Barclays is urging a more discriminating approach to investing in European building materials names as energy costs climb and inflation expectations rise. The firm argues that the traditional sector playbook no longer fits the evolving risk environment, and it prefers companies that have shown they can transfer rising input costs to customers while maintaining pricing discipline.
Sector stance and selection criteria
Across its coverage, Barclays highlights the need to prioritize firms with demonstrable pricing power and robust energy risk management. The broker rates several names as "overweight," selecting those that combine either conservative hedging programs or long-term power arrangements with a record of protecting margins through price increases when energy costs spike.
Rockwool - energy-heavy profile but proven pricing strength
Rockwool sits at the high end of energy intensity within Barclays' scope, with energy representing roughly 21% of revenue. That significant exposure underscores vulnerability to energy-price swings, but Barclays points to the firm's track record from the 2022 gas shock as evidence of strong pricing power. The bank notes Rockwool was able to pass through cost hikes in that episode and is therefore viewed as better positioned than many peers to repeat that performance.
On the near-term hedging front, Barclays reports that approximately 75% of the company's gas and electricity exposure is hedged for the first two quarters of the year, offering a degree of earnings visibility while the broader energy situation evolves.
Holcim - low energy exposure and conservative hedging
Holcim is another Barclays "overweight" pick. Among the cement producers covered, it has one of the lowest energy intensities at around 8% of revenue. The company has secured a substantial portion of its exposure through conservative hedging arrangements - Barclays estimates 60-70% of energy exposure is locked in, primarily via long-term power contracts.
Barclays also points out Holcim's limited direct exposure to the Middle East, with roughly 1.5% of sales in that region, which reduces immediate geopolitical vulnerability. The broker believes Holcim is well placed to maintain the elevated pricing it achieved following the 2022 inflation cycle even as a new wave of energy costs emerges.
Heidelberg Materials - balanced hedging and limited regional risk
Heidelberg Materials holds an "overweight" rating from Barclays as well. The company has less than 2% of sales tied to the Middle East and does not operate domestically in the region, which limits direct geopolitical exposure. In terms of hedging, Heidelberg secures 50-60% of its energy exposure forward while keeping the remainder on spot markets. Barclays interprets this structure as leaving the company somewhat sensitive to gas-price movements but still protected by a meaningful forward cover.
Like its cement peers, Heidelberg showed the ability to pass through cost inflation aggressively in the last cycle. Barclays views that pricing discipline as now structurally embedded in the business.
Vicat - defensive cost structure via long-term contracts
Vicat is another cement name rated "overweight." The company typically hedges 6-9 months forward but secures the majority of its energy volumes through long-term contracts, which Barclays says provides one of the more defensive cost structures in the cement group. Vicat's exposure to the Middle East is modest - under 5% of sales - and it has no domestic operations in the region, leaving it relatively insulated from current geopolitical disruption.
Barclays positions Vicat as a beneficiary of the broader narrative that the cement sector now possesses structural pricing power, with the added comfort provided by the company’s long-term energy supply arrangements.
Saint-Gobain - market-share strength and energy hedges
Rounding out Barclays' preferred building materials roster is Saint-Gobain, also rated "overweight." The broker highlights the group's concentrated market share in core product categories as a foundation for sustained pricing power across its key markets. Energy-wise, gas makes up roughly half of Saint-Gobain's energy bill, and the company has hedged more than 50% of that exposure for the year, giving it meaningful near-term cost protection.
Barclays additionally notes a potential longer-term tailwind for Saint-Gobain should the current energy disruption persist and accelerate Europe's push for energy efficiency - a dynamic the broker says could boost demand for the group's products over time.
Implications
Barclays' analysis reframes how investors should approach the building materials sector in an environment of resurgent energy-cost pressure and rising inflation expectations. Rather than applying a broad sector call, the broker is steering clients toward those names that combine demonstrated pricing power with hedging or contracting strategies that create earnings visibility as energy markets remain uncertain.