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Service center markets still favor larger companies

Jul 31, 2014 | 07:00 PM |

Tags  service centers, distributors, expansion, steel, John Ambrosia


This summer marks the fourth consecutive year that AMM has surveyed service centers and ranked them by annual revenue. Beyond the straightforward dollars reporting, what do the practices and subsequent fates of distributors tell us?

Let’s start with how much money the top 50 companies have generated each year. Here are the total revenues generated by the top 50 service centers over the past four years, in millions of dollars:

The average annual revenue per distributor for the top 50 service centers each fiscal year (not necessarily calendar year) in millions of dollars.

Despite a slight trailing off during the 2012-13 fiscal year, 2013-14 revenues bounced back slightly and are still significantly higher than they were in 2010-11.

Revenue performance varies widely, however, depending on where a company ranks on the list. Twenty-five companies on the list saw revenues hold steady or increase vs. last year. The average service center revenue in millions of dollars this year by the five tiers of companies.

Working up from the bottom, each tier roughly doubles in average revenue until the top 10, which sees a nearly fourfold increase over the group immediately below it, showing just how dominant a handful of large distributors are. The top 10 accounted for 65.7 percent of total service center revenue, and the top five companies--or just 10 percent of the top 50 list--accounted for nearly 45 percent of the revenue.

There are some other interesting trends that revenue reporting shows:

>> The ratio between tiers has become wider over time. In 2011, the first year of the survey, the average revenue of the top 10 companies was about 29 times the average of the bottom 10 companies. This year, that has returned to about 25 times as much after opening up wider to the 54 times as much seen last year.

>> The average revenue of the bottom 10 distributors is well above last year ($142 million vs. $68 million), as were tiers 31-40 and 21-30.
 
>> The top 10 companies are slightly behind last year, falling about 2.6 percent in average revenue.

>> Four of the companies in the top 10 have seen increases or held steady in each year of the survey.

>> The median revenue for all 50 companies was $400 million in 2010-11, $450 million in 2011-12, $430 million in 2012-13 and $448 million in 2013-14.

When it comes to consistency and market share, the conclusion is that the larger the company, the better the performance. Although revenues for the top 10 distributors fell slightly during the past two years, their market share of the top 50 is higher today than in 2011 or 2012. Here is the breakdown as a percentage of top 50 total revenue.

The next chart shows the percentage changes in average revenue from 2012-13 to 2013-14 among the top 50 distributors.

Last year, not only were the top 10 distributors the only tier to increase revenues, but the percentage declines in the remaining four tiers followed an almost steady line downward. This year, however, that line has reversed itself, suggesting that volatility is always in play.




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