Click the arrow to play
TRANSCRIPT
K. SCHIPPER: Hi, I’m K. Schipper for Radio Stone Update. Joining me today will be Emerson Schwartzkopf, publisher and editor of Stone Update, Hard Surface Report and Slab and Sheet, as we take a look back at the top stories and trends in news of the hard surfaces industry in 2021.
00:24
Granite, quartz and sintered products weren’t the only things being bought and sold in the hard surfaces industry in 2021. Several companies made significant moves over the past 12 months.
Leading the way was Caesarstone. The Israel-based producer of quartz surfaces and porcelain panels announced the first week in January that it had acquired U.S. stone supplier Omicron Granite and Tile. Pompano Beach, Fla.-based Omicron had an enterprise value of $27 million, including about $6 million in debt.
Omicron’s value included 17 showrooms and indoor warehouses across the Southeast and Ohio Valley. Ken Williams, president of Caesarstone North America, said at the time that the acquisition enhanced Caesarstone’s value to customers and by extending the company’s distribution initiatives.
The acquisition came on the heels of last fall’s purchase of India-based porcelain manufacturer Lioli Ceramica. The two purchases, plus a booming market, have helped Caesarstone set revenue records in the first three quarters of 2021. Caesarstone is a publicly traded company on the NASDAQ Exchange under the ticker symbol CSTE.
Mid-year saw further activity on the buying and selling front. The end of the second quarter marked the acquisition of two stone distributors – Walker Zanger and Opustone — by Mosaic Companies. Terms of the deals weren’t disclosed.
Mosaic is a partnership between Albert Claramonte, the founder of Surfaces Southeast and the Baupost Group, a Boston-based investment manager with experience partnering with family and founder-owned businesses. Miami-based Mosaic also includes Surfaces Southeast, a manufacturer and distributor of specialty wall and mosaic coverings in the home center and specialty retail market.
The dual purchases are seen as a way to bring together industry expertise and leading luxury brands to support Mosaic’s strategy of growth and diversification across product categories, including specialty and mosaic tiles, floor tiles and slabs.
Walker Zanger is one of the best-recognized stone brands in the country, with more than 65 years of experience offering a broad range of products through curated showrooms, slab galleries and authorized dealers to residential and commercial markets nationwide.
Opustone was founded in 2001 and is a distributor of decorative and ornamental stone in the south Florida region with showrooms in Miami, West Palm Beach and Fort Lauderdale.
The saga of Select Interior Concepts Inc., or SIC, came to an end this year – in two parts. At the end of June the company sold its Residential Design Services – or RDS – segment to a subsidiary of the Blackstone investment firm for $215 million.
At that time, SIC retained its Architectural Surfaces Group. Known as ASG, it included more than 20 stone distribution and fabrication facilities across the United States. However, at the end of October, SIC sold that portion of the business to private equity group Sun Capital for $375 million. Sun Capital announced that it will continue all operations under the ASG name.
The two sales end a seven-year effort that initially merged RDS, an interior-design service deeply rooted in California, with the assets of fabrication-based ASG. Both companies operated under Dallas-based private equity firm Trive Capital after it financed the buyouts of RDS in 2014 and ASG in 2015
The deals were expected to pay off outstanding debts and capital lease obligations. SIC was delisted from the NASDAQ in October.
For every buyer, there’s also a seller, and a couple companies parted with assets important to the hard surfaces industry.
Australia-based Boral Limited relieved itself of its North American Building Products business including major brand names in manufactured and architectural stone. The buyer is Houston-based Westlake Chemical Corp., and the $2.15 billion transaction is expected to be finalized by year’s end.
Boral’s holdings in architectural stone include Eldorado Stone, Cultured Stone, Versetta Stone, Dutch Quality Stone, StoneCraft Industries and Kindred Stone. A Bloomberg report cites the entire business generating $2 billion in revenue in fiscal 2020.
Westlake’s business portfolio is mainly in petrochemicals and polymers along with PVC-based building components under the Royal Building Products, DaVinci and NAPCO brands.
And India-based ASI Industries Ltd. announces that it will sell its engineered stone division to Indian stone processor-exporter Marudhar Rocks International Private Limited in a cash and debt-assumption deal. Value of the transaction is estimated at approximately $30 million.
The sale marks an abrupt change for ASI, which planned the roll-out of its Artizia brand of quartz surfaces for several years. The company, one of the largest limestone and sandstone quarriers in India, saw engineered stone as a progressive expansion. Commercial production – utilizing Breton® technology – began at its new facility near Jaipur on March 23.
The transaction will allow ASI to pare down its debts and become a zero-debt company in the near future.
06:22
EMERSON SCHWARTZKOPF: This is Emerson Schwartzkopf. Comparing this year in hard-surface imports to the lockdown, slowdown, knockdown and turnaround of the industry in 2020 is like comparing apples to aardvarks. 2021 may not be the new normal, but at least there’s some stability.
Why do we make a fuss about imports? Frankly, the U.S. hard-surfaces industry absolutely depends on foreign materials. When it comes to countertops, cladding and other uses, somewhere around 70%-75% of porcelain and quartz surfaces and 90% of natural stone is not made or quarried here.
The import data that our e-magazine Hard-Surface Report analyzes each month is one of the few open and reliable ways to judge market health. And, in 2021, the results have been excellent.
Giving you a lot of numbers in a few minutes during a podcast is sure to be confusing, and you’ll see a full wrap-up for 2021 with plenty of helpful charts and graphs in the March-April edition of Stone Update Magazine. We’ll hit a few high points here, using the latest import data through the end of October.
U.S. dimensional hard-surface imports, for the first 10 months of 2021, totaled $4.3 billion in declared customs value. Nearly one third of that – $1.4 billion – is man-made quartz-surfaces. All natural stone totaled $1.9 billion, and porcelain came to $971 million.
The $4.3 billion of imports in January through October easily topped the $3.1 billion registered during the same period in pandemic-punctured 2020. The leading sector of quartz surfaces led the way, rising by more than 50% in declared value and actual volume reaching U.S. ports-of-entry.
But … how does that compare to the market before the novel coronavirus hit? As it turns out … very, very good. Using that same January through October period, 2021 hard-surface values beat pre-pandemic 2019’s $3.4 billion total by almost 26%. You can see the current boom in quartz-surfaces, marble and quartzite with gains ranging from 38% to nearly 46% from 2019.
All of this year’s growth came despite what should be some red-light signals. For example, inflation rumbled back to life, topping six percent in October – a level not never seen before by half the population in the United States. (It happened last in 1982.)
The costs of container shipping also skyrocketed during 2021. One index that tracks ocean-freight prices showed prices rising from January to December by an average of 431% for East Asia to U.S. West coast sailings, and 390% for Europe to U.S. east coast destinations … and spot rates rose even higher during spikes in August and September.
09:40
K. SCHIPPER: Regardless of their politics, just about everyone agrees we can do a better job of taking care of Mother Earth, and various segments of the hard surface industry are putting their money where it counts.
Canadian quarrier Polycor celebrated Earth Day last April by announcing it’s the first natural-stone quarrier to make a firm commitment to carbon neutrality.
The company will achieve carbon neutrality by 2025, or five years ahead of the curve set by the American Institute of Architects’ call to become carbon neutral by 2030. Company CEO Patrick Perus says Polycor has a history and brand focused on global leadership while prioritizing and fostering sustainability, innovation, and environmental stewardship.
Founded in Quebec in 1987, Polycor employs more than 1,300 people and owns more than 50 quarries in North America and Europe. It’s one of the largest natural stone quarriers in the world.
The Natural Stone Institute will also play a part in making the industry more sustainable. In June, it announced it will now be responsible for the NSI-NSC 373 Sustainable Production of Natural Stone Standard. The Natural Stone Council officially transferred the ownership of ANSI-NSC to the institute in May.
First issued in 2014, the Natural Stone Sustainability Standard establishes criteria and methods for tracking, measuring, and improving sustainability in the production of natural stone. The Natural Stone Institute has contracted with NSF International to continue supporting the implementation of the standard for the next three years.
Michael Picco, 2021 Institute board president, says it has been working with the Natural Stone Council to identify ways to build relevance and awareness of both the Sustainability Standard and natural stone as a green building material.
Meanwhile, Australia is dealing with the issue of silicosis in multiple ways. Back in June, the Australian federal government committed $6 million – or about $4.66 million U.S. – in fiscal year 2021 to study silicosis diagnosis and treatment among the country’s stone workers.
The announcement was made by that country’s Department of Health and follows more than two years of highly publicized cases of the lung disease appearing in fabricators working with engineered stone.
The funding will be split among five university-level programs. Some of the funding will go to enhance working on whole-lung lavage, a process that utilizes saline to rinse out affected lungs. The process is being developed jointly by the University of Queensland and The Prince Charles Hospital in Chermside, Australia.
12:34
EMERSON SCHWARTZKOPF: Trade shows took a massive hit last year, as the pandemic stopped in-person events after February 2020. The situation improved in 2021, although all of this year’s events operated in recovery mode.
Both of the major U.S. shows made unusual summer appearances this year, as some areas relaxed large-meeting restrictions to allow in-person events. Most major shows worldwide also made a comeback … but travel restrictions and an abundance of caution limited size and scale.
The International Surface Event, or TISE, made an appearance at its usual Las Vegas location, but swapped the mild climate of late January for the intense heat of late June. Attendees remained cool inside the Mandalay Bay Convention Center while outside temperatures reached record scorching 110°F-plus levels.
Coverings, meanwhile, moved down the calendar from spring to early July in Orlando, only to run into a different weather conundrum. Hurricane Elsa bore down on Florida and only made a late swing away from the resort city and the Orange County Convention Center as the show opened.
Both shows had exhibit areas and attendance decrease by more than 50% from normal levels. Some of the drop came from some potential attendees’ reluctance to travel. However, major exhibitors from outside the United States were all but shut out, due to this country’s closed-off borders to battle the pandemic.
Major events this year in Brazil, Germany and the United Kingdom, meanwhile, were called off or delayed until 2022. Xiamen Stone Fair shifted from March to May, but China’s pandemic defense of slowing international entry and exit to a bare trickle eliminated most foreign participation.
After a 2020 hiatus, the big Italian shows of Cersaie for tile and Marmomac for natural stone opened in late September as in-person events. Both events – Cersaie in Bologna and Marmomac in Verona — operated at close to half-capacity. However, China’s policy cut off its participation, and Italy’s borders were closed to travelers from major export nations such as Brazil and India.
One other major US show with hard-surface exhibitors – The Kitchen and Bath Industry Show, or KBIS — suffered a major fail early in the year. KBIS planned to run as an online-only event in early February, but hit major technical problems on its planned opening day. The glitches first led to a postponement and then the scrapping of the cloud-based exhibition.
15:21
2021 is the year that new tariffs didn’t happen for U.S. hard-surface imports. And the biggest sigh of relief may have come from Europe when the Biden administration called off the so-called “Airbus” tariffs.
The controversy stretches back to the fall of 2004, with a U.S. complaint to the World Trade Organization (WTO) over what it saw as unfair subsidies by European countries to Airbus for developing certain types of airliners.
The WTO eventually agreed, allowing for retaliatory tariffs on goods shipped by any European Union country to the United States. The original list of products that could have been subject to tariffs of 100%, drawn up during the Trump Administration in 2019, included man-made quartz surfaces and all dimensional natural stone — with the exclusion of marble.
No hard surfaces went on the active list of products subject to tariffs, however. The Biden administration brokered a U.S. -EU joint agreement in June that suspended any tariffs related to the Boeing-Airbus issue for five years.
Another proposed hard-surface tariff that fell by the wayside involved U.S. actions against six countries imposing digital-services taxes against U.S.-based e-commerce juggernauts like Facebook, Amazon, and Apple.
In late March the U.S. threatened to place 25% tariffs on selected goods from those countries. Only Turkey’s list, however, included any hard surfaces, with proposed duties affecting annual U.S. imports of $105 million in porcelain and nearly $15 million in natural stone.
The U.S. suspended collections on the tariffs until the end of November. By then, all the countries, including Turkey, agreed to suspend the tax.
The 300%-plus unfair trade tariffs on quartz surfaces from China, meanwhile, received specific attention due to watchdog efforts by U.S. manufacturer Cambria.
In March, US Customs and Border Protection alleged that 15 U.S. companies dealt with Chinese quartz-surfaces shipped to this country under false documentation of being made in Malaysia. In December, Customs affirmed the decision – based largely on evidence supplied by Cambria – with tariff costs and penalties to be determined.
Customs also initiated two other tariff actions this year based on Cambria complaints. One involved shipping furniture from Vietnam clad with Chinese quartz surfaces, and the other cited importation of slabs made with crushed-glass powder that are included in the original 2019 quartz tariffs. A final determination in either case is still pending.
Also pending is a decision by the U.S. Court of International Trade to seek reversal of a Trump administration tariff of 25% on nearly all imported goods from China. More than 30 hard-surface importers joined 3,600-plus companies challenging the blanket tariff. The court is expected to hear the case sometime next year.
18:34
K. SCHIPPER: In general news of note, the National Building Granite Quarriers Association – the NBGQA – is merging with the Natural Stone Institute.
As part of the merger, the institute will acquire ownership of the NBGQA granite specifications, which are already heavily referenced in the “Dimension Stone Design Manual” along with other resources to further advance quarry safety initiatives, sustainability, natural stone promotion and advocacy.
Cambria Company LLC and Cosentino Group settled a patent lawsuit on veining in quartz-surface manufacturing. The announcement of the settlement, which came in September, did not include terms, although in a news release Cambria stated it had been fully compensated by Cosentino.
Cambria filed the lawsuit just a year ago in the U.S. District Court of the Western District of Texas, seeking damages and an injunction to stop sales of products allegedly infringing on company patents regarding quartz-surface products with veining.
As part of the confidential settlement, both parties agree that they will maintain their respective intellectual property rights. The action was withdrawn from the court in late August.
Pokarna Engineered Stone Limited dedicated its new, state-of-the-art quartz-surface manufacturing plant on July 31.
The new facility is equipped with Breton® technology and covers approximately 600,000 square feet. Commercial production began at the plant in late March. The plant increases Pokarna’s capacity for producing its Quantra quartz surfaces to 15 million square feet annually.
Lotte Chemical announced in January that it was beginning operation of a third production line at its Belenco Quartz Surfaces plant. Business Korea reported the line has an annual capacity of 120,000 slabs. With the new line, the plant’s capacity will grow to 350,000 slabs annually.
Lotte reports that it invested $30 million in the new production line, which utilizes technology from Breton S.P.A. The plant is near Manisa, about 185 miles southwest of Istanbul.
Knoxville, Tenn.-based BB Industries opened a large fulfillment center in Salt Lake City. The center, which opened in mid-April, serves 13 Western states with guaranteed two-day delivery. With the increased demand for direct shipping, BB Industries CEO Rick Stimac says the company wanted to ensure its delivery expectations were being met.
And, in March, Arizona Tile announced the opening of its Tempe Quartz Distribution Center. At 120,000 square-feet, it is the largest quartz slab facility in Arizona. The new facility, its adjacent slab outlet, plus the company’s existing Tempe location encompass 22 acres. The new facility joined two other recently opened Arizona Tile facilities in Jurupa Valley, Calif., and La Porte, Texas.
21:36
Sadly, the end of the year is also a good time to pause and remember industry stalwarts who have died in 2021. Leading that list is Leon Zanger, a founder of the Walker Zanger Luxury Surfaces stone brand. Zanger passed away in late January from complications of Covid-19 at the age of 93. The company was founded in 1952 when Zanger partnered with Marvin Walker to import stone from Portugal. From that modest beginning, it grew to 14 showrooms across the United States.
Zanger was born in 1927 in Antwerp, Belgium. In 1940 he and his family escaped just days before the Nazi invasion. Their flight – through France, Spain, Portugal and what was then Portuguese East Africa – eventually led to the United States. Adept at languages, Zanger joined the U.S. Army in 1945 and served as a translator for the U.S. Military Tribunal in Nuremberg, Germany.
After his military service, Zanger graduated from New York University and married Hannah Loewe, herself a Holocaust survivor. She died in 2017. Along with his family, Zanger was particularly proud of the numbers of people his company had supported over the decades. He is survived by a son, a daughter, and two grandsons.
Radio Stone Update also notes the passing of David Ross Fell, president of BG Hoadley Quarries, who died in early August in Bloomington, Ind., at the age of 59. Fell successfully led a multigenerational limestone business for more than 35 years. He served on the Boards of the Indiana Limestone Institute and the Allied Stone Institute and was a strong supporter of the Natural Stone Institute. His mother, Patsy Fell-Barker is still involved in the business, as are two of Fell’s three children.
Remember, for all the news in the hard surface industry, look for our online newsletter, Slab and Sheet, which alternates Wednesdays with Radio Stone Update. For a full transcript of this podcast, go to our website at radiostoneupdate.com. For Radio Stone Update, I’m K. Schipper, joining Emerson Schwartzkopf in wishing you a happy holiday season, and we’ll see you here again in 2022.
(teletype_fast_speed.wav CC 3.0 by stratcat322)
