January 1, 2014
While most operators don’t expect to be dazzled, most anticipate favorable business ratings for 2014.
For a decade, Aggregates Manager has asked operators to assess business conditions and production rates for the current year and upcoming year. We share this information to help operators benchmark their own operations, and, hopefully, develop an accurate picture of future conditions so they can plan accordingly. Based on operator feedback, it is apparent that 2013 was neither the best of times, nor the worst of times.
According to the 2013-14 Aggregates Manager Forecast Survey, the percentage of operators reporting excellent business results retreated from previous year for the first time since 2010, with just 3.8 percent who opted for the top rating. At the opposite end of the spectrum, the percentage of operators who described business conditions as poor fell below 10 percent for the first time since 2006, with 6.7 percent of operators who selected the lowest rating.
A true picture of conditions, however, may be better illustrated in the mid-range results. More than double the percentage of operators characterized 2013 business conditions as very good, compared to the prior year, while smaller percentages of improvements were seen among operators who reported good (37.1 percent in 2013, compared to 32.7 percent in 2012) and fair (30.5 percent in 2013, compared to 37.6 percent in 2012) business conditions. From an overall perspective, 62.8 percent of operators described positive business ratings (excellent, very good, or good) compared to the 37.2 percent who characterized business conditions as fair or poor. During 10 years of Aggregates Manager Forecast Surveys, positive business ratings have ranged from a low of 34 percent in 2009 to a high of 84.5 percent in 2004.
Those business ratings were borne out in production volumes. While more operators were likely to say that production increased (44.8 percent in 2013, compared to 33.7 percent in 2012), the average increase fell slightly from 14.3 percent in 2012 to 13.3 percent in 2013. On the plus side, fewer operators reported decreased production (18.1 percent in 2013, compared to 25.7 percent in 2012) and the size of the average decrease fell from 25.0 percent in 2012 to 18.2 percent in 2013.
Local markets, local results
While national results highlight overall trends, regional disparities were certainly in play throughout 2013. Operators in the North Central states were the most likely to report excellent business conditions (7.1 percent), followed by the Northeast (5.3 percent), and the South (2.9 percent). None of the operators in the West who answered the survey reported excellent business conditions. In fact, nearly one in five operators in the West (19 percent) chronicled poor conditions, while an additional 38.1 percent described the year as fair. Operators in the North Central (7.1 percent) and the South (2.9 percent) also reported poor conditions, with each percentage mirroring that of operators who experienced excellent conditions in each region. The Northeast region tipped to the positive side, with no operators who recounted poor conditions.
From a primary product basis, crushed stone & sand and gravel operators were the most enthusiastic, with 6.7 percent who described 2013 business conditions as excellent and two-thirds who categorized it as either excellent, very good, or good. Crushed stone-only operators followed with 4.2 percent of operators who depicted the year as excellent and 58.4 percent who opted for the positive business ratings. While no sand and gravel producers construed 2013 as excellent, two-thirds categorized it as very good, while remaining operators deemed business conditions as good. None of the operators of other materials (including recycled materials, cement, lime, and industrial minerals) described 2013 business conditions as excellent, but 57.6 percent selected very good or good business ratings.
Looking at results from an operation’s size, most of the ratings fell in the middle three ratings categories. In terms of positive results (excellent, very good, or good), operators with production of 3,000,001 to 5 million tons per year led the way with 85.8 percent describing positive business conditions. Their upbeat reports were followed by operators with production of more than 5 million tons (85.0 percent); operators with production of 500,001 to 1 million tons (61.1 percent); operators with 1,000,001 to 3 million tons (54.6 percent); and, finally, operators with less than 500,000 tons (52.6 percent). Operators in the 3,000,001 to 5 million tons per year category were also the most bullish on top-end results for 2013, with 28.6 percent who said it was an excellent year. No other size category reported excellent ratings in the double digits.
As operators were asked to forecast business ratings for 2014, their predictions for the top two results — excellent and very good — were identical to the results reported for 2013 with 3.8 percent who expect an excellent year and 21.9 who anticipate a very good year. The biggest movement was seen in the percentage of operators who foresee a good year; that figure increased from 37.1 percent in 2013 to 47.6 percent in 2014. The jump in those expectations came as a result of fewer operators who predict a fair year (down from 30.5 percent in 2013 to 23.8 percent in 2014) or a poor year (down from 6.7 percent in 2013 to 2.9 percent in 2014).
From a regional perspective, operators in the South are optimistic. An industry-leading 5.7 percent anticipate an excellent year. In addition, four of five operators in the South and Northeast regions expect positive ratings (excellent, very good, or good), while three of four in the Northeast indicate the same upbeat trend. North Central operators were the most cautious; approximately two in three call for positive business ratings.
No discernable trends were available on a product or production size category.
The results of this year’s survey indicate slow, but steady improvements in conditions for most operators. The results are not the best of times, as seen in 2006, but they are not the worst of times, such as 2009. Most operators are squarely in the center categories of business ratings, but trending toward the positive.
One of the most striking results of this year’s survey can be found among the 2.9 percent of operators who anticipate poor business results this year. It is the lowest percentage reported in that rating during 10 years of Aggregates Manager Forecast Surveys. In addition, 73.3 percent of respondents expect positive business ratings this year — the highest percentage of results reported in these surveys since 2006.
This bodes well for the industry given that all of last year’s forecast numbers were within 3.5 percent of their reported results, with the exception of operators who described 2013 as a very good year. In that case, positive results were 11 percent ahead of the forecast, taking into account all of the discrepancies in the other four categories of business results.
To paraphrase Charles Dickens, operators may look forward to a spring of hope.
Methodology, Objectives, and Sources
The objective of the 2013-14 Aggregates Manager Forecast Survey was to determine business and production volume trends. In November 2013, Aggregates Manager e-mailed questionnaires to a random selection of readers in the crushed stone and sand and gravel, crushed stone-only, crushed gravel-only, and other materials production categories. A total of 105 useable surveys were completed, with 50 percent being completed by owners, presidents, officers, or other executives, and another 19 percent being completed by mine superintendents.