Profit impact: How has the downturn affected house builders in the US?

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15 April 2008

According to iC's research, the 10 largest house builders in the US had total sales of s US$ 98.2 billion last year. Interestingly though, this total was +9.9% higher than aggregate revenues for the 10 companies in 2005 - a total of US$ 89.4 billion. The likely explanation for this is the lag between the physical construction activity - the construction put in place measured by the Census Bureau - and the sale of properties. In other words, while the physical volume of homes constructed last year fell, the number of properties sold still edged up, as house builders fulfilled their order backlogs.

Compared to previous years, the +9.9% revenue growth last year was poor. The previous three years had seen annual revenue increase for this group of between +23.5% to +28.5%, so there was clearly a slowdown in growth in 2006.

More noticeable was how the dip in the market affected these companies’ profits. Total net profits in the sector fell -31.4%, or US$ 2.78 billion to US$ 6.09 billion. This meant the sector's net profit margin fell from 9.9% in 2005 to 6.2% last year - worse than it was in 2002.

Market share

The revenues of US$ 98.2 billion achieved last year for these 10 companies represents 15.4% of the US$ 639.2 billion total for residential construction put in place reported by the US Census Bureau. This tallies well with the share in terms of housing completions/sales. According to the USCensus Bureau there were some 1.98 million housing completions last year, so the 315465 units completed by the top 10 equate to a 15.9% market share.

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Mike Hayes Editor, Construction Europe Tel: +44 (0)1892 786 231 E-mail: mike.hayes@khl.com
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