A healthy industry: annual production of 500 million yards is on the horizon
Concrete prices have risen, the industry is more efficient, and producers are fast becoming better financial performers. That, in a nutshell, is what the 2005 Industry Data Survey shows.
The NRMCA offers this terrific tool to its membership. All members receive a detailed questionnaire every spring. Financial personnel complete the form with the results of their prior year's financial performance and submit it to a third-party accounting firm to assure confidentiality.
The results are compiled and circulated to participants, all of whom receive a customized report that measures the performance of their companies against their peers throughout the industry, by region as well as volume. The Business Administration Committee presents the results at its annual fall conference in October, which is always well attended by our industry's financial managers.
Here are some of the key significant trends from this year's results:
* The price for concrete rose $1.40 per yard from 2003 to 2004, reflecting just the beginning of the pricing strength the industry has witnessed since cement shortages became an issue. Concrete prices really started increasing in 2004 as they tracked cement price increases, and that trend has continued this year. We think this number will jump by a few dollars when next year's results are in.
* The industry continues to make gains in utilization and efficiency. And despite upward cost pressures throughout the business, plant and delivery costs rose only pennies per yard. This reflects continuing improvements in cost containment.
* Marginal contribution gained almost $1 per yard, or 6.5%; earnings before taxes jumped 68 cents, or 30%; and return on assets rose from 5.8% to 7.2%. These significant gains speak to the overall progress the industry is making in growing its financial performance.
The biggest indicators are both pricing strength and growth in overall volume, both of which point to a financially strong industry for the foreseeable future.
A record year
This time last year, we projected 2004 would end at around 410-420 million yards of U.S. production. We blew past that with a record 430 million yards, and we foresee an even higher number this year. Barring a severe recession and a reasonably sustained housing market, that number could easily grow to 500 million by 2010, and maybe even sooner.
The Industry Data Survey is one of the most useful and important financial management tools available to managers in our industry, and we encourage all of our clients to participate. It allows participants to benchmark their financial performance against their peers, and pinpoint where their peers outperform them. We encourage everyone to participate in the 2005 survey when the questionnaires are circulated next spring.
Pierre Villere is president and managing partner of Allen-Villere Partners. Contact him at email@example.com or telephone 985-727-4310. For more, visit www.allenvillere.com.