Introduction#

As energy costs rise and inflation expectations increase, Barclays has adjusted its approach to European building materials stocks. The firm emphasizes the need for investors to be selective, focusing on companies with strong pricing power.

Rockwool: Strong Pricing Power#

Rockwool, rated "overweight" by Barclays, is heavily reliant on energy, which makes up 21% of its revenue—the highest among its peers. This energy dependence, however, also highlights its ability to pass on costs to customers. Following the gas price surge in 2022, Rockwool has shown it can maintain profitability, and with 75% of its energy exposure hedged for the first half of the year, it is well-positioned for the near future.

Holcim: Conservative Hedging Strategy#

Holcim, also rated "overweight," has the lowest energy exposure among cement companies at around 8% of its revenue. The company has taken a cautious approach to hedging, locking in 60-70% of its energy needs through long-term contracts. This strategy, combined with minimal exposure to the Middle East market, positions Holcim to sustain pricing gains despite rising energy costs.

Heidelberg Materials and Vicat: Managing Geopolitical Risks#

Heidelberg Materials, rated "overweight," has less than 2% exposure to the Middle East, which limits its geopolitical risk. The company hedges 50-60% of its energy needs, balancing sensitivity to gas prices with a buffer against volatility. Similarly, Vicat, also rated "overweight," secures most of its energy through long-term contracts, providing a defensive cost structure. With minimal Middle East exposure, Vicat is insulated from current geopolitical tensions.

Saint-Gobain: Market Share and Cost Protection#

Saint-Gobain rounds out Barclays' list of preferred stocks, benefiting from strong market share in key product categories. With gas accounting for about half of its energy expenses and over 50% of its exposure hedged, the company has solid near-term cost protection. This positions Saint-Gobain well should energy disruptions continue to impact the market.