Construction Materials, NEC

SIC 5039

Companies in this industry

Industry report:

This industry comprises establishments engaged in the wholesale distribution of mobile homes and of construction materials that are not classified elsewhere. Some industry products are awnings, grain storage bins, and septic tanks. The industry also includes establishments primarily engaged in the wholesale distribution of mobile homes, prefabricated buildings, and glass. Establishments primarily engaged in selling construction materials to the general public are classified in SIC 5211: Lumber and Other Building Materials Dealers. Establishments primarily engaged in marketing heavy structural metal products are included in SIC 5051: Metals Service Centers and Offices.

According to Dun & Bradstreet's Industry Reports, in 2010 there were 4,957 establishments engaged in the wholesale distribution of mobile homes and of construction materials not classified elsewhere, with combined annual sales of $4.8 billion. The industry employed approximately 50,636 workers. More than 78 percent of firms employed fewer than 10 workers, and these small firms accounted for about 30 percent of the industry's total sales; about 40 percent of sales came from medium-sized companies, with 10 to 100 employees, and the remaining 30 percent originated from larger firms employing more than 100. California accounted for the most establishments and employees in the industry and the most sales, with 505 companies employing 18,383 people and generating $1.07 billion in revenues. Other top states in terms of employment were Texas and Florida, although employment in these two states combined (6,687) was not even half that in the state of California. In terms of revenue, Tennessee was the number-two state, with $539.1 million in sales in 2009, followed by Texas with $399.9 million.

In 2010, the largest sector of the industry was construction materials, not elsewhere classified, with 831 establishments, representing about 17 percent of the market, and $259.5 million in combined sales. Prefabricated structure manufacturers numbered 723 and more than 14 percent of the market, with sales totaling $1.2 billion. Glass construction materials establishments accounted for about 13 percent of businesses and had sales of $1.1 billion. Finally, 444 establishments manufactured septic tanks and brought in a total of $129.8 million whereas makers of metal buildings and wire fence, gates, and accessories accounted for 335 establishments each with $258.3 million and $294.5 million in annual sales, respectively.

Background and Development

According to the U.S. Census Bureau, sales in the wholesale construction materials industry dropped in the early to mid-1990s, from $9.22 billion in 1992 to $6.9 billion in 1996. During the same period, the number of establishments in the industry also declined, from 4,049 in 1992 to 3,870 in 1996. Employment in the industry also fell from 36,978 in 1992 to 34,114 in 1996. The industry's payroll, however, grew slightly, from $970.9 million in 1992 to $1.02 billion in 1996.

As wholesalers of construction materials entered the 1990s, they faced economic challenges and changing industry conditions. Major retailers were growing in size and turning increasingly to direct purchasing and retail buying groups. Small building supply retailers were closing. This led to a diminished number of traditional wholesale customers, a situation reflected in the industry's dismal sales numbers in the mid-1990s.

A large portion of construction materials wholesalers' sales were generated by building supply retailers who operated a small number of stores. However, these were precisely the type of retailers who were being put out of business in the mid-1990s by building supply superstores such as Home Depot. Larger retailers--those with an annual sales volume of at least $50 million--were more likely to purchase directly from manufacturers.

Surviving wholesalers in this industry grew larger and were able to operate on lower profit margins. Industry analysts predicted that only those wholesalers able to offer value-added services would survive. Typical value-added services included inventory management, financing, training, ad development, and merchandising assistance.

Manufactured housing represented one portion of the industry that experienced growth in the mid-1990s, a dramatic reversal of fortune from the 1980s. Manufactured housing units are shipped from plants, either as singlewides or as single sections of multiwide housing units. Some manufactured housing is not used for dwellings but for light commercial use, classrooms, or clinics.

Manufactured home sales declined each year between 1983 and 1991 and were down to about 170,000 units in 1991. However, sales rose dramatically to 210,800 in 1992 and about 265,000 in 1993, increases of 23 and 26 percent, respectively. In 1994 the industry grew another 9 percent to 290,000 units, jumping to over 375,000 in 1998, according to the Manufactured Housing Institute. In 1999, one out of every three presold single-family homes was manufactured, and there were about 10 publicly traded manufactured housing companies. In the first 11 months of 1999, production was up 5.2 percent (around 346,000 homes), compared to the previous year's 329,000. Because of zoning restrictions in major cities, manufactured homeowners and developers focused on moving to rural areas.

Builders of traditional homes began diversifying into creating developments of manufactured homes in the mid-1990s. For example, Centex Corp., the largest-volume U.S. homebuilder, agreed to acquire Cavco Industries, Phoenix, a major manufactured housing company, in December 1996. Also, Pulte Home Corporation, another high-volume homebuilder in the United States, developed six manufactured housing communities in 1995 and 1996 and had plans to build more. Centex posted $10.36 billion for 2003, while Pulte Home Corporation recorded $9.0 billion. Other significant builders in the late 1990s and early 2000s included D.R. Horton, KB Home, MDC Homes, Bowen Builders Group, and Ryland Homes

The popularity of manufactured housing was spurred by the rising cost of traditional "stick-built" homes and a dramatic improvement in manufactured housing quality, according to Builder magazine. A shortage of skilled trades people made manufactured housing an attractive and cost-effective means of developing lower-income communities. Manufactured houses also became larger and had more features, resembling site-built houses but at a lower cost--50 to 60 percent less.

According to The Freedonia Group, Inc., an industrial market research firm, the overall prefabricated and modular housing market benefited from "cost advantages of factory production, such as bulk material purchasing and insulation from weather--related delays." Technology also played a significant role as the modular homes came to "closely resemble site-built houses."

Although shipments of manufactured homes continued to decline into the early 2000s, the industry experienced a surge in the mid-2000s with the drop in interest rates and resulting housing boom. Shipments of manufactured houses rose from 130,937 in 2003 to 146,744 in 2005, according to the Manufactured Housing Institute, before falling steadily through the rest of the decade, reaching an all-time low of 49,789 in 2009.

Current Conditions

The manufactured home industry strove to take advantage of the economic downturn of the late 2000s by promoting its advantages over traditional home building. The Manufactured Home Institute pointed out on its web site that "in the face of the economic crisis, the need for quality, affordable housing has never been greater" and emphasized that manufactured houses can cost between 10 and 35 percent less per square foot than conventional homes. The industry also moved to become more environmentally friendly and to educate the public about the environmental benefits of modular and mobile homes. Some manufacturers branched out into other markets, other than single-family homes, including multifamily, rental, and even resort building, according to Builder magazine.

Industry Leaders

Even as sales in the wholesale building material industry declined in the late 2000s, the most significant players in the industry remained very large. All of the companies, however, had extensive interests outside of the industry.

Industry leaders in the manufactured homes segment of the industry included Clayton Homes, Inc. (Maryville, Tennessee), a subsidiary of Berkshire Hathway, and Champion Enterprises Holdings LLC (Troy, Michigan), with 2009 sales of $1.0 billion. Fleetwood Enterprises Inc. of Riverside, California, had been a leader in the industry for years but filed for Chapter 11 bankruptcy in 2009. Other significant players included Palm Harbor Homes (Addison, Texas), which had 2009 sales of $298.3 million; Cavco Industries Inc. (Phoenix, Arizona), with $115.6 million in 2009 revenues; Wausau Homes (Wausau, Wisconsin); American Homestar Corp. (League City, Texas); Muncy Homes (Muncy, Pennsylvania); and Excel Homes (Camp Hill, Pennsylvania).

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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