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The North America Heavy Construction Sectors : A Company and Industry Analysis (September 2003)
Mergent, Sep 2003, Pages: 24
Current Environment - Key Points
- US construction companies faced significant challenges in 2002, including cuts in state funding, weaker market demand, significant legislative changes and an economy that faltered
- A decline in construction spending was partly due to the sharp drop in government outlay for big public works projects
February's decline largely reflected a steep 2.9% drop in government spending on schools, industrial buildings, highways, streets and sewer systems
- 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 slowdown in M&A activity does not mean that buying and selling operations will go into full hibernation as construction companies are looking to reduce debt and maintain their balance sheets
- The Canadian construction industry, after several years of strong growth, is projected to record growth of 1.9% in 2003, according to the Canadian Construction Association
- Canadian companies are beginning to explore 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) reported that US exports of construction machinery on a cross border transaction basis totaled $1.65 billion in Q1 2003, up 5.1% compared with Q1 2002
- US government spending on major public works projects increased by 0.2% in April 2003 to an annual rate of $201.2 billion
- 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
- Canada's construction industry generated revenues of $79.3 billion in 2002, representing 11% of the country's gross domestic product
- 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
- Many US companies are considering participating in foreign and local privatizations to avoid losing business to competitors
- A labor shortage is seriously threatening the construction industry
The Business Roundtables Construction committee reported that 25% of its members- projects experienced cost overruns or schedule delays caused by lack of labor
- The adoption of IT, though slower than in other industries, is already starting to gain momentum
- The Canadian construction industry is in need of improved technologies as pressure is mounting to decrease the environmental effects of construction
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