US building materials industry grows to $1.16 billion

21 December 2017 5 min. read
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The US construction industry materials segment has seen a resurgence in demand because of an upswing in residential starts. As revenues and total shareholder returns climb, challenges in the industry are mounting, mostly due to labour shortages stemming from workers let go during the financial crisis not returning to the industry.

The materials segment of the US construction industry was one of the hardest hit parts of the US economy following the financial crisis; at its nadir in 2011, value hit a low of $788 billion. The industry has seen a resurgence in more recent years, as the US economy improved and infrastructure investment was once again possible. Since 2011, total value has grown by more than 50% to reach $1,164 billion.

Amid this recovery, a recent study from Roland Berger has examined the US construction materials industry’s recent performance and projected growth, uncovering a bumpy road to future growth for the industry.

financial metrics

Building materials industry revenue was $144.2 billion in 2016, up 3.1% from 2015. EBITDA margins saw a modest increase over the previous year’s growth, reaching 10%, while working capital as a % of sales was up slightly to 19%. Debt/EBITDA ratio fell to 2.4x from 3.1x the previous year, indicating reduced risk – due in large part to debt reductions among ‘roofing, siding, and other materials’ and ‘construction metals’ companies.

Returns to shareholders in much of the industry has surpassed that of the wider S&P 500. From mid-2014 to mid-2017, total shareholder returns averaged 12.1% among building material firms, while the S&P 500 averaged only 7.3% over the same period.

Value of returns

‘HVAC plumbing and electrical equipment’ surged out well ahead of the other building materials categories, with the value of every $100 invested rising to $192. ‘Roofing, siding, lumber and other materials’ came in at second, increasing to $155. Not all subcategories surpassed the S&P 500 average of $124, though: ‘lighting and wiring’ saw the industry returns, at $111. Increased total returns in the industry in recent years have been driven at least in part by commodity price reductions; some sectors, though, have suffered from increased uncertainty because of the risk of new tariffs being introduced on imports from Mexico and elsewhere.

Industry growth

The annual value of construction put in place in the US is expected to grow in the next two years across the three sectors of infrastructure, residential buildings, and commercial buildings. Roland Berger projects that the value of construction will grow an average of 3.5% between 2016 and 2019, reaching construction additions of almost $1.3 trillion. Infrastructure will see the most significant increase, at 4.2% annually; the country’s infrastructure was awarded an overall rating of D+ in 2017 by the American Society of Civil Engineers, suggesting that considerable investment may be required. The residential buildings segment is projected to realize slightly more modest growth at 2.9%.


Growth in construction has been buoyed by relatively robust US economic growth, despite sector-specific issues like difficulty in finding skilled labour driving up costs.

The residential segment has witnessed particularly strong growth in recent years, with multi-family housing construction value seeing a compound annual growth rate of over 20% – rising from $35 billion in 2013 to $62 billion in 2016. Improvements investment grew 8.3%, from $122 to $155 billion, while single-family home construction saw strong growth of 12.9%, jumping from $172 billion to $247 billion.


One of the drivers of growth has been the cumulative population increase in metropolitan areas since 2012. Middle-size (0.5-4 million residents) and large (4+ million) metropolitan areas saw a CAGR of 1% and 0.8%, respectively, from 2013-2016. Roland Berger relates that increases to these urban areas accounted for nearly all population growth, as more rural areas (under 0.5 million) had a CAGR of only 0.3% from 2013-2016.

Labour shortages

Though the industry has improved its revenues significantly since the post-financial crisis low-point, it continues to face challenges. One major area of concern is that many of the skilled labourers laid off during the financial crisis years have not returned, resulting in an increased mismatch between growing housing starts and a lack of skilled labour. Shortages hit almost 60% in 2016, with many former workers unpersuaded by higher wages. Many of them have either switched to work in less cyclical industries or have left the US.


The report’s authors concluded: “The primary driver of this performance is the residential sector with double-digit growth in the multi-family segment and population growth in the Southern US. However, there have been some headwinds hampering the sector. The workforce shortage has knock-on effects in the forms of delayed projects, increased wages and higher home prices. Some builders have also had to slow down the pace of accepting new orders to make sure they can meet deadlines.”