Case Study – Social Media Small Business
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Copyright © 2011 by AMSYSCO, Inc. All rights reserved.
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It’s the time of the year to reflect on business and economy; the recent past and what lies ahead. With the challenges of 2008, 2009 and 2010 in the history books, one wonders what 2011 is going to be like. In trying to understand various indicators, I believe the US economy has morphed into a bull and bear dual-economy. The bull is the overall US economy and the bear is the construction economy. US ECONOMY The overall US economy is growing. The much-talked double dip recession has not happened. After a robust third & fourth quarter of 2010, the economy is poised to continue growth into 2011. I expect GDP will grow 2.4% in 2011. Many companies were able to enhance their profits in 2010 through cost-cutting measures. After curbing investment in equipment, hiring, M & A and expansion, many large companies are sitting on significant cash reserves. The companies constituting the S&P 500 derive approximately 30% of their profits from outside USA according to Barron’s Magazine. Global business allowed large US companies to create more demand for products and services from other countries. This provided solid support and momentum for the US economy. This will propel the stock market through a 10% gain in 2011 with a possible mid-year correction, in my opinion. However, unemployment hovers above 9% and under-employment is around 17%. What gives? The reluctance of companies to invest and hire is one reason. Smaller companies are generally not hiring, which normally is a job creation engine. The U.S. created approximate 950,000 new jobs in 2010. By comparison, Flextronics, a computer-technology company headquartered in Singapore, alone added 350,000 new workers in 2010. These jobs were all outside USA. You get the picture… CONSTRUCTION ECONOMY Two major construction industry segments are single-family homes and commercial structures. Both are mired in a deep prolonged slump. There is a huge inventory (and shadow inventory) of unsold houses and condominiums. Many owners and builders have defaulted or are underwater. This type of distress has extended to other commercial structures such as office building and hotels. Rather than lending, many banks are focused on getting back to good health. With high unemployment and a trend towards smaller spaces, the need for new office space/structures is almost non existent. In 2003, roughly 5,700 new condominium units, mostly in high rise structures, were sold in Chicago area. Last year only 600 condominiums were sold in the Chicago area – many at a deep discount. This picture is no different in Atlanta, Miami, Las Vegas, Miami and other larger cities. With a construction depression, it is no wonder that unemployment in construction in December stood at 20.8% (ENR Magazine, January 2011). In March 2009, it was around 27%. If discouraged workers who are not looking for work are also included, this figure would be higher. With time, some construction workers will transfer to other industries. A number of states are battling huge budget deficits. Now Texas is facing a budget deficit. Several states have turned down Federal funds for partially-funded infrastructure projects. Accordingly, the cancellation of other city/state projects will help the construction industry and its employment problem. It will take an “extended” period of time for the unsold inventory to be absorbed and builders and lenders working together to build new structures. I believe a notable recovery in single-family homes and commercial structures will occur in mid-2013 and mid-2014, respectively. POST-TENSIONING and AMSYSCO Now I will address unbonded post tensioning – the industry that my company AMSYSCO operates in. Accordingly to the word on the street, our industry metrics declined 70% from 2008 to 2010. (Alarming.) In our industry, it is not great recession…it is depression. Adding to the challenging environment is escalating raw material prices, which are defying laws of economics – supply and demand. However, commodities have gone global in pricing behavior (which explains some price increases). This effect is damaging to company margins. How did AMSYSCO do in 2010? We were very fortunate to chalk out a small profit in 2010. This was possible due to our key customers, suppliers and our great employees. I cannot thank them enough. As opposed to the temptation of cutting back, we have enhanced both product quality and service through additional investment. Additionally, we have expanded our internet presence and entered new markets. - Rattan Khosa, President ____________________________________________ Copyright © 2011 by AMSYSCO, Inc. All rights reserved.
Historical Timeline of Anti-Dumping (AD) and Countervailing Duties (CVD) associated with Prestressed Concrete (PC) Steel Wire Strand. December 8, 1978: U.S. Treasury issued antidumping findings on PC strand imports from Japan. February 3, 1999: After its first review, U.S. Department of Commerce (USDOC) issued a continuation of the antidumping duty findings on PC strand imports from Japan. ________________ January 31, 2003: A coalition of three U.S. domestic strand suppliers filed an anti-dumping complaint against Brazil, India, Mexico, South Korea and Thailand with U.S. International Trade Commission (USITC). March 17, 2003: USITC preliminary determined that imports from five countries materially injured domestic PC strand producers. July 11, 2003: USDOC announced preliminary determinations for antidumping compliant and levied countervailing duties against five countries. December 2, 2003: USDOC and USITC announced issued anti-dumping order on prestressed concrete steel wire strand (PC strand) from Brazil, India, Mexico, South Korea and Thailand. ________________ Early/Mid 2004: Strand shipments from China entered U.S. strand market through third-party brokers. June 25, 2004: USITC conducted second five-year review of PC steel wire strand from Japan and continues duties. December 2008 to March 2009: USITC conducted full five-year review of countervailing duty on PC strand from Brazil, India, Japan (3rd review), Korea, Mexico and Thailand. ________________ May 27, 2009: A coalition of the same three U.S. domestic strand suppliers filed an anti-dumping complaint against Chinese strand suppliers. July 10, 2009: All six USITC commissioners voted in favor that there is a case for dumping. October 26, 2009: USDOC and USITC announced in affirmative preliminary determination with countervailing duty on strand from China. December 18, 2009: USDOC announced its preliminary determination of dumping rate of 37.72% to 193.55% (depending on the Chinese steel mill). January 2010: By-in-large, Chinese strand suppliers exited US market. May 17, 2010: USDOC announced its final determination in AD and CVD investigations. June 10, 2010: USITC determined US industry is materially injured by Chinese imports. USDOC determined imports were subsidized and sold in the U.S. at less than fair value. June 29, 2010: USDOC and USITC announced issued anti-dumping duty order on prestressed concrete steel wire strand (PC strand) from China. ________________ - Rattan Khosa, AMSYSCO Copyright © 2010 by AMSYSCO, Inc. All rights reserved.
As 2008 and 2009 are behind us and 2010 is still young, I thought to share my insights with the reader about the Commercial Construction industry. COMMERCIAL CONSTRUCTION (2008-2009) 2009 was a year that most in the construction industry would like to forget. Everyone is aware of the “Great Recession” which started in 2008 and deepened in 2009. For Commercial Construction, with or without post-tensioned concrete, there has been a Depression with no turnaround in sight. The intensity of the downturn is best illustrated by a 4th Quarter (2009) drop of 88% in the construction starts for investment-type office buildings in 63 core markets (data provided by analytics firm CoStar Group, Inc., Wall Street Journal, January 20, 2010). COMMERCIAL CONSTRUCTION (2010) With the backdrop of tight credit markets, high levels of unemployment/underemployment and excessive inventory of office/residential space, the Commercial Construction industry in 2010 could be worse than in 2009. Unfortunately, any recovery may be deferred until 2012. In the meantime, the combination of a steep drop in business volume, an increased commodity prices and the downward pressure on margins has created a challenging environment for all construction-related companies. AMSYSCO, Inc. As a past, current or future customer of supplier of AMSYSCO, Inc., you may wonder how our company has done. In AMSYSCO’s 29 years in business, 2008 and 2009 were the second and third most profitable years respectively.
There are many factors which contributed to the positive performance. One key factor is that, in October 2006, our management predicted the potential for an industry downturn starting in 2007. (In October 2007, a major slowdown in the U.S. market and commercial construction started). In mid-2008, we also projected that the Dow Jones Industrial would go below 7000 (it hit 6500 in March 2009). Accordingly, we took some necessary steps to combat the Great Recession. At the same time, we stayed the course by relocating our headquarter and purchasing a 55,000 sq.ft. industrial building. This move enabled AMSYSCO, Inc. to serve our customers better, increase our plant production capacity and provide an excellent environment for our employees. AMSYSCO, Inc. will continue to strive to provide the best value to our construction clients in partnership with our suppliers and employees. Together we have already set a solid foundation for 2010. - Rattan L. Khosa, President ____________________________________________
Copyright © 2010 by AMSYSCO, Inc. All rights reserved.
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