ONCE AGAIN, the NRMCA's Industry Data Survey is tough to hear. Concrete producers are slugging it out to regain their footing and return to profitability. I would call the survey results a lesson in Rocky Balboa-meets-Indiana Jones in terms of the financial pummeling this industry has endured for four years.

As I wrote two years ago in a similar article, against the cruel reality of a market in contraction and an industry witnessing a transformation that represents the “new normal,” this may be the most compelling time to review the latest results.

The stark reality is the industry's financial performance hasn't been this challenging in decades. The news is grim, but the silver lining is that many metrics point to a slight improvement in many areas of financial performance.

It is hard to believe that losses are still accumulating for well more than half of all producers, but at least those losses are contracting a bit. More importantly, we are feeling very good about 2012, and I expect to report much better financial performance this time next year. Remember, this 2012 Industry Data Survey reports the industry results for calendar year 2011, which reflected a slight turnaround from 2010; that was the absolute bottom of the trough.

I am an unabashed bull when it comes to our industry. It has weathered the worst, yet the future is bright. This past recession has demonstrated the tenacity, fortitude, and sheer pluck of the typical producer who has hunkered down and slugged it out in survival mode since 2008, the fist year the wheels really came flying off.

The encouraging news is that volumes were up slightly. And while we thought selling prices would continue the steep decline we witnessed for the first time in 2010, they did not fall anywhere near as expected, a mere $1.06. We had expected another $5-plus contraction.

Positive EBITDA

But the best news was that earnings before interest, taxes, depreciation and amortization, or EBITDA, the measure of free cash a business generates, was in the black. This is in contrast to 2010, when selling prices fell a whopping $5.63 per yard, and the industry lost 34 cents per yard in EBITDA, compared to a positive 25 cents in 2011. Here are some of the key data:

  • For only the second time in decades, the selling price of a yard of concrete fell $1.06 to $89.36, compared with the dramatic contraction of $5.63 per yard in 2010 from $96.05 to $90.42. Clearly, the slide has slowed dramatically, and we are predicting it has stabilized in 2012.
  • The operating losses for the industry contracted from ($7.27 per yard) in 2010 to ($6.16) in 2011. While still higher than 2009's loss of ($3.07), we're headed in the right direction. I would say the industry turns a slight profit in 2012.
  • Even the tumble in total ready-mix production turned around, with 265.7 million yards produced last year, up from 257.7 million yards in 2010. While the improvement is slight, it nonetheless marks a turnaround from the depths of the recession. More good news: The industry is on track to ship close to 300 million yards in 2012.
  • Last year, we multiplied the loss-per-yard by the total yards produced to calculate the industry's loss. The numbers continue to boggle the mind. The industry shipped more than $1.6 billion in losses in the back of the nation's ready-mix truck fleet last year. Coupled with $1.9 billion in losses in 2010, the industry suffered combined losses of $3.5 billion in just the last two years, and a total of $4.3 billion if you add the losses from 2009. (Note that the industry was profitable until 2009.)
  • The big head-scratcher again is the continuing losses being posted by the Lowest Quartile, or those producers whose profits fall in the bottom 25% of the survey. In contrast, the Upper Quartile, or those whose profits are in the top 25% of the survey, continues to post strong profitability as it has every year since this recession. Here is a comparison of both groups:

  • Operating losses for the Lowest Quartile were ($9.75) per yard, while the Upper Quartile earned $4.29, a swing of $14.04 between the two groups.
  • EBITDA was ($3.36) for the Lowest Quartile, compared to $8.55 for the Upper Quartile, a difference of $11.91 in the amount of cash these businesses generate.
  • Of keen interest is their difference in their top line selling price: $82.75 for the lowest quartile, and $94.25 for the Upper Quartile, for an advantage of an additional $11.50 per yard for the best performers. The top line makes up virtually all of the difference in profitability for these two groups.
  • While the real story continues to be the disparity between the Upper and Lower Quartiles, the Typical Producer, defined as the average of all respondents (not taking into account size or geography) saw very little change in their metrics. Annual production, yards-per-plant, and yards-per-truck were remarkably flat compared to 2010.

    The Industry Data Survey is the most important tool any concrete producer can utilize to benchmark the performance of his company against industry peers. We hope members of NRMCA will participate next year.

    Pierre Villere writes the “Concrete Returns” column and is president and managing Partner of Allen-Villere Partners. E-mailpvillere@allenvillere.comor telephone 985-727-4310. Visitwww.allenvillere.com.


    Historically, participants are solicited each spring, and financial personnel within the participating companies complete detailed questionnaires with the results of their prior year's financial performance. This is then submitted to a third-party accounting firm to assure confidentiality.

    The data from these questionnaires are compiled and circulated to the participants. Each receives a customized report that measures the performance of their individual business against their peers throughout the industry. The results are tabulated by region, size of the business, and by the top and bottom quartiles in terms of profitability.

    For those individual states where five or more respondents participate, regional results are reported by state, which is even more meaningful for individual participants. The Business Administration Committee then presents the results at the NRMCA's ConcreteWorks Conference & Expo, which was held in Washington, D.C., in September. The results are for the prior calendar year, so in this instance, the 2012 survey is reporting financial results for 2011.

    Check out "How to Manage Risk" a web exclusive with advice from Pierre Villere to concrete producers.