Concrete contractors are like farmers—things are never perfect. In the hot years of the late 1990s, labor shortages abounded and quality suffered. Fighting to find business and get decent margins were the main woes during the cold years from 2001 through 2003, then in 2004, just as business warmed again, steel and cement prices spiked and margins suffered.
But in general, 2004 was one of those rare years when most contractors felt pretty good about their businesses. Margins in many parts of the country recovered slightly and the steadily increasing pace of work allowed more focus on quality and safety. Residential work remained very strong, and commercial work began to rebound. Tilt-up work continued to gain in popularity and decorative boomed.
Looking at the numbers, here's what we see:
GC or CC: Once again, we have included in the CC100, general contractors who self-perform their concrete work. If we define a general contractor as someone who derives less than half its revenue from concrete work, the number of GCs in the survey has remained pretty stable from year to year. This year there were 15 companies in that category compared with 16 in the survey based on 2003 data, and 12 in 2002.
- Revenue: Total revenue for the CC100 companies rose more than 15% in 2004, compared with 2003. Oddly enough, though, concrete-related revenue rose less than 2%. Partly this is due to Walsh reducing its concrete-related revenue from 33% in 2003 to only 15% in 2004 (a drop of $276 million in the concrete column). Also, some traditionally high percentage concrete companies (such as Bomel and Ruttura) were doing more non-concrete work. This trend has resulted in a steady decline over the past four years in concrete's percentage of the total—from 59% in 2001 to only 45% in 2004. Since we don't always have the same companies responding to the survey each year, it's difficult to draw conclusions from this.
- Types of work: Above-grade cast-in-place commercial concrete construction and slabs on grade still dominate the dollar volume of concrete work in the United States, although the percentage of those two categories combined went from 58% of the total concrete revenue in 2003 to 51% in 2004 (a drop of $568 million). That probably doesn't mean there was less commercial construction in 2004 but rather that the CC100 companies have diversified more and that there were more small companies (not falling into the top 100) doing commercial work. Some of this decline could also be from diversification of construction methods, such as tilt-up. Reviewing the table of the top 20 “pure” commercial concrete contractors, we see that five of the top six had down years in 2004. But also several of the top 20 had very good years. On the revenue chart, note that total revenue for the 20 largest commercial concrete contractors has been virtually flat for the past four years. Paving work also appears to have declined from 10.5% in 2003 to 6% in 2004, probably due to less spending by cash-strapped departments of transportation.
- Tilt-Up: Tilt up is higher, going from 6.3% last year to 9% this year, an increase of over $100 million. Note that 14 of the 20 had double-digit increases in revenue in 2004, and only 2 had down years. “Traditionally, tilt-up has been used for warehouses and industrial buildings,” said Clayco's Bob Clark, “but today tilt-up is being used in schools, prisons, multistory office buildings, and medical labs. New techniques, like brick inlays, give tilt-up a more upscale appearance. With this method, clients who normally would have rejected tilt-up's industrial appearance are embracing it.”
- Residential: Only 1 of the top 20 residential contractors suffered a decline in revenue in 2004 and 14 of the 20 had double-digit increases. Over the past three years, revenue from residential construction (above-grade walls, basements, and residential slabs) has risen from $386 million in 2002 to $403 million in 2003 (4%) to $525 million in 2004 (30%).
- Decorative: Decorative concrete work performed by the CC100 contractors has steadily increased over the past five years, from $30.7 million in 2000 to $102.4 million in 2004. Comparing which companies reported decorative work in 2000 to those on the 2004 list, we see little difference in who is doing the work and therefore conclude that this actually does reflect the growth of the decorative industry. It's not just that the bigger contractors are getting more involved with decorative work but that the amount of decorative work is increasing and that decorative contractors are getting bigger. But check the table of the decorative contractors. Feeling that it would be more interesting to list companies for which decorative is a significant portion of their work, we only include those where decorative is at least 10% of their business. That eliminated companies like Walsh with 1% of their work being decorative, although that makes their dollar volume greater than that of many smaller contractors who do nothing but decorative. Reviewing this list, it's apparent that decorative work is still primarily being done by small companies. “There are more start-up companies in decorative concrete,” said Dan Dittman, Greystone Masonry, Stafford, Va., “although some started up and dropped out just as quickly.”
- Fastest growing: Many of the fastest growing companies are small and within their first few years of business, but there were also several large contractors posting high growth rates, mostly bouncing back from declines in 2003. All this implies that it's easier to grow rapidly as a small start-up business than as an established business and that it's easier to bounce back from a bad year than to continue to grow steadily.
- Growing or declining: This data was significant, indicating that things were definitely better for the CC100 in 2004 than in any year since 2000 when we started our survey. There were 68 companies that had significantly increased revenues in 2004 compared with 54 in 2003 and 47 in 2002. Those with declining revenues went from 37 in 2002 to 24 in 2003 to only 17 in 2004. A rising tide really does lift all boats.
What's going on out there?
CC asked respondents to the CC100 survey to tell us what they see going on out there—what defined the concrete market in 2004? What made last year unique? Not surprisingly, the most common response was that material shortages and price hikes had hurt margins and even put some unprepared contractors out of business. Here's a sampling of the responses to the question, “What were the defining issues of 2004?”
Having to do 15 to 20% more work to equal the dollar volume of five years ago, we set records for sales but at much lower margins. Wayne Albanelli, Albanelli Cement Contractors (94).
- Competition was very strong in specific geographic locations, but margins were up slightly in our core market segments. The industry is intensifying its focus on safety. Recruiting efforts have increased to attract people with the necessary leadership skills by defining career paths. The construction industry is redoubling its efforts to improve all levels of construction efficiency. Dan Baker, Baker Concrete Construction (4).
- The rising cost of materials continues to be an issue. As prices rise, owners and developers strive to obtain more value for their dollar. This, in turn, causes bidding to become more competitive as more contractors who are willing to take a gamble by bidding low enter the market without concentrating on the constantly rising materials cost or the scarce labor market. Interior contractors bluff their way into jobs, betting that they will make money even though the bid they submit is lower than their competitors' bids. This year contractors face a very stiff labor market. If they are awarded a contract, if the weather holds, if the permits fall into place, and if the project stays on schedule, will they have enough labor to finish the job? And can they afford the constant rise in materials costs? These continue to be substantial issues in the future of both competitive bid and negotiated pricing contracts. Stephen Ballard, S.B. Ballard Construction (21).
- Margins are up, competition is the toughest we have seen, and our quality of work has set us apart from the rest. You get what you pay for— the cheapest is not always the best. Emmett Jones, Jones Concrete Construction, Phoenix (105).
- The volume of work was unsteady and hard to plan for. The size of the projects was generally smaller and the Mid-Atlantic work has evaporated. Rising interest rates and inflation will probably cause the same work-load and unsteadiness in 2005 as last year. We are starting to see a lot of public work and less private work, which indicates the economy is not as good as it has been in the past. There is stiffer competition because of the decreased amount of work. There also continues to be a potential cement shortage. Richard McPherson, Seretta Construction (40).
- We were not able to get prices up in 2004, but. margins remained stable. Competition gets tougher every year. Our defining issue was and is measuring productivity. Michael Gresser, Gresser Companies (66).
- Last year was characterized by the shifting of project risks (financial, insurance, damages for delay) to those least able to control them. Woody Rohrbach, F.A. Rohrbach, Inc., Allentown, Pa. (114).
- Margins were unstable due to the frequency of material price increases. Relationships with customers and superintendents were strained due to material shortages. Stephen Campbell, Campbell Companies (3).
- Insurance costs and litigation continue to be the most difficult issues to contend with. Rod Maher, R.E. Maher Inc. (64).
- Growth developed in the exterior concrete paving market, and I expect it to continue as environmental concerns over water runoff, sustainable building materials, and global warming become more important in construction. Len Swederski, Swederski Concrete Construction (97).
- Work was available, but higher labor and fringe costs, coupled with increased steel and cement prices, reduced profitability. Bob Dalryrnple, North Coast Concrete (87).
- We view the main impediment to growth, and our defining issue, as the ability to either train existing people or hire supervisors. Jim Dolente, Madison Concrete Construction (25).
- Cast-in-place concrete construction seemed to rise in the Southwest along with the overall volume of construction. Margins: were up compared with 2002 and 2003, however concrete and reinforcing materials have been difficult to manage or even obtain at times. C. Wayne Riggs, Riggs Contracting (55).
- We have tried to improve sales and customer communication by incorporating software solutions that can aid us in creating a heightened focus on value-added services and quality that separates us from many of the competitors in a very competitive market area. Mark Markovich, Dependent Foundations, Brighton, Mich. (108).
- Owners are requiring more bonds, which actually reduces our competition because of our strong financial situation. Terry Pricks, The Pricks Company (68).
- Volume of work available was up but, because owners were slow paying, it affected our cash flow so that we could not take all the work we wanted. Michael Hardin, Harcon, Inc. (53).
- We take care of our customers. If there is a problem or something is not up to standards, we address the problem straightforward until all of the customer's needs are met. Tony Ver-Meer, TK Concrete, Pella, Iowa (120).
- Bonding and insurance were the defining issues. Ronald Urbanczyk, Urban Concrete Contractors (19).
- The escalating cost of rebar, concrete, and fuel made it so we couldn't put any more labor money into the job and still get the job. Steve Hamilton, Western Star Construction, Orem, Utah (112).
- Last year we were hurt by price increases and shortages of steel and cement, lowering our margins. This year we are trying to index those items to pass along price increases to our customers. Clay Fischer, Woodland Construction (52).
- With the current trend towards “E” bids, jobs are getting tighter than ever. There is no time for weather considerations. Quality is more of an afterthought with the dollar being the deciding factor. Tony Lampasona, Lampasona Concrete (73).
What's the most valuable new technology out there?
- Receiving and sending plans and submittals electronically
- Laser - guided equipment
- On - screen takeoffs for estimating
- Wireless technology
- Tracking and compiling payroll using biometrics
- Forming and shoring systems that reduce labor costs
- 3-D laser screeds
- Kryton waterproofing
- Self-consolidating concrete
- Type K concrete
- Ultracure curing blankets
- Online weather services
- Copperhead walk-behind laser screeds
- Instant jobsite communications
- Digital photography
Number One: The Walsh Group
Started over 100 years ago, The Walsh Group is now in its third generation of Walsh family ownership and, for the past three years, has been the largest construction company in the Chicago-land area, according to Grain's Chicago Business. Starting in Matthew Myles Walsh's basement in 1898, it now operates offices in eleven cities across the United States, has $3.2 billion in projects under construction nationally, and employs 4700 people. It's currently listed in Engineering News Record as the nation's 20th largest contractor. Daniel and Matthew Walsh III, Matthew Myles Walsh's grandsons, now serve as president and chief executive officer respectively.
Walsh provides complete design-build services and self-performs major portions of work, including concrete.