Old Industries, New Ventures

Dec. 21, 2004
Clay, glass, and stone manufacturers are growing with the booming economy and new e-business alliances.

On this year's IndustryWeek 1000 are 37 of the world's largest companies in the clay, glass, and stone industries. Those manufacturers enjoyed an average revenue growth rate of 9.3% and generated combined revenues of $159 billion last year. Fueling a positive forecast for this group in 2000 and beyond is the unprecedented economic expansion in the U.S. and in other parts of the world, and the nascent e-business revolution that is changing even the oldest of the clay, glass, and stone manufacturers. For example, Lafarge SA, Paris, founded in 1833 and today one of the world's largest stone aggregate manufacturers, earlier this year became a major equity partner in BuildNet Inc., Research Triangle Park, N.C. BuildNet provides management software programs for Internet-based procurement, e-commerce, and information services that link manufacturers with home builders and suppliers. Lafarge officials see this equity agreement as a key driver for its future growth because BuildNet's software is used by the builders of about one of every three homes in the U.S. "BuildNet is a software platform that is very familiar to home builders, one of our key constituencies,'' says Ted Pile, vice president of corporate communications for Lafarge Corp., the French company's U.S. subsidiary that is based in Reston, Va. "We need to . . . understand what they envision in terms of the future of the Internet affecting their business needs." Lafarge SA and Lafarge Corp. ranked 181 and 669, respectively, on the IW 1000. The world's largest glass maker, Compagnie de Saint-Gobain, Paris, through its U.S. construction materials subsidiary CertainTeed Corp., became a founding member of BuildNet's new e-business system last year. Saint-Gobain, founded in 1665, is one of the world's oldest companies and is ranked No. 88 on this year's IW 1000. It derives nearly 45% of its revenues from glass products, manufacturing 30 billion bottles, flasks, and jars a year and providing glass for 50% of the cars in Europe. The Internet and telecommunications also provide promising growth opportunities for high-tech glass manufacturers such as Corning Inc., Corning, N.Y., which climbed to No. 436 on the IW 1000, up from 521 in last year's ranking. Corning -- whose scientists in 1970 invented optical fiber cable that is capable of carrying 65,000 times more information than copper wire -- is seeing soaring worldwide demand for optical fiber and photonic devices used to increase the capacity and speed of ubiquitous communications networks. Some traditional glass makers in Asia are not faring as well, however. Asahi Glass Co. Ltd. of Tokyo, one of the world's largest glass manufacturers, saw revenues drop mostly because of the sluggish Japanese economy. The company, which ranks No. 151 on the IW 1000, says domestic demand decreased for its flat glass that is used in commercial buildings and automobiles. Although Japan's economy is expected to improve gradually in 2000, a strong recovery is unlikely because private-sector capital investment is forecast to remain slow, Asahi states in its financial report for the first half of fiscal 2000 -- which ended Sept. 30, 1999. In contrast to Asia's economic struggles, unprecedented growth continues in the U.S. Although high interest rates are expected to impact new-home construction in 2000, the stone aggregate companies that make various products for the $240 billion U.S. home-building industry are not particularly worried. Over the next six years many aggregate manufacturers will see revenues rise as a result of the Transportation Equity Act for the 21st Century (TEA-21), the largest federal spending bill in history. TEA-21 calls for $173 billion, an average of $28.8 billion annually over the next six years, for highway and bridge projects. And most of the asphalt pavements and concrete roads in the U.S. are made from aggregates. That $173 billion represents more than a 40% increase over previous federal spending levels on infrastructure improvements, says Trip Rodgers, an analyst for UBS Warburg LLC in New York. Although TEA-21 was signed into law in 1998, state governments needed time to plan and administer highway projects that will get under way during the 2000 construction season. Even with moderate economic growth in the U.S., TEA-21 is expected to provide a boost for aggregate manufacturers, says Donald M. James, chairman and chief executive officer of Vulcan Materials Co., the largest producer of construction aggregates in the U.S. Birmingham-based Vulcan spent $890 million last year to acquire CalMat Co., Los Angeles, making Vulcan one of the U.S.' largest producers of asphalt mix for highway construction. Vulcan is ranked No. 740 on the IW 1000, up from 930 a year ago. International clay-brick manufacturers also have reaped profits from strong economic conditions. About 50% of U.S.-based clay-brick manufacturing companies are owned by foreign firms, according to the Brick Industry Assn. (BIA), Reston, Va. Sydney, Australia-based Boral Ltd. is the largest brick manufacturer in the U.S. Boral ranks No. 566 on the IW 1000. Its American subsidiary, Boral Bricks, based in Atlanta, operates 14 manufacturing plants with the capacity to produce 1.5 billion bricks annually. "It's a growth time that I haven't seen in the 14 years that I've been in the industry," says Nelson J. Cooney, BIA president. "A record-breaking 8.9 billion bricks were shipped to construction sites in 1999, the highest amount ever shipped." Today's 83 brick manufacturers that manage 203 plants in the U.S. are enjoying a popular resurgence for their products among home builders after years of market share loss to other materials such as synthetic stucco and vinyl siding. To meet this increasing demand, Cooney says 10 new brick manufacturing plants have been built over the last three years. Top Companies in Stone/Clay/Glass

Leaders by Revenues
IW 1000 Rank Company Revenue (US$ Millions)
88 Compagnie de Saint-Gobain* $17,945
151 Asahi Glass Co. Ltd. $12,544
181 Lafarge SA $10,601
265 RMC Group PLC $7,263
274 Holderbank Financiere Glaris* $7,077
*1998 revenues
Leaders by Profit Margin
IW 1000 Rank Company Profit Margin
401 Cemex SA de CV 20.1%
515 USG Corp. 11.7%
436 Corning Inc. 11.3%
669 Lafarge Corp. 10.4%
740 Vulcan Materials Co. 10.2%
Leaders by Return on Equity
IW 1000 Rank Company ROE
515 USG Corp. 81.3%
634 FLS Industries A/S 50.2%
436 Corning Inc. 32.1%
302 CRH PLC 29.2%
401 Cemex SA de CV 24.0%
Leaders by Revenue Growth (1996 to 1999)
IW 1000 Rank Company 3-Year Growth
338 De Beers Consolidated Mines Ltd. 1,344.4%
816 Cia. Valenciana de Cementos Portland* 226.8%
671 Imerys SA 111.7%
302 CRH PLC 105.9%
181 Lafarge SA 95.9%
*Growth is for 1995 to 1998
Industry Hightlights
Average revenue growth of companies: 9.4%
Company with highest revenue growth (1998 to 1999): De Beers Consolidated Mines Ltd., 115.9%
Company debuting highest on list: De Beers Consolidated Mines Ltd., No. 338
Company with highest profit growth (1998 to 1999): FLS Industries A/S, 186.4%

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