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Company ratings agency Standard & Poors (S&P) has published a report that says the European building materials sector is wrestling with difficult and uncertain end markets, and increasing input and fixed cost inflation is likely to persist for the next 12-18 months.

Light building product manufacturers continue to outperform heavy material producers and, in S&P’s opinion, companies with exposure to renovation, remodelling, and improvement (RMI) should continue to perform strongly.

The report says light product manufacturers and distributors also tend to be able to pass on cost increases more easily than the more commoditised heavy material producers.

S&P sees the credit quality outlook in the building materials sector as relatively stable because most businesses have already reduced their cost base substantially, which should allow them to weather an extended period of weak demand.

In S&P’s opinion, building materials companies will need to look outside of Europe – particularly to Latin America and Asia Pacific – for respectable rates of economic growth.

S&P has pushed back its forecast for a recovery in the sector to 2014.

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