On the other end of the spectrum, 24% of producers expect profits to decrease. A mid-sized precast/prestressed producer in Pennsylvania says, “We are off to a slightly slower start in 2007 versus 2006.”
Although factors such as the economy are beyond producers' control, they can still adopt some of investors' strategies to gain an edge. Thinking like an investor is the best way to avoid being targeted in the acquisition frenzy. Many of the biggest players are already following this model by becoming more efficient and gaining higher margins through expansions, acquisitions, and using technology.
One of the most striking differences between small and large players is the number of products they sell. (In this case, small producers' revenue is less than $35 million; large, more than $35 million.) In our survey, 41% of small producers reported revenue from a single product, compared to only 17% of large producers. On the other hand, 45% of large producers have three or more product lines, compared to only 20% of smaller operations.Product portfolios
Diversifying product lines, through expansion or acquisition, is one of the most important keys to growth. By offering more products, big producers can be involved in more aspects of construction. If ready-mix sales are down, they can rely on block or precast products.
There were several examples in 2006. U.S. Concrete bought six companies in 2006, acquiring assets worth $208 million from New Jersey to California. They also partnered with the Edw. C. Levy Co. to create Superior Materials, the largest ready-mixed concrete producer in Michigan. Titan America changed the landscape in the Southeast, acquiring companies in Kentucky, Virginia, and South Carolina. Italcementi Group invested more than $70 million to expand its Essroc operations in North America.
Expanding product lines may be a factor in the changing amount of ready-mix sold in 2006, compared to just a few years ago. In 2002, ready-mix made up almost two-thirds of producers' sales. In 2006, it dropped to less than one-half. Manufactured concrete has tripled. Together with precast and prestressed concrete, these products now account for one-third of producers' revenue.
One factor: Producers are adapting to customers' demands for time savings and more cost-effective products. Concrete also is making headway against other materials, like steel and plastic, in applications such as bridge segments and pipe.
Concrete producers also seem to agree with investors and strategic buyers on the importance of investing in technology. They plan to spend a median of 5% of their capital budgets this year on information technology.
This may not appear to be a significant investment. But in 2006, the median IT spending reported across all industry sectors in the United States and Canada was only 2%, according to a Computer Economics “IT Spending, Staffing, and Technology Trends” study.
Half of producers say they plan to spend the same or more on IT this year. It's all part of rising to the top of the TCP100.Methodology
We rank the TCP100 by total revenue, not just concrete sales. Our goal is to show the wide spectrum of companies involved in the industry, whether ready-mix represents their entire business, or just a part. Producers are included by their parent company names.
Revenue figures for concrete producers were solicited by questionnaire and by telephone. Other revenue figures were obtained through company annual reports, press releases, Dun & Bradstreet, Hoovers, Manta, and media sources.
Tables & ReportsTCP's Industry Leaders
U.S. Housing Markets reports
- Complete list of companies who responded to this year's survey, and the products they sell.
Hanley Wood Market Intelligence (HWMI) publishes quarterly updates on metropolitan area housing market data for the U.S. Full copies of these reports are available for purchase on the HWMI web site
- Excerpt of the HWMI U.S. Housing report referenced in the article
- Most recent HWMI U.S. Housing report