State of the industry

We asked. You answered.

More than 800 glass companies representing the commercial, retail and fabrication markets participated in Glass Magazine’s 2010 State of the Industry survey, providing insight into how they did in 2009 and how they plan to remain profitable in what forecasters predict will be a challenging year ahead. (See Closer look, the nonresidential construction forecast, and the housing forecast.

Last year was difficult for many glass companies, with 71 percent of survey respondents reporting a profit decrease. Readers cited the recession as the primary culprit (77 percent), followed by a decrease in job volume (68 percent), and increased operational costs (26 percent). The majority of companies that experienced profit declines in 2009 reported drops of 20 percent to 50 percent. (See Fig. 1 and Fig. 2 below)

“Though it’s a statement of the obvious, each and every part of the glass channel—from primary glass makers to fabricators to installers and retail shops—is struggling through this economic downturn,” said Scott Follett, director of new products and services, Performance Glazings strategic business unit, PPG Industries, Pittsburgh. “Even the architects who specify and homeowners who use our products have been impacted.”

Salem Distributing Co., a provider of glass fabricating equipment and consumable supplies headquartered in Winston-Salem, N.C., is among those companies that felt the effects of a depressed economy in 2009. “We experienced decreased profits, and of course, it’s due to the recession,” said Mike Willard, executive vice president, sales and marketing. “Further, more finished glass products are being sourced from Asia, so the effects are cumulative.”

For Miles Glass Co., Silver Spring, Md., it was the increased cost of doing business that contributed to last year’s profit decline. “We had a decrease in profits, although sales volume was probably the same [as the previous year],” said Brian Novak, president of the contract glazier specializing in storefront replacement and security glazing. “We do a lot of work for the federal government, and it appears that money is still available, so we didn’t suffer there in terms of sales. Demand was still up, but the cost of doing everything became more expensive: energy surcharges, taxes, workers’ comp, health insurance. Our margin got smaller because of it.”

Not everyone saw a profit decline last year. Twenty-nine percent of survey respondents reported an increase in 2009. The majority of those companies attributed their profit increase to reduced operational costs (45 percent), followed by increased job volume (43 percent) and reduced personnel costs resulting from layoffs (34 percent). (See Fig. 3 and Fig. 4 below)
 

Greg Haynes, president, Midwest Glass & Mirror, Stevensville, Mich., said his full-service glass shop experienced an uptick in profits after implementing several cost-cutting measures. “We cut as much waste and expenses as possible,” he said. “We laid off staff that we used to keep around in the winter to do miscellaneous projects; we minimized overtime; and we took insurance off of the vans and equipment we didn’t use in the winter.”

Corey Myer, president, TBM Inc., a Santa Ana, Calif., fabricator, credited his company’s profit increase to a unique product offering, a niche target market, and investments in cutting-edge equipment. “This year [2009] has been another good year,” he said. “We’re up about 13 percent; that’s good in this economy. We’re not going after the same customer base that other people are. And what we make, we make better than anybody. We [also] believe in investing in state-of-the-art equipment. It will pay off in the long run.”

Expectations for this year
As for 2010, readers almost split down the middle when asked if next year would be better for the glass industry: 53 percent said ‘no’ and 47 percent said ‘yes.’ 

David Kochendorfer, CEO, Thermo-Tech Vinyl Windows and Doors, Sauk Rapids, Minn.,  said things could be looking up for his sector this year. “We offer a full line of vinyl windows and doors for the light commercial and residential markets, both new construction and replacement. We’re expecting the market to grow in single digits in 2010,” he said. “Our expectations are that we’ll surpass that.”

On the flip side: “I would love to say that we’re going to expect more business and expand, but I don’t see the economy getting better next year,” Novak said. “If we are able to remain status quo, I almost will be content with that. I really don’t see things turning around yet.”

“Currently, there are less jobs to bid,” Haynes said. “Other than hospital and school projects, there is very little growth in contract glazing. We are constantly seeing jobs bid below our cost. Housing starts are way down, so the mirror and shower market is down. We continue to be aggressive in all of our niche areas. We hope can stay busy enough until the summer of 2010.”

Interestingly, the majority of survey respondents (40 percent) projected profits would increase in 2010, despite expectations for a tougher year. Twenty-seven percent said 2010 profit margins would stay level with 2009, and 19 percent anticipated a profit decrease in the coming year.

To increase or maintain profitability, glass company execs indicated they would continue to cut operational and personnel costs, explore diversification opportunities, and extend marketing efforts.

“We are budgeting for a down year,” said Bill John, president, InterClad, Minneapolis. “We will carry forward several successful jobs to help for 2010, but will have to make some overhead adjustments, some of which we have made already.” In regards to diversification, “We have tried to sell our break metal services and bid more on the metal panel side,” he said. “We are [also] looking at much smaller jobs than we would have normally.” 

Officials at Harmon Inc., Eden Prairie, Minn., already have diversification efforts in place. “As certain of our key markets around the country began to either slow down or [experience] significant competition, we began to reach out geographically to markets we had not performed work in for a number of years,” said Tom Niepokoj, vice president of sales. “[That allowed] us to retain key personnel through the downturn,” he explained.

Advertising also will play an important role this year, readers reported.

“We have explored different avenues and seen positive results, but are finding more success with promoting our core competencies and increasing our competitive edge in those areas,” said Courtney Little, president, Ace Glass, Little Rock, Ark. “Advertising has brought new customers to established areas of our business, and we have capitalized on our good reputation.”

“We’re still actively seeking new customers,” Miles added. “We’re trying to get creative with some of our advertising to reach people we haven’t done work for yet. We’ve cut our advertising budget some, but we’ve redirected what we’re still spending.”

This year will be challenging for the glass industry, but survey respondents remain committed to providing quality products and services despite the pressure. “Hopefully, the economy is going to start to turn in the second to third quarter of this year. How will that directly affect our industry? Maybe not much for the next two or three quarters because they tend to lag,” Myer said. “You need to stay lean, provide the best possible service, and do what you do better than anybody else. If you’re going to cut corners, which some people do in this type of economy, that’s where you’re going to get into trouble.”

Read accompanying article on glazier backlog and margin expectations for 2010, here.