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Accelerating change in a strong but uncertain marketNorth American building materials winners and industry outlook

November 2018

Management summary

2017 marked the sixth consecutive year of positive an-nual growth in the North American construction mar-ket. Underlying macroeconomic strength has translat-ed to healthy performance for Roland Berger's Building Materials Index through 2017.

However, recent headwinds in the housing market, combined with a generally uncertain market, have led to a downturn in shareholder returns in 2018. Reve-nues of the constituent firms have mirrored overall eco-nomic activity by growing ~3% p.a. for calendar years 2015-2017, and EBIT margin improved 0.5% year-on-year, to 10.6% on average. The U.S. Census Bureau esti-mates that USD 1.25 trillion of value was put in place across residential, commercial and infrastructure con-struction in 2017, representing a 4.5% increase com-pared to the prior year. Although annual increases have cooled from a 2014 peak of 11%, forecasts call for this positive trend to continue at a steady pace, with construction value put in place estimated to reach USD 1.43 trillion in 2020 (4.8% p.a. growth).

Despite strong industry performance, a shift of power across the value chain is challenging suppliers, distrib-utors and contractors. Suppliers of select sub-groups are increasingly pressured by the growing power of e-commerce platforms, particularly if they are sub-scale. Distributors are confronted by the threat of both DIY retailers and an advanced building information modeling environment where their value proposition is radically questioned.

Finally, distributors and contractors may start to see their roles being circumvented by startups trying to compress the value chain and provide end-to-end solutions. The industry-wide response has been consolidation to chase economies of scale and broaden digital capabilities.

Given the speed of change in this tradition-ally stable industry, it has never been more important to have a coherent long-term strategy and clear vision of the future.

2 Roland Berger Focus – Accelerating change in a strong but uncertain market

Contents

1. Robust macroeconomic conditions continue positive industry trends .. 4 Building materials industry performance in 2017

2. Power shift across the value chain driving consolidation ............................. 10 Factors impacting market dynamics

3. Turning weakness into advantage ................................................................................... 13 Case study

4. Roland Berger Winners' metrics ....................................................................................... 17 Appendix

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Accelerating change in a strong but uncertain market – Roland Berger Focus 3

For most of the North American building materials in-dustry, 2017 was a year of continued strong perfor-mance. Construction activity continued to grow, with value put in place of USD 1.25 trillion, up nearly 60% from the Great Recession low of USD 788 billion in 2011. Continued strength in the North American econ-omy as well as a rebound in global commodity prices served as a helpful backdrop for building materials companies in 2017.Industry revenues were up 12.9% compared to 2016, while the average operating margin increased 0.5 per-

centage points to 10.6%. A Productivity measures were relatively steady, with working capital as a per-centage of sales at 18% and the ratio of revenues to total assets (asset turnover) flat at 0.9x. Balance sheets displayed positive trends with leverage ratios continu-ing their recent decline; the reduction in debt/EBITDA was in large part driven by improvements in the con-struction metals segment. Risk-adjusted profits (ROIC- WACC) improved by 1.4 percentage points, with return on invested capital outpacing the cost of capital by 3.2% on average.

1. Robust macroeconomic conditions continue positive industry trends Building materials industry performance in 2017

A: Financial metricsBuilding materials industry financial performance dashboard1)

Source: Capital IQ, Roland Berger

1) Includes 81 companies with 3 full years of publicly available financials and headquartered or listed in North America (USA, Canada, and Mexico)2) YoY 2017, YoY 2016, 3-year CAGR 2015-2017

CAPITAL PRODUCTIVITY

REVENUE Revenue [USD bn] 157.1 139.1 143.9

GROWTH2) Revenue growth [year-on-year] 12.9% 2.8% 3.0%

Working capital [as % of sales] 18% 19% 18%

RISK Debt/EBITDA 2.1x 2.4x 2.5x

PROFITS EBIT margin 10.6% 10.1% 9.4%

Asset turnover 0.9x 0.9x 0.9x

% of industry earning cost of capital (ROIC > WACC) 75% 64% 71%

WINNER’S METRICS

ROIC-WACC 3.2% 1.8% 1.5%

Invested capital growth 9.3% 1.0% 3.1%

2017 20162015-2017 AVERAGE


B: Industry classification.Six sub-segments of the Building Materials industry


Winners, had the highest average total shareholder returns, gaining 18.5% p.a. (unweighted). Although the Cash Generators in Quadrant II had the highest average ROIC at 15.8%, shareholder returns of 11.7% p.a. were lower than those of the Winners. The market punished shares of the Profitless Growers residing in Quadrant III; these firms displayed the lowest return on invested capital, culminating in negative shareholder returns of -2.4% p.a. on average. Quadrant IV's Underperformers managed to realize slightly positive total shareholder returns, but on average were not able to raise their level of invested capital during the 2014-2017 time period.

The financial performance matrix maps building mate-rials companies according to key profit and growth metrics calculated over the full years 2015 to 2017. C Again, we see mixed performance among the industry sub-groups, although all but group F achieved positive economic profits and capital growth. Low commodity prices help explain the depressed levels of invested cap-ital for these firms during the time period studied. Group A was the most profitable by a wide margin. Coupled with strong growth these metrics help explain the group's best-in-class total shareholder returns evi-dent in Exhibit D. The Winners' matrix broadly aligns with market performance. Quadrant I companies, the

INDUSTRY SUB-GROUP PRODUCTS DESCRIPTION

A Includes manufacturers of refrigeration and heating equipment, hot water heaters, boilers, plumbing fixtures, blowers, fans, and electric housewares

HVAC, Plumbing, and Electrical Equipment

B Includes manufacturers of electric lighting and wiring equipment, and those engaged in drawing and insulating of wire

Lighting and Wiring

C Includes manufacturers of millwork, structural wood members, and wood products including cabinets; roofing, siding, and decking products of various materials; and paints, miscellaneous plastics, and other materials

Roofing, Siding, Lumber, and Other Materials

D Includes producers and manufacturers of cement and concrete ingredients, concrete products, mineral products, and structural clay products

Concrete, Minerals, Clays, and Stone

E Includes manufacturers of finished glass products, windows, interior and exterior doors, and flooring products

Glass, Windows, Doors, and Flooring

F Includes manufacturers of steel, basic metal products, and metal hardware

Construction Metals


Ø 0.3%

Ø 0.6%

C: Building Materials financial performance (Winners' matrix) from 2015-20171)

More than half of sector categories achieved profitable growth. "Winners" delivered higher TSR performance than their peers


1) Includes companies with financials for three full years from December 31, 2014 – December 31, 2017; 2) 3-year invested capital CAGR; 3) Excludes conglomerates

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TED

CA

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AL

CA

GR

RETURNS: 3-YEAR AVERAGE ECONOMIC PROFIT SPREAD (ROIC – WACC)

SEGMENT3) 2017 REVENUES [USD BN]

3-YR. AVG. ROIC-WACC

3-YR. CAPITAL GROWTH

NUMBER OF COMPANIES

A: HVAC, Plumbing, and Electrical Equipment 16.1% 10.6% 67.6

C: Roofing, Siding, Lumber, and Other Materials 3.1% 18.4% 1840.9B: Lighting and Wiring 4.7% 4.9% 108.4

E: Glass, Windows, Doors, and Flooring 0.3% 13.3% 54.3F: Construction Metals -2.4% -1.0% 1948.4Total / Average 1.5% 3.1% 80149.5

D: Concrete, Minerals, Clays, and Stone 1.5% 1.8% 2239.9

-50% -40% -30% -20% -10% 0% 10% 20% 30% 50%40%

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

UnderperformersTSR 1.0%Growth2) -4.2%ROIC 5.9%WACC 7.9%IV

Cash GeneratorsTSR 11.7%Growth2) -3.2%ROIC 15.8%WACC 7.0% II

Profitless GrowersTSR -2.4%Growth2) 9.7%ROIC 5.6%WACC 8.8%

III WinnersTSR 18.5%Growth2) 10.1%ROIC 11.9%WACC 6.8%

I


The building materials industry enjoyed strong market performance with total returns of 15.7% p.a. for the 3-year period ending 12/31/2017, versus 12.3% p.a. for the S&P 500. D Although the sector's market perfor-mance was generally strong, there was a significant deviation in performance among the sub-groups. Groups B (Lighting & Wiring) and E (Glass, Windows, Doors, and Flooring) both underperformed the broad index, while Groups A (HVAC, Plumbing, and Electrical

Equipment), C (Roofing, Siding, Lumber, and Other Materials), D (Concrete, Minerals, Clays, and Stone) and F (Construction Metals) were strong performers. This trend reversed itself in 2018, as the building mate-rials industry underperformed the S&P 500 with annu-alized returns of -11.1%. Concerns regarding a poten-tial weakening of housing demand due to higher mortgage rates and reduced tax incentives for home-buyers are the main drivers of this trend.

D: Value of USD 100 invested1).The building materials industry has largely tracked the S&P500 since 2015


1) Total shareholder returns accounting for capital gains and dividends; 2) Includes all 81 firms in the analysis

C: Roofing, Siding, Lumber, and Other Materials (144) F: Construction metals (156)

A: HVAC, Plumbing, and Electrical Equipment (185) D: Concrete, Minerals, Clays, and Stone (157) ALL (150)2)

B: Lighting and Wiring (85) E: Glass, Windows, Doors, and Flooring (130) S&P 500 (136)

Jan 2015 July 2015 Jan 2016 July 2016 Jan 2017 July 2017 July 2018 Jan 2019Jan 2018

220

200

180

160

140

120

100

80

CAGR '15-'17

CAGR Q1-Q3 '18

183

155146143142134129

108

27.1%

18.2%12.3%19.8%15.7%17.6%

7.7%

3.5%

-14.4%

-8.1%4.3%

-21.8%-11.1%

-22.8%3.9%

-3.3%


The major segments of the construction market are res-idential buildings, commercial buildings, and infra-structure projects. E The annual value of total con-struction put in place in the United States increased 4.5% in 2017 compared with the prior year, and is pro-jected to continue growing at a similar pace in the near term. Residential building investment has been the most robust, growing at a CAGR of 12.4% from 2014-2017. Sustained economic growth continues to support these positive trends, however higher mortgage rates

due to federal rate increases and a reduction in tax ben-efits for U.S. homebuyers could slow growth. Commer-cial buildings value put in place grew at a 7.7% p.a. rate over the preceding 3 years, driven by strong corporate balance sheets that have allowed companies to invest in the property required for planned growth. Infra-structure value put in place has been fairly flat in recent years, despite repeated calls for improving national infrastructure through fiscal stimulus. The potential for a major infrastructure spending bill represents

E: Annual value of construction put in place in the United States [USD bn] U.S. construction activity is forecasted to continue growing steadily

Source: Census Bureau, FMI, Roland Berger

1) Includes Power, Highway and Street, Sewage and Waste Disposal, Water Supply, and Conservation and Development

Infrastructure1) Residential buildings Commercial buildings

CAGR 4.8%

CAGR 7.4%

2014

392

375

239

1,006

2015

446

429

239

1,114

2016

1,192480

474

238

2017

1,246489

532

225

2018

1,304513

563

229

2019

1,374545

596

234

2020

1,434569

623

241

5.5% 12.4%

5.2%7.7%

2.3%-2.0%

CAGR '17-'20

CAGR '14-'17


significant upside to the projections outlined below. Furthermore, the rapid acceleration of e-commerce has necessitated building numerous warehouses and dis-tribution centers in recent years. Although we view this trend as quite durable, removal of this stimulus, due to moderating e-commerce growth or infrastructure satu-ration, would threaten forecasted construction levels.Firms in the building materials industry are generally more sensitive to changes in commodity prices than the average company. The chart below shows recent

price trends for four commodities widely used in con-struction. F Mining companies have closely moni-tored production levels and undertaken fewer new projects in recent years, helping to correct the price declines of 2015/16 generally attributed to oversupply. Of note is the recent swing in lumber prices, driven largely by an escalation of the Canada-U.S. softwood lumber dispute which found temporary resolution with the U.S.-Mexico-Canada Agreement (USMCA) for-mally reached on October 1, 2018.

F: Commodity pricesLumber prices have experienced abnormal volatility in recent months

1) Producer Price Index

Source: Capital IQ, FRED, Roland Berger

Lumber (IOM:^LB)1)Concrete ingredients PPI1) Copper (COMEX:^HG)Aluminum (LME:^0B)

2014 2015 2016 2017 2018 2019

160

140

120

100

80

60

119

111

91

82


CONNECTIVITY AND E-COMMERCEAccess to information, enabled through the popular-ization of the Internet, has reduced information asym-metry for both consumers and business. This phenom-enon has impacted the sales process in the building materials industry – redefining the traditional sales funnel and often relegating sales representatives to consultative roles rather than owners of information. Distributors have reacted by consolidating to invest in digital technologies and redefine their value proposi-tion. Furthermore, pure e-commerce players have made inroads into building materials distribution. Originally these were niche web properties that en-abled suppliers and buyers to connect through auc-tions for one-off transactions, however, recently e-com-merce giants are starting to serve as the largest customer for select sub-groups of building materials suppliers. This has created a power shift where some smaller suppliers' financial viability is dependent on maintaining a positive rating on Amazon.com. As a re-sult, scale is increasingly important to manufacturers as well, and proactive players in sub-groups with high e-commerce penetration are focused on expansion through acquisition to drive down costs and counter-act dramatic margin erosion.

TRADITIONAL CHANNEL CHANGESNational DIY retailers have substantially grown their sales to professional end-users thus encroaching on the domain of local distributors. This has been made possi-ble by economies of scale developed by major players – Home Depot and Lowe's – in a traditionally fragmented market. Home Depot has been particularly successful with 45% of their USD 100 billion sales now coming from professional end-users and growth exceeding that of their marquee DIY businesses1. Lowe's is attempting to close the gap with recent acquisitions of Central Wholesalers and Maintenance Supply Headquarters but

remains far more reliant on the consumer market. This trend of DIY retailers building out full service offerings for professional end-users is expected to continue and be driven both through M&A and organic growth initiatives. Business models are emerging that threaten contrac-tors by promising to streamline the design-bid-build process. Katerra, a Menlo Park-based unicorn, takes orders and delivers directly to customers, thereby re-placing the role of select supplier sub-groups, distrib-utors and contractors. This is possible through modu-lar off-site manufacturing and an organization with experience across the entire building materials value chain. Despite the business model remaining relatively unproven, a USD 1 billion backlog serves as proof of market enthusiasm for this type of solution2.

GROWTH OF MONEY AVAILABLE FOR BUYOUTSThe global private equity industry raised a record USD 453 billion in 2017, surpassing the previous record set in 2007 and leaving it with more than USD 1 trillion to invest.3 This liquidity has fostered fierce competition for deals to put capital to work, driving up acquisition prices while also eroding potential returns for inves-tors. Firms that had previously not considered selling are increasingly open to being purchased, as their growth strategies are unable to compete with valua-tions being offered. This is manifesting itself in the building materials industry as the generational owners of smaller distributors are selling during the market uptrend and private equity firms execute roll up strat-egies to create economies of scale.

2. Power shift across the value chainFactors impacting market dynamics

1 �Earnings release transcript2 Press, Company information3 Pitchbook


PREPARATION FOR BIMAdvancements in BIM technology facilitate a much closer relationship between suppliers and builders giv-en the technology's potential to replace much of the value previously provided by distributors. G In the legacy building materials supply chain, middleman re-lationships and expertise were required to help con-tractors maneuver through the highly fragmented pro-ducer landscape. Sophisticated digital tools not only reduce that reliance but allow producers to directly access end markets for their goods as well. In an envi-ronment where distributors no longer monopolize in-formation about customer order specifications, pro-ducers could develop the capability to meet customer needs and partner with traditional logistics firms to facilitate delivery at a low cost. Distributors are re-sponding to this threat by turning towards M&A to grow economies of scale, sophisticated digital infra-structure and differentiated value propositions.

In an environment where distributors no longer monopolize information about customer order specifications, producers could develop the capability to meet customer needs and partner with traditional logistics firms to facilitate delivery at a low cost.


G: Producer/logistics partnerships threaten to replace dedicated distribution firms as digitalization shrinks the supply chain; BIM intensifies the threat of direct distribution, forcing distributors to re-tool their value proposition to end customers

Source: Roland Berger

PRODUCTION DISTRIBUTION CONSTRUCTION

A 2

B

Producer A

Producer A

Contractor A

Contractor A

Producer B

Producer B

Contractor B

Contractor B

Distributor D

Distributor A

Distributor B

Logistics provider (e.g. FedEx)

Distributor C

Consolidated distributor

Distributor D

E-commerce (e.g. Amazon)

Materials flow Contractor order data flow

TODAY: EARLY-STAGE BIMA

TOMORROW: ADVANCED BIMB

Distributors own the customer relationship, restricting producers' access to information about contractor needs to maintain their position in the value chain

1

Smaller and/or more specialized distributors are able to survive by serving their respective niche products or geographies

2

With advanced BIM, contractors can communicate specific product needs directly to producers, who can make direct sales efforts as a result

3

Producers could outsource delivery to traditional logistics firms (e.g. FedEx, UPS), allowing value capture as a collaborative supplier without building physical delivery infrastructure

4

Consolidated distributors retain access to order data, and compete with producer/logistics partnerships to win business

5

E-commerce grows to become major channel for standardized products for all building material sub-groups

6

Direct sales routed through pure delivery services replace the volume previously served by distributors unable to develop the new value proposition

7

1

3

7

5

6

4


Technology is changing building materials distribution from a regional business to a national business where scale is needed to make substantial investments in e-commerce and digital tools. H The case of Beacon Roofing Supply offers an instructive example of how to use strategic acquisitions to develop a full service organization with geographic and product breadth that is well positioned for a rapidly changing industry landscape. IBeacon's ability to execute their strategy successfully and acquire 32 targets over the past 10 years has re-warded investors, with returns well above the S&P 500

average until a downturn in 2018. J A substantial fac-tor in the recent drop are challenges associated with integrating Allied Building Products, their largest ac-quisition to date (closed January 2, 2018).Despite Beacon's recent downtown in equity value, Bea-con's strategy and actions are aligned with Roland Berger's Winners' Characteristics and should be re-warded over the long term. This is due to their business leadership through a clearly defined and broad product offering to contractors, strategically coherent growth strategy and financial scale reached through consistent implementation. K

3. Turning weakness into advantage Case study


H: Distributor acquisition strategiesAcquisitive distributors target companies that help move their business profile away from the origin along one or both axes

National

Local/Regional

Specific products Broad lineup and services

GEOGRAPHIC COVERAGE

CAPABILITIES

Too narrow

Legacy model

Full Service

Too small


I: 2009-2018 Beacon Roofing Supply acquisition detail 1)

Diverse acquisition history is representative of multi-purpose roll-up strategies.

Source: Capital IQ, company information, Roland Berger

1) Based on closing date of transaction2) Management commentary relates solely to target's location or branch footprint3) Management commentary includes reference to acquiring technical expertise or adding complementary products

Geographic expansion (22 total)2) Minor product lineup expansion (8 total)3) Major product lineup expansion (2 total)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Lookout Supply Company, Inc.

Applicators Sales & Service, Inc.

Wholesale Roofing Supply Houston, Inc.All Weather Products Ltd

Structural Materials Co. Inc.

Contractors Roofing & Supply Co. Inc.

McClure- Johnston Company

Ford Wholesale Co. of San Jose and Construction

Materials Supply

Cassady Pierce Company, Inc.

No activity

Fowler & Peth, Inc.Enercon Products Ltd.

Roofing Supply Group, LLC

Rci Roofing Supply Company, Inc.

Roofing & Insulation Supply, Inc. Statewide Wholesale, Inc.ProCoat Systems, Inc.

Atlantic Building Products, Inc. Fox Brothers Company Woodfeathers, Inc. BJ Building Material

Supply CompanyLYF-TYM Building Products Co. Inc.

Eco Insulation Supply, Inc. Acme Building Materials, Inc. Lowry's Inc.

Tri-State Builder's Supply, Inc Atlas Supply, Inc.

American Building & Roofing Inc.

Allied Building Products Corp. and Kapalama Kilgos

Acquisition Corp.

Phoenix Sales, Inc. Louisiana Roofing Supply, LLC

Posi-Slope Enterprises, Inc.

Independent Building Materials, LLC


J: Value of USD 100 investedBeacon Roofing Supply outperformed the S&P 500 over the past decade in terms of total shareholder returns until a recent downturn


Beacon (BECN) S&P 500

500

450

400

350

300

250

200

150

100

502009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


K: Beacon has succeeded across all characteristicsRoland Berger's four Winners' Characteristics and Beacon's performance


Roland Berger assessment Success factors

1 BUSINESS LEADERSHIP

Beacon has developed a clearly defined full-service offering for contractors. This includes not only a broad product portfolio but also highly utilized consultative and digital services (design, e-commerce, training, marketing).

2 STRATEGIC COHERENCE

Both organic investments and M&A have been utilized to execute a clear and consistent growth strategy. Further- more, their portfolio companies are clear geographic and product extensions that support the firm's strategic intent.

3 FINANCIAL SCALE

The combination of Beacon and Allied Building Products created one of the largest wholesale building materials distributors in North America. Beacon has been publicly traded on the NASDAQ since September 2004.

4 PROVEN ABILITY TO EXECUTE

Beacon has proven that they are able to acquire and integrate targets that fit with their growth strategy executing 32 acquisitions in a 10 year period.


4. Winners' metrics Appendix

When developing their expectations of financial perfor-mance of a company, investors, either implicitly or ex-plicitly, are analyzing its profitability and growth poten-tial and adjusting these metrics for risk. Typically, investors will develop a financial forecast to build a free cash flow model. Revenue growth will be used as the growth metric, EBIT margin percentage as the profit-ability metric, and the cost of capital representing the risk adjustment. We believe the best metric to analyze growth is the real growth in the invested capital of a company, which represents the capital on a company’s books that finances its assets. It is a better metric to measure growth compared with revenues, which is more commonly used. Revenue trends can be mislead-ing due to price volatility, driven by raw material fluctu-

ations (common in the chemical industry as evidenced in the current cycle) or supply and demand dynamics. Invested capital growth measures the increase in assets and represents additional investment into the enter-prise and is not as affected by raw material price chang-es. We believe the best metric to measure risk-adjusted profitability takes the difference between the return on invested capital (ROIC) and the weighted average cost of capital (WACC). L It is better than EBIT margin be-cause it is a normalized metric, which measures not only profitability, but also the amount of capital re-quired to generate the profitability. EBIT margins pro-vide no perspective on the capital intensity of a compa-ny and, therefore, may be misleading when comparing companies with different business models.

L: Definition of economic profit in Winners analysis The right metrics to measure growth, profitability, and risk


INVESTED CAPITALTotal Debt + Total Equity

[(Cost of Equity x Equity) +

(After-Tax Cost of Debt x Debt)]NOPAT

(Net Operating Profit After Tax)

Invested CapitalInvested Capital

WACC (Weighted Average Cost of Capital)

ROIC (Return on Invested Capital)

RISK-ADJUSTED PROFITABILITYROIC – WACC


M: Winners’ characteristics.We have defined these characteristics and how they separate Winners from Underperformers


1 BUSINESS LEADERSHIP

Winners set the agenda in their areas of participation by combining: > A comprehensive understanding of the core competencies they posses in each business > A business model grounded in these competencies > Focused participation in customer segments in which the business model offering is relevant

2 STRATEGIC COHERENCE

Winners are the high value owners of their portfolio businesses, achieved by having:

> A clear strategic intent, describing what the company wants to be, and what it stands for > A portfolio of businesses that operates similar business models and supports the strategic intent > Strong competencies and industry knowledge at the corporate level to successfully run the portfolio businesses (parenting advantage)

3 FINANCIAL SCALE

Winners are relevant to investors, driven by: > Size which makes them more likely to be included in well-known financial indices > Clear risk-reward propositions to investors

4 PROVEN ABILITY TO EXECUTE

Winners deliver results by executing along four key dimensions: > Clear communication of the strategic intent and successful execution against it > Disciplined approach to identify and deploy competitive advantage to drive Business Leadership > Active portfolio management > Systematic standardization of processes and centralization of key functions to capture benefits of Strategic Coherence


N: Group A – HVAC, Plumbing , and Electrical Equipment1)

The strongest performing segment, with high profitability and strong growth

O: Group B – Lighting and Wiring1)

Consistent revenue growth hampered by below-average return on invested capital


1) Includes 6 companies with financials for three full years from December 31, 2014-December 31, 2017; 2) YoY 2017, YoY 2016, 3-year CAGR 2015-2017





GROWTH Revenue growth [year-on-year] 7.7% 5.2% 5.7%








PROFITS EBITDA margin 14.4% 14.3% 13.7%






WINNER’S METRICS

ROIC-WACC 13.3% 18.6% 16.1%

WINNER’S METRICS

ROIC-WACC 3.9% 4.8% 4.7%



2017 2016 2015-2017 Ø

2017 2016 2015-2017 Ø










WINNER’S METRICS

ROIC-WACC 2.4% 1.0% 1.5%

Invested capital growth 6.6% -1.8% 1.8%

2017 2016 2015-2017 Ø





P: Group C – Roofing, Siding, Lumber, and Other Materials1)

Consistent top-line growth and improving profitability has helped contain segment risk metrics

Q: Group D – Concrete, Minerals, Clays, and Stone1)

Segment with the highest ratio of firms earning their cost of capital at 95%, characterized by steady profitability and growth









WINNER’S METRICS

ROIC-WACC 4.7% 5.4% 3.1%


2017 2016 2015-2017 Ø



GROWTH Revenue growth [year-on-year] 20.2% -8.0% -4.9%







WINNER’S METRICS

ROIC-WACC 1.5% -2.1% -2.4%

Invested capital growth 6.1% 0.0% -1.0%

2017 2016 2015-2017 Ø





R: Group E – Glass, Windows, Doors, and Flooring1)

Depressed economic profit margins relative to other segments has contributed to lower shareholder returns

S: Group F – Construction Metals1)

Segment financials improved markedly in 2017, benefiting from the rebound in commodity prices


GROWTH Revenue growth [year-on-year] 13.0% -7.5% 3.5%







WINNER’S METRICS

ROIC-WACC 0.4% 0.9% 0.3%


2017 2016 2015-2017 Ø


WE WELCOME YOUR QUESTIONS, COMMENTS AND SUGGESTIONS

AUTHORS

Gareth [email protected]

Christopher HoyesSenior Project [email protected]

Christopher NeanderSenior Consultant

Joseph WilesSenior Consultant

Credits and copyright

This publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable for any damages resulting from any use of the information contained in the publication.

© 2018 ROLAND BERGER GMBH. ALL RIGHTS RESERVED.


About us

Roland Berger, founded in 1967, is the only leading global consultancy of German heritage and European origin. With 2,400 employees working from 34 countries, we have successful operations in all major international markets. Our 50 offices are located in the key global business hubs. The consultancy is an independent partnership owned exclusively by 220 Partners.

Navigating Complexity Roland Berger has been helping its clients to manage change for half a century. Looking forward to the next 50 years, we are committed to supporting our clients as they face the next frontier. To us, this means navigating the complexities that define our times. We help our clients devise and implement responsive strategies essential to lasting success.


PublisherROLAND BERGER LLC300 N. LaSalle StreetSuite 2000Chicago, IL 60654United States+1 312 662-5500

www.rolandberger.com

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