We spoke to several leaders in manufacturing (residential, commercial, coatings and metal) and got perspective from contractors as well. The goal was to find out how business was currently, what it is looking like for the near future, what challenges may still lie ahead and what new things each manufacturer or contractor plans to introduce this year.
Overall, the consensus seems to be that business is good and the economy is definitely improving. There are still issues with insurance and labor, but both contractors and manufacturers alike have strategies to succeed, the biggest of which is an emphasis on proper education and training of the work force.
ContractorsMike Satran, president of Interstate Roofing, Portland, Ore., is the first of the contractors that we spoke too. In his area of the country, "Business is picking up but margins are at historical lows," he says. "People want everything, they just don't want to pay for it. The future looks better, but not ‘bright.'"
Satran's plans for dealing with the situation are to expand into new geographical areas and consolidate. "Getting paid on time and getting profitable jobs are harder than ever," he explains. "We may downsize a bit in each location and try to cherry-pick more."
And what about a company with a national reach? Richard M. Nugent, president and CEO of generalRoofing, Ft. Lauderdale, Fla., admits that the roofing industry has gone through some tough times in the past few years. "Slow economies have a negative impact on all businesses, but those of us who are somewhat seasonal have also had to deal with the effects of two years of harsher than normal weather," he says. Nonetheless, at generalRoofing, "We are optimistic about the economy and the effects on our company for the next several years. Our industry has a lot to look forward to and generalRoofing is well positioned to capitalize on the quickly recovering economy."
Issues challenging contractors in 2004 haven't changed much, in Nugent's view. "Labor is our biggest challenge by far," he says. In addition, "Customers and consultants are demanding the highest quality, which we all believe they deserve." Unfortunately, as Nugent sees it, "The fragmented nature of the industry still rewards the lowest cost contractor with the job in most cases. If a contractor wants to compete at a high level he will have to have the best trained roofers. These are the modern day roofers that not only are great mechanics with the myriad of roofing systems that we install; they are also the safest and most efficient."
As we heard throughout the interviews for this article, training is key to overcoming obstacles in the marketplace. "There is little room for error in our industry and the companies that train their workforce to meet the new criteria will have a competitive advantage," says Nugent. "generalRoofing is in development of numerous training programs at every level of the business in order to keep our workforce safe and efficient, while providing a consistent high quality product."
New things on tap from generalRoofing are all designed to improve the customer experience, according to Nugent. "Our goal is to be the nation's leader of roofing solutions whether it's a repair or total reroof anywhere in the USA," he says. "With that said, you will see growth in service operations throughout the country to maximize efficiencies while consolidating some of our construction units where we have too big of an overlap."
To get another perspective on the national scene, we spoke to National Roofing Contractors Association President John Gooding. Gooding, whose company Gooding, Simpson & Mackes Inc. is in Ephrata, Pa., says, "The residential market has been very strong and we are convinced this trend will continue for the next five to 10 years, assuming interest rates do not spiral out of control." Though Gooding concedes that there are several areas of the country where, because of a drought or hailstorms in recent years, the residential market has become very weak. "The low-slope roofing market for both new and reroofing is another story," he continues. "Most contractors did not get very busy until the second half of 2003. But there are still pockets, particularly in the Midwest and South, that have not seen the rebound that other contractors are experiencing."
Gooding remains optimistic and feels that 2004 should be a very good year for both new construction and the reroofing market. "There seems to be a pent-up demand in the reroofing market due to the lack of capital spending over the last two to three years," he says. However, "We must realize that this is a fragile global economy and bad news could change the outlook of many business owners and reverse economic trends rather quickly."
According to Gooding, the NRCA's biggest challenge in the coming year is to secure insurance for its membership at a reasonable cost. "We are working closely with CNA insurance and looking for alternative options in states where coverage is not available," he says. "The insurance industry is struggling with mold claims and construction defects claims that both started in the West and are slowly moving East." Gooding notes that last year the NRCA created a mold task force made up of contractors, manufacturers and NRCA staff. The task force is charged with writing a white paper and other publications for both the contractor and the residential building owners.
In addition to the mold issue, Gooding believes that an improving economy will bring challenges in finding and hiring skilled workers and entry-level employees. To combat this, "NRCA is working with the Jobs Corps on a pilot training program to help with our labor shortage," he explains. "We are also continuing to improve our training videos and they are now available in both English and Spanish. Industry surveys tell us 40 percent of the workforce is Spanish-speaking and that number will continue to rise."
Gooding points to building code changes regarding the use of aggregate in high-wind areas as another issue for roofers in 2004. He says that the NRCA will be working closely with local and regional code bodies and will keep membership informed of developments.
What else should contractors look for from the NRCA? Gooding says the association has been very busy scheduling educational programs for 2004 and will be providing online learning. "We will be offering Roofing 101 in an online interactive format for an audience of designers, owners, government officials and NRCA members' entry-level employees. We're also working on an electronic version of our own safety manual so our membership can customize the information and even keep their own training and OSHA logs in a single-file format."
NRCA has also recently completed two new quality control documents for built-up and modified bitumen roofing. In addition, "This spring we will have a new video on electrical safety as well as a new training module on metal roofing," explains Gooding. "One of our last projects for 2004 is developing certification programs for safety professionals and torch applicators. NRCA has over 35 active committees constantly striving to improve this great industry of ours and help our contractor base to succeed in business."
Commercial and Residential ManufacturingOn the manufacturing side, we began by talking to Bill Collins, president and CEO of GAF Materials Corp. Founded in 1886, GAF, a supplier of residential and commercial roofing products, has grown to be North America's largest roofing manufacturer, currently with over $1.3 billion in sales.
Collins' overall message is to expect strong roofing demand in 2004, but not without risk. At press time, he reports that third quarter 2003 business has been unseasonably strong in both the steep- and low-slope markets. On the other hand, manufacturing is still down and he doesn't expect a jobs recovery until well into 2004. On the positive side for roofing, Collins says, "This softness will hold down interest rates and help drive the continued growth in new home sales as well as home repairs and remodeling."
Collins says that there is a strong residential backlog and forecasts, "For the next six months shingle unit volume will be up 3 to 4 percent year over year - barring a serious weather event that either slows down work or accelerates demand in a region. Full year growth is also weather dependent, but we expect shingle unit growth to be 2 to 3 percent over 2003." Collins' one caveat to a generally rosy outlook is that it will be difficult to match the strong second half the industry had in 2003.
For the low-slope market segments, Collins reports that modified bitumen unit growth is up 5 to 6 percent, built-up roofing is up 3 to 4 percent and TPO is up 15 to 20 percent. PVC and EPDM are up slightly.
What new things should we look for from GAF in '04? Collins touts new labor and energy saving systems; new easy installing roofing products with high curb appeal; an expanded line of restoration and maintenance products and service contracts for owners; and more specification-driven leads for supportive customers.
In addition, GAF, as with many others in the industry, continues to promote training, training and more training, "over the Internet, at C.A.R.E. seminars and on the roof - in both English and Spanish," according to Collins. "In ‘03, we trained over 10,000 and expect to train over 12,000 in '04," he says. He also reports that GAF will be running at full capacity this winter and spring in anticipation of next year's demand, with capital spending in 2004 double that of 2003.
When asked about challenges in the year ahead, Collins answers, "In general, the biggest challenge remains the differentiation of a company's offerings whether it be quality products or services." In other words, avoid becoming a commodity! For residential contractors, Collins sees general liability and health insurance costs as lingering concerns.
He also cautions, "Product costs will probably inflate as a result of tight supply and rising raw material costs (energy, asphalt, paper products) - hopefully not dramatically, although the Venezuelan asphalt supply issue has not been resolved only hidden by the lack of paving demand in 2003." Collins warns that care must be taken with the quality side of the asphalt if availability does get to be a problem. "Extensive testing must be done before new streams of asphalt can be introduced without fear of premature failure. GAFMC has done extensive testing of alternative asphalts and has already pre-qualified alternative sources should shortages arise."
In the commercial arena, Collins notes, "Changing transportation regulations relative to hazardous materials and drivers' hours, as well as a general reduction of flatbed carriers coming out of the recession, will drive up transportation costs (3 to 5 percent) and make job-site delivery scheduling less reliable."
Here too, "Insurance costs are still rising and more facility owners and consultants are scrutinizing contractors for insurance coverage as well as safety and training practices," he says. According to Collins, "If the recently reported fire rating issues with EPDM and spray foam prove accurate, many existing roofs will have to be resurfaced to avoid being at risk with their insurance coverage if there is a catastrophic event."
We next spoke to Jon Apgar, vice president, Sales and Marketing, GenFlex Roofing Systems, Maumee, Ohio, a full-line supplier of single-ply roofing products for the commercial market. Apgar looks back on 2003 as "a tale of two cities." The first part of the year was very weak while the latter was quite strong for GenFlex and for the industry. "Both the East and West are showing strength and there is a backlog for contractors. Let's hope for a tough winter!" says Apgar. "The economy is better for companies, reroofing is strong. It's a lot different from last year."
Apgar reports that GenFlex's numbers for 2003 were up over 2002 - every month went up in the second half of the year with EPDM, TPO and PVC, all looking good.
In 2003, GenFlex introduced a new peel-and-stick TPO product. Though Apgar notes that it takes time for new products to catch on in the industry, he sees a growing acceptance for this product. "So far it has been received well," he says. "When contractors try it, they like it."
As for other new things from GenFlex, Apgar comments, "A lot of what we're doing relates to labor savings - peel and stick, accessories for TPO, etc." In addition, "We are focusing on interactive training products for contractors. We have CD ROMS for training on all products - in English and Spanish. Contractors will also be able to download this material from our Web site."
Keith Lowe is director of sales for IKO, Chicago, which supplies organic and fiberglass-based shingles and roofing felts, as well as APP- and SBS-modified bitumen roofing systems for commercial and industrial applications. Lowe confirms that there has been an upturn in business, especially in the third quarter and the beginning of the fourth quarter as compared to the first two quarters in 2003. He points to indicators, such as housing starts, that are strong and have actually shown increases in the third quarter of 2003 in some geographic regions. Agreeing with Collins, he notes, "It appears that interest rates will remain low and help fuel demand for new housing. While the recession may not be over, I think the demand for roofing products, whether related to re-roofing or new construction will be relatively strong in 2004."
According to Lowe, challenges for shingle manufacturers include "the availability and consumer interest in other types of roofing materials and the misperception that asphalt shingles may not be as aesthetically pleasing as alternative roofing products." To counter this trend, IKO is participating in the current Asphalt Roofing Manufacturers Association campaign that promotes the benefits, performance and appearance of asphalt-based roofing products. "We also produce laminates and designer shingles that give the consumer the options to coordinate and complement any house design," he adds.
He agrees with Collins that another challenge for manufacturers will be the rising cost and availability of raw materials and being able to reflect those increasing costs in pricing. "At IKO we do everything possible to control our costs and ensure raw material availability by being vertically integrated," Lowe explains. "We manufacture our own mat - for both fiberglass and organic shingles, produce our own granules and oxidize our asphalt. This vertical integration ensures that IKO will be able to service the market needs for 2004 and beyond."
Lowe says that IKO's goal for 2004 is a continued commitment to supply products demanded by the marketplace. "Laminate shingles have grown to be the major segment of the steep-slope market," says Lowe. "IKO has added laminate capacity to meet this market demand by installing a new laminator at our Chicago plant and increasing capacity to produce laminates at our Hawkesbury facility. This additional capacity has allowed us to expand our product line offerings, including having one of the broadest color offerings in the industry for laminate shingles."
IKO is also responding to the demand for algae-resistant shingles, which, according to Lowe, continues to grow even in geographic areas where algae-resistant products have not historically been required.
When asked how IKO plans to help the roofing contractor succeed, he notes that the company is introducing new sales tools for professional contractors. One such tool is the RoofViewer™ program, which allows contractosr or consumers to easily select shingle style and color to coordinate with brick or siding and trim colors - either on IKO's Web site or via a CD-ROM version. The bottom line according to Lowe, however, is that IKO's "key commitment to the contractors and to the industry remains having a quality product with great color and style selection."
CertainTeed Corp., Valley Forge, Pa., is a leading North American manufacturer of building materials including roofing, siding, insulation and windows. John Donaldson, president of the Roofing Products Group, echoes the sentiment heard at GAF and IKO. "Since the summer, business has been extremely robust, and the year will end up much stronger than 2002, exceeding most predictions by a large margin," he says. "During the first part of the year, legitimate concerns about asphalt shortages distorted buying patterns of distributors, but fortunately those fears are behind us now."
Donaldson also emphasizes the trend toward laminates: "This shift has been especially strong over the past several years and now the industry has almost achieved a 60 percent share for laminates in the U.S."
When asked his take on the status of the recession, Donaldson explains: "In general, I don't think the building industry has experienced the recession that most other industries have seen. Low interest rates have really helped the housing market and strong house pricing has given homeowners the confidence to invest in upgrading their home. As for the recession the media talk about, it's absolutely over!" And Donaldson doesn't see these positive trends changing anytime soon. "We will have a very strong economy for the foreseeable future, barring some unusual event or terrorist catastrophe."
Donaldson agrees with Collins that one challenge confronting the industry across the board is the change in DOT driver legislation. "It's going to put pressure on freight rates and truck availability," he says. "Another issue is that of qualified installers, and whether the industry should support licensing. And you can never let asphalt supply leave your mind for too long!"
CertainTeed plans to meet these challenges "with careful and proactive planning." According to Donaldson, "We are collaborating internally to address these issues and develop strategies to meet and overcome these challenges. It won't be easy, but we're confident we will be successful."
Taking a look at what's new at CertainTeed, "We're extremely proud to be launching a state-of-the-art laminated shingle line at our Shakopee, Minn., plant which is manufacturing our top class Landmark laminate and will serve the North Central United States," says Donaldson. "In addition we will be adding a laminator in Shreveport (La.) during the fourth quarter 2004 which will assist us in meeting the continuing shift towards laminates in the southern United States."
Moreover, "We intend to capitalize on the early success of Self-Adhered Flintlastic products, which we launched only a few months ago," Donaldson explains. "Also, CertainTeed has a new line of coating products, some of which are used with these self-adhered rolls. And I would be remiss not to mention the excitement being generated by our Landmark TL shingle, which recently joined the Landmark family of laminates."
And what is CertainTeed planning to do for the contractor in 2004? "CertainTeed continually strives to deliver innovative products and business-building tools to the professional contractor," says Donaldson. "We are very excited about several new sales and marketing aids available through our Contractor's EDGE™ program in January 2004. Some of these items are designed to help a contractor generate leads through advertising, such as the CertainTeed MarketZone, while others such as SureStart PLUS warranties, give roofing companies an exclusive sales advantage."
Curt A. Barker, vice president, Sales & Marketing, Elk Premium Building Products Inc., Dallas, reports more of the same. "This past year started slowly but quickly improved as we saw the reroof market strengthen in many markets, buoyed by spring storm damage," he says. "While economic conditions have improved, we are cautious in our forecast, as some of the demand is not entirely due to a stronger economy."
Nonetheless, Barker says that Elk remains optimistic that the first half of 2004 will show similar trends as experienced in the last half of 2003. "There will likely be periods where roofing supplies may become tight. The second half is going to be harder to predict, especially in the light of the 2004 presidential election and the resulting impact on the economy."
When asked about challenges facing the industry, Barker says the biggest issue will continue to be "squeezing out acceptable margins for the manufacturer, distributor and contractor." In his opinion, the proper response is to focus on selling value-added products and services. "This is a great business and one that can be profitable for the entire industry," he says. "Our approach will be to continue our tradition of being an innovator and developing new and unique products allowing the distributor and contractor to sell at a premium and earn higher margins."
Like its competitors, Elk will add additional laminated shingle capacity in April 2004. This expanded state-of-the-art facility under construction in Tuscaloosa, Ala., will serve the growing demand for the company's premium laminated Prestique® shingles in the southeastern United States.
"We will expand our ‘revolutionary' Grandé product (discussed in the April and September 2003 issues of Roofing Contractor) into additional markets," says Barker. "This is a product that is attractive to the homeowner and was developed with the contractor in mind - speed of application, larger exposure but less weight and larger nail area. We are also expanding our ventilation platform with the introduction of Vented RidgeCrest™. This product allows the contractor to apply a ridge vent with the ridge shingle already applied."
Training is a focus at Elk as well. "We will again offer our Elk Edge contractor training program in 13 cities," says Barker "This program will focus on teaching contractors how to succeed in business and earn higher margin dollars on each sale. Elk is promoting these seminars with its ‘Rev It Up' Harley-Davidson drawing."
Finally, the Elk "Peak Performance" Program gives participating contractors an additional competitive edge in the sales and application of ELK products. "Qualified participants in the program are able to provide homeowners with more professional service and longer warranty coverage for the roofs they install," says Barker.
CoatingsCoatings continue to be a hot topic in the industry - whether they are used for maintenance purposes or for environmental (cool roof) considerations, or both. We spoke to some in this segment of the business to hear their thoughts on 2004.
Chris Salazar, vice president of sales and marketing, Karnak Corp., Clark, N.J. reports that business is excellent. "We have had the best year in Karnak history," he says. "There are indications that the recession is over, but only time will tell. Our business is somewhat recession-proof, because most people use coatings to maintain roofs in lieu of replacing them during recessions to save money. The next 12 months should bring continued growth for our company."
Salazar still sees a lack of skilled labor and diversification as the biggest challenge for contractors. And as other interviewees have indicated, Karnak will also continue to emphasize and provide training to both contractors and their employees. According to Salazar, the goal is to help them "broaden their business horizons."
Salazar reports that Karnak is moving on several fronts in the new year. "We expect to have a new production plant on board in Dallas by the end of 2004," he says. "We are also continuing our market expansion of Energy Star products. For contractors, we are developing a new and improved Web site to help them navigate the site and get more productivity. Our training and lead generation program will continue to bring more business to contractors."
Jim Leonard, president of ERSystems, Loretto, Minn., agrees that business has been terrific for coatings in 2003. "We have experienced solid growth in 2003 just as we have for the last couple of years. 2003 has been a year where the economy has been gathering momentum with dramatic increases in productivity, growth in the GNP, and now growth in inventory and jobs; and we expect the economy to really take off again in 2004 and beyond," he says. "In 2004 we expect the roofing industry to reap the rewards of the significant effort put in to the last couple of years."
Challenges facing the roofing industry in the year ahead are probably not a lot different than they have been the last several years, according to Leonard. In his opinion, "It appears the commercial roofing industry has been inclined to produce, sell and install ‘cheap'; following a commodity materials mindset from the manufacturer, to the contractor, to the building owner. We do not think the future is thicker EPDM, cheaper TPO, or extended warranties; rather, in the end it is about providing the building owner with improved return on investment over time." In short, Leonard says, "We believe building owners do not make roofing decisions; they make FINANCIAL DECISIONS about their roof, so we will continue our educative selling approach to that end."
In the year ahead, ERSystems plans to continue to educate contractors and building owners about the benefits of cool roof restoration of metal, single-ply and asphaltic roof substrates. According to Leonard, "Our focus will continue to be a) demonstrate to building owners how to achieve an increased return on their investment and b) show the roofing contractor how to become more profitable."
Leonard says that the company's spring training seminars in Minneapolis, Atlanta and Dallas in addition to its 2004 trade show exposure and its advertising and literature for the next year, will all reflect this focus.
MetalMetal is another area of the industry that continues its upswing. Kit Emert is general manager of the Architectural Systems Business Unit of Fabral and president of the Metal Construction Association. He says that business at Fabral Architectural Systems has been surprisingly good during 2003. According to Emert, the company has "enjoyed moderate growth while the overall non-residential construction economy has not realized any measurable growth during this period." He believes that the recession is indeed well behind us, "however, it is not expected that non-residential construction activity will rebound with any force until well into 2004, maybe the second quarter - probably, the third quarter of the year."
In the year ahead, Fabral Architectural Systems will continue to operate its roofer's certification programs and architectural selling schools, as well as AIA CEU programs. "These programs support the roofing contractor through material installation training, product training and project specification and detail development," says Emert.
As for remaining challenges, "It is always easy to reference the construction economy as the biggest challenge. While this challenge is very real, it can be addressed through a proactive market presence," says Emert. "Other issues to be concerned with in 2004 will include the escalating cost of raw materials, various building code issues, the possibility of increasing interest rates (particularly during the latter stages of 2004) and business's willingness to free up capital for construction project funding. Certainly, green building issues and sustainability issues will continue to grow in design and application importance. Fabral will remain active in the effort to address these various issues (i.e., those issues that we can impact) positively for our customers and for Fabral."
Deborah Harnett, president and CEO of Englert Inc., Perth Amboy, N.J., reports that business is good at Englert: "We are experiencing growth in both commercial and residential roofing, and we are seeing a pickup in business compared to (2002)." She says that based on the information the company has received from contractors, "We are very optimistic over the next six to 12 months in both the commercial and residential sectors. Our experience seems to support recent economic data and trends that suggest the economy may have finally turned the corner."
The biggest challenge that remains for the metal roofing industry, according to Harnett, is finding qualified contractors with the skill and experience necessary to keep pace with the continued growth that is projected. "That is why Englert has historically been a leader in providing support to contractors and installers," she says. "Our new contractor training and certification program is one more example of our commitment to creating a seamless standard of excellence encompassing everything from materials and machines, to technical expertise and service."
According to Harnett, "New things you can look for from Englert in 2004 highlight our ‘Can Do' attitude, and will help roofing contractors succeed in many different ways." For example, Englert is introducing the Ultra Cool Low Gloss paint system that is fully Energy Star compliant. In addition, "We are developing three new roofing and commercial gutter machines, as well as a new soffit and flush wall panel machine and expect all to be ready in 2004," says Harnett. "Englert will also introduce a new curving system for our Series 2500 commercial roofing panel machine. In addition, we will be announcing a new contractor training and certification program in 2004."
Bo Hudson, president of Tasman Roofing Products, Corona, Calif., says that overall, business in 2003 produced a considerable increase compared to the previous year. "A backlog of activity continues on the West Coast and the hail areas of Texas and Colorado," he explains. While he believes that the economy has finally turned the corner, he says that areas in the Midwest are still soft. Overall though, he still sees a continued strengthening of the economy and consumer confidence over the next 12 months.
Still challenging for the industry is insurance. "Unfortunately, the major problem is out of our control," says Hudson. "Worker's Compensation premiums for the roofing trade have escalated to extremely unfair levels."
Ahead in 2004, "Decra Roofing Systems will continue efforts toward growing our markets for stone-coated steel roofing," says Hudson. "Emphasis will be placed on new marketing tools for both the distributor and contractor trade. A new product profile is not out of the question."