Industrial and Construction Services Newsletter - Q3 2020

TKO Miller Market Analysis 

Industrial Services: activity in the industrial services and construction markets returned to positive monthly YoY growth in Q2 and Q3, albeit at lower levels due in large part to delays in ongoing projects and cancellations of planned summer/fall projects. The proprietary TKO Miller Industrial & Construction Services Index shows industry valuations increasing in 3Q20, but not quite returning to historic levels
Non-Residential Commercial Construction: growth in key commercial construction end markets such as lodging and office space has remained in red figures in recent months, continuing the trend of abysmal YTD spending figures, with expectations for Q4 to be as low, or lower, due to expected year-end cyclicality
Construction Spending: the decline in overall spending figures in Q2 and Q3 was more moderate than expected as many believe that the worst part of the COVID-19 downturn is over, and construction spending will continue for the foreseeable future at the current, slightly-lower level
Backlog: companies are still working through robust pre-COVID backlogs, meaning major slowdowns are yet to be seen; as bidding activity and pipelines dry up, future backlogs are expected to be significantly reduced, and spending figures are estimated to drop off and have larger adverse impacts in 2021/22
Private Sector: TKO Miller expects the timing of a full economic recovery to remain a moving target well into 2021/22, disproportionately affecting private sector construction spending as long-term uncertainty and negative structural trends in key end markets will funnel private investment elsewhere
Public Sector: significant budget gaps in both state and federal budgets will limit the amount of construction spending approved in coming months, but TKO Miller expects that a federal aid approval prior to 2Q21 and increased state revenues will stabilize markets, albeit the effects may not be seen until 2022
Conclusions: 2020 is still maintaining a modest amount of industry spending due to less shutdown-related declines and stronger end market growth than expected, while a 2021 outlook is far bleaker with limited insight into federal aid and substantially weaker backlogs driving expected declines
Forecast: TKO Miller expects 2020 spending to remain flat, while 2021 is expected to decline roughly 7.0-9.0%

Industrial and Construction Services Transactions

Jul 2020 – Volvo CE to Divest Blaw-Knox Paver Business to Gencor Industries

Volvo Construction Equipment has signed an agreement to divest the North American Blaw-Knox paver business and associated assets to leading asphalt equipment manufacturer Gencor Industries. The deal, which is expected to be finalized in the fourth quarter of 2020 will allow Gencor to manufacture and develop Volvo CE’s current North American paver product line and market it under the Blaw-Knox brand. Gencor has announced that it will continue marketing and servicing the Blaw-Knox paver line through selected Volvo CE dealers in North America.

By Timothy Oleszczuk on Oct 16, 2020 11:06:13 AM