ENR Top 400 Sourcebook: Firms Feel Pinch for Profitability
September 19, 2024
ENR Top 400 Sourcebook: Firms Feel Pinch for Profitability
September 19, 2024Emery Sapp, in a joint venture with Ames, is working on the $570-million US 69 project in Kansas—the state's first-ever to add express lanes, the firm says.
Photo courtesy of Emery Sapp & Sons
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ENR 2024 Top 400 Sourcebook (PDF)
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Go to Key Sector Outlooks
For the second consecutive year, Top 400 revenue has increased by a double-digit percentage—rising 13.9% to $556.9 billion from $488.98 billion last year while median firm revenue is also up 10.9% to $629.5 million. Also, of the 375 firms that filed surveys for both the 2024 and 2023 rankings, 77.3% reported more general contracting revenue. But that is slightly down from 78.9% on last year’s survey.
“Interest rate increases have made it challenging for some clients to obtain construction loans,” says Primus Builders' chief financial officer Matthew Hott. While this has not reduced the No. 278-ranked contractor’s backlog, he says the delays can affect project starts, “which can move financial activities from one year to the next in some cases.”
Inflation rates are still higher than the Federal Reserve’s target average, and some contractors are finding cost increases to be “a more manageable and predictable challenge than [they were] a couple of years ago,” says Anthony Johnson, Clayco executive vice president and president of its industrial business unit. For other contractors, the ability to manage such a challenge depends on the company ability to adjust already strained labor resources.
As owners shift their attention to opportunities in lower risk sectors, Top 400 revenue numbers illustrate how contractors are following the demand.
From 2022 to 2023, revenue increased in all ENR-tracked sectors, except hazardous waste, which was down 9.7%. The largest growth was seen in manufacturing (up 74.8%), petroleum (up 46.7%), sewer/waste (up 38.8%) and water supply (up 28.6%). The manufacturing market in particular grew exponentially, with total general contracting revenue up 201% from 2021 to 2023. In 2021, 115 Top 400 firms had at least some manufacturing revenue. In 2023, that number increased to 142.
Industry wide, Top 400 contractors say projects funded by the Bipartisan Infrastructure Law, CHIPS and Science Act and Inflation Reduction Act are also creating more opportunities. Despite an abundance of projects in some sectors, contractors say others are slowing down because they need more owner buy-in to justify the risks.
In the multifamily residential building sector, Wieland CEO Edward Lorenz says the No. 318-ranked firm has seen many deals delayed or scrapped entirely due to higher interest rates. “These customers must rethink their [return on investment] goals, or raise rents, and rents are already at all-time highs,” he says.
At Dallas-based MYCON, interest rate hikes have reshaped the sector makeup of its project portfolio, as owners shift to sectors that will yield more returns in the short term.
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Of 314 contractors that reported their profitability status, 97.5% said they made a profit domestically, while 97.1% saw international profits. The median domestic profit margin is 4%, up from 3.2% last year.
Moreover, Top 400 contractors see ongoing pressure to keep projects profitable.
On recent jobs, Clancy & Theys President Baker Glasgow says the firm, ranked at No. 120, faced challenges to manage shifting project schedules, supply chain disruptions and meet labor demands.
Yet even as the U.S. drives toward an energy shift with electric vehicles, Top 400 firms say there is a steep technical learning curve for contractors to get electric infrastructure and manufacturing projects shovel-ready, and an even steeper timetable for owners looking for investment returns.
Like many Top 400 contractors, “the Inflation Reduction Act and CHIPS Act have resulted in a wave of new projects” for Gray Construction, ranked No. 40, says president and CEO Brian Jones. He adds that the firm sees “a surge of projects emerge related to electric vehicles, solar panels and semi-conductors.”
To reduce risks and bake more predictability into projects, Jones says Gray has developed a preconstruction phase, including multiple value engineering sessions that are “deliberate" and a “collaborative” engagement of all project stakeholders to determine best value solutions. “Understanding our client’s decision-making process is key to our preconstruction strategy,” says Jones.
Looking at Key Sectors
General Building
Work Starts on New Health Facility in Texas
El Paso veterans’ care center will reflect the surrounding natural landscape
The design-build team of Clark Construction Group and SmithGroup + HKS Joint Venture broke ground in August on the El Paso VA Health Care Center at Fort Bliss, Texas.
Transportation
Pittsburgh Bridge's Planned Slide Show
Aging structure will be replaced using accelerated construction techniques
Construction is underway to replace Commercial Street Bridge, an 861-ft-long open spandrel concrete arch structure that rises up to 85 ft above Nine Mile Run and Frick Park in Pittsburgh, Pa.
Power
Mississippi Builds First Big Solar-Storage Complex
Tech giant Meta also to gain power from 550-MW project for two data centers under deal with utility TVA
Work has completed on the first of a planned 550-MW three-part solar energy generation complex in Mississippi that also includes record battery storage capacity in the state.
Oil and Gas
Orphan Well Cleanup Gets $775M From Feds
US Interior Dept. advances new round of funds to 21 energy producing states
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Also—Golden Pass LNG terminal in Texas ask feds for more time to finish $11B megaproject, citing on-site turmoil this year that caused delays and departure of lead contractor Zachry Group.
Environmental
Recycling Water Grows in the Age of Drought
San Diego makes progress on a major drinking water purification program
Shimmick Construction Co. is general contractor under a $373.8-million design-bid-build contract for San Diego's North City Pure Water Facility and Pump Station
Manufacturing
EV Battery Plant Nears Production Start
Turner and Yates are building Panasonic Energy's $4-billion Kansas facility
Panasonic Energy Co.’s $4-billion electric vehicle battery plant in De Soto, Kan., is taking shape with the aim of beginning production early next year.
