Aggregates Manager Digital Magazine
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M&A REPORT • 19 however, 2010 and beyond had prom- ise. We saw people dust off their notes every year since and repeat this hope for the sector. The market established a bottom with modest gains in 2012 and 2013, and there is cautious optimism for 2014 and beyond. As residential construction bottomed out and showed improvement in 2012, there was hope; however, the absence of transportation funding at the state and federal level kept expectations in check. Residential improved again in 2013, and the consensus forecast is for strength in this sector for the next few years. The Portland Cement Associa- tion's forecast for cement is very bullish through 2018, as shown in Chart 6. Additionally, the outlook for overall construction put in place is very en- couraging for 2014 as shown in Chart 7. Federal highway funding has been flat since the expiration of SAFETEA- LU in the fall of 2009 as shown in Chart 5. The current federal transportation bill expires this fall, leaving uncertainty about future funding. There is con- cern that the political process, and not the need for maintaining the nation's bridges and roads, will control the de- bate and result in insufficient funding. At the same time, states are getting creative and increasing funding. At least 10 states including Arkansas, Maine, Maryland, Ohio, Nevada, Pennsylva- nia, Vermont, Virginia, Wisconsin, and Wyoming have enacted some combina- tion of tax increases, increased fees, or approved bonds as a way to raise funds for transportation spending. These fundraising efforts are only a start and do not solve the funding challenges; however, they represent a step in the right direction that may have influence on the national transportation funding discussion. Leverage ratios have also improved for the CMI companies with the medi- an net debt/EBITDA ratios approach- ing pre-recession levels. Cash levels have increased by nearly 47 percent Chart 5: Highway and street construction put in place $- $10 $20 $30 $40 $50 $60 $70 $80 $90 Billions - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Metric Tons (Thousands) $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Construction in Millions GDP in Billions GDP Chart 7: Total construction put in place Chart 6: U.S. cement consumption Source: FMI 1st Quarter Outlook 2014 Source: FMI 1st Quarter Outlook 2014 Source: USGS & PCA Note: USGS fi gures through 2013 contain all cement consumption, while PCA only forecasts consumption of portland cement.