Dear Friends:
As I write this in late October the general economy appears to be slightly rebounding but the commercial construction economy appears
to still be heading downward. There have been numerous stories in financial publications and trade journals saying that the commercial
construction bottom has not yet been found. Some are saying that it may be another year, or even longer, before commercial
construction improves. The main reason for this is the lack of credit being extended by banks to commercial developers. I
recently had a developer tell me he couldn't get a Walgreen's job financed even after offering to put 50% down and with a
twenty year lease in hand. Two years ago he said he could have gotten the job financed with no money down. (Of course, this
type of loose financing is a big part of why we are in this current mess.)
Residential construction continues to increase but at a very slow rate. There is about an eleven month supply of houses on the market and a healthy backlog is about a six month supply. I recently read that it may be until 2012 until residential housing is robust again.
We're preparing for a prolonged commercial slowdown and are tightening up on expenses wherever possible. We're pursuing the commercial opportunities that are out there and also going after residential and road and bridge opportunities.
In regards to price increases, commodity prices have largely held steady, with just a few exceptions. To learn more about the pricing outlook for the main commodities we sell, please see below:
Early October prices for commodities, such as scrap steel, petroleum resins, and metal alloys, either held steady, or in some cases have decreased slightly, due to an unexpected lessening in world wide demand. Because of this, manufacturers of most construction materials which use these items in their finished products are expected to hold prices at, or about, the same levels through the remainder of 2009.
Steel scrap prices fell by $30.00/ton in early October instead of increasing as many industry analysts expected. Because of the reduced cost for scrap steel and continued weak demand, Nucor announced on October 15th that they would reduce prices for their November rollings by $30.00/ton. Gerdau Ameristeel and Steel Dynamics followed Nucor's lead and announced price reductions for their November rollings of $30.00/ton as well. Unless demand increases, expect rebar prices to remain flat through the balance of 2009.
Raw copper prices fell slightly in early October, but the lower prices are expected to be short lived, as foreign demand is expected to increase in late fall. Due to weak domestic demand and because raw copper prices fell in early October, prices for copper thru-wall flashings will hold steady through November. If the price of raw copper does increase in November, expect manufacturers of copper thru-wall flashings to increase prices sometime in December.
Prices for masonry reinforcing and ties are holding steady in October after the industry wide 20% plus increase that went into effect in September. Although wire rod manufacturers were expected to increase prices again in October, they did not implement an increase due to their decreased cost for scrap steel. Because wire rod prices did not rise in October, masonry reinforcing and tie prices are expected to stay the same through November.
To date the October industry wide price increase of 8 to 9% for concrete reinforcing wire mesh is holding, as most analysts expected. Since their costs for wire rod will not increase in October, concrete reinforcing wire mesh manufacturers have indicated they expect no price changes in November.
Polyethylene prices remained steady in October and little, if any, movement is expected for the next 30 days. The same holds true for products manufactured using petroleum or natural gas resins, such as PVC waterstops, polyethylene expansion joints, and PVC waterstops as resin prices did not increase in October and demand is expected to continue to be weak.
This month we are featuring the following suppliers:
- Simpson Strong-Tie is the undisputed leader in construction anchors and fasteners. They not only have an extremely broad product line but are known for their quality and on-time delivery. For more information about their products, please see below or visit your nearest New South branch.
- BoMetals is one of the top suppliers of metal keyway, PVC waterstops, masonry control joints, and other concrete and masonry accessories in the industry. They have a wide range of products available, and all of them are available at your local New South branch.
- Zurn Flo-Thru is the preeminent supplier of preformed trench drains in the construction industry. They have a wide variety of sizes and shapes, as well as numerous types of grates ranging from purely functional to highly decorative brass grates. The next time one of your projects calls for trench drains, please give us the opportunity to give you a quote.
I also want to inform you and your accounts payable department of a service we now offer called
Invoice Gateway. New South customers now have the ability to view, download, and
even pay for invoices online.
There is also a great feature that will let you import your invoice data into popular
accounting programs such as QuickBooks, Peachtree, and Timberline, saving your accounts payable department valuable time.
Instead of re-keying all of our invoices one by one into your Accounts Payable program, with one mouse click all of our invoices will be electronically transferred into your AP program. In these challenging times we are always looking for ways to save time and money and I know you are too. Here's another way to save both time and money. And, it's free!
By enrolling in invoice gateway you also have the option to turn off paper billing altogether, and you will receive an electronic bill notification. This cuts down on paper clutter at your office and is an environmentally friendly billing option. No more lost invoices! You can register for invoice gateway and continue to receive paper invoices if that is your preference.
You can also register by going to
http://newsouthsupply.billtrust.com. You will need your customer
ID and the enrollment code that can be found at the bottom of any invoice. Or, just send Jimmy Sobeck, our IT Manager,
(jimmy.sobeck@newsouthsupply.com) an email and he will enroll you automatically using your preferences.
The management article this month is entitled, "Eight Key Budgeting Tips for Your Management Team". As this is budget time of the year
for most companies I thought this would be a helpful article. I know that very few people enjoy doing budgets, myself included.
However we always do one because I believe in the old adage, "No one plans to fail but many people fail to plan."
As I mentioned last month, we are now on Twitter and are posting a lot of articles every day about the construction industry,
and especially the future outlook for construction. Even if you don't want to sign up for Twitter you can review the
articles on our site by clicking on http://twitter.com/NewSouthSupply.
As always, thank you for your support and don't ever hesitate to give me feedback on how we can better serve your company.
Sincerely,
Jim
Jim Sobeck
President
(864) 325-6518
jim.sobeck@newsouthsupply.com
8 key budgeting tips for your management team
by Gene Siciliano
Most companies with sales under $10 million, and some much larger, don't use
budgets to help them meet profit goals. CEOs and operating owners reason the
effort to learn how to build, and then use, a workable budget is just too much.
They seem to feel it's more frustrating than just hoping the numbers will all
work out, if they only sell enough widgets or services or whatever.
There is no need to quote business failure rates among companies in this
size range, nor the steady stream of survey findings that say lack of good
management practices is usually to blame when a company falls short of its
potential. Instead, it would be more productive to follow some tips to make
budgeting easier. Even if you've never done it before, or at least never done
it successfully.
The overriding principle: Profit planning, or budgeting, is far and away the
most effective way to consistently meet profit targets and avoid costly
surprises. It helps you invest your resources to best advantage, based on
careful consideration rather than the urgency to make a move "today."
CEOs or business owners need to decide it's time to begin controlling the
bottom line with some of the same tools they use to control the top line, especially
since these days the bottom line is more controllable than the top line.
Here are 8 tips for your consideration:
1) Take the time, take the team. A budget is not the forecast you put
together on the weekend to impress your banker. It must be the result of
coordinated input and effort by you and your top management team. That makes it
a project that requires some time and thought, just like any other important
project your company takes on.
2) It takes a little practice, like any new tool. Regardless of how tough it
may be to estimate the future, your forecasting accuracy will improve, and
you'll be better able to control the results, if you actively use a budget.
Practice does make (almost) perfect.
3) Any business can be budgeted. The only question is how much practice it
takes to strike a balance between time invested and forecasting accuracy. If
you doubt this, remember that virtually every startup business had to be
forecasted to get financial backing, including those trying to do something that
had never been done before (making budgeting even more challenging).
4) Use a Gantt chart – an expanded timeline – to track
deliverable dates for budget completion. As with any project management tool,
it will tell you if you've scheduled too much to be completed in too short a
time, given other business activities that also require your team's
participation.
5) Don't try to budget to the last penny. Accurately predicting actual
results is not the objective, nor is the creation of an immovable object. It's
all about giving your company a direction to use for course corrections, and at
the level of detail where it matters. If you try to forecast every little
expense, the detail will drive you crazy.
6) Make the tradeoffs when necessary. You have a finite amount of resources
available to you. If you must spend money for something you didn't budget, then
decide what budgeted expense can be removed to "finance" the new
item. Without that discipline, you will almost always overspend, because there
are always good reasons to spend money. They don't always produce more profit,
however.
7) You need both profit and cash flow targets. Every budget should have
profit targets and cash flow targets, because the two bottom line measures are
very different and they require different kinds of attention to control them.
If you doubt this, know that every year businesses with smashing profit
pictures go out of business for lack of cash.
8) Three questions to powerful results analysis. At the end of each month,
with budget comparisons in hand, ask your team these key questions:
- How are we doing compared to
budget? Why did actual results differ from the plan?
- What must we do NOW to have a
better result next month? How can we keep the positive differences and
avoid more of the negative ones?
- What are we learning that will
make next year's budget better?
If you follow these eight tips in your financial forecasting and reporting,
you will find your income statement more informative, your bottom line more
appealing, and your peace of mind more comforting than ever before.
Congratulations. Doesn't that feel good?
