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The North America Heavy Construction Sectors : A Company and Industry Analysis (February 2004)
Mergent, Feb 2004, Pages: 28
Current Environment - Key Points
- Non-residential building construction in the third quarter of 2003 grew by 4.8% after declining by 2.9% in the first quarter of the year
- The combined total revenue in 2002 of the top five companies in the US was $22.97 billion, up 11.65% from $20.29 billion in 2001
- The industry is slowly seeing increased mergers and acquisitions as the economy emerges from war and recession
- In Canada, the construction industry witnessed significant growth as cumulative investment increased by 5.9% in the first three quarters of 2003
- Canadian companies are increasingly exploring opportunities outside North America
- Indicators suggest that both horizontal and vertical consolidation of Canadian companies is likely to accelerate over the next few years
Industry Profile - Key Points
- The Association of Equipment Manufacturers (AEM) reports that the industry shipped more than $1.86 billion worth of machinery to global markets during the second quarter of 2003
- Bechtel's $4.3 billion petrochemicals mega project, the Nanhai Petrochemicals Project in Southern China, will consist of 11 chemical plants, including an ethylene cracker with an annual capacity of 800,000 tonnes
- Severe competition within the fragmented industry makes R&D difficult; smaller scale construction is increasingly becoming internationalized, with foreign construction firms competing in the domestic market
- Highway funding in most states is low, which could limit highway construction
According to the American Roads and Transportation Builders Association (ARBTA), the fiscal 2004 budget for highways is $2.3 billion lower than the 2003 budget
- Canada's construction industry generates revenues of $100 billion annually, representing 12% of the country's gross domestic product (GDP); the industry employs more than 880,000 workers
- The Canadian Federal Government, heavily involved in infrastructure development, has established programs directed towards urban renewal and improvement of the country's urban infrastructure, including the Canada Strategic Infrastructure Fund and Border Infrastructure Fund
- Canadian construction R&D is significantly below any of the OECD countries and is eclipsed by that in the high-tech industries
Market Trends and Outlook - Key Points
- In 2004, US residential construction could slow due to high interest rates and tighter lending regulations; commercial construction, however, may revive as bank credit availability improves
- Many US companies participate in foreign and local privatizations to avoid losing business to competitors
- A labor shortage is seriously threatening the construction industry
The main reason for the shortage is the combination of reality and image
The Business Roundtables Construction Committee reports that 25% of its members- projects experienced cost overruns or schedule delays caused by lack of labor
- The adoption of IT, which will revolutionize the industry, has been slow but steady
- Machinery manufacturers are expected to see a 3% to 5% growth, with sales increases in almost all major product groups in 2004 with earthmoving machinery sales being the strongest
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