Profitability has recovered from recession lows, but volume remains at 1996 levels.
FOR THE PAST 10 years, I’ve written about the results of the NRMCA’s Industry Data Survey, the most important tool any concrete producer can utilize to benchmark his or her company against industry peers. I’ve described the survey’s value, the distinctions between the top and bottom performers, and reported specific gains and losses in various areas of operations to help point producers to the parts of their businesses they should examine carefully. Unfortunately, the industry has seen falling prices and red ink since 2007. But finally, we turned the profitability corner in 2014.
Here are some of the key 2014 data:
• The increase in selling price jumped significantly, from $93.42 in 2013 to $98.23 in 2014, an improvement of $4.81 per cubic yard on the top line. This is an all-time high in selling price, eclipsing the high of $96.05 in 2009.
• The increased selling price was a big factor in the other good news, which is that the industry returned to profitability as we had predicted, swinging to a $2.23 net profit from a $1.03 loss in 2013, representing a $3.26 improvement. Just as importantly, EBITDA increased by 71%, to $6.60 from $3.87. This is an important gain in free cash flows, which are critical to generating the funds needed to address badly deferred reinvestments.
• Other key indicators including the Average Member’s annual cubic yards, cubic yards per plant, and cubic yards per mixer truck all saw improvements. (Average Member is the 50th percentile, not accounting for size or geography).
Specifically, annual cubic yards jumped from 504,620 cubic yards to 577,259, a 14.4% improvement. Cubic yards per plant also jumped 11.4% from 43,566 to 48,556. And cubic yards per mixer truck increased 3.8% from 4,969 to 5,158. While plant and fleet efficiencies are slowly recovering, they still stand well below their pre-recession highs, pointing to how much farther the industry has to go in regaining its peak performance in terms of asset utilization.
• The gap between the Upper and Lower Quartiles remains staggering. The leaders outperform the laggards on top line selling price at $105.25 versus $95.78, or $9.47 per cubic yard. In net profit and EBITDA, they outperformed by $21.36 and $16.78, respectively.
But the biggest news is the stubbornly slow rate of recovery in production volume. It looks like 2015 will be flat in total volume compared to 2014, when the industry produced 324.7 million cubic yards. While the industry peaked at 458 million cubic yards in 2005, we have only recovered to 1996 levels, and we are still 125 million cubic yards below the all-time high in 2005.
As 2016 begins, the industry has stabilized, margins have expanded to some of their best spreads ever, and the trend line continues to point upward. The gradual recovery will continue at midsingle-digit rates of growth for the next few years. By 2020, concrete volumes will recover to the 2005 peak, having taken 15 years to recover from the longest construction recession in memory.
Pierre Villere is President and Managing Partner of Allen-Villere Partners. Contact Pierre Villere at firstname.lastname@example.org or telephone 985-727-4310.
© 2015 Hanley Wood, LLC. All Rights Reserved. Republication or dissemination of “Finally, a Recovery!” (The Concrete Producer, November • December 2015) is expressly prohibited without the written permission of Hanley Wood, LLC. Unauthorized use is prohibited. Allen-Villere is publishing “Finally, a Recovery!” under license from Hanley Wood.