德银-美股-建筑与建材行业-德银全球产业与材料会议要点-2019.6.2-49页 (2).pdf

2 June 2019Deutsche BankResearch North America United States Industrials Building&Building Products Industry Building&Building Products Date Industry Update Deutsche Bank Global Industrials&Materials Conference10th Annual Global Industrials&Materials SummitOn June 5th&6th Deutsche Bank will be hosting the tenth annual Global Industrials&Materials Summit at The Westin-Chicago River North in Chicago,IL.The Confer-ence will feature senior management from over 100 industrial companies as well as panel discussions and one-on-one meetings.If you have not already registered,please contact your Deutsche Bank sales representative.For additional details please,visit the conference website(here).Conference Guide Homebuilding,Building Products&Building MaterialsThis report is meant to serve as a reference guide summarizing the homebuilding,building products and building materials companies in attendance.Additionally we provide recent developments and questions/themes that may be helpful in meet-ings.Conference schedule on pages 4 and 5Building ProductsJELD-WEN Holding,Inc.(JELD),HOLD rated,$22 PTMasonite International(DOOR),not coveredArmstrong World Industries(AWI)Advanced Drainage Systems(WMS),HOLD rated,$29 PTContinental Building Products(CBPX),HOLD rated,$28 TPBuilding Products DistributorsSiteOne Landscape Supply(SITE),BUY rated,$75 TPBuilders FirstSource(BLDR),HOLD rated,$17 TPHomebuildersToll Brothers(TOL),HOLD rated,$35 TPBuilding MaterialsMartin Marietta Materials(MLM),BUY rated,$244 TPU.S.Concrete(USCR),not coveredNishu SoodResearch Analyst+1-212-250-4756Timothy DaleyResearch Analyst+1-212-250-7278Marius MorarResearch Associate+1-212-250-1659Deutsche Bank Securities Inc.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MCI(P)066/04/2019.Distributed on:03/06/2019 02:51:09 GMT7T2se3r0Ot6kwoPa2 June 2019Building&Building ProductsBuilding&Building ProductsPage 2Deutsche Bank Securities Inc.Valuation/RisksWe value the homebuilders by applying individually calibrated price-book multiples to our forecasted F12M book values.Our base multiple is 1.75x,which is then adjusted for company-specific factors.We value building products and building materials companies under coverage using a blended methodology(DCF,EV/EBIT-DA,P/E)and then take the approximate midpoint.Risks are employment trends,consumer confidence,home sales volumes and price appreciation/depreciation and foreclosures.2 June 2019Building&Building ProductsBuilding&Building ProductsDeutsche Bank Securities Inc.Page 3Table Of ContentsConference Schedule.4Building Products.6JELD-WEN Holding,Inc.(JELD),HOLD rated,$22 PT.6Masonite International(DOOR),not covered.10Armstrong World Industries(AWI).13Advanced Drainage Systems(WMS),HOLD rated,$29 PT.16Continental Building Products(CBPX).20Building Products Distributors.23SiteOne Landscape Supply(SITE),BUY rated,$75 TP.23Builders FirstSource(BLDR),HOLD rated,$17 TP.27Homebuilders.32Toll Brothers(TOL),HOLD rated,$35 TP.32Building Materials.36Martin Marietta Materials(MLM),BUY rated,$244 TP.36U.S.Concrete(USCR),not covered.412 June 2019Building&Building ProductsBuilding&Building ProductsPage 4Deutsche Bank Securities Inc.Conference ScheduleFigure 1:Conference Schedule June 5th(Subject to change)7:00 a.m.Session One|Grand CSession Two|Prom ASession Three|Prom BSession Four|Prom C8:00-8:35 a.m.Westlake Chemical CorporationAlbert Chao-President&CEOSteven Bender-EVP&CFOSiteOne Landscape SupplyDoug Black-CEOUnion Pacific CorporationJennifer Hamann-SVP,FinanceMasTec,Inc.George Pita-CFO8:40-9:15 a.m.CabotErica McLaughlin-SVP&CFOBuilders FirstSource,Inc.Chad Crow-CEOKansas City SouthernJeffrey Songer-EVP&COOQuanta ServicesKip Rupp-VP,IR9:20-9:55 a.m.DowHoward Ungerleider-President&CFOToll Brothers,Inc.Martin Connor-CFOCSX CorporationJames Foote-President&CEOWillScot CorpBrad Soultz-CEO&PresidentTim Boswell-CFO10:00-10:35 a.m.Spartan MotorsDaryl Adams-President&CEORick Sohm-CFOJELD-WEN Holding IncGary Michel-CEOCanadian PacificNadeem Velani-CFOFederal SignalJennifer Sherman-President&CEOIan Hudson-SVP&CFO10:40-11:15 a.m.BorgWarnerFred Lissalde-CEOKevin Nowlan-CFOGlatfelter CompanyDante Parrini-Chairman&CEOSam Hillard-SVP&CFOForward AirTom Schmitt-CEOMike Morris-CFOLinamarLinda Hasenfratz-CEOMark Stoddart-CTO&EVP Marketing11:20-11:55 a.m.ColfaxChris Hix-CFOBall CorporationJohn Hayes-CEOCanadian National Railway CompanyKeith Reardon-SVP of Consumer ProductsKBR,Inc.Mark Sopp-EVP&CFOFarhan Mujib-President,Energy Solutions Delivery12:00-12:35 p.m.12:35-1:20 p.m.Session One|Grand CSession Two|Prom ASession Three|Prom BSession Four|Prom C1:25-2:00 p.m.General Electric CompanyJamie Miller-SVP&CFOMasonite International CorpRuss Tiejema-CFOMKS InstrumentsJohn Lee-President&COOTerex CorportionJohn Garrison-Chairman,President&CEO2:05-2:40 p.m.Stanley Black&Decker,Inc.Don Allan-EVP&CFOWerner Enterprises,Inc.John Steele-CFOMcDermott International,Inc.Stuart Spence-CFO2:45-3:20 p.m.Armstrong Worldwide IndustriesVic Grizzle-CEOBrian MacNeal-CFODelphi TechnologiesRick Dauch-CEOVivid Sehgal-CFOXPO Logistics,Inc.Matt Fassler-Chief Strategy OfficerTarget HospitalityJames Archer-President&CEOAndrew Aberdale-CFO3:25-4:00 p.m.EntegrisBruce Beckman-SVP,FinanceLandstar System,Inc.Jim Gattoni-President&CEOKevin Stout-VP&CFO4:00 p.m.Day 1 Presentations concludeCocktail reception hosted by Deutsche Wealth Management,Grand Court,River Level IILunch,Grand Ballroom,River Level II-service promptly concludes at 12:35 p.m.Eaton Corporation PLCRick Fearon-CFOWednesday,June 5,2019Registration&Breakfast-Grand Ballroom,River Level IISource:Deutsche Bank2 June 2019Building&Building ProductsBuilding&Building ProductsDeutsche Bank Securities Inc.Page 5Figure 2:Conference Schedule June 6th(Subject to change)7:00 a.m.Session One|Prom ASession Two|Prom BSession Three|Prom C8:00-8:35 a.m.Martin Marietta Materials,Inc.Ward Nye-CEOJim Nickolas-CFOCNH IndustrialHubertus Muhlhauser-CEOMax Chiara-CFOAir Products and Chemicals,Inc.Scott Crocco-EVP&CFO8:40-9:15 a.m.Eastman Chemical CompanyCurt Espeland-CFO9:20-9:55 a.m.YRC Worldwide Inc.Darren Hawkins-President&CEOStephanie Fisher-CFOTennecoBrian Kesseler-CEOJason Hollar-CFOOmnova SolutionsPaul DeSantis-SVP,CFO&Treasurer10:00-10:35 a.m.Ryder SystemRobert Sanchez-Chairman&CEOQuaker Chemical Michael Barry-CEO&PresidentMary Hall-CFO10:40-11:15 a.m.Atlas AirSpencer Schwartz-EVP&CFOSonoco Products CompanyJulie Albrecht-VP&CFORogersBruce Hoechner-CEOMike Ludwig-CFO11:20-11:55 a.m.Teekay LNGRyan Hamilton-Director,FinanceO-I John Haudrich-CFOFerroPeter Thomas-Chairman,President&CEO12:00-12:35 p.m.Saia IncFrederick Holzgrefe-President&COOCelanese CorporationScott Richardson-SVP&CFOW.R.Grace&Co.Hudson La Force-CEOBill Dockman-SVP&CFO12:35 p.m.Thursday,June 6,2019Registration&Breakfast-Grand Ballroom,River Level IIPresentations Conclude(meetings conclude at 4:00pm)Box Lunches in Grand Ballroom,River Level IISource:Deutsche Bank2 June 2019Building&Building ProductsBuilding&Building ProductsPage 6Deutsche Bank Securities Inc.Building ProductsJELD-WEN Holding,Inc.(JELD),HOLD rated,$22 PTManagement in AttendancenGary Michel,President and CEOnKarina Padilla,SVP Corporate Planning and AnalysisnChristopher Teachout,IRCompany DescriptionJELD-WEN is one of the largest door and window manufacturers in the world.Their products are used in new construction,R&R of residential homes,and,to a lesser extent,non-residential buildings.The company operates 115 manufacturing facili-ties in 19 countries across North America,Europe,Australia and Asia(Australasia).Sales from North America were roughly 57%while sales from Europe and Australa-sia were 28%and 15%,respectively.The company operates in three reportable seg-ments:Doors(66%),Windows(21%),and Other(13%).Figure 3:Revenue and Growth-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%30.0%02004006008001,0001,2001,400Revenue(mm)Sales Growth YoY(%)Organic Sales Growth YoY(%)Source:Deutsche Bank,Company ReportsFigure 4:End Market ExposureNA Resi New29%NA Resi R&R26%NA Non-Resi 1%Europe30%Australasia14%Source:Deutsche Bank,Company ReportsFigure 5:Recent GuidanceN Ne ew w 20 01 19 9 Gu ui id da an nc ce eP Pr re ev vi io ou us s 20 01 19 9 Gu ui id da an nc ce eRevenue Growth1%-5%1%-5%Adjusted EBITDA$475mm-$505mm$470mm-$505mmCapital Expenditures$75mm-$80mm$140mm-$160mmSource:Deutsche Bank,Company ReportsRecent DevelopmentsVolume headwinds hold 1Q19 in lineStabilization of earnings outlook is a positive after a tough 20182018 was tough for building products companies as increasing input costs were followed by demand volatility towards the end of the year.For JELD-WEN,there were additional pressures from Australian housing market weakness,and some operational difficulties in the US windows business.After a tough 2018,1Q19 earn-ings showed stabilization with results coming in about in line with expectations and management maintaining full-year guidance.While expectations were low coming 2 June 2019Building&Building ProductsBuilding&Building ProductsDeutsche Bank Securities Inc.Page 7into the quarter(modest sales growth,margins down yr/yr),1Q19 still represents a potential inflection point for the companys fundamentals.1Q19 did some challen-ges with North American volumes down 4%;however,the decline is less ominous when considering the volatility in housing and poor weather in 1Q19;also,pricing momentum mostly offset the volume headwinds.Stabilization in the earnings out-look in 1Q19 despite volume headwinds is encouraging;however,we think further risks may lie ahead in terms of volatile end-market demand.This risk is exacerbated by the back-half loaded nature of FY19 guidance so for now we maintain our Hold rating.(link)2 June 2019Building&Building ProductsBuilding&Building ProductsPage 8Deutsche Bank Securities Inc.Key Questions/Themes1.Price has been strong in North America over the last three quarters.Do you expect the strength to continue,or do you expect some moderation going forward?2.What end markets do you expect the growth to come from in the various geographical areas?3.Could you talk about the mix to the retail channel,whats driving it,and when do you expect it to be annualized?4.Could you give us an update on the manufacturing footprint rationalization?Is the timeline the same you highlighted when you launched the process?5.JELD-WEN has talked about JEM for a few years.What has changed in how you approach JEM?What is different?6.Could you give us some examples of some of the JEM projects you have in the pipeline?7.Are you still confident in the 15%EBITDA margin target you laid out,and what needs to happen to achieve it?8.The tariff impact is baked into your guidance.How much aluminum do you use and do you expect any relief from the reversal of the aluminum tariffs?9.Do you have any labor shortages or any difficulty finding skilled labor?10.In what areas do you see the most cost inflation,and has your outlook changed in any way since the beginning of the year?11.Could you describe the strategic vision behind the VPI acquisitions and the potential for revenue synergies?12.Will future acquisitions be more focused on the adjacent products or the core ones?13.What are some other adjacencies you would like to enter via acquisitions?2 June 2019Building&Building ProductsBuilding&Building ProductsDeutsche Bank Securities Inc.Page 9JELD Notes2 June 2019Building&Building ProductsBuilding&Building ProductsPage 10Deutsche Bank Securities Inc.Masonite International(DOOR),not coveredManagement in AttendancenRussell Tiejema,CFOnFarand Pawlak,Director IRCompany DescriptionTampa,FL based Masonite is a residential and door manufacturer serving 9,000 customers in 64 countries.The company develops a wide range of interior,exterior,and patio doors,maintaining its product competitiveness through its Masonite Innovation Center,one of the top R&D facilities in the industry.With 32 facilities,Masonite is a vertically integrated company through all of its door and architectural product lines.In 2018,the company counted approx.$2.2 bn in net sales,with 67%exposure in the NA Residential Market,17%in Europe,15%in Architectural Prod-ucts,and other.The Doors segment end market is split between Residential R&R and New Construction.Figure 6:Revenue and Growth-4%-2%0%2%4%6%8%10%12%14%0100200300400500600Revenue(mm)Revenue YoY(%)Source:Deutsche Bank,Company ReportsFigure 7:Gross Profit Margin(%)-15%-10%-5%0%5%10%15%20%25%30%35%40%Source:Deutsche Bank,Company Reports2 June 2019Building&Building ProductsBuilding&Building ProductsDeutsche Bank Securities Inc.Page 11Key Questions/Themes1.Can you talk about the trends you see in the decline of the number of doors per home and what you can do to mitigate the impact?Could you give us an update on your restructuring plant?Where are you in the process,and how long will it take?2.Could you give us an update on the Advisar service you launched two years ago that allows you to sell doors directly to customers online?How is it doing so far?3.Could you talk about the investments youve made in digital tools and what youve learned from your UK acquisitions that do business online?4.Can you tell us about some of the projects youve undertaken to automate some of your facilities?How many years does it take to recoup the investments through cost savings?What are your plans on automating the door facing components processes?5.Can you give us an overview of your Mvantage operating system?In how many of your plants have you implemented it so far?6.Are you experiencing labor constraints?How big of a driver this on the decision to automate?7.In Architectural,which end markets are doing well and which ones not so well?8.What is the backlog in the Architectural business,and how has it changed over the past year?9.In which commodities have seen the highest inflation?What is your price-cost relation so far this year,and what are your expectations for the rest of the year?10.What are your expectations for the Canadian and UK market?11.Can you talk about some of the productivity initiatives you took last year and the benefits youve realized?12.Could you talk about the businesses youve divested and are planning to divest in the UK?13.Could you give us an update on the wholesale business in North America?Has the decline stabilized?14.What led to the loss of the retail business last year?Did you prioritize price over volume?Are there other products at risk?2 June 2019Building&Building ProductsBuilding&Building ProductsPage 12Deutsche Bank Securities Inc.DOOR Notes2 June 2019Building&Building ProductsBuilding&Building ProductsDeutsche Bank Securities Inc.Page 13Armstrong World Industries(AWI)Management in AttendancenVi