Precasters and their customers weigh in on the state of the industry.
By William Atkinson
In today’s rocky business climate, many precasters are left floundering in the fields of uncertainty. There are so many questions and so few answers. What are the short-term prospects for precasters? What about the long-term prospects? How can precasters position themselves for the future? Buyers of precast concrete are looking for their own answers to these questions. Following are responses from key people working on both sides of the fence.
THE PRECASTER PERSPECTIVE
Current business trends
“We have lost 27% of the jobs that were in construction three years ago,” reports Pete DeLay, president and CEO of Sherman-Dixie Concrete based in Nashville, Tenn. “Architectural firms have lost 25%.” As a result, according to DeLay, the industry will definitely need to restructure, and it is going to be a long, slow pull. “Going forward, there is entirely too much capacity for the amount of demand,” he says.
At 2% GDP growth, it is possible to maintain the current level of employment, at best. “To get unemployment down to 8%, you need periods of time of GDP growth in excess of 3% to 4%,” continues DeLay. “Furthermore, I am hard-pressed to believe that we have the national will to invest public money in infrastructure. Commercial construction is certainly not coming back. Residential construction might bounce a decent percentage, but this will be from incredible lows.”
According to Mimi Rainero Coles, sales manager with Permatile Concrete Products in Bristol, Va., there is an incredible need to work on the nation’s infrastructure. “However, I just spent three days at the governor’s conference,” she says. “There are a lot of promises of work, but no way to fund them. I think we have a couple of more years before things actually start to turn around.”
The majority of sales for Milan Vault (Milan, Mich.) are concrete burial vaults, concrete septic tanks and basement entry systems. “The burial vault market is on the wane and has been for about 10 years, primarily because people are choosing cremation more often,” says Dan Wagner, co-owner. The company’s other products are tied to construction, which has been hit particularly hard in Michigan. “There is very little new construction, so most of our business here is replacement business.”
If there is any good news, according to Wagner, it is that he believes we have hit bottom. “I don’t think it is going to get any worse,” he says. “We will come out of it slowly, but it will be years before we get back to the levels of a few years ago.”
Steve Rodgers, general manager for Contractors Precast in Davidsonville, Md., has some observations on a number of industry segments:
- Housing. “Recently, we have seen a little uptick, but it is still 40 to 50% off of where it was a few years ago,” he says. “However, I think this is temporary. I don’t think the housing market is going to take off for another year or so.”
- Commercial. The commercial market, such as small shopping malls and small commercial buildings, has slowed down a lot for his company. “I don’t see much growth here for at least another year,” he says.
- Transportation/Roadways. “There are some major projects going on in this area,” says Rodgers. “There is also strong demand for more, but there isn’t a lot of money available for these projects.”
According to Bryan Bach, business development manager for Jensen Precast in Sparks, Nev., things have definitely been tough. “However, we are doing pretty well with utility products in Southern California,” he says. “People are still using water and power, so this market keeps us going.”
Charles Moses, product development manager for Jensen, says one thing that has helped the company out is expanding and diversifying its product line. “We have introduced some new products, such as pump and lift stations,” says Moses. “We are also working on some new stormwater products.”
Mike Leathers, president of Hanson Engineered Products, a division of Hanson Pipe & Precast in Irving, Texas, is responsible for pressure pipe for North America, structural precast for the West, and pipe and precast for eastern Canada. “Overall, we are seeing bidding opportunities increasing, but these are obviously coming off some substantially depressed levels,” he says.
In pressure pipe, bidding rates are about 15% over last year in terms of total revenue. “We are seeing an increase in water lines, wastewater treatment plants, sanitary and combined sewer overflow,” says Leathers. “A lot of this is the result of pent-up demand. Customers are at the point where they have to get some of these projects on the books.” Leathers is also seeing growth in the demand for chilled water for industrial applications – a market for Hanson’s pressure pipe – as specifications and requirements for water quality continue to increase. “Overall, we are entering the year in pressure pipe with a lot better backlog than we did last year.”
In structural precast, Hanson is also starting off the year better than it did last year, with about 15% more backlog than last year, and a 15-plus % increase in identified projects to bid. “Again, though, this is coming off historical lows,” he says. “In addition, we are starting to see some increase in pricing pressure from alternate products, such as cast-in-place. Even though we emphasize the value of precast, we still get some pushback from our customers and contractors.”
According to Leathers, eastern Canada never experienced the slowdown that the United States did in terms of housing, so the volume last year was as good or better than the previous year. “We also see 2011 to be a good year,” he says. “Overall, we expect flat to slight growth in 2011.”
Precaster recommendations to maintain and build business
“The principles for keeping business these days are the same as they always were,” points out Moses. “We do everything we can, customer service-wise, to keep buyers coming back to us.”
Wagner agrees. “The keys to success are the same as they were in the strong market, which are quality and service,” he says. “We feel we are making the most of the market that is available to us; there just isn’t much of a market. We haven’t lost any customers. It’s just that the customers we do have aren’t doing much of anything.”
In terms of maintaining business, according to Rodgers, the bidding process remains very tight because of all of the competitors. “It is still a very tough market for precast people,” he says. “We deal with a lot of the same contractors over and over again, but we still have to have a good price to get the work.”
“Our strategies for getting new business are changing,” says Bach. “Before, we focused a lot on order-taking. Now, we go out and fight for work. That is one reason I was hired. My job is to put more focus on sales and marketing rather than just waiting for the phone to ring. We do a lot more work going out and meeting with municipalities, engineers and project owners, because everyone is so focused on cost savings.”
Moses adds: “One of our most effective ways to attract new customers is our Web presence.” Using search engine optimization tactics and improving the company’s website has done great things for the company, he said. “We have received a lot of inquiries that we might not have otherwise received.”
According to DeLay, the best way to make a case to clients is to explain that, in a time when resources are scarce, they can do one of two things. One is to create the most value by building things correctly the first time using precast. The other is to build the cheapest way possible. “The former, obviously, is the better choice in the long run,” he notes.
THE SPECIFIER PERSPECTIVE
Louis R. Pounders, FAIA, a consulting architect with ANF Architects in Memphis, Tenn., and the 2009 national chair of the Committee on Design of the American Institute of Architects, is a bit more optimistic. “Demand for precast seems to be staying the same these days in our area,” he says. “In Memphis, we see it being used quite a bit in industrial applications, since we are such a large national distribution hub. Many of these buildings have precast walls, because they provide a very efficient and extremely durable envelope.”
He is also seeing precast being used in commercial and institutional buildings. In fact, he designed a library that recently opened at one of the city’s community colleges. “It turned out nicely, because we were able to get some nice architectural details into the material,” he says. “It was also very efficient and cost-competitive. We also selected it for aesthetic reasons, as well as for the fact that it is very durable.”
John McCaskie, chief engineer for Swank Associated Companies in New Kensington, Pa., also sees some strength for precast. “Our firm is predominantly a horizontal contractor,” he explains. “We do a lot of highway work, and we use precast primarily for drainage work.”
In the long term, McCaskie believes that precast has room to expand into some other areas for a number of reasons. One is the result of the industry continuing to press for “instant gratification.” “There is no question that precast is quicker at the site,” he says. Second, it is more economical in that the end product can be turned out less expensively in a manufacturing process than in piecemeal fashion in the field. “This leads to a significant reduction in labor costs,” he adds. Third, you can guarantee better quality control. A fourth is the ability to use the product year-round. In bitter cold weather, you can’t really pour concrete in place.
Specifier recommendations for precasters
What does Pounders look for from precast products? “One is the quality of the product,” he says. “It needs to be crisp and sharp, with no cracks or broken pieces. It needs to be something people can look at up close.” Another issue is color. “With , we had two colors,” he says. “One color was chosen to relate to the color of the adjacent building. The entrance portion had a different color to define access.” Architectural detail is also important. “In the library panels, for example, we had some reveals that aligned with other elements of the building. We even had a section of the building where the panels were factory-fabricated to be curved.”
According to Guy Tridgell, communication manager for the Illinois Department of Transportation, Chicago, IDOT and the industry are experiencing many changes as a result of the current environment. “IDOT seeks precasters that are continually seeking to improve their products through good quality control practices,” he says. “In addition, a positive attitude toward change with the continuous improvement of operations will ensure that precasters continue their vital role in providing products that expedite the construction process.” He says this demand to accelerate construction will only grow with the aging of the infrastructure.
What McCaskie believes will lead to the success of one precaster over another, based on his experience over the years, is the precaster’s attention to detail and a willingness to put a little bit of engineering into the product, so that he gets exactly what he expects, and maybe a little bit more. “An example is the precasting of inlets and manholes,” he says. “Some come out the way they should. Others come out with holes or embedments that are mislocated. That turns us off pretty quickly.”
The future as the specifiers see it
Pounders believes there is potential for increased demand for precast in the future. “I think one of the most important determinants of future success relates to the concept of sustainable design,” he says. “There is a green movement going on in architecture these days. Concrete is a good example of a recyclable and sustainable material, particularly if the concrete itself is made with recycled and sustainable materials, such as fly ash.” In other words, Pounders believes, precast concrete will become an even stronger choice in the future in projects that are seeking sustainable certifications.
According to Tridgell, precast products have always been an effective way to accelerate construction and minimize disruptions to the traveling public. “The Illinois Department of Transportation, in partnership with the industry, would like to continue the implementation of new innovations that minimize inconveniences and ensure long-lasting infrastructure,” he says.
McCaskie admits that, in the short term, everyone needs to wait for the economy to return to something better. “Eventually, of course, it has to turn around,” he says. “There is just so much work out there that has to be done at some point in the future. Society will simply not be willing to wait and just watch everything fall apart.”
William Atkinson, Cartersville, Ill., is a freelance writer who covers business and safety issues.