GLG News by Building Materials Industry Experts

Kirk CoynePresident and Chief Executive OfficerKSC Ventures Inc

Cemex growing into Industry Leader

December 20, 2006

Analysis of:Cemex moves forward with hostile Rinker bid | money.cnn.com

Cemex is pursuing its aggressive growth strategy, both through vertical integration (into concrete) and horizontal integration (into aggregates) with its takeover effort for Rinker.

Cemex is establishing itself as the clear leader in the US construction materials industry, and becoming a global giant in the sector as well.

Cemex's move underscores some of the strategic changes in progress or its on the horizon in the global and U.S. construction materials industry.

David GordonPrincipalChannel Marketing Group, Inc.

Home Depot Buying at Top of the Market

August 22, 2006

Analysis of:Home Depot Profit Rises on Sales to Professional Builders | www.bloomberg.com

Home Depot recently announced its Q2 results which were positively received due to sales and profit growth.  Its HD Supply division was bolstered with its Hughes Supply acquisition.  While the company expects to grow its business through acquisitions of distributors to stabilize revenues, with the decline of the residential market and the boom in commodity pricing, is Home Depot buying at the top of the market and how does the company's knowledge of retail translate to an understanding of distribution markets where relationships and project management are key?  How does a company that is used to double digit net margin in a retail business manage distribution businesses that are lucky to achieve 5% net margins ... and manufacturers are already providing Home Depot the lowest acquisition costs and highest rebates in the industry?

David GordonPrincipalChannel Marketing Group, Inc.

Emerging Giants Buy-In or Sell Direct

August 21, 2006

Analysis of:Emerging Giants | www.businessweek.com

The article focuses on the threat from international companies to enter the U.S. market with lower cost and/or more effective products for the industrial markets.

A number of examples are highlighted, but the trend in them is that the “new” company sells direct, sells to only a few customers (i.e. Home Depot) or has bought an incumbent.

While the threat is significant to disrupt the market, the greatest threat is that price (and margins) will decline although minimal market share will change unless the international firm buys into the market as the distribution channel is the key to success for these companies.

David GordonPrincipalChannel Marketing Group, Inc.

An Electrically Green House Means More High Tech

August 18, 2006

Analysis of:Energizing a 'green' movement: Brokers, builders tout environmental focus as home energy costs soar | www.marketwatch.com

The article focuses on the increased interest in energy efficiency, especially for homes.  While consumer mindshare of the issue has increased significantly due to increased energy costs and the advent of Eco-brokers, the current product marketplace is somewhat limited, and in many cases expensive, but a niche opportunity is available for those who focus on it.

David GordonPrincipalChannel Marketing Group, Inc.

Construction Material Challenges...Long term

August 2, 2006

Analysis of:Building materials in short supply | www.kentucky.com

The article references the material shortages that are occurring in the construction trades with particular focus on copper, lumber and cement. While perception is that shortages should either not exist or only exist for a short-term due to the downturn in the residential market, the boom in public and private commercial construction, coupled with international pressures and the Gulf Coast rebuilding, will continue shortages for the longer-term. This is the classic supply-demand conundrum.

David GordonPrincipalChannel Marketing Group, Inc.

Electrical Industry Material & Employment Challenges

August 2, 2006

Analysis of:Construction Booms As Material Shortage Looms | www.thebusinessledger.com

While the article focuses on the Chicago marketplace, this experience is being replicated throughout the country in major markets.  The commercial marketplace remains strong, with many distributors reporting significant project commitments for future release.  At the same time, raw materials prices have increased, with most of these increases being passed on to contractors, and every good contractor is completely booked (and can't hire people).  Combined, these factors are increasing construction costs.  For example, in Raleigh the school board looked at building a number of new schools but, when faced with the increased construction costs, needed to scale back its expectations.

David GordonPrincipalChannel Marketing Group, Inc.

Electrical Manufacturers Benefit from Construction Growth

July 28, 2006

Analysis of:US construction seen aiding manufacturers into '07 | www.investor.reuters.com

This is one of the few articles on the construction sector that I have seen that hits the nail on the head...the commercial construction market is booming while residential cools off...and the commercial construction market is much more important to the construction industry, and associated manufacturers, than the residential market.

The construction boom benefits a number of construction and industrial equipment manufacturers in the electrical industry as electrical materials are not a large percentage of a home's construction costs.

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060724:MTFH54288_2006-07-24_16-11-21_N24364646&type=comktNews&rpc=44

David GordonPrincipalChannel Marketing Group, Inc.

Will LEDs Shine Brightly

July 19, 2006

Analysis of:Shedding a new light on LEDs | money.cnn.com

For many years, lighting (known in the industry as lamps) have been either incandescent or fluorescent with the major manufacturers being Philips Lighting, OSRAM Sylvania (owned by Siemens) and GE Lamp.

Over the past 10 years a number of inventors have been experimenting with technologies to improve the energy efficiency and color rendering of lamps - from changing the spectrum to LED technologies.

The LED market is now a $4B market; however, it is focused in niche opportunities and is becoming more prevalent in high-end architectural lighting as well as retail lighting.  There are many advantages to LEDs, from energy efficiency to light output, as well as the ability to easily change color and the shape of the bulb (called an envelope).

The article infers that there is a significant opportunity for LEDs to become mainstream, and compete against incandescents and fluorescents. Due to this, venture capitalists see a significant opportunity.

David GordonPrincipalChannel Marketing Group, Inc.

Could GE Be Rexel's Exit Strategy

July 13, 2006

Analysis of:Rexel Set To Nearly Double U.S. Sales With GE Supply Acquisition | tedmag.com

Rexel, which is owned by three private equity firms, has recently made two acquisitions, with its largest this week (GE Supply).

Rexel plans to operate two competing brands, which is interesting that GE will allow another company to use its brand.  Further, there are purchasing commitments, and funding, from GE (Capital and Industrial/Consumer).

Could this be the seed of an exit strategy for the private equity companies - build the company, improve the profitability of the firm through reduction of duplication, help GE manufacturing divisions learn more about their competition and then GE, possibly through GE Capital, purchase the distribution arm (Rexel) in a couple of years thereby helping the manufacturing arms.  This has the potential to significantly improve GE revenue, and market share for GE Lamp and GE Industrial & Consumer at the detriment of Sylvania, Siemens, and Square D.

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