Much has been written about the considerable downturn the industrial PVF segment of the industry has experienced the last few years. But hope is on the way according to insights from distributors who took the 2017 Supply House Times Premier 150 distributor survey.
The annual Premier 150 survey is conducted by Supply House Times and BNP Media Market Research. BNP Media is the parent company of Supply House Times as well as BNP Media Plumbing Group publications Plumbing & Mechanical, PM Engineer (pme) and West Coast-based Reeves Journal.
The Premier 150 survey ranks the top PHCP-PVF distributors by their reported sales for the past year. The 2017 survey is based on sales for fiscal 2016. Individual company sales are never disclosed and in some cases editor estimates were used if companies did not respond to the survey, which is made readily available through a number of different industry channels at the beginning of each year.
“Material cost continued declining in 2016,” noted Kip Miller, president and CEO of Greenville, S.C.-based Eastern Industrial Supplies, an industrial PVF distributor. “As the year progressed, prices bottomed out and began turning up. In early 2016 and especially after the presidential election, most commodity prices continued to advance, some at a steady pace. With rising market prices and economists projecting a healthy 2017 in PVF and plumbing, our industry should see solid gross-revenue growth.”
Miller isn’t the only PVF player expressing renewed optimism about market conditions. “We have seen steel pricing improve and with our coast-to-coast reach, we see 2017 as a year of growth and prosperity,” said Gerald Merifsh, president and CEO of Houston-based Merfish Pipe & Supply, which acquired the pipe division of Kloeckner Metals last June and now has five stocking locations.
Brian Tuohey, president of East Windsor, Conn.-based PVF distributor The Collins Companies, added: “We are looking for a marked improvement in the oil and gas and power segments of our business in 2017.”
Michael Taylor, president of Long Beach, Calif.-based PVF distributor Columbia Specialty Co., is seeing an uptick in business conditions in the Golden State. “The California economy is gaining momentum into 2017, which includes increasing activity in commercial and industrial construction,” he said.
On the flipside, Jim Porter, CEO of suburban Chicago-based Porter Pipe and Supply, is seeing more work come online, but at a cost in his area.
“Our market is in a bloodbath price war, which is killing our margins and giving away inventory gains,” Porter said. “This should not happen with this much business out there.”
2016 industry performance
In almost a carbon copy of the 2016 Premier 150 survey, 2016 projections again did not meet up to actual 2016 performance. Looking back at the 2016 survey, 86% of respondents predicted their sales would increase in 2016. This year’s survey reveals 75% of respondents had increased sales in 2016. That follows the 2015 split of 87% predicting sales would increase compared to 79% finishing the year with increased sales.
Further, actual increased sales for the last three Premier 150 surveys have decreased each year going from 83% in 2014 to 79% in 2015 and to 75% in 2016 — still positive numbers when considering where the industry was at during the recession.
This time around, 14% of distributors participating in the survey say their sales decreased in 2016 (predicted was 7%) — the exact same number reported in the 2016 survey.
Morris Cregger, president and CEO of Columbia, S.C.-based Cregger Co., noted his company did not reach double-digit growth in 2016 for the first time in six years (in the 7-8% range in 2016). Cregger said his company is focused on returning those numbers to the 10-plus territory. “We have added appliances to our product offering and anticipate a return to double-digit growth in 2017 from same-store sales,” he said. “We are in search of acquisitions across the southeast and hopefully we’ll be able to expand our footprint this year.”
One industry source added: “It was a tough year. Too many distributors, too many selling channels in a mature marketplace, not enough projects, too much risk for wholesalers extending credit in a weak marketplace.”
Jeff New, president of Elkhart, Ind.-based Mid-City Supply, which is celebrating its 70th year in business in 2017, is on the other side of the fence. He noted his company had a record year in 2016 and is looking for more of the same. “2016 was our best sales year ever,” he said. “We expect 2017 to be even better.”
Market segments
Those respondents heavily entrenched in the plumbing/hydronics side of the business generated about $12.8 billion in sales, up slightly from last year’s $12.2 billion total.
On the PVF side, respondents accounted for $15.1 billion in sales, up from $12.2 billion last year and inching up toward the $15.7 billion total from the 2015 survey — keeping with the feeling the market is on the upswing after some extremely tough times.
HVAC-focused distributor respondents had sales of about $13 billion last year, down from last year’s $14 billion total but still better than the $11.1 billion total in 2015.
The largest number of respondents to this year’s survey fall into the $50 million-$99 million sales category with the $100 million-$199 million category a close second. Those two categories account for more than 50% of survey respondents.
What does the future hold?
This year’s survey shows optimism is even higher than in recent years. Out of all respondents, 92% say they expect sales to increase in 2017, while 5% see sales being flat and only 2% expect sales to decrease. This compares to the 2016 slash line of 86 (increase)/6 (flat)/7 (decrease).
“After considerable growth in 2016, we are excited about the pending commercial explosion in our area,” said Jim Fabricatore, vice president of HVAC distributor Dasco (Dunphy and Associates Supply). “We feel that there is at least two years of growth in the pipeline.”
Lewis Okin, president of Long Island, N.Y.-based Green Art Plumbing Supply, said his market is ready to put the pedal to the metal. “Right now we project major projects to start in New York City, Nassau and Suffolk counties,” he said.
Randy Wool, president of Miami-based Wool Plumbing Supply, sees the same thing occurring in Florida. “We are looking for another strong year in Florida in 2017 with continued growth in double digits,” he said.
Jack Bell, president of Louisville-based Masters Supply, described positives occurring in various facets of his business. “We expect another increase in the residential housing market,” he said. “Multi-family projects still are prevalent. We have large mechanical jobs upcoming in our territory. Showroom business is up 15% company-wide and we expect another good year in our showrooms.”
The 2018 Premier 150 survey will be available for PHCP-PVF distributors to take in January 2018. If you would like to be added to the survey distribution database, contact Chief Editor Mike Miazga at miazgam@bnpmedia.com.
