The Manufacturers

After the events of Sept.11, GAF saw a drop off in orders. Within a relatively short period of time, however, the orders file began to build again. At the time Roofing Contractor spoke with Collins about his thoughts on 2002, he stated, “I think the picture is changing.” GAF’s early intelligence had shown a residential new construction market that would be down 6 to 8 percent, with remodeling down “somewhat.” By the end of 2001, the upcoming year was beginning to look more like a “flat” year for new residential construction, with the possibility of a slightly improved remodeling market.

Regarding strength in the remodeling market, Collins points to the low mortgage interest rates coupled with a very competitive and active refinancing market. According to some studies, the residential roofing and remodeling industry are in a prime position to take advantage of this opportunity. Consumer confidence will play a major role in how much money actually gets spent. Collins feels that the main factors that drive this process are the value of consumers’ stock portfolios and the net worth of their homes. So keep a watchful eye on both the stock and real estate markets.

As far as GAF’s plans for the new year, Collins says, “We manage our business … on a two-months-in-advance (plan) … as a general rule.” When asked about inventory levels, Collins responds, “We will be running our plants as usual this winter.” GAF has in recent years opened up several major new production facilities. Plans for 2002 call for production improvements across the spectrum of GAF’s nationwide manufacturing assets. According to Collins, these improvements translate into the equivalent of “half a plant added per year with improvements in efficiencies.”

As for some of the challenges, the low-slope market will likely continue at a relatively sluggish pace. Private work slowed in 2001 due to the economy, but the milder climate and drier weather were also factors. By the end of the year, contractors accustomed to a backlog (at least for the past several years) are getting caught up. Some segments of low-slope work are looking brighter, for example, growth in energy-saving systems. Collins cited an energy supplier in Florida offering rebates for owners who increase the energy efficiency of their roofing system by installing more roof insulation, or applying a reflective membrane or membrane coating. Cold-applied modified systems are a focus for GAF and growth is expected in that line as well.

GAF still considers attracting and maintaining the best people a key business challenge. Collins says, “We are hiring.”

Looking ahead, GAF plans to continue operation of the Center for Advanced Roofing Excellence (C.A.R.E.). This initiative, begun in 2000, has offered training to over 4,000 professionals. GAF also manages a number of warranty programs that are designed to offer home and building owners premium roofing warrantees through their network of authorized roofing contractors. Bill Collins sums it up by restating GAF’s mission to continue to improve and expand its claim to being “America’s largest roofing manufacturer … (and) the best and safest choice.”

Jim Hilyard, president of CertainTeed Corp.’s Roofing Products Group, Valley Forge, Pa., agrees that 2002 will be a flat year, at best. Hilyard points out that prior to the events of Sept. 11, there was already concern about an economic slowdown. “In 2001, what saved the roofing industry as a whole from having a down year was the business gained from damage caused by ice dams in the North and hail damage in South Central United States.”

Hilyard indicates that CertainTeed will be taking a conservative approach to 2002. “I have asked everyone within our company to streamline their budgets and look for ways to cut expenses and save money.” The heightened degree of uncertainty following the terrorist attacks and the war in Afghanistan is not unprecedented. “Our experience during the Gulf War in the 1990s gave us enough of a perspective to make certain assumptions during times of world crisis,” Hilyard explains. “For the nine months following the start of the war, we, as well as our competitors, experienced a drop in sales volume. Fortunately, as the conflict resolved, the business rebounded. We’re using that same model in looking at 2002.”

When asked about any possible positive outcomes in a downturn, Hilyard responds, “Down economic times really challenge us to look hard at our costs and production efficiencies so that we can remain profitable. If we can become leaner, trim budgets, minimize waste and contain costs, yet continually work on making better products, we will be that much farther ahead once the economy rebounds.” The biggest challenge of 2002, other than economic uncertainty, is, according to Hilyard, “Maintaining the delicate balance of being able to meet the demands of the marketplace for shingles without getting caught with too much inventory or not enough. When economic conditions improve, the challenge is to be prepared to hit the ground running with material, particularly laminates, which continue their overwhelming growth in popularity.”

To this end, Hilyard mentions that CertainTeed is introducing its newly redesigned and visually enhanced Landmark Series asphalt roofing shingle. “This new product was developed after extensive consumer and trade research and the result is a more universally appealing design and better warranty protection. With laminated shingles being the fastest growing and most competitive segment of the roofing industry, we wanted to renew the Landmark line to reflect changes in consumer tastes.”

Owens Corning, Toledo, Ohio, is also introducing a new shingle called the Berkshire, in the second quarter of 2002. “It’s a top-of-the-line product,” says Bob Franco, vice president of marketing, Exterior Systems. “We are committed to the industry, so we are investing in plants and adding capacity. Customers have told us that they want nicer, fancier shingles, and we will be in a position to service our customers. Our quality, and the quality of the industry as a whole, is greater than it ever has been.” Though Franco describes his outlook as “high on the industry,” Owens Corning is keeping its eye on an uncertain situation. “We are planning to monitor our inventory better than last year, as is the entire industry,” he explains. Though Franco believes everyone was affected emotionally by the events of Sept. 11, at the time of this interview, Owens Corning had had two very strong months, and was on track for a very strong fourth quarter.

“But we can feel the uncertainty with contractors,” Franco admits. “The challenge will be getting through the first quarter (of 2002). People are poised for disaster. We, and our competitors have to bolster the confidence of our contractors.” Franco says Owens Corning is striving to offer good, fast service to its contractors, so they can buy what they need and not get caught with too much product. “They will see that it’s not the end of the world.”

“The roofing business is so big, it can’t go that far down,” Franco explains. “Even a 10 percent drop in new construction will not throw us in to a tailspin of chaos and despair. While there is no question that the war and unemployment are matters of concern, in general, interest rates are low, things are looking up, and companies are starting to turn around. And the roofing industry is having a good year.”

While Franco is speaking from the residential end, we also spoke to Mike Ducharme, EPDM marketing manager at CarlisleSyntec, Carlisle, Pa., for additional perspective on the commercial side of the industry. Ducharme concedes that business has slackened a bit, but it’s not a crisis. For 2002, Carlisle Syntec is planning a “broadbrush agenda,” to get back to the basics. “There is always potential on the reroofing side of the business,” Ducharme explains. “We had been focusing on new construction, but now we are focusing on reroofing products and accessories. We are offering a new hot-mopped system – which is EPDM in asphalt. We also have new alternatives on our mechanically fastened systems, which are good for retrofit. We are focusing our sales efforts on building awareness of our products.”

Reinhard Schneider, Dens-Deck product manager, Georgia-Pacific, agrees with the focus on retrofit. “We’re well aware of the shift in the economy. There is a decline in overall construction, with more emphasis on publicly funded projects like schools, universities, and government buildings. The saving grace is that 75 percent of roofing is retrofit, so it’s not as connected to the new construction market. We have products that work for both.”

Schneider describes the post-Sept. 11 market as apprehensive, but not yet a problem. At the time of this interview, he was more concerned with the first quarter of 2002 than with the fourth quarter of 2001. For the new year, Dens-Deck is planning to turn its attention to the roofing contractor, as opposed to architects and specifiers. “Ours is a specialty product,” explains Schneider. “We want to inform contractors and make sure they make informed decisions. We are actively soliciting top contractors in the country to communicate with some sort of incentive program. This is critical for maintaining sales.” In addition to strengthening its connection to the contractor, Dens-Deck is also working with systems manufactures — the decision-makers when it comes to warranties and allowing Dens-Deck to be part of the system. “We want to strengthen our relationships with the systems manufacturers so that when contractors install systems with a warranty, we are part of that.”

Dens-Deck is also involved in the evaluation and testing of products. One such test is the new FM hail test with the ice ball cannon. “We are also doing comparison testing with single-ply, aged vs. new, with different substrates,” says Schneider. “We found that we come out very good as far as being the ideal substrate. And customers are putting their money where their mouths are, using Dens-Deck to protect against hail damage.”

Dens-Deck is developing new products for use with hot-mopped asphalt. In addition, the company is working on getting out the message that Dens-Deck is mold- and mildew-resistant. “It’s a health, performance and cost issue,” says Schneider. “Most products have an organic component susceptible to mold. Not Dens-Deck. We came out on top of ASTM testing.”

Jim Hoff, vice president of marketing for Firestone Building Products Company, Carmel, Ind., agrees with Ducharme and Schneider that the focus is on reroofing. “We anticipate there will be greater business opportunities for reroofing in 2002 and, in general, we have already seen an increased demand for single-ply membranes, especially white thermoplastic membranes.”

As far as finding anything positive in a downturn, Hoff mentions the importance of life-cycle cost. “Although roofing contractors are always interested in maximizing the value of a roofing system investment for their building-owner customers, critical issues such as life-cycle costs and long-term performance take on a heightened urgency during slower economic times,” he explains. Hoff is confident that Firestone’s full-line of roofing membranes, insulations and accessories, which can be warranted from the deck up, will enable the company to weather changing economic cycles.

Hoff points to continued concern over the lack of a trained workforce for roofing contractors as another challenge to be aware of in 2002. To that end, “Firestone invests heavily in its own roofing contractor training programs and is a strong financial contributor to industry-wide endeavors to improve workforce training.” The company is also working to make incremental progress in all aspects of the business. Says Hoff, “This year, contractors can look forward to new metal building reroofing specifications for Firestone RubberGard® EPDM Roofing Systems, as well as new offerings in our Asphalt and ISO 95+® polyiso product lines.”

Roofing Contractor thought it might also be useful to see how the market looks from the distribution perspective. Bob Fury, chief operating officer of Allied Building Products, East Rutherford, N.J., says Allied noticed a change in business for the two weeks following Sept. 11, but then things went back to normal. The New York area saw a downturn, but it bounced back. Nonetheless, Fury says, “We are planning for a softening of business. Momentum had been carrying things along, and there was business in the pipeline. Now we are watching everything and preparing accordingly.” Fury advises keeping an eye on consumer confidence: “This year will be more uncertain than ever before.” Whereas in previous years one could make reasonable assumptions about how far up or down the market would go, all bets are off in 2002. “If the market does soften up, you have to be able to react quickly enough, that’s the challenge,” Fury says. “For us, it’s business as usual. But we will be more cautious with acquisitions and opening new offices.”

The Contractors

Dodd Roofing has cut its expenses to a bare minimum, including advertising and insurance, and is lowering its profit margin as well. Dodd sees consumers cutting back on spending and material prices rising. “A lot of companies are going out of business,” she says. Dodd Roofing plans to focus on getting more work and keeping the business going. While times are tough, Dodd says the situation is bringing her employees closer together and highlighting the importance of working as a team.

The larger contractors, on the other hand, seem to be fairing a bit better. “Since Sept. 11, there has been a much more conservative approach to construction,” concedes John Larimer, president of generalRoofing, Ft. Lauderdale, Fla. “There is a natural slowdown in some of the normal construction business.” On the positive side, in addition to taking out weak competitors, a recession, as Larimer sees it, “makes healthy businesses evaluate their programs, strengths, and weaknesses, and will result in increased demand at the end.”

According to Larimer, for 2002, his company is concentrating on managing all expenditures as well as continuing a sales initiative begun a year ago. “We have been offering a different set of products and taking a different approach, and we’re not giving that up,” says Larimer. “We also have a few surprises in the works.”

generalRoofing has the capability of servicing multiple-location owners. “We’re finding unique ways of being of service to building owners. In fact, maintenance and repair work is going up,” says Larimer. “There will be continued growth from us and continued expansion into new markets, as well as more visibility. Our true focus is on our customers. Our biggest challenge is to not burn out our resources, and not overburden our companies and people as we continue to grow.”

Mike Promen, president of Clark Roofing, Broadview Ill., and also president of the National Roofing Contractors Association, agrees that business is holding up. “After Sept. 11, we’ve seen a drop-off in new leads, but generally speaking, customers are going ahead.” Promen describes the outlook for 2002 as a “mixed bag” although he wouldn’t call it “wait and see,” since many customers are going ahead with their projects. At press time, he reported: “I have had two customers put their projects on hold, but on the other hand, they signed service contracts.” Clark Roofing doesn’t do new construction and does very little bid work. The company focuses on commercial work including service work, slate and wood repair.

As far as the outlook for 2002, Promen says that Clark Roofing’s planning meetings have determined, “We will do what we always do: Look for people with a problem we can fix. A company going through a downturn will still need its roof fixed if there is a problem. Things aren’t changing a whole lot in that way.”

Promen also sees positive outcomes in a downturn. “In Chicago, the gates to entry into roofing are wide open,” he explains. “People are putting in low bids and charging less than their direct costs. But cash dries up quickly when you’re not covering your overhead. This might weed people out that shouldn’t be in the business.” Promen also mentions that he’s noticed that many of his customers negotiate for 60-day terms, and then stall for 90. “We had one large company not pay up. Managing cash flow right is as important as buying materials correctly.”

When asked about the biggest challenge of 2002, Promen has one answer: insurance. “We recently talked to a major East Coast brokerage house and they are talking about a 25 to 30 percent increase in liability insurance.” So Promen’s advice to contractors is to no longer rush into locking in job costs with customers.

On the other hand, labor, which last year was on the top of everyone’s list of challenges, hasn’t been a problem in Chicago as it has been in other areas of the country. “It affects more of the large, new construction companies,” explains Promen. “We have a training program and a large, trainable workforce. We can afford to pay people more. On the other hand, Chicago also hasn’t hit the boom of the last few years — we lag behind in the good and bad times.” Clark Roofing’s plans are to concentrate on the mundane — “Work as hard as we can with insurance costs, OSHA regulations, etc.”

Promen does point to a bit of uplifting news in light of the Sept. 11 tragedy and the economic uncertainty. The NRCA has offered to reroof the Pentagon, for free. “When we offered and they asked, ‘Why?’ (Executive Vice President) Bill Good said, ‘Because we’re Americans,’” Promen comments. At press time, he reported, “The materials are in place, all the major players have donated without hesitation. Demolition is done. The work will consist of a vapor retarder, new wood deck, ice and water shield, then slate and peripheral built-up work. This project allows us to do something, help make a difference. It involves a substantial amount of money, but anyone we asked, whether a contractor making under a million or over 30 million, just said, ‘Tell us what you need and when you need it.’”

Promen also points to the NRCA convention in San Antonio, Feb. 10 to 13, 2002. This year’s theme is “Limitless Possibilities,” and it will also have patriotic undertones – Former President George Bush will be speaking, as will James Bradley, son of John “Doc” Bradley, one of the Iwo Jima flag raisers. Promen is looking forward to the convention and feels it will offer contractors good “insight and information.”

Ginny Cameron, president of A.C. & R. Insulation Co., Beltsville, Md., and also president of the Insulation Contractors Association of America, has a similar perspective from the insulation industry. Cameron says she isn’t sure what to expect in 2002, so, taking a cue from the Boy Scouts, she plans to be prepared. “In good or bad economic times, it’s always best to be as efficient as possible,” she says. This includes watching expenses closely, paying particular attention to credit controls and accounts receivable, efficiently controlling inventory levels, and generally taking strict control of your business.” She agrees that the downturn will weed out the weak, and in order to avoid being in this category, she advises contractors to know how much it costs to run their businesses – and then charge customers accordingly. “In a downturn it’s easy to turn to selling under cost, out of sheer desperation to maintain a sales volume. That’s an easy way to go out of business.”

As for A.C.&R Insulation’s plans for 2002, “We’ll continue to be proactive in providing solutions to both homeowners and builders, without straying far from our mainstay of building insulation,” says Cameron. “ We hope to expand our fireproofing and may enter info firestopping and light commercial insulation.”

Metal

Stone claims no ability to predict the future, but says it appears that manufacturing, as well as the metal building industry, is “in the tank.” On the other hand, metal architecture is skyrocketing. “Metal is increasing at an astonishing rate, especially in residential areas,” he says. Stone notes that MetalForming is doing well and continuing to gain in market share. “Metal roofing is good business. We were disappointed after the Midwest (MRCA) show, but MetalCon was great, we sold over $2 million worth of equipment.”

As Stone sees it, the challenges of the upcoming year can’t be separated from the world economic situation. “The issue is whether or not customers will continue to invest in capital equipment,” he explains. “If the government makes a contribution to business investment by accelerating write-offs and depreciation, then we’ll have the biggest year ever.” As it is, MetalForming is expanding and adding people.

Stone calls attention to some new trends in metal roofing that are keeping demand on the rise. “We’ve seen an enormous increase in interest in tapering and curving,” he says. “Architects are falling in love with tapers and curves, and we have machines for curving and for slitting tapers from coil. Many customers are looking for this – it adds a sophisticated architectural look.” In addition, Stone points to metal roofing on houses using the new nail-strip profiles, “Contractors are very interested in this.”

Also taking note of the surge in residential metal is Follansbee Steel, Follansbee, W.V. The company is developing a pre-painted shingle product that any contractor, as well as some homeowners, could install. The company’s traditional products – Terne II, a carbon steel coated with a zinc-tin alloy that requires painting, and TCSII, an architectural stainless steel also coated with the zinc-tin alloy that does not need paint – are specialty products geared toward a niche market.

“We haven’t noticed much change since Sept. 11, because our projects are worked out well in advance,” explains John Bonar, sales manager for Follansbee. “Our product is not tied to the economy, so it doesn’t go up high or low.” The company’s challenge for the coming year is the same as usual: “It’s always a challenge for us to find new projects and markets; to find people who are willing to pay more for better quality.”

Finding people willing to pay for metal has not been a problem for Wayne Threadgill, owner of Threadgill Sheet Metal Works in Cyprus, Texas. After the events of Sept. 11, Threadgill says his phone didn’t ring for about a month, “But we were backlogged enough to keep busy.” Then, on about the fifth Monday after the attacks, the phone started ringing again. At the press time, Threadgill reported that his company was covered through the end of 2001 and already had one job scheduled for after Jan. 1. “We’ve been getting invitations to bid, so things are looking good in the South,” he says.

Threadgill feels that it might take a few months to see how things will turn out for 2002, because with new construction, he often doesn’t get called until it is time for the roof. On the other hand, the home improvement market is looking good, no doubt due in part to the low-interest loans available. “Reroofing can be put off in bad times,” says Threadgill, “but people are going ahead with it.”

As far as planning for 2002, Threadgill Sheet Metal Works plans to keep doing what it has been doing – keeping up its quality and products, and keeping its customers satisfied. The company does residential, commercial and home improvement work, and Threadgill says that tapping into several markets is key to staying afloat.

Threadgill Sheet Metal Works also has a Web site and several marketing initiatives to maintain. “I plan to make more accessories (downspouts, cupolas, weathervanes) available through our e-commerce,” says Threadgill. “In the winter, when it slows down, I like to work on our marketing infrastructure, but it hasn’t slowed down yet.” As far as challenges in the upcoming year, Threadgill still sees labor as an issue. “It’s always hard to find qualified help,” he admits, especially since the company is expanding. All in all though, things are looking good. Residential metal is taking off, and Threadgill says the fourth quarter of 2001 was the company’s strongest. “The established upper market it upgrading.”

While there are certainly challenges ahead in 2002, the biggest hurdle seems to be uncertainty. A strong industry, and a strong country for that matter, can surely come out on top.