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  1. Building Value - Part 1
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Building Value - Part 1

Across Canada, economically vital stone, sand and gravel operations (SSGO) are prospering. In times of expanding economic activity, this bedrock sector of the construction industry flourishes. While exact revenue figures are not available, this sector of Canada's economy is in an upswing phase in the traditional business cycle for stone, sand and gravel operation owners. Over the past 10 years, the sector has grown on average 1.3% annually.

That's the good news. However, an ongoing exploratory survey of SSGO owners and others close to the industry conducted by the Jim Sanderson Group in Ontario points to mitigating factors that cast some shadows on the sunny landscape for SSG owner/operators.

The Survey

SSGO owners, consultants, regulators and others in the stone, sand and gravel sector were asked to describe in detail the strategic, operational and financial issues confronting the industry. The objective of this continuing survey is to understand challenges as they arise and to devise strategies and financial planning tools to create greater personal and corporate wealth for SSG operation owners. (Development of finance strategies for this sector of the economy is the sole focus of the Jim Sanderson Group.)

This white paper presents the findings of this informal poll and offers resulting recommendations to the industry for a strategic approach to building value. This approach is based on finance opportunities that leverage the inherent value and revenue potential of any SSGO owner's prime asset, the aggregates reserve.

Survey Findings

Strategic and operational challenges:

1. While the Canadian market is currently strong, a tip over the peak and into a decline phase in the business cycle may be heralded by slowing construction activity across Canada.
2. Consolidation in the sector nationally is creating a volatile environment for longer-term strategy development and revenue re-investment plans.
3. Licence barriers limit new supply and therefore corporate growth.
4. An aging owner/operator demographic is creating pressure for creative exit strategies and succession planning.

Financial Challenges

1. Fuel cost increases are pressing profitability and the resulting transportation cost uncertainty makes accurate revenue forecasting difficult.
2. Although the fee for a new site licence piece of paper is not prohibitive, the expense of regulatory requirements for site surveys and environmental studies is a barrier to asset development
3. While operational cost spiral, the market price for stone, sand and gravel remains stagnant at unrealistic and outdated levels.
4. An aging owner/operator demographic is creating pressure for creative exit strategies and succession planning.