Editor's note: It's always interesting for producers to learn what concrete contractors are thinking and how their businesses are doing. Thanks to the editors of CONCRETE CONSTRUCTION, THE CONCRETE PRODUCER's sister publication, we have a detailed look at that segment.
The following article is an excerpt from CONCRETE CONSTRUCTION's annual CC100 report, which appeared in July 2006. For the full article, the complete list of the top 100 concrete contractors, which includes residential work, and more, visit the magazine's Web site atwww.concreteconstruction.net.
In December, 2004, The Brookings Institution, an independent research organization, issued a report on the forces that will affect U.S. building trends over the next 25 years. “In 2030, about half of the buildings in which Americans live, work, and shop will have been built after 2000,” said Brookings' Arthur C. Nelson. That's a lot of buildings, and the concrete industry made big strides in that direction during 2005.
Last year was the best year by far since the boom of the late 1990s, with concrete-related revenue increasing almost 20% for the CC100 contractors, led by a 20% increase in revenue from commercial construction. Anecdotal reports indicate that growth in 2006 may not be quite that dramatic, but overall volume will remain at a very high level. The following are a few observations from our survey of 2005 financial results in the concrete industry.
Revenue: Total revenue for the CC100 contractors rose from $12.08 billion in 2004 (which was an increase of 18% over 2003) to $15.48 billion in 2005, or a whopping 28% increase.
Concrete-related revenue increased slightly less rapidly to $6.47 billion, an increase of 19%.
Based on our November 2005 report showing the entire concrete industry at $110 billion, the CC100 contractors represent about 6% of the industry.
Concrete Work: The portion of the total work performed by the CC100 that was concrete related continued to go down, to 42% in 2005. This number has decreased every year since 2001 when we started our survey, partly due to huge revenue increases for some of the large general contractors in the survey. Another reason for this aberration in the 2005 data is the absence of Miller & Long, last year's number one commercial concrete contractor, who declined to participate in the survey this year.
Commercial Concrete: Following lackluster or even negative growth in this category over the past several years, 2005 revenue jumped 9.2% for the 20 largest commercial concrete construction companies reporting. Had Miller & Long participated, assuming their 2005 revenue was close to last year's revenue, this number would have increased as much as 20%. Even more remarkable is that only one of the 20 commercial contractors made less in 2005 than in 2004 and two had increases over 100%. Obviously, 2005 was a very hot year for commercial concrete construction.
Types of Work (see chart, page 47): The breakdown into types of work performed by the CC100 contractors changed very little from 2004 to 2005. The total percentage of residential concrete work (for foundations, basements, and above-grade concrete walls) remains at 12% (it was 11% in 2004). This despite our November 2005 report showing that residential concrete work is by far the biggest sector of the industry ($52 billion of the $110 billion total). This means that the bulk of the residential work is being done by smaller contractors who didn't make it into the CC100. That may be changing, though, with the creation of SelectBuild.
Tilt-Up: Tilt-up work continued to increase, albeit not at the blistering pace seen between 2003 and 2004. Tilt-up revenue for the CC100 increased from $614 million to $626 million and the percentage of work the CC100 performed that is tilt up increased to 10%. One interesting development in the tilt-up industry is the spin off of Concrete Strategies from St. Louis-based Clayco Construction, creating two similarly sized concrete operations.
Decorative: Oddly, total revenue for decorative work done by the CC100 went down in 2005 from 2004. It's difficult to explain this, when we know that decorative work continues to increase. “We have noticed an increase in the use of colored concrete in commercial construction,” says Archie Foor, Foor Concrete. Perhaps the reason, then, is simply a shift in decorative work to smaller contractors.
Growth: Only eight CC100 contractors had lower revenues in 2005 than in 2004, while 74 saw increases, the best year since 2000. Looking at the list of the 20 fastest growing companies in the CC100, we see astonishing growth rates. Some of these, like Danko or SelectBuild, are relatively new companies, but most are well-established companies that have simply exploded. “We have been able to grow by 83% and still be in control of our company while providing a quality product to our customers,” says Eddie Quarles, Foundation Contractors.
We asked contractors filling out the CC100 survey form for their thoughts on the factors currently controlling the concrete construction business. Here are some of their responses:
“We are seeing more negotiated work as developers, owners, and general contractors realize the need to secure sub-contractor resources earlier in the planning stages. They can no longer wait to complete the bid docs and put it out for hard bid and expect three good bids. We are sold out through September. If you have a project starting in October and you want me to be there, you need to commit now and I'll reserve my manpower and equipment. That's the nature of the market we are in.” Robert Mantranga, Bomel Construction, Anaheim Hills, Calif.
“It is becoming harder to make a living as a concrete contractor because of a more competitive market, the scarcity of skilled labor and supervision, less coordinated plans and specs, and a more litigious environment.” Ross Edwards Jr., Webcor Concrete, San Mateo, Calif.
“We see a continued decline in the completeness of construction documents, which is compounded by the owner's and GC's efforts to pass all of the risk possible down to the subcontractors. Another obstacle that contributes greatly to our business success is the increasingly lengthy payment terms. It's not uncommon to have to wait 60 to 90 days from the time we start work before we receive our first payment. And long after our scope of work is complete we have to wait longer still on retainage, which includes some or all of the profit.” Keith Wayne, Wayne Brothers, Davidson, N.C.
“We are a subcontractor. General contractors control our schedules. General contractors control the dirt work. Until a few years ago, we had young people walking through the door looking for work. That has stopped; kids seem to have little desire to get into construction. Because of this, wages are increasing. Overall costs of being in business are increasing, particularly insurance. Other than all of this...I love it!” Craig Morrison, Finishing Edge Concrete Construction, Arlington, Wash.
— The author is Editor in Chief of CONCRETE CONSTRUCTION. Editorial assistant Colette Palait provided the list research. For the full listing of CC100 companies, visitwww.concreteconstruction.net.
What Is Giving You the Most Sleepless Nights?*
Lack of good employees: 19.1 %
High prices on materials: 11.8 %