In this report, S&P Global Ratings ranks its universe of rated global building material companies from strongest to weakest. We rank the companies by rating, outlook, stand-alone credit profile (SACP), business and financial risk profile, and liquidity assessment. Investment-grade companies are ranked by business risk profile, then financial risk profile. Speculative-grade companies are ordered by financial risk profile, then business risk profile. If companies are not distinguished by these factors, we list them alphabetically.

According to our corporate rating methodology, the final rating may vary from the SACP when factors such as government support, group consideration, or ratings above the sovereign are relevant. In cases where the SACP differs from the anchor--occurring in more than a quarter of the ratings--we have applied one or more modifiers, which may include that for liquidity. We have noted the anchor and active modifiers of each company for informational purposes only. For our more detailed analysis, please refer to the company-specific pages on RatingsDirect using the hyperlinks below.

As shown in our charts and comments (see the end of this report), most of our business risk assessments are closely correlated with the corresponding competitive positions. The likely variation is usually because of our higher assessment of the country risk, which constrains the competitive position. Government or group ownerships, as well as sovereign ratings, are explicit rating factors for about 4% of the companies.

For our sector outlook and analysis, please refer to Related Research.

The table and charts in this publication summarize the 105 entities we rate in the building material industry--29 investment-grade entities ('BBB-' and above) and 76 speculative-grade ('BB+' and below).

About 72% of building material companies are rated below 'BBB-'. Among these, roughly 51% are owned by financial sponsors with comparatively higher financial risk (see table 1, and charts 1 and 2).

Table 1

Chart 1

Chart 2

Approximately 79% of rating outlooks are stable, indicating a reasonable volume of rating headroom on average, which has been built over the past few years, alongside balance capital allocation (see charts 3 and 4). However, we note a significant reduction in the post-pandemic headroom, particularly in the speculative-grade category, as reflected in an increase in negative outlooks compared with a year ago. Currently, 14% of rating outlooks are negative (versus 7% last year), largely reflecting globally weakened business conditions and reduced cash flow generation. We note that about 70% of negative outlooks originate from the U.S. Conversely, the number of upgrades in 2024 (eight) doubled from 2023 (four), primarily driven by prudent debt management, financial policy, cost savings efforts, and effective pricing strategies, apart from a few region-specific uplifts and favorable end-markets. There was no change in downgrades (nine).

Chart 3

Chart 4

Our business risk profile assessments typically mirror our view of competitive positions in this sector (see chart 5).

Chart 5

The most common financial risk profile assessment in this sector is highly leveraged (see chart 6), reflecting companies with stretched balance sheets and sponsor-backed holding company loans.

About 38% of issuers have financial sponsor ownership (see chart 7). All the companies assessed as highly leveraged are rated 'B+' or lower.

Chart 6

Chart 7

Roughly 34% of the ratings incorporate one or more modifiers. This is often due to the comparative rating analysis that we use for credit considerations we have not already factored into the ratings. In other cases, our assessment of a company's financial policy refines the view of its risks beyond the conclusions derived from the standard assumptions in the cash flow and leverage assessments. For instance, this may capture the risks related to a company's appetite for large-scale debt-financed mergers and acquisitions or shareholder distributions whose amount and timing cannot be confidently predicted.

We consider most of our rated building material issuers have adequate or better liquidity (see chart 8), indicating the sector's good access to debt markets. Typically, the cash held by building material companies, combined with their cash generation and liquidity resources, will cover the uses of cash to which they have committed over the next 12 months by 1.2x or more.

Chart 8

The ratings and scores in this report are as of Jan. 28, 2025.

Related Criteria And Research

• Industry Credit Outlook 2025: Building Materials, Jan. 14, 2025
• Sector-Specific Corporate Methodology, April 4, 2024
• Corporate Methodology, Jan. 7, 2024
• Group Rating Methodology, July 1, 2019
• Corporate Methodology: Ratios And Adjustments, April 1, 2019
• Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015