by the number of construction workers available, with the construction unemployment rate already below 5%, close to its previous trough level. Also 29% of the construction workforce is Hispanic or Latino, where President Trump’s policies on illegal immigration may particularly impact.
  • Our separate reports on aggregates, cement, readymix and asphalt contain tables showing the number of quarries and plants that each of the major companies have in each state. For cement they also show their capacities in each state.
  • There has been a structural improvement in aggregates profitability in this cycle, with a higher profit per ton now than previously when volumes were significantly higher.

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