Launch Slideshow

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Finding the Road to Recovery

Finding the Road to Recovery

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    More than half of producers in the TCP 100 survey expect to make less profit this year. Only 11% expect to earn more.

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    Four of the five largest North American producers suffered drops in revenue from 2007 to 2008. Heidelberg Cement's revenue increased due its 2007 purchase of Hanson.

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    Lead dispatcher Frank Greco has worked at Greco Bros. Ready Mix for 25 years.

JOE GRECO JR. SIGHS when asked about the state of the concrete industry. The president of Greco Bros. Ready Mix Concrete in Ozone Park, N.Y., chuckles and says in a thick New York accent, “Oh boy, oh boy. I don't know where it's headed,” his friendly timbre showing only a trace of distress.

The residential sector has been the focus of the Greco Brothers' business since the family-owned company started in 1958, but the past year has forced the Grecos to concentrate elsewhere. As the housing market collapsed, the banks stopped investing money in new residential construction. Greco Bros.' primary source of revenue, residential high rises in New York City, all but disappeared.

“The commercial and residential business has slowed tremendously, but the government work has picked up,” Greco says.

That has helped his company avoid layoffs, an issue every producer in the nation is wrestling with. “I've stopped capital expenditures,” he says. “I'm trying not to lay anyone off.”

Last year was not actually a down year for Greco Bros. Growth slowed considerably, but it wasn't until the first half of 2009 that the company, and the industry as a whole, began to feel the full force of the housing collapse and the big banks' retreat back into their safes.

It's no secret: The TCP100, the concrete industry's most complete listing of the top 100 North American producers (page 30) shows 2008 was an awful year for producers and the U.S. construction industry. According to many producers and analysts, this year and the first half of 2010 will be even worse before the recovery.

Housing, commercial ills

Many believe the sun will shine again by next summer, so don't expect to see an immediate recovery. With commercial projects in a tailspin, and U.S. housing turning from a seller's market to a fleer's market, more tough times and tough choices are coming for producers.

Jim Braselton, senior vice president of marketing and sales for cement at Lafarge North America, doesn't see a turnaround until the second half of 2010. And economist Armine Thompson believes that while the housing market will hit bottom this year, don't expect a protracted recovery until 2011. Thompson analyzes concrete pricing for IHS Global Insight, a multinational economic forecasting firm.

Thompson doesn't expect housing starts to hit 1 million until 2011. Global Insight predicts housing starts will total 560,000 this year, and 870,000 in 2010. Usually, 1 million starts is the threshold of a healthy or struggling housing market.

Also, the record number of U.S. home foreclosures in 2009 means that even as home buying recovers, a glut of foreclosed homes on the market will thwart new home construction even further. An added wrinkle: Unemployment approaching and possibly surpassing 10% will cause still more homeowners to foreclose on their homes in the next several months, adding more inventory to the market.