Equipment and tech producers are zeroing in on

A panel made up of three aggregate producers explored the latest equipment and technology developments in the industry, as well as approaches to production management, at the Pit & Quarry Roundtable & Conference.

Those who participated were Scott Alexander of ACG Materials, Brian Hollrah of Alleyton Resource and Dan Johnson, formerly of Anderson Columbia.

Alexander is vice president of aggregates at ACG Materials, joining the company in 2013. Alexander has three decades of construction materials experience. He held senior management positions for 20 of those years with two of the nation’s top aggregate producers. In his current role, Alexander is responsible for managing the company’s mining business in south Texas and growing the overall aggregate business for ACG.

Hollrah is currently the CFO of Alleyton Resource, a Summit Materials company that’s based in the Houston area. He’s been in this position at Alleyton for more than two years, and he served as assistant financial controller for two years before shifting to Alleyton. Alleyton operates multiple sand and gravel sites and ready-mixed concrete plants in the Houston metro area. The company has about 300 employees.

Johnson, the former vice president of operations at Anderson Columbia, was previously responsible for aggregate operations in Florida, Georgia, North and South Carolina, and Texas, as well as affiliates such as Junction City Mining. Johnson held his position for 14 years.

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P&Q: To provide a little context for us to dig into this discussion, can you tell us a little more about your aggregate operations and the respective markets you serve? How did your companies perform in 2017 and in the year or two prior?

Johnson: At Anderson Columbia, we work primarily in the Southeast and Texas. Up until just recently we were a diversified materials supplier and a heavy civil contractor – one of the larger heavy civil contractors in the U.S., and certainty one of the largest in the Southeast, focusing primarily on roads and bridges.

We’ve been an aggregate producer in Florida, the Carolinas, Georgia and Texas with multiple sites. Just recently, we divested the ready-mixed concrete division. We’ve divested out interest in the cement mill and all the other ready-mix [concrete] properties to Oldcastle to focus more tightly on the aggregates and the heavy civil construction.

So, we feel like we’ve got a good focus going forward and a good base in the Southeastern United States and Texas – some of the best markets, some of the fastest-growing markets, but also some of the most competitive markets.

Alexander: We’re a privately held company that’s about 60 years old. We’re owned by HIG [Capital]. A private equity group, HIG has about $22 billion worth of assets under management. They acquired Harrison Gypsum six years ago. Harrison had five gypsum operations in Oklahoma and one in Texas.

HIG’s intent was to use that as a platform to develop an aggregate business, mining [and] manufacturing industry minerals. We now have 30 operations in Florida, Texas, Oklahoma, Kansas, Nevada, British Columbia and Washington. We’re pretty active and pretty acquisitive. As a company, we average two acquisitions a year. We’ve doubled in size in the past five years, and our anticipation is to do that again over the next five [years].

Hollrah: We’ve got eight sand and gravel pits now, and 11 ready-mixed [concrete] locations. We’re growing. We had a couple of acquisitions last year. In the Houston market, we had a really up and down year with Hurricane Harvey, but we had some positive things happen throughout the year with the UTP (Unified Transportation Program) and spending some $7 billion a year, keeping us strong and steady. The residential market still seemed to be strong for 2017.

P&Q: How has the economic environment surrounding your business impacted your ability to purchase new equipment over the last couple of years?

Hollrah: We’re looking out three years to see if there is the right return. With the equipment market, we are always looking to see if there is a deal to be had and if we can get a return on investment within a couple of years. [If there is] we put out the capital.

Alexander: We are fortunate to have a very large company behind us [in] HIG. They want us to grow and they want us to be profitable. Resources are not an issue, especially on the capital equipment side with the growth that we’ve had and the acquisitions we’ve made. We’ve, on average, spent 8 to 10 percent of our revenue on capital. We spent a lot of money last year [and] we anticipate we’ll spend a lot in 2018. It’s mostly growth related but our operations are not under-capitalized.

Johnson: Our company is privately held as well. I think a year ago at this time (January 2017) we were very optimistic. We didn’t have the new tax bill. Unfortunately, we ended up the year down in Florida, Georgia and in Texas, mostly due to the storms, of course.

We’re starting out this year just as optimistic as last year. We’re probably a little more optimistic with the tax deal. [We are] taking a hard to look at not just replacements and upgrades but introducing new equipment and new technologies to some of the plants to try and improve our productivity and cut our downtime. As a privately held company, I think the tax law [represents] a tremendous opportunity for us. But we’re off to a little bit of a slow start this year because of the cold weather in Texas and Florida.

P&Q: For the others here, does tax reform and the potential for federal infrastructure spending influence your ability to go ahead and makes some big investments in equipment?

Alexander: It adds a little optimism that makes us feel like our investments will be less risky. We usually get a two-year payback or less on capital expenditures. At the legislative fly-in [last year] and visiting with different members in the Senate and the House, it was very disappointing to see firsthand that there’s recognition of a need for infrastructure spending. Both parties want to do it, but it seems like the current administration is being stonewalled.

Privately, staff members are telling us they support what we’re trying to do but they don’t support the president. They don’t want him to have success. That takes away some of the optimism.

But that doesn’t really impact our spending because we’re in growth mode and we’re spending based on expansion. If the infrastructure bill gets passed and we get more money there, that’ll be fantastic. 2017 [was a] record year and in 2018 our anticipation is to be well above 2017. We’re very optimistic in spite of all of the politics.

P&Q: The demands of production are generally high for producers. We recently surveyed Pit & Quarry readers, and 40 percent of them tell us that the demands of production “keep them up at night.” Only one other area – compliance with MSHA rules and regulations – causes producers more stress than production demands. Considering this, what can you tell us about the demands of production at your operations? How is equipment and technology alleviating some of these demands?

Hollrah: With technology, we’re connected to all of our plants now. We’re trying to keep the connection there with all of our computers, phones [and] tablets at all times. We are investing in an internal software program that I have on my phone. We can pull up and see what plants are down and what [plants] are producing. You can get real-time information. I think that should alleviate stress.

Alexander: In our organization, we use a monitoring system that is centralized. The regularly scheduled maintenance is all monitored. In some locations, managers are notified when maintenance is required [and] what needs to be done. On the plant side we really haven’t – from a technology standpoint – got too advanced.

Johnson: We do what I think everybody else does. We try to review our compliance procedures and we try to review our performance procedures. What everybody gets excited about [is] we’re doing facial recognition and time management on tablets so we can record hours. We’re using drones to survey piles and cut our needs for surveyors, but there’s a lot of incremental technology that we’ve gradually become aware of and we just gradually work into our operations.

We started switching everything over to zero-stretch belts. They’re a little more expensive but they have a much longer life and they result in a lot [less] downtime. I tell our guys in Georgia that the plant’s probably worth $10,000 an hour. So if a set of belts burns up and the plant shut downs for an hour because we have to replace the belts, that’s $10,000.

It’s a lot cheaper to spend 50 percent more on a set of belts and just gradually transition everything over to zero-stretch belts. We’re doing a lot of things like that.

P&Q: When it comes to data you’re obviously capturing a lot of data from your plants and mobile fleets. How does your data analysis process start? Which data points stand out? Which ones don’t provide great value?

Johnson: We’re pretty well sold on Caterpillar equipment. We’ve got tremendous access to Cat through telematics.

We found out the hard way that the first thing to do is make sure the right people are getting the data. [For us], our telematics were going to [a] Cat dealer in Florida but our guys weren’t getting them. We ended up burning up a front differential. We had hundreds of warnings, but nobody paid attention to them.

The best data is no good unless it’s directed to the right people and managed correctly. We work with telematics company wide, and we’re using a lot of data. At the end of the day, it boils down to the top line and bottom line and then trying to finesse everything in between to see where there’s room for improvement. All of the equipment and process data feeds into the financial data, and we go from there to try to be successful.

Alexander: There’s great technology out there. The biggest obstacle we have to get over is getting our employees to use it because what we had to do is have individual managers have their annual goals tied to tracking different metrics available through the technology. We’re having success with that, but we still have a long way to go.

We’re also partnering with our suppliers and distributors. They monitor our equipment as well and work with us. We may happen to miss something, but the backup is our distributor or supplier who notifies us. We must have a team effort there.

Hollrah: The most important thing to us is keeping the metrics simple and not getting [overwhelmed] with 10 or 20 different metrics. We focus on tons per man-hour to the plant. We have belt scales and automation there. We’re doing some pilots with the telematics and getting some really good data there – faulty codes when those pop up, being able to respond quicker to the maintenance items.

P&Q: What percentage of the data available would you say you’re actually utilizing?

Hollrah: It’s a very small amount. There’s so much out there. I just want to keep it simple to the things that will have the most impact to the business.

P&Q: How do telematics translate to crushing more rock and cost savings in that area?

Hollrah: For us, I can’t put numbers to it because we’re still in the pilot stage. We have seen a lot of benefit identifying areas like a haul road – can we expand the road and how much that is costing us as a result? Or, is equipment right sized for the issues we’re seeing at the plant? That’s helpful to make some changes.

In terms of the cost per ton, I’m not sure how much we’re getting out of that yet.

Alexander: Plant availability and uptime are ways to measure that. By putting the applications in place we’re able to see what kind of improvement we have there and it’s easily quantifiable. It’s not a difficult thing to do but it’s something that needs to be done.

We’re somewhat fortunate in that demand has been extremely high at most of our locations – sometimes we have two or three shifts. Those metrics become very important because there are real dollars associated with them.

Johnson: We use telematics for the plants and the equipment and it’s just an effort to catch the problems while they’re small. It saves us money on downtime and all the way around.

P&Q: Is there a next frontier for data capture?

Hollrah: We have a lot of different types of reserves. [With] gradation for sand and gravel pits, you can go from 80 percent sand to 30 percent, so if there’s a way somehow in the next frontier to figure out what percentage is sand or gravel going to the plant, that would be my preferred answer.