Heavy materials face weighty challenges in stagnation and consolidation.
Heavy materials face stagnating European markets, slowing emerging economies, and rising input prices. Large international players have been consolidating and restructuring. These established players have to defend against rising regional competitors and well-funded entrants, as the sector has become attractive to private equity players.
The cement industry in Europe in particular is under pressure due to rising energy prices and the lack of a consistent regulatory framework that would allow for long-term investment planning. The sector is no longer achieving hoped-for returns—the average return on capital over the last four years has been about 5% below the cost of capital.
Other parts of the world, including Latin America, Africa, and Asia, have grown much faster in recent years. That’s forced heavy-side materials producers to be more focused about where they deploy their resources—and how. Successful companies are making the best use of their geographic footprint and tightening vertical integration through asset swaps, divestments, and comprehensive cost programs.
How can a heavy building materials company navigate an increasingly complex market and make an accurate assessment of its assets? A reliable asset analysis should look at three major areas.