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    Diversified Industrials Q2 2020

    Q2 2020 Diversified Industrials

    Industry Trends

    Consumer Spending Continues on Big-Ticket Items

    Automakers reported steep drops in sales during the 2nd quarter due to the pandemic. Consumer spending for these big-ticket items picked up once the dealerships were able to reopen. Car sales have rebounded to pre-pandemic forecasts since the first shutdowns occurred in March.1

    Additional Boeing Orders Canceled

    Boeing is reopening manufacturing plants, although customers continue to cancel and delay orders for new planes. Over 300 Boeing 737 Max planes were canceled by customers in the first half of the year. Boeing’s backlog has decreased to 4,552 planes.2 3

    Industrial Production Index Remains Below Pre-Pandemic Levels

    Many factories are starting to reopen partially. As a result, the industrial production increased by 1.4% in May. Total production levels are still down 15.4% from where they were before the pandemic. In June, IPI increased 5.4% but remained 10.9% below its pre-pandemic levels reported in February. The performance of Q2 2020 is down 42.6% on an annualized rate the largest quarterly decrease since WWII.4

    Single-use Plastic is Seeing a Resurgence

    Single-use plastic bags, wraps, and other hard-to-recycle items have surged amid the pandemic. Efforts to fight the virus are boosting sales for plastics makers. Consequently, the plastics industry is citing the pandemic to lobby against bans, asserting that their products preserve hygiene.5

    Toilet Paper Continues to Ramp Up Production

    The paper goods company Georgia-Pacific is producing 1.5 million rolls more toilet paper per day than they were before the pandemic. Yet, there is still a shortage across the United States, despite producing toilet paper 24 hours a day, seven days a week, with faster shipping than usual. It is estimated consumers will use 140% more toilet paper this year due to staying home during the pandemic.6

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Lummus Technology Business of McDermott
    • Rhone Capital, LLC; Haldia Petrochemicals Limited
    • $2,725.00
    • Pope MGP, Inc./Pop EGP, Inc/Pope Resources, A Delaware Limited PartnershipLimited
    • Rayonier, Inc.
    • $552.23
    • R.H. Sheppard Co., Inc.
    • Bendix Commercial Vehicle Systems, LLC
    • $149.50
    • Elliot Sawmilling Co., Inc.
    • Canfor Southern Pine, Inc.
    • $110.50
    • Consumer Packaging Group Business of Greif, Inc.
    • Graphic Packaging International, LLC
    • $85.00
    • Champion Bus, Inc./El Dorado National Kansas, Inc.
    • Forest River, Inc.
    • $49.00
    • Rapak, LLC
    • TriMas Corporation
    • $12.00
    • Energy Recovery, Inc.
    • Raymond James & Associates, Inc.
    • $11.28
    • Refrigerated Solutions of Standex International Corporation
    • Ten Oaks Group
    • $11.00
    • PeakLogix, Inc.
    • Alta Equipment Group, Inc.
    • $7.70

     

    Source S&P Capital IQ as of 7/15/2020 and PCE Proprietary Data

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    Data Assumptions

    This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

    Glossary

    EBIT - Earnings Before Interest and Taxes
    EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
    LTM - Last Twelve Months
    TEV - Total Enterprise Value

    Sources:

    1. “Consumer Appetite for Cars, Homes Bolsters U.S. Economy,” Sarah Chaney, The Wall Street Journal, July 15, 2020.
    2. “Boeing To Reopen Some Production Plants with New Worker Safety Protocols,” National Public Radio, April 17, 2020.
    3. “Boeing 737 Max Cancellations Climb Again in the Dismal First Half of the Year,” CNBC.com, July 14, 2020.
    4. The Federal Reserve, Industrial Production and Capacity Utilization, July 15, 2020.
    5. “Single-use Plastic is Back in the Pandemic Era,” The Wall Street Journal, June 29, 2020.
    6. “Toilet Paper Shortage: When Will it End?,” The Atlanta Journal-Constitution, May 3, 2020.

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