As an annual measure of the precast concrete industry in North America, the NPCA Benchmarking Report tracks sales in the five largest product sectors, compares the financial metrics of high-profit companies to the total sample, and includes granular data on salaries and benefits. The many graphs, charts and infographics tell the story of the last year and how precasters fared in the ever-changing construction environment. This year’s report, based on 2016 data, drew 63 responses representing 168 plants. The 129-page report results from a survey conducted in spring 2017 by Industry Insights, a management consulting firm in Columbus, Ohio. Here are a few highlights.
Market size figures provided by the Benchmarking Report are considered rough estimates because of the size of the sample. While the dollar figures may be rough estimates, the report’s methodology has been the same over the years, so we are essentially comparing apples to apples. The estimated sales by product category can be compared year-over-year to shed light on product lines that are growing, remaining stable or shrinking. Using this data, the precast concrete industry grew by about 5% in 2016, with total sales of $18.2 billion, surpassing the previous year’s total of $17.3 billion. That includes all precast, prestressed and pipe products.
Prestressed structural building elements and prestressed bridge components were the highest growth segments last year, with building elements growing at 18% and bridges at 22% over the previous year. Another trend appears to be in the wall sector, where retaining wall systems lagged 7% from 2015, but sound wall/barrier grew by 9%. Utility vaults once again emerged as the largest individual product category, with 13.2% of precast market sales. The estimated market size of the utility vault sector grew 9% from 2015 to 2016 to $2.7 billion in sales. Utility vault sales could be seen as a bellwether in the precast industry. If vault sales are healthy, the industry is likely healthy.
In the sanitary and stormwater area, sales tracked slightly above 2015, with the stormwater management and retention structure product line leading the way with 8% growth as cities modernize their stormwater infrastructure to meet EPA guidelines and move away from combined sewer overflow systems.
The report compares high-profit firms with the total sample to show areas where higher-profit firms achieve their success. It turns out that these firms are a little better at just about everything measured in the survey. For example, they spend a lower percentage on raw materials (26.4% to 28.6%), they spend a lower percentage on labor (13.2% to 14.8%), their plant operating expenses are lower (5% to 6.1%), and the same applies in most other categories. A little bit of efficiency in every category adds up to significantly more profit. The net profit before taxes of all precast companies surveyed was 7% while the net profit of the high achieving group was 14.2%.
Sales and Profits
Overall, 2016 was a strong year in the precast industry. The majority of precast companies experienced growth in 2016, with 69% increasing sales. Some of those companies were very successful, with 46% increasing sales by 15% or more. It was a profitable year as well, with 86% of companies reporting profits and 32% reporting profit margins of more than 10%.
According to the survey, the median number of employees per company is 54. Companies are split fairly evenly by size with 28.8% employing fewer than 25; 39% employing 25 to 75 people; and 32.2% employing more than 75. The typical company is roughly 2.5 times the size it was 20 years ago, not adjusting for inflation. When adjusting for inflation, companies have grown by about 50%. A company with $2 million in sales in 1996 would have grossed about $5 million in 2016. But that $5 million would have the purchasing power of about $3 million because of inflation.
There are other tidbits in the report that could serve as discussion starters for industry watchers. For example, nearly 70% of all precast plants in the survey use self-consolidating concrete. Among the high-profit firms, however, the figure sinks to 60%. One in four precast companies uses ready-mixed concrete. However, 50% of the high-profit firms use ready-mix. Does that mean ready-mix concrete in the plant means higher profits? Let the discussion begin.