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Editor's Comments

At the Crux If you dig into the numbers of the Top Metal Builders for 2012 and compare them to the results from the

previous two years, you can begin to see a positive trend emerge. The largest metal builders are growing in size, landing more projects and buying more steel. Conclusion? If the big guys are growing, then the industry must be growing. The trend is clear, but there are questions remaining.

How strong is the growth trend? It’s always dangerous to draw conclusions from a small sample group, but over the last few years, those companies that are in the Top Metal Builders group have shown increased size year over year in average square footage put in place and total tonnage built. The square footage number may be a better indicator than tonnage because some companies work as both general contractor and erector and their purchase of steel can vary from job to job. The other side of the strength of the growth trend is how large is the increase. The numbers show massive

increases year over year in both square footage and tonnage. For the last two years, the Top Metal Builders have indicated increases greater than 30 percent in both measurements. I think we can safely say that the industry isn’t growing at that rate, so what is happening? That brings us to the next question.

How much change is there in market share? Overall, our response to the Top Metal Builder surveys has increased signifi cantly. That’s good, since it’s show- ing that we’re getting contractors to engage more, and it can be attributed both to improvement on our part in reaching out to the industry and to an increased willingness to participate in these kinds of surveys when you have good news to report. (Who, after all, wants to self-report a signifi cant decline in fortunes?) Even allowing for those variables, we see a constant churning in this group. That indicates to us that

industry consolidation and increased market dominance are a long way off. I think that we’re at a point in the recovery where companies are grabbing any project they can. Focusing on a single niche can be detrimental to the long-term success of your business. Consequently, we may see companies in 2012 hitting a run of metal building projects, while in 2011 they had landed a number of concrete tilt-up. We are also seeing some segments of the market perform better than others. Companies specializing

in transportation are seeing more activity than those that specialize in retail. Even if your business has broadened its specialization, you have to compete against companies that are already strong in those segments. That means they will probably outperform you for the short term.

What’s the future hold? As the industry continues to grow, we can predict a few things based on the events we see in other industries. We will begin to see consolidation, and the Top Metal Builders list will start to show that. There are economies of scale that attract mergers and acquisitions people, who will provide the capital necessary for some companies to gather market share. At the same time, I would imagine we’ll see consolidation vertically in the supply chain. This has

happened quite a bit in other construction industries and is often driven by manufacturers wanting to have more control over the installation of their product. So, they’re buying distributors and installers, creating a cohesive whole in the supply chain. Not much of that has happened in our industry, but it’s not unreasonable to see it coming. Once all market segments are growing, we’ll see companies revert back to their specializations. Trans-

portation, education, retail, etc. By working one or two niches, companies can create leaner operations and drive down costs, while increasing productivity. That’s hard to beat for a generalist coming against them dur- ing the bidding process. We may see that represented in the Top Metal Builder list as those niche operations that tend to work in segments with larger buildings will begin to dominate the list. The future is uncertain, of course, but we’re excited about the prospects for growth in metal buildings. We also look forward to tracking the changes as they occur.

Paul Deffenbaugh Editorial Director

May 2013


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