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More On Recent Acquisition by Saint-Gobain

GCP to help Saint-Gobain target construction sustainability

Al Greenwood


HOUSTON (ICIS)–Saint-Gobain expects its pending $2.3bn acquisition of GCP Applied Technologies will help it capitalise on rising demand for construction materials that can make homes and buildings more energy efficient and sustainable, an executive said.

The boards of both companies approved the deal, and Saint-Gobain expects to close on the acquisition at the end of 2022.

The GCP acquisition falls in line with Saint-Gobain’s focus on light construction and sustainability, the subject of its investor-day presentation in October, said Mark Rayfield, CEO of Saint-Gobain North America. He made his comments in an interview with ICIS.

GCP makes concrete admixtures and cement additives, and these can lower the carbon emissions produced from making concrete.

Concrete produces a lot of carbon dioxide (CO2), accounting for about 8% of the world’s emissions of carbon, according to Chatham House, a UK-based think tank.

“By adding additives and admixtures to cement construction in both infrastructure and commercial construction, you’re decarbonising that industry significantly and driving towards a more sustainable building practice,” Rayfield said. He estimates that these products can reduce the carbon intensity by a third or even higher versus traditional concrete.

Saint-Gobain already produces concrete admixtures and cement additives through its Chryso business, which it acquired earlier this year for €1.02bn. Much of Chryso’s footprint is in Europe and the Middle East. GCP complements this with its larger presence in North America, Asia-Pacific and Latin America.

“This is really building a significant global leader in this type of construction-chemical business across Saint-Gobain,” Rayfield said.

GCP also makes products used in fire protection, roofing underlayments and building envelopes. These products prevent air leakage, water damage and fire.

Saint-Gobain already makes these products, but the GCP acquisition will give the company a larger selection to meet the evolving needs of the construction industry.

The construction industry accounts for 40% of global emissions of carbon dioxide (CO2), and 120 countries have committed to carbon neutrality, Saint-Gobain said during its recent investor day.

To achieve those carbon-neutrality goals, policy makers will impose stricter energy-efficiency standards for buildings. On top of that, some companies are adopting their own energy-efficiency goals independent of government, and these targets could filter down to any buildings they renovate or construct.

Energy efficiency will put new demands on the performance of buildings. To meet those demands, companies will approach building design from a standpoint of systems and not from one of individual products.

“The world you and I grew up in was product, product product,” Rayfield said. “The world we are going into is systems and solutions.”

The GCP acquisition will help Saint-Gobain provide these companies with such systems, be it roofs or facades. The systems will make homes and buildings consume less energy, last longer and feel more comfortable.

For residential construction, the US is at a good level of activity, Rayfield said.

However, it has not returned to the highs it reached before the financial crisis of 2007-2008. The following chart shows new housing starts in the US. Figures are in thousands of units and they are not seasonally adjusted.

Source: US Census Bureau

In the years following the financial crisis, the US construction industry has not built enough houses to keep up with the country’s demographics. Based on the rate of family creation, Rayfield estimates that the construction industry underbuilt by 4m houses.

The rate of housing construction is still good, but it is being moderated by supply-chain constraints, labour shortages and limited availability of land, he said.

For nonresidential construction, spending has surpassed its highs from the time of the financial crisis. However, it is still below pre-pandemic highs, as shown in the following table. Figures are in millions of dollars and are not seasonally adjusted.

Source: US Census Bureau

Nonetheless, Rayfield noted signs of recovery. “We’ve seen a lot nonresidenial construction in warehousing and those types of spaces that support the order-from-home type of environment,” he said.

At the same time, companies are renovating revamping offices so they can accommodate post-pandemic work habits.

“You’ll see the market in different areas go at different speeds, but I think it is starting to recover now,” Rayfield said.

That recovery should receive a boost from this year’s $1tr infrastructure package.

Construction uses several coatings, adhesives, sealants and elastomers (CASE), which are important chemical end markets.

The white pigment titanium dioxide (TiO2) is used in paints.

For polymers, expandable polystyrene (EPS) and polyurethane (PUR) foam are used in insulation.

Polyurethanes are made of methylene diphenyl diisocycanate (MDI), toluene diisocyanate (TDI) and polyols.

High density polyethylene (HDPE) is used in pipe. Polyvinyl chloride (PVC) is used to make cladding, window frames, wires and cables, flooring and roofing membranes.

Insight by Al Greenwood