New home sales were up 16% in April, according to the National Association of Home Builders (NAHB). That sounds like good news, but read the fine print and you learn that April 2007 sales were 11% below 2006 levels, and that building permits are down sharply from a year ago. “The pattern of building permits clearly shows that the dramatic downward correction in housing production still is under way,” says NAHB chief economist David Seiders.
So how do you explain the concrete business, which is in the midst of an historical boom? The difference is that the concrete industry went through a tough time in 2002 as the housing industry roared along feeling invincible. Just when someone insists that a new paradigm is upon us, the cycle comes back around. The concrete industry's point in the cycle in 2007 is almost all good, as revealed by our survey of the United States' top concrete contractors. What does this year's data reveal? A great year in 2006 and no hint of a slowdown in 2007. But what about 2008, I asked JH Concrete's Jerry Holtschlag. “Boy! We'd have a lot more money if we could look that far ahead,” he said.Revenue
Concrete-related revenue for the CC100 contractors was up a whopping 27% in 2006—and that follows a 19% rise in 2005. Since the low point in 2002, concrete revenue for the CC100 has gone from $5.1 billion to $8.2 billion, an increase of 61% in only four years. Based on our review of the entire concrete market last fall (see Gazing into a Concrete Ball November 2006), the CC100 contractors represent about 7% of the entire $117 billion concrete industry.
Total revenue for the CC100 contractors was up only about 11% in 2006 from 2005, although that's a bit misleading, since some contractors have moved on and off the list. The total 2005 revenue for the contractors on this year's list was $14.2 billion, meaning total sales rose in 2006 by 21%.
In a reversal of a trend from the past several years, the percentage of work that was directly concrete related increased in 2006. This number is always a bit skewed by the several large general contractors in the survey who self-perform their concrete work. So the 48% of the total revenue for all 100 contractors that is from concrete work seems to indicate two things: that the larger GCs in the survey are doing more concrete work and that the pure concrete contractors have grown so rapidly this year that their numbers are dominating.
An even more incredible number is the increase in revenue for the top 20 “pure” commercial contractors—those that earn the majority of their revenue from structural work and commercial slabs. Those 20 contractors saw an increase of 48% in total revenue in 2006 from 2005, with seven having increases greater than 25% and only two of the 20 companies seeing declines.Charts & GraphsTypes of work
As shown in this bar chart , 37% of the concrete revenue for the CC100 was from structural work. That's up from 31% of the total in 2005. Slab revenue was at 15% in 2006, down from 20% the year before. This shift is due to a huge increase in revenues from construction of concrete parking structures and concrete frame high-rises (more than $1 billion), while the dollar volume earned on commercial slabs dipped slightly.
Although the percentage of work among the CC100 due to tilt-up construction continues to rise—from $626 million in 2005 to $667 million in 2006—this 6.5% increase is less than the overall rise in revenue. Interestingly, tilt-up still seems to be a regional phenomena, with 8 of the top 10 contractors being in Florida, Texas, or Arizona—and the other two doing most of their tilt-up work in those states.
Decorative concrete, which still represents only about 1% of the total for the CC100, did increase 15%—again less than the overall increase. Decorative work remains primarily the purview of smaller contractors, although there are a couple of larger contractors (such as Penick and PBC) that do a lot of decorative work.Charts & GraphsGrowth
Several contractors enjoyed (or suffered through) spectacular growth in 2006, with five companies having revenue increases more than 90%. Of the CC100 companies, only seven saw a decrease in revenue from 2005, making this the best year since 2000, at the end of the previous construction boom. Comparing these numbers in the bar chart, 2006 looks nearly identical to 2000. Could this mean that 2007 will look like 2001, where suddenly 27 of the CC100 had down years? Unlikely. From what everyone is telling us, 2007 should be as good as or better than 2006. No reason to start circling the wagons yet.Charts & GraphsASCC
One interesting observation on this year's list is how many of the CC100 contractors are members of the American Society of Concrete Contractors (ASCC). The first year we identified ASCC members on the list was in 2003 when there were 43 members in the CC100. That just happens to be the same year Bev Garnant took over as executive director of ASCC. This year there are 52 ASCC members in the CC100. One could conclude that something is going right at ASCC, although we won't speculate on whether this means that more contractors are joining ASCC or that ASCC members are simply doing better than their non-member competitors.
— William D. Palmer Jr. is president of Complete Construction Consultants, based in Lyons, Colo.
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