February 19, 2013

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CONSTRUCTION

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CONSTRUCTION

February 19, 2013

JOHNSON: We’re seeing lot of activity this year with very, very low margins. Our company is spreading out of state to fill that capacity up. It’s the same or similar margins, but there’s a little bit more of it. We’re putting an aggressive push out in the middle of nowhere—out where there’s no competition.

What are you seeing on the equipment-supply side?

P. CAMPBELL: The industry is up from very low numbers. Our industry dropped about a third of what it was. So we’re up. Easy comparables, so nowhere near where we were.

The biggest shift we are seeing is those who need equipment—it’s primarily replacement, nobody’s really expanding. And those who do replace prefer to rent rather than purchase. Everybody is trying to avoid risk or commitment due to the uncertainty out there. That’s throughout the industry and, actually, throughout the country.   

Dave, what are you predicting on the underground side?

TEMPEST: It’s interesting to hear Paul—we’re in that boat where we’re renting. There’s an opportunity to take a third write-off this year, but we took a look at it, and we don’t really want to make that purchase—take advantage of the tax credit, write it down in a three-year time period instead of a seven-year time period. And we don’t want to buy it and have it sitting in our yard for two years, wondering what it’s going to do. It’s one of those times where you hope for the best, prepare for the worst, and hang on with both hands.   

You guys don’t build homes, but you do build subdivision infrastructure—water/sewer, fiber, curb and gutter, sidewalks. I understand that the housing inventory has come down and that building permits are up. Are those numbers real?

KILGORE: We are seeing an improvement on the residential side from our ready mix division, and also the number of subdivisions we are quoting. We’ve quoted a lot more subdivisions in the last 12 months than we did the prior year.

Today, we might only be a third of where we were at from the high point. It might be worse from the subdivision standpoint. The news might be reporting a 30 percent increase, for example, but 30 percent of nothing is still not a lot. So the reports are probably accurate, but when you look at the actual numbers, it’s not a lot.  

GOLDING: Regarding building materials, a lot of lumber has gone to multifamily projects, and we’re seeing quite an uptick in residential on the lumber and truss side of things, and ready mix also.

I’m hearing that a lot of the land inventory that was developed five, six, seven years ago is now being bought and they’re starting to build on it.    

KILGORE: I recently spoke with a banker about that. They rank their lots A, B, C and D, and all the good lots are pretty much taken. They’re gone now. But a lot of the poor lots that aren’t as desirable just aren’t being bought up.

So the development we are seeing is on the newer lots—the A and B range. But having said that, the subdivisions we’re seeing built aren’t 50- to 100-lot subdivisions. They might be 10 to 30 lots. So they’re biting off a lot smaller projects.     

BEECHER: The good thing, though, is we’ve stopped decreasing. We’ve started seeing some growth, even though it’s small and it’s slow, but there is some growth in a lot of the sectors of the market. And some of the markets around us that were enormously depressed are starting to see some growth, too.

So there is some indication that maybe the growth that’s being predicted for the next four or five years is actually going to happen—instead of the static situation we’ve been in. Just trying to spin a little bit of good light on things.

GOLDING: We have to be optimistic. We don’t go to bed at night just totally depressed. We see that growth in the population—ultimately, something has to happen. There’s still some help that needs to happen. The gears of progress need to be loosened somehow, because the demand is there. The state is still growing. We’re going to have to provide services and infrastructure, housing, offices for this growth.

But we’re seeing that quagmire of government, and financing for the private sector, that continues to belabor and drag out this grind we’ve been in for five years.   

WADMAN: Rob mentioned the $1.5 billion in work that was available, and now there’s $600 million. When we look around the table, I think all the same people were here four or five years ago. Some have been waiting for others to go out of business, and it hasn’t happened; so we all have to deal with the $600 million that’s left.

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