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SPEAKERS
Chris KingEditor
Roofing Contractor
Bob TafaroPresident & CEO
GAF Materials Corp
Paul BromfieldVice President, Marketing
GAF Materials Corp
Tom WattsAssociate Editor
Roofing Contractor
Archivewww.roofingcontractor.com
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BACKGROUND
For the third year in a row, Roofing Contractor and BNP Media Market Research teamed up to conduct a
research study to get the contractors’ perspective on the roofing industry. The State of the Industry survey,
sponsored, sponsored by GAF Materials Corporation, was designed to find out how contractors fared in
2010 and how they expect their businesses to perform this year and beyond.
PURPOSE AND OBJECTIVES
Specific research objectives of the State of the Industry study included:
• Measuring sales volumes in 2010, 2011 and over the next three years.
• Determining trends among different product categories.
• Finding out the percentage of contractors using the Internet, websites, smart phones and social media
for business purposes.
• Indentifying key problems contractors currently face.
Study Overview
Study Results
Other
6%
Manager/
Supervisor
26%
Senior Executive
(Owner/President/
CEO/VP)
68%
Which one of the following best describes your job title?
Job Title
Estimator (4) Administrative (3) Sales (2) Foreman
33%
17%
5%
12%
6%
7%
20%
0% 20% 40% 60% 80% 100%
21 to 40 Employees
11 to 20 Employees
7 to 10 Employees
5 to 6 Employees
3 to 4 Employees
1 to 2 Employees
In total, how many full time people does your company employ?
Number of Full Time Employees
Mean = 35 EmployeesMore than 40 Employees
24%
19%
7%
9%
4%
37%
0% 20% 40% 60% 80% 100%
$5 million or more
$500,000 to $999,000
$250,000 to $499,999
$100,000 to $249,000
Less than $100,000
Roughly, what were your gross annual sales for 2010?
2010 Gross Annual Sales
Mean = $4,920,355
$1 million to $4.9 million
What percentage of your business revenue comes from the following?
Business Revenue Sources
33%30%
13%
10% 9%6%
0%
10%
20%
30%
40%
50%
CommercialReplacement
Residential Replacement
CommercialRepair
CommercialNew Construction
ResidentialNew Construction
ResidentialRepair
-10%
-12%
-22%-19%
10%
27%
18%
60%
48%
32%
19%
10%
8%
-2%
-4%
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
2010 Compared to 2009
1. Compared to 2009, do you expect your 2010 total annual sales volume to…?
2. Thinking ahead to 2011, how do you expect your 2011 total annual sales volume to do compared to 2010?
3. Over the next three years, do you expect your company’s total sales volume to…?
Total Annual Sales Volume
Decrease Greatly Decrease Slightly Remain the Same Increase Slightly Increase Greatly
In the next 3 years
In the next 12 months
-20%
-23%
-12%
-7%
-15%
-19%
-18%
-23%
-17%
-14%
-9%
-9%
-7%
-6%
-9%
50%
42%
55%
60%
39%
40%
32%
53%
34%
20%
13%
14%
11%
14%
27%
29%
30%
26%
32%
40%
5%
5%
6%
6%
8%
10%
7%
10%
8%
-7%
-14%
-16%
-15%
-13%
1%
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Have your sales for each of the following products increased, remained the same or decreased in 2010…?
Change in Product Sales Over Past 12 Months
Decrease Greatly Decrease Slightly Remain the Same Increase Slightly Increase Greatly
Mean / n=
Single-Ply Roofing 3.22 / 237
Metal Roofing 3.14 / 219
Cool Roof Coatings 3.14 / 195
Steep-Slope Asphalt 2.96 / 220
Garden Roofing 2.92 / 122
Low-Slope Asphalt 2.71 / 224
Slate 2.74 / 150
Concrete Tile 2.64 / 138
Solar 3.20 / 132
Overall Sales 3.15 / 261
-13%
-14%
-16%
-6%
-11%
-8%
-6%
-10%
-8%
-6%
62%
54%
40%
48%
38%
48%
37%
37%
31%
22%
14%
24%
31%
29%
36%
32%
40%
41%
47%
56%
5%
6%
9%
12%
11%
12%
13%
9%
-4%
-2%-7%
-4%
-6%
-3%
-3%
-11%
-9%
-10%
1%
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
In 2011, do you think product sales for each of the following categories will increase, remained the same or decrease?
Expected Change in Product Sales for 2011
Decrease Greatly Decrease Slightly Remain the Same Increase Slightly Increase Greatly
Mean / n=
Single-Ply Roofing 3.61 / 238
Metal Roofing 3.45 / 220
Cool Roof Coatings 3.49 / 201
Steep-Slope Asphalt 3.31 / 218
Garden Roofing 3.15 / 128
Low-Slope Asphalt 3.10 / 227
Slate 2.83 / 151
Concrete Tile 2.91 / 140
Solar 3.39 / 143
Overall Sales 3.59 / 258
Do you have access to the Internet at work?
Internet Access at Work
Yes
97%
No
3%
76%
22%
<1% 2%
0%
20%
40%
60%
80%
100%
More than
once a day
Daily Once a
week
Less than
once a
week
Yesresponses
How often do you access the Internet at work?
1%
1%
6%
14%
78%
0% 20% 40% 60% 80% 100%
Other
Which search engine do you prefer?
Preferred Search Engine
Other Mentions: Dogpile Manufacturer
Google (www.google.com)
Yahoo (www.yahoo.com)
Bing (www.bing.com)
YouTube (www.YouTube.com)
Does your company have a website?
Company Website
Yes
80%
No
20%
Who designs, builds, and manages your website?
Website Manager/Features
2%
8%
30%
61%
0% 20% 40% 60% 80% 100%
Other
In-house
Which of the following does your website feature? (Multiple response allowed)
10%
8%
19%
20%
63%
93%
0% 20% 40% 60% 80% 100%
Other
Relative or friend
Professional Web hosting/design service
―Contact us‖ online form for requesting service or estimates
Links to roofing manufacturers websites
Video demonstrations of your services
Introduction video
Page One optimized for Smartphones
Other Mentions: Built by a professional company managed in house CEO In-house with professional webhosting and design assistance Self
Other Mentions: Project photos/descriptions (7) Company overview (2) Angie’s list Counter Customer testimonials Insurance contact information, warnings, deals Links to associates Links to organizations Product information References Video
When was the last significant update of your website?
Website Update/Annual Cost
What is your annual cost for your website (including “search engine optimization” costs)?
21%
20%
13%
13%
34%
0% 20% 40% 60% 80% 100%
Less than $500
$501 to $999
$1,000 to $1,499
$1,500 to $2,499
$2,500 or More
Less than one
year ago
70%
More than one
year ago
25%
Never
5%
Mean = $1,634
Which method(s) do you access to the Internet for business
purposes? (Multiple response allowed)
Internet Access Method/Mobile Device Used for Business Purposes
31%
15%13%
19%22%
0%
10%
20%
30%
40%
50%
Blackberry Droid iPhone Other None
Which mobile device do you use for business purposes?
Personal homecomputer/laptop
Mobile device/ Blackberry/Smartphone
12%
11%
43%
90%
0% 20% 40% 60% 80% 100%
Netbook/iPad
OtherOther Mentions: Business computer (29) iPod (2)
Other Mentions: Cell phone (36) Smartphone (4) Laptop (3) Windows mobile phone (2) Epic
Evo iTouch, iPod Nextel radio phones Omnia II Palm pre
Do you send and receive text messages between your office and: (Multiple response allowed)
Office Text Messaging Usage
62%
46% 43%
34%
0%
20%
40%
60%
80%
100%
Your employees Your customers Your vendors Do not send or
receive text
messages
48%
1%
2%
3%
5%
6%
10%
11%
13%
25%
30%
5%
0% 20% 40% 60% 80% 100%
Other
DIGG (Collaboration Tool)
Flickr (Multimedia Tool)
Wikipedia (Collaboration Tool)
MySpace (Social Network)
Plaxo (Social Network)
Twitter (Micro Blogs)
Blogs
YouTube (Multimedia Tool)
LinkedIn (Social Network)
Facebook (Social Network)
Which of the following social media websites do you use for business purposes? (Multiple response allowed)
Social Media Website Usage
Other Mentions: Company website (2) Yellow book (2) Emails Gmail Google KSL Manufacturers and suppliers Personal site for bookkeeping Roofer’s coffee shop
I do not use the social media sites for business purposes
How often do you log into social media websites (blogs/ micro blogs/social networks/collaboration tools/multimedia tools) for business purposes?
Social Media Website Frequency of Usage/Time Spent
More than once
a day
16%Never
10%
Less than once
a week
28%Once
a week
13%
Daily
25%
How much time do you spend on blogs/micro blogs /social networks/collaboration tools/multimedia tools?
Less than 30
minutes
75%
More than one
hour
3%30 to 60
minutes
22%
-7%
-7%
-5%
-5%
23%
34%
28%
25%
15%
15%
13%
30%
25%
35%
27%
30%
27%
22%
30%
27%
38%
46%
49%
55%
-14%
-6%
-4%
-2%
-3%
-5%
-5%
-5%
-5%
-5%
28%
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Thinking about 2011 and the challenges roofing contractors will face, review each category below. Rate each category using
a five point agreement scale where 1 is Completely Disagree and 5 is Completely Agree.
Expected Challenges for Roofing Contractors in 2011
Completely Disagree Somewhat Disagree Neutral Somewhat Agree Completely Agree
Mean
Weak economy 4.09
Insurance/healthcare costs 4.11
Increased material costs 3.78
Cash flow/financing 3.70
Finding qualified workers 3.63
Government intervention/regulation 3.87
Lowball pricing/bidding wars 4.18
24
Taking The Lead In
Uncertain Times
Bob Tafaro Chief Executive [email protected]
Paul BromfieldSenior Vice President, [email protected]
Taking The Lead In Uncertain Times
Today’s Agenda
2010 – Year In Review
2011 – Anticipated Directions
Key Opportunities
25
2010 – Year In Review
Key Highlights We Will Review
Generally soft year for volume:
- Strong residential start weakened in back half of year as
macro trends (home sales, inventory levels, etc.)
- Commercial was improved over 2009, but still well below
historical averages
Within a relatively stable market, some sectors are performing well
- Increased TPO penetration in Single Ply market. Asphaltic membrane systems still growing
- ISO more important in roofing systems
- Solar: Small but growing
26
Volume Trends
27
Commercial experienced slight growth throughout the yearStrong start became a disappointing second half for residential volume
Source: Company estimates
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
tho
usa
nd
s
- 26%
2010 Home Sales (New & Existing)
Source: U.S. Bureau of the Census
Home sales slumped post home buyer tax credit, intensifying pressures on volume 28
Housing Starts
Source: U.S. Bureau of the Census
Housing starts stable but well below historical average
-
500
1,000
1,500
2,000
2,500
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
tho
usa
nd
s
1990-2010 Average Housing Starts : 1.38 million
29
Distribution and Efficiency Gains
Source: U.S. Bureau of the Census
2001-2010 ratio average: 1.32
Business has become more efficient with inventories –Roofing included
30
Increased TPO Penetration
31
TPO increasing share of single ply market
Source: Company estimates
ISO Growing Importance in Systems
32
Minimum Insulation by Weather Zone
Higher insulation standards will continue to increase
ISO usage in systems
Source: PIMA
Solar – Small But Growing
Source, SEIA
69% CAGR since 2001
2009 equates to approximately 35,000 installs compared to approximately 6MM roofs installed.
33
2011 Anticipated Directions
Key Highlights We Will Review
Raw material uncertainty and cost pressures, compounded by increased inflation expectations
Residential stable or likely to experience modest growth, although pent-up demand will eventually need to be met
Commercial stable, slight growth off a low base
Capacity balanced—plant mothballing now, new capacity additions some years off
Some sectors continue to prosper (e.g., TPO, solar)34
Crude Oil & Asphalt
Increasing pressure on asphalt costs, as well as supply risksSource: Company data
35
Other Key Materials
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
cent
s/lb
Polypropylene Contract Price
Polymer prices have been increasing, putting pressure on TPO, PVC, other plastic based materials
Source: Chemidata
36
Projected Inflation
Inflation expectations increasing
0.00%
0.50%
1.00%
1.50%
2.00%
2009 2010 2011
Average Core Inflation
Source: Federal Reserve Open CommitteeJan 2011
37
Pent Up Remodeling Demand
38
Joint Center for Housing Studies sees opportunity for increased remodeling spend and indicate pent up demand from projects delayed over past few years
Source: JCHS
New Home Inventory
8.0 8.0
7.1
6.3
9.2
8.2
8.99.1
7.6
8.68.4
6.9
5
6
7
8
9
10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
New
Ho
me
Mo
nth
's S
up
ply
6 month Supply considered healthy
Source: U.S. Bureau of the Census
Existing home inventory will limit construction
39
Housing Starts
40
NAHB expectation of housing starts flat for first half of year, possible improvement in second half
Source: NAHB
Non-Residential Building Construction
41
Commercial construction: slight growth from a low base
Source: McGraw Hill
- 54%
+ 8%
More Solar Growth Expected
Solar expected to continue strong upward trend (Roofing industry is approximately $30 billion total market)
42
Key Opportunities
Key Highlights We Will Review
Business Fundamentals Remain The Same
With Some Key Points Of Emphasis:
•Trend to Performance & Aesthetics
•Increased Sustainability
•Technology
43
Business Fundamentals Remain The Same
44
Building Relationships… with customers, employees, distributors, and manufacturers
Quality… workmanship and accurate estimating are essential
Upsell… to higher value products, more profit from every job
Focus On… strengthening your position in your market
Work On… improving customer relationships, enhancing quality - Be innovative, understand and control your costs!
Demonstrate Value
Trend to Performance & Aesthetics
• Industry residential warranty upgrades
- Require that the industry delivers on its promise of quality
- Appearance is increasingly important in decision process
• Research shows that homeowners increasingly recognize the importance of shingle style
- 84% said the specific shape and style of the shingle was important or very important to their shingle purchase
• Commercial systems are being designed for the overall building use, with a variety of possible uses for the roof space including Solar and TPO
45
Priorities for Contractors in Age of Aesthetics
- Educate homeowners on color and cut choices
- Provide affordable luxury options
- Incorporate designer shingles in every proposal,
show samples
- ―Show them the money‖ – Curb appeal/ROI vs. price
- Recognize enhanced warranties still important
- Understand commercial building owner’s longer
term plans—not just fixing leaks
46
Trend Toward Increased Sustainability
- Importance of sustainability and a source of
differentiation
- More favorable economics
- Asphalt the most recycled material
- Programs for commercial membrane roofing recycle
- ―Green‖ Codes and standards are more important
(e.g., LEED and IGCC), regulators becoming more
involved
- Growth in Solar expected to continue
47
$80.00
$58.00
$30.00
-$18.00
$40.00
$34.00
$16.00
$28.00
$21.00
$32.00
$105.00
$40.00
$10.00
$20.00
$55.00
$35.00
$31.00
$12.00
$0.00
$50.00
$29.00
$17.00
-$20.00 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00
C&D Disposal (NE)
Mixed Debris
Concrete, Brick, Block
Bathroom Fixtures
Clean Wood
Comm. Roofing
Doors, Window s
Glass
Metals
Asphalt Shingles
Gypsum Wallboard
Total Cost of Recycling or Disposal (Bottom Bar)
Tip Fee Per Ton Transportation Cost Per Ton
Compared to disposal (bottom bars), recycling costs much less
for nearly all construction and demolition materials.
Costs: Recycling vs Disposal
48
Growth of LEED Projects
49
Increased Sustainability
Key Priorities For Contractors
- Offer residential shingle recycling
- Understand architect/building owner needs for
commercial membrane recycling
- Solar: Consider early entry to learn as market
evolves
- Use sustainability as a tool for differentiation, stay
ahead of code changes, join USGBC
- Be active in the community, volunteer
50
Technology
Key Priorities For Contractors
Increasing technology use shown by Roofing Contractor Survey but still only 80% of contractors have a website
• Using digital media to reach out to customers
• Search engine optimization for marketing effectiveness
• Understanding your business quickly and effectively through technology
• Adopt new business technology where possible
• Look for customer self-service options, scheduling, etc
• Demonstrate value and competence
51
Summary
Continued market uncertainty is no excuse - By
continuing to take the lead on improving quality and
being innovative, our industry won't merely survive —
We can thrive.
- Differentiate (e.g., quality materials, use of solutions
that enhance aesthetic experience, thorough
installations
- Innovate through technology
- Sustain efficiency and productivity
52