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2000: What will it bring?
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Roofing contractors share their expectations for the coming year and reflect on 1999
by The Editors
The roofing industry has endured a lot during the past year, including roofing company consolidations, a dwindling work force and various regulatory mandates that may prove to be more burdensome than helpful. But the economy remained strong, and the number of construction contracts climbed. All this may change, however, as the industry prepares itself for another year and another century.
Professional Roofing interviewed U.S. roofing contractors, as well as some abroad, to discover what they expect for 2000. Following are their responses, presented regionally.
New England
Similar to the past couple of years, a lack of roofing workers is a pressing problem in the New England area, which includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.
According to NRCA President Jamie McAdam, president of F.J. Dahill Co. Inc., New Haven, Conn., "Finding workers is tough, and it's getting tougher all the time."
Steve McBrady, president of SMR Inc., Portland, Maine, echoes McAdam's concern: "We have the equipment for big roofing jobs but not the personnel. There just aren't any workers out there."
Contractors in this region have tried numerous techniques to recruit workers, such as advertising job openings in newspapers, but to no avail. "I've done everything short of tackling people in the street," jokes John Hostetter, president of Progressive Roofing Inc., Woburn, Mass.
Another concern for New England contractors is waste disposal. "It's expensive to dispose of tear-off materials in our area," says Rob Therrien Jr., president of Al Melanson Co. Inc., Keene, N.H. "Landfills are closing, and there aren't any new ones opening."
David Cazeault, president of J.T. Cazeault & Sons of Plymouth Inc., North Plymouth, Mass., cites similar problems. "As larger disposal companies buy out smaller ones, disposal costs are increasing."
Although roofing professionals in this region have concerns, many are cautiously optimistic about business during 2000. "Our overall revenue was up 10 percent to 15 percent during 1999," McBrady says. "We expect the same for next year."
Cazeault concurs, "1999 was a good year for us, and I think things will continue positively next year."
Mid-Atlantic
Roofing contractors in the Mid-Atlantic region—New Jersey, New York and Pennsylvania—have mixed opinions about how business was during 1999 and what to expect for the coming year.
According to Mike Meyer, president of Canopy Roofing Systems, Elmsford, N.Y., "1999 was the best year we've ever had." And he predicts business during 2000 will be just as good.
On the other hand, John Gooding, chairman of the board of Gooding Simpson & Mackes Inc., Ephrata, Pa., experienced about a 10 percent decline in work volume and profits from 1998. "We experienced a letdown because we had a mild winter," he says.
Weather seems to be on the minds of many contractors in this region. "Right now we're busy, but we need to have a severe winter," Gooding notes. "If we don't have a bad one, it will be a lean spring in 2000."
Phil McKinney, president of Evans Service Co. Inc., Elmira, N.Y., is somewhat optimistic about 2000. But because of possible year 2000 (Y2K) problems, such as computer failures, McKinney believes consumers will adopt wait-and-see attitudes before awarding contracts.
McKinney also cites a lack of quality workers as a top concern. To help combat this problem, his company offers an attractive benefits package; in-house, hands-on worker training; and a program that rewards workers for acquiring new skills.
Gooding notes that contractors have to treat their employees as their No. 1 assets: "We make a lifetime commitment to employees if they're willing to work hard for us. Therefore, we've had little turnover."
The roofing industry's poor image—another concern for many—directly relates to contractors' inability to find workers. McKinney offers his insight about how to improve this problem, "Contractors need to continue to produce quality work and provide excellent customer service."
South Atlantic
Business was good for some roofing contractors during 1999 in the South Atlantic region (Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia), but others report the opposite.
"Reroofing work is dead in our area," says Scott Baxter, vice president of CRS Inc., Monroe, N.C. "We are so slow we've let other contractors from throughout the United States 'borrow' our crews—we don't want to lose our workers."
When asked about his predictions for 2000, Baxter says he's hoping for the best. "Right now, we're just trying to get through the end of the year."
On the other hand, Sherri Miles-Foley, vice president of J.D. Miles & Sons Inc., Chesapeake, Va., says there is plenty of work in her area, but rain has kept her crews inactive. "It's a double-edged sword," Miles-Foley explains. "Because we've had so much rain, there's been a lot of work; however, the rain has kept us from doing that work."
Steve Kruger, president of L.E. Schwartz & Son Inc., Macon, Ga., notes that people in his area are not spending as much money on roofing work as they have in the past. "This has increased competition," he says. "More contractors are bidding jobs farther away."
Once again, retaining and recruiting employees continues to be a problem for some roofing contractors in this region. "Finding workers, especially those in middle management, still is our No. 1 concern," Kruger notes.
Rodney Piper Jr., president of J.A. Piper Roofing Co., Greenville, S.C., says it's not as difficult as it used to be to find workers in his area. However, he is concerned about training his work force. "A lot of our workers are Spanish-speaking, so training must be done in Spanish," Piper says. "We've had to learn some Spanish to communicate, and, in turn, some of our workers have learned English."
Most contractors in this region agree that the industry needs an image makeover. Kruger provides his thoughts about improving the industry's image, "We have to let people know about all the good things in which contractors have been involved, such as Habitat for Humanity and other charities."
East North Central
Roofing contractors in the East North Central region, which includes Illinois, Indiana, Michigan, Ohio and Wisconsin, experienced increases in overall revenues during 1999 and expect this upward trend to continue next year. Profit margins in the area, however, are declining.
Casey Bechtel, president of Harold J. Becker Co. Inc., Dayton, Ohio, agrees. "In our area's low-slope market, we are seeing 10 to 12 bidders on projects, which is decreasing our profit margins," he says.
Increased government regulation is another top concern among roofing contractors in this region. "The federal and local governments' attitudes toward business ... are appalling and greatly affecting roofing contractors' costs and styles of business," says Robert Huntington, president of AAA Roofing Co. Inc., Indianapolis, Ind. Contractors cite the Occupational Safety and Health Administration (OSHA) and environmental agencies as organizations that recently have been implementing more regulations.
Similar to other U.S. regions, consolidations are on the rise in the East North Central region. However, most contractors do not feel threatened by this trend. "Consolidations have entered our market, but the impact has not been significant to date," says Bill Bubenzer, vice president of Henry C. Smither Roofing Co. Inc., Indianapolis.
"There is no proof conglomerates are going to dominate or even greatly affect the market overall," Huntington notes.
Contractors in this region continue to struggle with recruiting and retaining quality workers. To combat this problem, contractors are offering more employee benefits, such as health-care coverage and incentive programs. Many believe improving the roofing industry's image will attract more workers to the field. Others recruit and retain workers by hiring within families, providing training programs, and advertising at trade fairs and schools.
"There is a serious skill shortage intensifying in our industry because we are not pulling in new, young talent," Huntington says. "This is where [future] journeymen, foremen and superintendents come from."
East South Central
Although 1999 was relatively prosperous for roofing contractors in the East South Central region—Alabama, Kentucky, Mississippi and Tennessee—contractors predict a weaker 2000. Most surveyed anticipate revenues will remain steady or decline and profit margins will be lower. Contractors attribute these declines to less new construction, unpredictable weather, and increasing competition from consolidated companies and fly-by-night contractors who ignore licensing rules.
Other concerns roofing contractors in the East South Central region share include insurance and workers' compensation costs, government regulations and the economy's future.
Terry Hale, president of Hale Roofing Inc., Bowling Green, Ky., particularly is concerned about the increasing cost of insurance. "To keep insurance costs down, we preach safety," Hale says. "By having a good safety record, our company has reduced its premiums more than 20 percent."
In addition, Jonah Farris, president of All-South Roofing Inc., Memphis, Tenn., would like to see workers' compensation changed to eliminate bogus claims and keep premiums down.
Lowering costs also factors into roofing contractors' concerns about licensing fees in the region. Some contractors surveyed report that fees are too high and should be lowered. They argue that fly-by-night contractors ignore licensing requirements and, therefore, offer prices that are considerably less than professional roofing contractors. If the fees were less, contractors say they could reduce their overheads and be more competitive.
When it comes to company consolidations, most contractors in this region have wait-and-see attitudes. "Consolidations have not entered our local market yet, and I think it is too early to determine their effects," says Don McCrory, president of Kiker Corp., Mobile, Ala.
West North Central
Roofing contractors in the West North Central region (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) enjoyed a moderately successful 1999 and predict that 2000 will offer steady and possibly increased revenues. However, many roofing contractors in this region are concerned about profit margins.
Contractors report that during 1999, roofing work was in demand because there were too many jobs and not enough workers. But contractors believe demand will shrink during 2000, they will be forced to bid more competitively, and profit margins will decrease.
Roofing contractors in this region share other concerns, such as the labor shortage. Some roofing contractors are worried not only about the labor shortage, but also its effects. "Presently, there is concern about the quality of construction projects," says Chip Cornell Jr., president of Cornell Roofing & Sheet Metal Co., Independence, Mo. "Because there are fewer workers to complete jobs, projects are slapped together, and the quality isn't like it used to be."
Roofing contractors are fighting the labor-shortage problem in a variety of ways. Most report they find new workers through newspaper advertisements and word-of-mouth. Many also offer signing bonuses for current employees who recruit new workers.
Kent Schwickert, president of Schwickert Inc., Mankato, Minn., works closely with high-school counselors to offer job fairs for students who aren't considering college as part of their futures. To retain workers, Schwickert has organized a mentor program where new workers are trained by journeymen. His roofing crews that use the program have no turnover.
Another topic that elicited a variety of responses was roofing company consolidations. Some contractors still are weighing the pros and cons of consolidations, and others believe larger roofing companies may neglect customer and community service. However, both those for and against consolidations feel strongly about losing authority within their companies.
"I can't fathom working for somebody else," says Mike Pelzl, president of Twin City Roofing Co. Inc., Aberdeen, S.D.
In the West North Central region, roofing contractors generally are not concerned about the problems associated with Y2K—though they have prepared for it. Most have either replaced their computer systems or upgraded software packages with Y2K-compliant products.
West South Central
Roofing contractors in Arkansas, Louisiana, Oklahoma and Texas—the West South Central region—are relatively optimistic about 2000. For these contractors, 1999's revenues were lower or about the same as 1998's and profit margins decreased. Contractors predict revenues and profit margins during 2000 will increase or stay the same.
However, to succeed financially, these roofing contractors agree that the work force situation must improve.
"Five years ago, we had plenty of help and had to work to get jobs," says Ed Lundin, vice president of Lundin Roofing Co. Inc., Port Allen, La. "Now we work to find people to be on crews."
Jerry Bullard, owner of The Bullard Co. Inc., Bossier City, La., has an additional work force concern: contractors employing illegal immigrants. Bullard believes some roofing contractors in the West South Central region hire illegal immigrants as a cheap labor source and thereby offer lower bids, which drives down profit margins.
Another concern these contractors share is the increasing costs of materials and supplies. One trend roofing contractors see influencing costs is roofing materials manufacturer consolidations. Cliff Johnson, president of Empire Roofing & Insulation Co., Tulsa, Okla., believes these consolidations affect not only cost but also material availability.
One industry improvement contractors would like to see is increased access to worker training, particularly for rural areas.
"Properly training employees is important but difficult in rural areas," says Scott Monroe, vice president of Jonesboro Roofing Co. Inc., Jonesboro, Ark. "It's expensive to send workers to training programs in cities far away. The industry needs to offer more training in rural areas."
Bullard agrees and reports that contractors in his area are working to combat this problem. "We have a problem finding educated workers in this area, so some contractors are working with a local junior college to create a training program," Bullard says.
Mountain
Contractors in the Mountain region (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming) are expecting their overall revenues either to remain the same or increase during 2000—and most report increases for 1999.
But the optimistic outlook for 2000 is marred by concerns, particularly the seemingly futile search for qualified workers.
"I am concerned about the industry's image from workers' perspectives," explains Conrad Kawulok, president of B & M Roofing of Colorado Inc., Boulder. "We need to show workers that roofing is a career. Companies must provide better training programs and overcome obstacles, particularly if some employees do not speak English."
Kent Tolley, president of Tolley-Hughes Inc., Boise, Idaho, agrees: "Maintaining a good work force is tied to proper training. Contractors must invest more time in training workers appropriately."
Most contractors in the Mountain region do not expect that roofing contracting company consolidations will affect their markets significantly. "There are a few in the area, but they haven't had a significant effect on competition," Kawulok says.
"Consolidations have not affected our market yet," says Dane Bradford, president of Bradford Roofing & Insulation Co., Billings, Mont. "Competition has remained fairly constant during the past three years."
With regard to updating computers for 2000, most contractors report they have contacted customers and suppliers to ensure a smooth transition to the new century.
Pacific
Contractors in the Pacific states, which include California, Oregon and Washington, seem to have one overriding concern—increased competition.
Profit margins are falling and competition is "everywhere," says Tim Davey, president of Davey Roofing Inc., Irvine, Calif. "Pricing in the southern California market has tightened considerably during the past 12 months," he says. "There seems to be more contracting capacity than ever, and pricing is eroding as a result."
NRCA Senior Vice President John Miller, chief executive officer of Western Roofing Service, San Francisco, Calif., agrees. "I am concerned about decreasing margins and companies that are volume-driven as opposed to profit-driven," he says.
Perhaps because of the increase in competition, contractors in this region are divided on whether their overall revenues will increase or decrease during 2000.
"I expect a tighter market during 2000, which should cause a decrease in profit margins," says Don Guthrie, vice president of Wayne's Roofing Inc., Sumner, Wash. "In turn, our revenue will either stabilize or decrease."
And, as is the case with other regions, a lack of a qualified, consistent work force is a problem in the Pacific region. To combat this problem, several contractors have increased their employee education programs and benefits to keep good workers.
Alaska and Hawaii
The Alaskan roofing industry continues to face a shortage of "experienced, quality, loyal, committed help," reports Richard Bienvenue, vice president of A & A Roofing Co. Inc., Fairbanks, Alaska. There also seems to be less roofing work available in the area, which increases competition for labor and projects. However, roofing company consolidations have not affected Alaska.
To combat the labor shortage, Bienvenue offers incentives to his employees, such as seasonal overtime. He also believes better training is needed to improve the quality of existing roofing workers.
Overall, contractor revenues in the Alaskan roofing industry declined this year and are expected to stay down during 2000. In addition, profit margins are experiencing a slight downward trend.
Profit margins have decreased substantially in the Hawaiian market, as well, and are expected to continue to decline because of supplier influences and a weak economy, says Alan Meier, president of Hi-Tec Roofing Services, Honolulu, Hawaii.
Similar to other U.S. regions, roofing contractors in Hawaii are concerned about the problem of manufacturers selling materials directly to consumers, such as building owners. "This leads us to [another] problem as these consumers ... hire workers from the industry," Meier says.
Hawaii is facing an increased number of roofing company consolidations, which Meier believes will create lower quality standards and "make this industry more of a margins game than it already is," he says. "We also are concerned about the political influence these consolidations will have on manufacturers when dealing with smaller companies who wish to install their products."
Seeing the future
Although it often is difficult to predict what will happen during the next year, roofing contractors appear to be generally optimistic about 2000. However, slight downturns in sales volumes and profit margins wouldn't surprise many. As a result, as they face 2000, contractors have adopted wait-and-see attitudes.
Ambika Puniani is editor, Mary Beth Doyle is associate editor and Laura Meister is assistant editor of Professional Roofing. Mari Ujka Paulson is a free-lance writer from Darien, Ill.
The global roofing market
Following are brief summaries of the roofing industry's performance around the world from NRCA's international members.
New Zealand
According to the Roofing Association of New Zealand Inc., a top concern among the country's roofing contractors is the continual undermining of roofing contracting companies by materials suppliers and manufacturers that sell directly to consumers. This issue perpetuates a problem of hiring labor-only contractors to carry out the work as a separate contract, says Lorraine Mills, the association's executive officer.
Mills also cites a lack of skilled labor and good trainees as industrywide problems. "The industry needs a larger body of trained, skilled roofing applicators and improved margins to help form a more professional industry," Mills says. She thinks New Zealand must put an increased emphasis on promoting industry training and roofing as a worthwhile occupation.
In terms of computers complying with possible year 2000 (Y2K) problems, Mills reports that contractors have checked all their companies' computer-governed equipment for compliance and do not expect any effects on roofing businesses.
Japan
Contractors in Japan also are not worried about the effects of Y2K—but for different reasons. "Y2K is of secondary importance," says Shinji Hamano, president of Hamaken Roofing Co. Inc., Sapporo, Japan. "I am filled with thoughts of how to address even more severe conditions of the construction industry." For example, the Japanese government has proposed a measure that would reduce the number of construction firms from an estimated 500,000 to 300,000.
Hamano reports a 10 percent to 30 percent decrease in overall revenue this year and expects this downward trend to continue in 2000.
To improve the recruitment and retention of quality roofing workers, Hamano suggests that Japan establish a roofing specialist qualification system. "A state examination will enable us to retain quality workers even though the amount of work is small," he says.
United Kingdom
According to Paul Newman, director general of BFRC Services Ltd., Nottingham, England, contractors in the United Kingdom are struggling with late payments from clients, as well as a labor shortage and lack of worker training. To combat the worker-retention problem, some companies are offering premium pay to existing quality workers.
Newman reports contractors enjoyed a 4 percent increase in overall revenue this year and says contractors expect an increase of about 2 percent in 2000. To prepare for Y2K, companies have upgraded their computer systems and received confirmation of compliance from suppliers.
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