Industry has followed the race to the bottom of the trough with the rest of the economy
By Herb Duane
Again this year I have been asked to write about the state of the demolition industry. This is somewhat difficult because 99% of the industry is made up of family-owned enterprises that don’t report
their earning to the public. One that does is PDG Environmental of Pittsburgh, Pa.
I first started watching PDG Environmental about 10 years ago. The company focuses on asbestos and lead abatement, disaster response, loss mitigation and reconstruction, and demolition service throughout the U.S. At that time, the stock was selling at about $0.11/share. I watched it rise to around $2/share a year or so ago. I said to myself, I wish I had dropped $10,000 into that stock; I would have made some good money. On February 1, 2010, I looked at the stock and it was down to $0.06/share. This is an indication of the state of the industry. Not as healthy as it should be.
The company reported in its latest third-quarter earnings that it may pursue a sale of the PDG reported a 59% drop in contract revenue for the third quarter to $11.5 million compared with $28.1 million in the year ago period.
Management attributed the decline to lower sales volumes as a result of lower capital spending by clients because of the recession. The company also pointed to a lack of natural disasters in the current year compared to last year, when it benefited from work generated by Hurricanes Ike and Gustav.
PDG, founded in 1984, had total secured debt of roughly $12.9 million due within 12 months, and company management said the company may not be able to extend the loan agreement or replace the financing at the same or similar terms.
Great Lake Dredge & Dock, Oak Brook, Ill., which owns 75% of Boston-based North American Site Developers, stated in its third quarter report that the economic slowdown continues to negatively affect construction activity, which caused third quarter revenue in its demolition business to drop from $19 million last year to $11.7 million. That’s another 60% drop in revenues.
From across the pond we get this information. The United Kingdom’s demolition industry is preparing for a big hit in 2010 as inactivity in the commercial property building sector and soaring vacancy rates heap pressure on already weak demand.
The five largest demolition companies—all of which are privately owned—have seen a fall in revenues during the past 18 months and there is a growing concern among them that a revival in the industry’s fortunes will lag behind any rebound in the wider construction sector. Keltbray, the UK’s largest demolition company with revenues of $210 million in 2008, said the fall in construction activity would take a toll on the industry and it expected to experience at least a 25% drop in business this year. Commercial building work, the main driver of demand for site clearance, is thought to have slumped by about 30% during 2009.
“We have been clearing a good number of sites this year but a lot of them haven't been getting built on,” said Hugh Minnet, business development director, Squibb Demolition. The year just concluded, he added, had been a “bit slower” for demolition work but “the real pain will be in 2010 when there is not much demand for new buildings and plenty of empty sites.”
This view was echoed by the National Federation of Demolition Contractors, the industry’s main trade body, which says it expects to see 2010 workloads fall to about half those at present.
This is sad and the problems companies are having is not due to bad management but the economic climate in the country. So you have to wonder if others that they compete against aren’t in the same boat.
Lots of Company
In writing my bi-monthly article for www.demolitionforum.com, I noticed a big increase in the amount of bidders per demolition project. It is not uncommon to have 20 or more bidders. At that rate is seems that who ever makes the bigger mistake is the low bidder. Not a good situation.
Also, all of the projects out for bid are financed with government money. There is little private investment money in the market place.
Another sign of the times: When the city of Norwich, Conn., called a meeting this past month for contractors interested in working on the proposed transportation center on Falls Avenue, Joe Barone did not have to be asked twice. “We do site work, demolition and concrete work,” said Barone, of Plainville-based Manafort Bros. Inc. “Right now the atmosphere is tough. We’re putting a bid on any job we can. If it’s in the state, we’re interested.”
Despite the gloom there is work. There are several large on going projects taking place and others coming out for bid:
The upcoming implosion of the Texas Stadium in Irvine, Texas, the former home of the Dallas Cowboys. This will be imploded April 11. The demolition contractor for the project is A&R Demolition, Del Valle, Texas, and the implosion contractor is Dykon Blasting, Tulsa, Okla. The implosion is going to be called the Cheddar Implosion. Kraft Floors have purchased the naming rights to the implosion. I think this is a first. A&R Demolition recently demolished the Reunion Arena in Dallas and used Advanced Explosive Demolition of Idaho, to implode roof.
At Giant Stadium, Meadowlands, N.J., the seating and other memorabilia is now being liquidated. A demolition contractor has yet to be announced.
Yankee Stadium is in the process of being demolished by Demco, from upstate New York. Demco demolished the AUD in Buffalo last year. This was a large arena and auditorium.
The University of Delaware, Newark, Del., last year purchased the 272 acre Chrysler Assembly Plant in that city. Tools, machinery, cleaning equipment and other items from the plant are going on the auction block. As the University of Delaware starts clearing the 272-acre site in preparation for reuse as research and academic space, hundreds of items will be auctioned off on February 25. Items expected to be auctioned range from tools that could be used in a home workshop to complex machinery designed for use in large factories. UD’s Vice President of Administra-tion J.J. Davis said crews are still going through the buildings on the property so there’s no clear estimate yet of how many items will be included in the auction. After the auction, the university will begin searching for a contractor to lead salvage and demolition efforts at the site.
The dormant Prince Albert pulp mill will likely soon be demolished. Paper manufacturer Domtar is planning to demolish its dormant pulp mill in Prince Albert, Saskatchewan, Canada. Domtar issued a statement in December that said the Montreal-based company plans to “continue to remove machinery and equipment from the site and (would) take steps to engage the services of demolition contractors and file for a demolition permit.” The demolition work could start in early 2010, said the report.
A big implosion project coming up this month, February 14, has been the long delayed implosion of 1515 Flagler Drive, Palm Beach, Fla. This is a 30-plus story building that was heavily damaged in a hurricane five years ago. The demolition contractor is BG Group, Boca Rotan, Fla., and the implosion contractor is Advanced Explosive Demolition, Idaho. This is Eric & Lisa Kelly’s company. You have been able to watch their TV reality show on the Learning Channel, called the “The Imploders.” I saw the first show December 30, and it was good.
Detroit, Michigan’s Downtown Development Authority voted last June to demolish the vacant Lafayette Office Building. The project went to Adamo Demolition, Detroit. The contract price was around $1.4 million.
In Camden, New Jersey, Brandenburg Industrial Services, Chicago was low bidder at around $1.5 million for the demolition of the Riverfront Prison.
In Laughlin, Nev., decommissioning of the defunct Mohave Generating Station is under way. Gil Alexander, spokesperson for Southern California Edison, said that work began in October to dismantle the power plant that has been idle since January 1, 2006. Early estimates put the cost of the dismantling at $30 million. CST Environmental, one of the nation's largest demolition and environmental remediation contractors, is the principal contractor for the project.
If you would like to view a real interesting demolition video go to www.demolitionnews.com and scroll down until you see Wrecking Ball vs. High Reach. It is a video Testa Corp. demolishing a large multi-story warehouse in Lowell, Mass. Part of the warehouse he takes down with the wrecking ball the other part he does with a high reach excavator. It is done simultaneously.
As an old wrecking ball fan this certainly opened my eyes to the value of high reach excavators and the safety factor of their use. The operator of Testa’s excavator seemed more like a surgeon than an equipment operator. What impressed me was there appeared to be no difference in demolition time between the two machines. Watch, it is real interesting. Let me know what you think.
Herb Duane is a long-time demolition contractor who is also an international demolition consultant. He founded the National Association of Demolition Contractors (now National Demolition Association), and has a regular column and breaking news regarding the demolition industry at www.demolitionforum.com. He is also a Fellow of the Institute of Demolition Engineers, London, England. Duane can be contacted through his Web site www.demolitionexpert.com.