On the Upswing
U.S. Concrete’s growth shows that, even in a down market, its fortunes are on the rise.
By Therese Dunphy, Editor-in-Chief
Just over a year ago, I got a phone call from Bill Sandbrook, president and CEO of Euless, Texas-based U.S. Concrete. He asked me to include the company in the Data Mining section of the magazine (see page 31), noting that the company had numerous aggregate operations and should be included in the magazine’s overview of publicly held companies. I immediately agreed and, knowing Sandbrook’s management skills, paid particularly close attention to the company’s stock performance. What I’ve seen during the last year is pretty remarkable stuff. When I first started tracking its stock prices, U.S. Concrete was trading at $6.70 per share, with a 52-week low of $1.90 per share. On the day of our interview, one day before Sandbrook marked his second anniversary with the company, the stock price was at $18.95. Read on to learn how Sandbrook worked with the U.S. Concrete team to achieve the nearly three-fold growth.
What drew you to U.S. Concrete?
I was interested by the challenge. I thought we were at the bottom of the cycle. I thought that U.S. Concrete had great potential because the markets it operated in were what I believed to be leading regional markets as we came out of the recession, with good fundamental, underlying economic characteristics. I thought that the asset base was above average. I thought that they had strategically located plants, and I had the desire to really be able to lead a public company. This was an opportunity amongst very few publicly traded, U.S. materials companies… that was very attractive to me. I made the decision to leave Oldcastle with very mixed feelings because they had been very, very good to me. They had trained me; they had nurtured me; they had given me the opportunity to grow business; they had given me the opportunity to be involved in multi-national operations — in Canada and South America — so I did not make the decision lightly.
How did the company’s stock price rise so rapidly?
The regions that we’ve operated in over the last years — which include the San Francisco Bay Area, Northern Texas and the Dallas metroplex, Washington, D.C., metropolitan New York City, and Northern New Jersey — have had very, very healthy construction climates. Everybody knows how healthy Texas is and the San Francisco Bay Area is doing very, very well too. Over the past two years, there has been growth from a low base, but good absolute growth in all of our markets.
I did make some leadership changes within the company that helped. We refocused the organization — the headquarters staff — to be more responsive to the field’s needs. To that end, we closed our Houston office and moved it to Euless, Texas, and co-located the corporate staff with the regional headquarters, which has culturally realigned everyone’s interests. It was very good for the corporate staff and it was very good for the field to see that we were willing to rub shoulders with them, and that the company was aligned from top to bottom.
We did make some strategic acquisitions and divestitures that helped us. We decided that our precast businesses were not core, and, therefore, sold the bulk of them to Oldcastle. We used that money to buy another company in the San Francisco Bay Area that allowed us to partake of the technology boom and the ancillary growth that is taking place there.
We stuck to our knitting. We were very focused on cost control, but we invested selectively in assets where we thought we could make money: we replaced mixer trucks where necessary, improved on quarry operations with both mobile and fixed plant equipment in order to lower our costs of production, and, on the soft side, got everybody to believe again that we were winners. I instituted some increased performance incentives to reward people for performance results.
We have run with all of those initiatives that have, collectively, led to our stock performance.
It really shows that attitude and leadership matter. I have a great winning team here. There aren’t that many people who are different, but they are different, with a different focus and a different attitude. You build on small successes, and it breeds bigger successes. There is value in teamwork and having everybody from the CEO to the newest ready-mix truck driver being aligned. When they are all aligned in this mission of improved performance, of excellence, these results can happen, and we’re proving that.
How do you continue this growth in the future?
I still think we have opportunities for organic growth. We can improve on our efficiencies. We are doing cutting-edge research on environmentally friendly and environmentally sustainable concrete out of our R&D lab in San Jose; so we do have new product rollouts that are going to help us. We’re looking aggressively for tuck-in, bolt-on acquisitions to expand our footprints where we think we have enough size and stability to grow in all of our markets. And, I still think that all of the dynamics — the underlying trends of increased residential housing starts (both single-family and multi-family), non-residential, and, hopefully increased infrastructure spending later in the cycle — are still in play for a number of years.
Are you seeing customer demand for sustainable products?
It is absolutely a growing trend in the areas where we operate in California. In the San Francisco Bay Area, we believe that gives us a competitive edge. Customers are requiring it, not requesting it. As with many trends, it appears that California leads the nation.
Looking at second quarter year-over-year growth by segment, the overall revenue growth rate was 17.6 percent, and the aggregate segment grew 32 percent. Is that growth through acquisition or organic growth?
It’s all organic. We didn’t add any aggregate operations during the quarter. A lot of our our aggregate growth was internal. We are very diligently trying to supply as much to ourself as we can, where we can. There was an added focus on internal supply.
The margins for concrete have been particularly good. Is there a focus on serving your own aggregate demand first?
The aggregate operations are there to supply the concrete as a primary customer, however, concrete plants can’t consume all of the products produced at an aggregate plant, so we do go to market with our non-internally consumed aggregates, and we are running it as an aggregates company should, trying to maximize the profitability of our externally sold aggregates.
Are there any markets you’d like to expand into, or are you focused on the markets you are already in?
For the next 18 to 24 months, we are very focused on strengthening within our existing footprint or concentrically growing our footprint so we can utilize our existing management teams and don’t have to go into a new area with a new management team. That doesn’t preclude that if I have a very good deal somewhere that I’m not looking, but our focus is definitely around our existing operating footprint.
U.S. Concrete is a material supplier for One World Trade Center, and you’ve always been extremely patriotic. Did that project take your career full circle?
It is full circle. When you and I first met, it was under what we had done to help with the World Trade Center. Coming out of the army, it was very, very close to me. I had a very close friend who I had worked with on my last army assignment on the plane from Boston that hit the towers. Being on the site and then coming full circle and rebuilding the site was bittersweet. It shows the resilience of America. For me, it was completion. It was destroyed; I helped in that aftermath, and then I helped rebuild it.