Concrete Producer, The: TCP 100 batter up: producers score big in another good year

With 162 games to play, a major league baseball season is more like a marathon, rather than a sprint. A year in the life of a concrete producer is similar. How you handle business and its, challenges day in and day out over the long-run determines success or failure.

Continued strong residential construction and an uptick in commercial spending let producers get a few hits in 2004. But there also were challenges. If a producer didn't respond to those pesky cement shortages, he most likely would be charged with an error. And soaring fuel costs turned what would have been some robust doubles and triples into mere singles.

But when all was said and done, many producers hit home runs. These biggest hitters comprise THE CONCRETE PRODUCER's Fourth Annual TCP 100 survey of the North American concrete industry's largest producers.

If you've ever wished the day had more hours so you could focus your business on those bigger strategic issues, don't despair--you're not alone.

In our survey, we asked producers how much some of the most important issues in the industry (LEED certification, the prescriptive-to-performance or P2P movement, material shortages, and Tier III/Stage 3 truck emissions regulations) are affecting their businesses. Material shortages was the day-to-day issue most on their minds, they answered.

But this didn't prevent the typical producer from posting a sales increase in 2004, as many credited strong construction activity during the past year. So it's no surprise that portland cement consumption increased by 6.6% in the United States and 5% in Canada in 2004, according to the Portland Cement Association.

U.S. cement imports increase 17.5% last year, indicating just how tight the supply squeeze was. Canada was the biggest exporter to the United States, shipping 5.7 million metric tons.

Earlier this year, PCA projected continued strength in U.S. construction activity in 2005. Demand for cement will remain strong in the United States, with consumption increasing by another 3% this year, said PCA chief economist Ed Sullivan. A long-awaited turnaround in nonresidential construction will drive this growth.

Material costs have impacted many producers' bottom lines the past few years. And the only way to compensate is to raise concrete prices, says Pierre Villere, president and managing partner of AllenVillere Partners, a private investment banking and consulting firm focusing on the concrete and aggregates industries.

"There are parts of the country where people have been able to raise the price of concrete a dollar for every dollar increase per ton in the price of cement," says Villere. "Considering that about 30% of the cost of a yard of concrete is the cement cost, if your cement goes up a buck, you must get another 30 cents on the concrete to be even." Initiatives such as promoting concrete for LEED projects and the P2P movement, as well as tracking the total cost of concrete materials and delivery, are ways to counteract increases in material costs, Villere adds.

Product performance

Despite always focusing on maintaining quality and serving customers, the industry's strategic direction is never far from producers' thoughts. For example, more than half of the producers surveyed indicated that the P2P movement, which would go a long way toward insulating producers from high material costs, has changed how they conduct business.

To continue this movement toward performance selling, however, producers agree the industry has to take greater control of measuring and promoting their product's performance. This means producers, both large and small, will place greater emphasis on internal quality control.

Darryl Winegar, vice president and general manager of Midwest Products Group, Jefferson City, Mo., says he and his fellow producers get frustrated when specifiers choose drywall over block for interior building walls. "You can say a block wall has a two-hour fire rating and a sheetrock wall has a two-hour fire rating, but in our minds, that's not accurate," Winegar says. "We're losing market share every year with schools because prescriptive-based products say they can meet a two-hour rating."

How can a producer counteract these claims? Winegar relies on historical empirical data. "Testing reinforces our stance that concrete is a better way to build, and the cost isn't really that different," he says.

Similarly, ready-mixed producers must continue to meet their contractor-customers' fresh concrete workability requirements and continue to educate specifiers on concrete performance, says Frank Kozeliski, president of Gallup Sand & Gravel Co., Gallup, N.M. "Structural engineers think they're concrete materials engineers, and they're not," he says, adding that large and small producers must invest in QA/QC functions to allow them to quantify concrete performance.

Producers must "assure themselves that they're selling a good product," adds Kozeliski. "If they don't want to do P2P, then they're going to have to start looking for their niches in the housing market or somewhere else."

LEED's impact

The movement toward the Leadership in Energy and Environmental Design (LEED) Green Building certification also is impacting producers, more from a promotional standpoint than in terms of operations. Similar to quantifying concrete performance, it's a matter of educating specifiers about points that can be earned by specifying concrete on a project.

"Subjectivity is the toughest part; we can't just make a blanket LEED-approved product," says Winegar. "We didn't have to change a lot of our production strategies. We just had to tell specifiers, 'You can get credit for LEED projects by using us, period.'"

In the long term, "we want to focus on the bigger picture, which is sustainable building design," Winegar adds. "LEED is just a tool to get more designers to use it."

Time will tell if producers will be able to insulate their businesses from the effects of high material costs and recession by promoting their product with tools such as performance measures and LEED certification.

"The problem recession brings to our industry is that one producer in a market can set the price," says Villere. "During a recession, the price of concrete in a market is driven by the guy who has to make a truck payment next week. He would rather sell that job for $3 or $4 a yard less.

Ten dollars came off the selling price in many markets during the last recession. "It hit hard because there was no corresponding downdraft in the price of materials," says Villere. "In an industry that's earning $3 or $4 a production yard--the best it's ever been--losing $10 off the selling price is $10 off the bottom line."

$1 billion plus 2004 Annual Sales North American HQ 1 CEMEX (1) Houston 2 Lafarge North America Herndon, Va. 3 Hanson PLC North America (2) Dallas 4 Rinker Materials West Palm Beach, Fla. 5 Vulcan Materials Birmingham, Ala. 6 Trinity Industries (3) Dallas 7 Oldcastle Atlanta 8 Martin Marietta Materials Raleigh, N.C. 9 TXI Dallas 10 MDU Resources (4) Bismarck, N.D. 11 Holcim U.S. Dundee, Mich. $500 million to $999 million 12 Florida Rock Industries Jacksonville, Fla. 13 A. Teichert and Son Sacramento Calif. 14 Gate Petroleum (5) Jacksonville, Fla. 15 Taiheiyo Cement USA Glenndora, Calif. 16 R.B. Ramplin (6) Portland, Ore. 17 Robertson's Ready Mix Corona, Calif. 18 Irvin Materials Greenfield, Ind. 19 U.S. Concrete Houston $100 million to $499 million 20 Oglebay Norton Cleveland 21 A&A Ready Mixed Concrete Newport Beach, Calif. 22 Clyde Companies Oren, Utah 23 Impulsora Tlaxcalteca de Industrias Mexico City 24 The Lane Construction Corp. Meriden, Conn. 25 Pavestone Co. Dallas 26 Barrett Paving Materials Roseland, N.J. 27 Lone Star Industries (7) Bethlehem, Pa. 28 Staker & Parson Ogden, Utah 29 Prairie Material Bridejeview, Ill. 30 Essroc Corp. Nazareth, Pa. 31 Ready Mixed Concrete Co. (8) Raleigh, N.C. 32 Cretex Elk River, Minn. 33 Superior Ready Mix Escondido, Calif. 34 Lattimore Materials McKinney Texas 35 Meadow Valley (9) Phoenix 36 Harper Industries Paducah, Kv. 37 Cemstone Products Mendota Heights, Minn. 38 Dolese Brothers Oklahoma City 39 Monarch Cement Humboldt, Kan. 40 Thomas Concrete of Georgia Atlanta 41 Hog Slat Newton Grove, N.C. 42 Continental Materials Chicago 43 Ernst Enterprises Dayton, Ohio 44 Concrete Industries (10) Lincoln, Neb. 45 Eastern Industries Center Valley, Pa. 46 Alamo Concrete Products San Antonio $50 million to $99 million 47 MMC Materials Ridgeland, Miss 48 High Concrete Structures Denver, Pa. 49 County Materials Marathon, Wis. 50 Alley-Cassetty (11) Nashville, Tenn. 51 Silvi Concrete Products Fairless Hills, Pa. 52 Tarmac America, Div. of Titan America Norfolk, Va. 53 Nevada Ready Mix Las Vegas 54 Dorsett Bros. Concrete Supply Pasadena, Texas 55 Midwest Block and Brick Jefferson City, Mo. 56 Concrete Suply Co. Charlotte, N.C. 57 Hormigonera Mayaguezana Mayaguez, Puerto Rico 58 Ralph Clayton & Sons Jackson, N.J. 59 Boston Sand & Gravel Boston 60 Cranesville Block Amsterdam, N.Y. 61 Campbell Concrete Cleveland, Texas 62 Doan Cos. Ypsilanti, Mich. 63 Sequatchie Concrete Service South Pittsburgh, Tenn. 64 Supermix Miami 65 MCCoig (12) Plymouth, Mich. 66 Shamrock Materials Petaluma, Calif. 67 Gulf Coast Pre-Stress Pass Christian, Miss. 68 Premarc/Marsh Products Durand, Mich. 69 Suhor Industries Overland Park, Kan. 70 Devcon International Deerfield Beach, Fla. 71 Thelen Sand & Gravel Antioch, Ill. 72 Delta Industries Jackson, Miss. 73 Redi-Mix Inc. Carrollton, Texas 74 Casino Ready Mix Las Vegas 75 Keys Concrete Industries Odessa, Fla. 76 Walker Concrete Stockbridge, Ga. 77 Miles Sand & Gravel Auburn, Wash. Up to $50 million 78 Moraine Materials Franklin, Ohio 79 Fabcon Savage, Minn. 80 Nitterhouse Concrete Products Chambersburg, Pa. 81 Ozinga Bros. Chicago 82 Pete Lien & Sons (13) Rapid City, S.D. 83 Custom Crete Dallas 84 Newmark International Birmingham, Ala. 85 Holliday Rock Upland, Calif. 86 Empressa Master (14) Toa Baja, Puerto Rico 87 Clark Pacific West Sacramento, Calif. 88 Service Rock Products Victorville, Calif. 89 Ferrara Bros. Building Materials New York City 90 Best Block Warren, Mich. 91 Shockey Bros. Winchester, Va. 92 Coreslab Structures Hopkins, S.C. 93 Silver State Materials Las Vegas 94 Molin-Concrete Products Lino Lakes, Minn. 95 Echo Rock Ventures Auburn, Calif. 96 Standard Concrete Products Columbus, Ga. 97 R-Con Wichita, Kan. 98 Heldenfels Enterprises San Marcos, Texas 99 All-Rite Read Mix Florence, Ky. 100 Grand Rapids Gravel Wyoming. Mich. Footnotes (1) Estimated using March 1, 2005, acquisition of RMC Industries. (2) Converted from British pounds, using exchange rate of 1.915988. (3) Parent of Transit Mix Concrete & Materials. (4) Parent of Knife River Corp., Empire Sand & Gravel, and Morse Bros. (5) Parent of Gave Concrete Products. (6) Parent of Ross Island Sand 7 Gravel and Pacific Northwest Aggregates. (7) dba Buzzi Unicem USA (8) dba Nebco. (9) Parent of Ready Mix Inc. (10) Based on sale price of Southern Equipment Co. to Audax Group; Nov. 8, 2004. (11) Parent of Alley-Cassetty Brick & Block. (12) Parent of merged Michigan Foundation-Koenig Fuel & Supply. (13) dba Dakota Block. (14) Parent of Master Concrete. Producers Cope with Shortages Degree of business Impact In % Major 3 Moderate 34 Little/none 63 Degree of business Impact In % Major 15 Moderate 38 Little/none 47 Degree of business Impact In % Major 24 Moderate 52 Little/none 24 Degree of business Impact In % Major 3 Moderate 40 Little/none 57 Producers have a full plate of concerns. LEED certification, the P2P movement, material shortages, and truck engine regulations are impacting producers' businesses to various degrees, with material shortages hitting hardest. Note: Table made from bar graph.