Although many of the nation’s businesses are expecting some level of decline this year, the U.S. stone industry appears to be a notable exception to this trend, according to an exclusive Stone World survey of stone producers throughout the country. Spurred by increased consumer awareness, stone use per capita in the U.S. has steadily risen --as much as 45% over the past five years, according to some reports --and stone fabricators expect that this trend will continue despite the overall economic situation.

Of those who responded to the Stone World survey, which was sent primarily to stone fabricators, a healthy 62.0% expected the stone market to increase in 2002. Only a small amount of respondents, 11.3%, predicted a decrease for the year, and 26.8% said that business would hold steady.

Moreover, respondents also predicted the stone industry to do well over the long term. A total of 80.3% said they felt the stone market would grow over the next 5 to 10 years, and 16.9% said it would remain the same. Only 2.3% felt business would decline over the next 5 to 10 years.

It is also important to note that those predicting increased business in the stone industry --both this year and in the long-term --feel that the growth will be significant. Nearly half of those expecting an increase this year (46.9%), believe that the rise will be more than 15%. For those predicting an increase over the next decade, about two-thirds (66.6%) expect growth of over 20%.

Respondents cited several specific reasons for their optimism. Most often, they cited increased consumer demand and interest, as well as heightened awareness of the benefits of natural stone. Additionally, stone fabricators are pointing to improved stoneworking technology that allows them to fabricate high-quality finished products at a lower price than before. "We are breaking into our market with better quality at much lower costs," reported one participant in the survey, while another cited "methods to lower costs and make stone available to a larger market."

Additionally, with uncertainty in the stock market, people are looking at their homes as a financial investment, and they are looking to add value through the use of natural stone. "A lot of people will concentrate on home improvement," stated one respondent. Pointing to the long-term benefits of stone, one fabricator stated, "People are willing to spend for lasting value."

Of those who saw a potential decline in 2002, most pointed to the overall economic downturn in the U.S., as well as the events of September 11, which have placed some projects on hold. But with four out of five respondents predicting solid growth in the next 5 to 10 years, it appears they feel the decline will be temporary.

Results for 2001

Looking at the performance of the stone industry over the past year, companies reported that the growth of the past few years continued in 2001. A total of 68.4% of companies saw increased business last year, with only 4.5% experiencing a decline. The remaining 27.1% of respondents saw business remain the same for 2001.

The increases in business for stone fabricators last year were significant. Nearly all of the companies showing an increase (93.7%) saw a rise of more than 5%. Moreover, 41.3% of companies saw their business increase by a factor of over 20%.

It is important to point out that these surveys took place nearly three months after the terrorist attacks of September 11, giving respondents some time to gauge the short-term and long-term effects on their business. A solid majority of respondents (59.7%) felt that the attacks would not have any direct, negative impact on their business, and even those who did feel there would be an impact said it would be short-lived, with comments such as "Terrorist attacks are temporary."

Gross annual sales for participating companies was typically in the $1 million to $5 million range, with 40.7% reporting this total. While 7.4% reported sales of over $5 million, most of the other firms were below $1 million, including 20.4% with sales between $250,000 and $500,000 and 18.5% with sales between $500,000 and $1 million.

Future investments

Given the optimism for this year as well as the long-term, it is not surprising to see that most fabricators are planning to increase investments in their operations in 2002. A total of 75.5% of those polled said they will increase their investments in machinery in 2002, and a significant number will also be upgrading their overall fabricating facilities (42.7%). In addition, many respondents also said they will invest more in personnel (37.8%) and marketing (37.8%) this year. Other investments will be made in showroom facilities, with 32.3% of participants reporting increased investment, and in stock (32.9%).

Equipment purchases are being made with an eye on the residential market, especially for fabrication of granite countertops. Hand tools were the most prevalent common area of investment, with 83.2% of respondents indicating they will invest in this area in 2002. Other common choices were polishers (45.0%), bridge saws (29.0%), shapecutting machines (22.1%) and cranes (15.3%). As usual, the work in U.S. fabricating shops is overwhelmingly slanted towards slab fabrication, as only a small percentage of respondents were planning investment in blockcutters (4.6%), gangsaws (3.8%) or tile lines (2.3%).

Following last year’s trend, the increased spending will be handled with a somewhat cautious approach. Overall capital outlay in 2002 will be moderate, according to the survey. A total of 58.5% of respondents have budgeted $250,000 or less for 2002, while 16.9% are planning to invest between $250,000 and $500,000. However, there is a noteworthy amount of firms planning relatively major investments, with 12.7% planning to invest $500,000 to $1 million, and 12.0% planning to invest more than $1 million this year.

As usual, the survey demographics show the survey participants to be well-established firms --matching the trend of the industry. However, the prosperity of the stone industry appears to have attracted some newcomers as well. A total of 67.9% of respondents have been in business for over five years, as opposed to a figure of 75.6% a year ago. Also, a total of 39.3% of participating firms have been in operation for more than 15 years, and 18.6% have been in business for more than 20 years.

Overall, the stone industry is comprised of relatively small businesses, as 64.5% of the firms responding had 10 employees or less, and 84.1% had 25 employees or less.