Producers, equipment suppliers reflect on 2019

The following transcripts were edited from two concurrent discussions Jan. 15 at the Pit & Quarry Roundtable & Conference. 

Producers: Tell us about your construction materials sales in 2019 and how they compared to the previous year. What factors or developments contributed to the demand of your products in 2019? Equipment suppliers: Share your observations of the 2019 construction materials market, and tell us about your equipment sales to the market in the last year. Did your sales to the aggregate industry meet or exceed your expectations?

JOHN GARRISON (SUPERIOR INDUSTRIES): As far as the aggregate business, I think we’ve heard everybody’s kind of up a little bit. There are pockets where it was hotter. We had a really good year right out of the gate.

2019 was strong. There was a lot of rollover from 2018. Big projects carried through. Toward the summer kind of going into the fall, things softened up a little bit. I think we noticed more projects that were planned getting pushed back. I think there’s been more capital budget-type reviews. 

Overall, 2019 was a good year for us. We exceeded our budgets in some divisions and were near to others, but it definitely softened up in the fourth quarter. 

SHELDON SHEPHERD (TECWEIGH): That’s exactly what we found. Last year was extremely strong. In the fall, it kind of softened up. People were putting different things off until the first quarter of 2020. 

Now, I can tell it is picking back up some. It was a little slow over the [winter] holidays, but the inquiries and quotes are really picking back up.

JOSH SWANK (PHILIPPI-HAGENBUCH): I echo what they said. We had a stronger December. We had an early uptick for 2020, so our fourth quarter actually was stronger than budgeted or was expected. We have seen that come through into January. 

Based on our projections for this year, we expect it to remain strong through May and then start softening in June through November.

KAREN HUBACZ-KILEY (BOND CONSTRUCTION CORP.): A producer’s take on it: We are in Massachusetts, so 2018 was very positive. We are about the same as we were for 2019 as 2018, to the point that I have had trouble keeping up with demand. This is a problem, but it’s a great problem. Whether it be homeowners, municipalities and state work, it’s all exceptionally positive.

SCOTT ALEXANDER (ARCOSA): Arcosa is a national publicly traded mining company that experienced a lot of growth in 2019. That was really a result of acquisitions. Arcosa acquired ACG Materials and combined over 30 mines that are spread out across the country. So that was very positive for our company. 

Our industry has a built-in growth factor that’s very good for us in terms of population growth. So on per capital consumption and population growth – and depending on the markets that you are in – that greatly influences the business. 

We tend to be in some large markets where there has been a lot of population growth, and that’s helped drive 2019. We see more acquisitions in 2020. 

In addition to the economy being pretty robust – and that’s been positive for our company – a lot of people I’ve spoken to in the industry have very similar feelings. 2019 was good, and we expect 2020 to be good, as well.

PAT JACOMET (OHIO AGGREGATES & INDUSTRIAL MINERALS ASSOCIATION): 2019 was a great year to be a Buckeye. We passed the two-year transportation bill that included a substantial hike in user fees, both for fuel and diesel. We’re very optimistic moving into 2020. Then, the next couple of years we are hoping that the feds will step up and do the same thing. 

We feel that we are on solid ground for the next couple of years, at least. But again, from the federal side, we’d like the feds to step up.

PAUL ROSS (DOUGLAS MANUFACTURING): Bearing in mind that 2018 was a record year, 2019 was off a little bit for us overall. The major impacts to us were export sales and capital purchases. Aggregates industry sales were higher than expected. We expect 2020 to be flat over 2019, just because it’s an election year and we, like most people, are holding on to bigger money until after the election results.

MATT LEPP (VDG): I’ll echo what a lot of the other equipment manufacturers said. I think 2018 was an absolutely phenomenal year. Going into 2019, the first half of the year I would say, for us, remained fairly strong in comparison. But we did notice a slowdown in the latter half – specifically in the larger capital products that we had seen in 2018 going into 2019. 

We did get some feedback from producers that even though it was very good times for them, there were some edicts coming down from the ‘powers that be’ to focus more on needs than wants in planning for the rest of the year. 

We have a pretty positive outlook moving forward.

VINNIE ROCCO (AMCAST): For the equipment side of our business, there seemed to be more interest – and a little bit stronger interest – in the beginning of 2019. As we got through the year, it seemed to be more customers were interested in either short-term or long-term rentals, which we are seeing already converting into purchases for 2020. 

On the flip side with the parts side of the business, we actually saw kind of the opposite. We had a slowdown, and around the third quarter it was kind of slow with parts. In the fourth quarter, it actually picked up substantially. So it was kind of a mix of both, but opposite on the parts and equipment. 

MARK STRADER (BRAMCO-MPS): Our rental business in 2018 and 2019 was extremely strong. We did see a little downturn in new equipment sales, but the parts and service pieces to our business continue to grow at a nice pace.

EVAN CLARKE (KLEEMANN): We’re seeing the same as Mark. We had a big year last year. The rental market has grown compared to the national global market with location. We’ve got one of the strongest markets right now, with products that have been changing for years. 

I think buyers obviously want to capitalize on their equipment investment and keep it there. So the customers seem to have the ability to capitalize on this current market, and it’s a good year for it.

RYAN LAYTON (JOHN DEERE): I’d echo that. We’ve seen rental and leasing, for that matter, definitely uptick over the last little bit. We’ve taken some steps to make sure we adjust a little bit how we approach some of our dealers and make sure we are accounting for that and helping them manage their inventory and the equipment they need,

ALEXANDER: We’ve seen our rental equipment really grow significantly in double digits for a number of years. It’s pretty much for us, being on the growth side of things, portable equipment has been very, very helpful for us to expand into new markets.

And again, we’ve got a pretty good appetite for growth and the portable equipment is a very good first step to allow us to prove out a market and then, in many cases, we end up leasing/renting the equipment and then converting it to a capital purchase.

SHANE GEE (POLYDECK): Overall, we hit budget. Depending on what part of the country you were in, some areas were affected with the flooding and the weather. But overall it was good, and we expect 2020 to be good as well.

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The following transcript was edited from a concurrent Pit & Quarry Roundtable & Conference discussion.

DAN JOHNSON (THE CONCRETE CO.): Our sales in 2019 were pretty good. We didn’t have a lot of surprises. I think some of the stimulus from the current administration that was enacted helped us. 

For 2020, we’re still forecasting growth but it’s tapered off a little bit. It’s probably a more modest growth and flat in some markets.

ALEX KANARIS (VDG): In 2019, we had approximately a 17-point drop from the last year. I tried to find out exactly what happened, because I know a lot of projects took place. Still, in 2019, we’re approximately five points higher than 2017. So we think 2018 could be a spike or an anomaly. I don’t know what to attribute it to.

In 2020, especially with new legislation and new regulations, we probably are going to be the same in the aggregate industry.

BRAD NICHOLS (SYNTRON MATERIAL HANDLING): One thing I’ve talked to several people about is it looks like – instead of large capital projects, instead of new greenfields – we’re seeing a lot more small, marginal increases in the various areas out there in the market.

Are [producers] looking to do much as far as efficiency improvements, or getting small, marginal gains in your production? At this point, are [producers] putting in longer hours? More days? I know a lot of producers don’t run complete 24-hour operations. What seems to be the trend going on with the producer?

STEWART PETROVITS (ROUTE 82 SAND & GRAVEL): I can address some of that.

We’re a small producer in New York state. 2018 was very good. 2019 was forecast, based on interviews with our customers, to frankly be down. But it wasn’t down at all. 

It wasn’t a tremendous increase but, frankly, we couldn’t have handled a tremendous increase. We’re already working to address it [with] 10-hour shifts, six-day [work weeks] and maintenance on Sundays if we need to with another shift and great prices.

There’s only so much in the pipeline. I’m not going to incur any more overhead to produce the product if I’m not going to be able to recover that in costs. So we’ve raised prices significantly over the past few years. 

In terms of what I found most interesting: Most of our customers are ready-mix or precast manufacturers. In the past two years, almost all of their work – all of the big-volume work, all of the high-dollar work – is private. 

In our region, New York has very little infrastructure work and no major resurfacing projects for the past two years. There are some bridge jobs. We just had an influx of private investment and it’s been great. It’s really kept everybody busy.

I’m starting those talks again with our customers this year. It’s the same thing: ‘Ah, it probably won’t be as good.’ But I see 2020 being equal to 2019.

NICHOLS: You think it’s flat?

PETROVITS: Flat is good at this point. We couldn’t really handle anymore. In fact, it [might help if it] tailed off a little bit so we could build up the stockpiles. 

We’re seasonal up [in New York]. We really have to shut down for the winter. We can always make it through the winter if you start with enough stockpile in the spring to carry you through the season so you have a stockpile for next winter.

I’m good for now. I’m good for spring. I’m already worried about if we have a long winter and can we manufacture enough to get to next winter. Even if it was off 3 to 5 percent, we probably would be OK with that.

COLIN OERTON (STONEPOINT MATERIALS): On 2019 versus 2020: We’re located in three, four regions across the country, and we’ve seen different growth rates across the country. Generally, 2019 was a good year. With 2018, I think a lot of people maybe had operations in the South and had a lot of wet weather. That really hampered a lot of our sales toward the end of the year. You really saw a big push in 2019 as a result of that.

For 2020, we kind of expect it to be up again. We’ve got a number of projects that we’re working on. To echo what Stewart said: We tend to see a lot more private investment than [investment] in infrastructure – just in the parts of the country we’re located in.

When we do see some of the infrastructure projects coming along, they tend to be big and last a few years. We kind of do well despite that.

From an operations perspective, we have to spend. In the past, we were really trying to focus on operations of the businesses. There’s not much you can do with the market. There is something you can do with the pricing side. 

The other thing we focus on is the operating and financial side. One of the things we have done is more at the corporate level: We’re trying to have somebody focused on looking across the board on ways to [achieve] efficiencies.

If we think there are efficiency projects to be done, we will act on behalf of that. We tend to get a good return. It comes down to things like looking at tons, manhours and parts of the plant where you could be more efficient.

Everybody knows that every plant is a little bit different in terms of the way it is set up, but this is something we’re going to be focused on.