Six Reasons Why Concrete Companies Are Losing Money

Due to the serious overcapacity, weak market and vicious competition in the concrete industry, the business situation of concrete enterprises is worrying. Therefore, we summarize the problems of the loss-making enterprises and analyze the main causes of losses for the reference of the operators and peers of concrete enterprises.

sales price is low

Excessive concessions

Many enterprises contracted sales price is based on the information price provided by the local engineering information and cost center for settlement. However, due to the vicious competition in the market, many companies have to win the volume of business, have concessionary sales, in the information price based on the floating 12% to 25%. Such as the actual concrete enterprises in a region, the actual price of C30 sales in 275 yuan / cubic, while the local cost of C30 materials on the 230 to 240 yuan per cubic, plus financial costs, taxes, transportation, depreciation, wages, etc., is actually selling at a loss, and the more sales the more losses.

Sales model

In addition, the research found that many companies have signed sales contracts for fixed-price sales, that is, a price, the signing of the contract when the price of materials is relatively low, if the current price of materials is unable to perform the contract. One of the enterprise contract is so bound: pumped concrete C25 delivered to the site delivery per cubic meter for 255 yuan, C30 delivered to the site delivery per cubic meter for 265 yuan, regardless of how the market raw materials rise and fall, the price remains the same, both parties bear the risk. In fact, this sales price according to the current Jiangzhe bring a calculation, production and sales of one cubic meter of concrete is not depreciated, a loss of 20 ~ 30 yuan. Later, the business operators have repeatedly communicated with each other ineffective price adjustment, in desperation to stop supplying means, the other party was sued, the court accepted the verdict of the concrete enterprise breach of contract, continue to perform the contract, while compensating for the loss caused by the suspension of each other.

Six Reasons Why Concrete Companies Are Losing Money

Excessive financial costs

Due to the specificity of the industry of concrete enterprises, a large proportion of advances in the process of selling on credit, the project cycle is longer, resulting in large receivables. And raw material purchases must be paid, taxes, wages, utilities can not be defaulted, so most concrete enterprises through the financing to solve. More than a hundred million dollars, less is also tens of millions of dollars. In the research found a concrete enterprise with an annual output of 700,000 cubic meters or so, 150 million in bank financing, are based on the base interest rate floating 20 ~ 30% range, another more than 60 million in private financing, monthly interest rates ranging from 3 to 9 points, you can imagine the pressure of its operation. Nearly $300+ million of outside receivables could not be paid in time to fulfill contracts. In the fierce competition in the industry market, concrete enterprises have been small profits to survive, the former windfall period has become history, such a high financial cost, so that enterprises can not afford, difficult to operate.

large investment in operational costs

Due to the serious overcapacity in the concrete industry, the market is overcrowded. In order to seize the market and build the business, the enterprises have to show their own skills, so that a project can receive bids from N enterprises and put forward various requirements, which makes the concrete enterprises invest more human and financial resources in the pre-signing stage. The construction side of the concrete enterprises to seize this mentality, low prices, poor payment terms, to force the concrete enterprises to comply. A concrete business operators have encountered such a phenomenon: a large state-owned enterprises to win a project, the amount of concrete about 80,000 cubic meters, the project manager of the organization’s project staff of eight concrete companies to investigate, respectively, many times to accept the eight concrete companies to banquets and gifts, and finally the project manager made a return of 20 yuan per cubic meter of the demand for benefits, forcing enterprises to give up cooperation, and finally by the other two small enterprises to do together. This project, however, has resulted in other bidding businesses spending over $60,000 in business fees to float. The business fees also ranged from $2 per cubic meter in the past to $5 to $10 per cubic meter in the current market, and without the associated business fees, the salespeople transferred the business outside to other businesses. Another thing is that many projects have been interfered by the main division heads, and internal transfers have to be made to win the projects and to give business fees in disguise.

prices of raw materials rise too fast

With the increasing scarcity of resources, raw material prices in general have risen again and again, some areas at the end of July river sand unit price has reached 300-320 yuan per side, up 10 to 20 yuan per day. River sand in short supply, some regions appeared “a sand hard to find” situation. There are many reasons for the price increase, but just one is enough, the small cement plants are all closed down, and the regional cement plants can raise prices arbitrarily, monopolizing the well.

In recent years, the price of concrete has not fluctuated much, while the price of raw materials has changed considerably. Another important reason is that the supplier’s advance ratio situation is different to determine the price of raw materials. In the same area, the same supplier, raw material prices vary from 5 to 20 yuan. We are clear, with the supplier settlement, cash price, acceptance price, advances 4 knot 1 price (i.e. 4 months to 1 month) are different. In the research there is a company in the yellow sand and stone per ton price is about 15 yuan higher than other companies, the reason is the large proportion of advances, so that production costs are directly high. In the same area, there is no competitive advantage.

Six Reasons Why Concrete Companies Are Losing Money

equipment maintenance costs are too high

Production equipment repair costs are difficult to detect without comparison, and each company feels good about itself. We are comparing the repair costs of many regional concrete companies for many consecutive months, and found that the equipment repair costs per cubic meter (including mixing building, mixer, pump, shovel) have ranged from 3.5 to 34.8 yuan, it is conceivable that more than 30 yuan per cubic meter repair costs must have loopholes in the management, and then the business operators only found themselves on the loss of the enterprise has not been to investigate the reasons for the monthly No team meeting was held to analyze the business situation and to identify and treat the problems.

Internal management reasons

To do business, we can only improve the competitiveness of the enterprise market by grasping internal management, rationalizing responsibilities, implementing fine management and plugging management loopholes.

(1). the cost is too large. There are many enterprises lack of effective monitoring of costs, especially state-owned enterprises, the main leadership to grasp the business management, only for pleasure. A vice president in charge of business in a month in the same hotel spending 15 million yuan.

(2). sand and gravel main raw material quantity out of control. An enterprise materials manager in a year of sand and gravel raw material losses of more than 20,000 tons.

(3). Drivers selling fuel seriously. Nowadays, there are many hawkers who buy diesel and gasoline on the highway. Mixer truck drivers selling oil has become the industry’s heart disease. Zhejiang, an enterprise driver at night selling oil was caught by the police patrol, leading to the enterprise more than colleagues selling oil, and someone in a month to sell oil up to 23 times.

(4). Safety accidents. Two traffic accidents happened in Zhejiang province in half a month, causing two deaths and one serious injury. Not long ago, when the mechanic of a concrete enterprise was cleaning up the machine in the mixer, the operator forgot someone was working and started the mixer directly, and hanged a 40-year-old mechanic to death.

(5). Quality accidents. Due to the operator’s poor quality awareness and lax quality control of raw materials, the quality of the hidden dangers are constant. An enterprise in the supply of concrete, the design strength of C35, 28d strength after only C25, the original concrete enterprise in the supply of raw materials, the use of special fine sand mix concrete. Finally, the design communicated with the owner and took reinforcement treatment, and the reinforcement cost and lost wages paid out more than 3 million yuan in total.

(6). Risk of receivables. The downstream customers of the concrete enterprise is the construction unit, most of the construction unit is mobile operation, there are many project managers to rely on, plus construction companies have no entity, so it is necessary to standardize the contract procedures, to prevent deadlines occur. A concrete company and a provincial construction company litigation, not only the implementation of the difficulties, but also dragged for nearly three years, the result of the construction company bankruptcy, simply can not be recovered, the remaining more than 200 million yuan of receivables floating.Six Reasons Why Concrete Companies Are Losing Money

General analysis

Concrete industry is facing such a difficult situation, the future development prospects are worrying, the serious overcapacity is the main bottleneck restricting the development of the industry. How to promote the healthy and sustainable development of the industry, the editor believes that.

(1). The competent departments should strengthen correct guidance, rational planning and layout, put an end to the blind construction of stations, and crack down on black stations without a license.

(2). According to the requirements of energy conservation and emission reduction, improve the acceptance standards of concrete plants, carry out technical improvement and acceptance of concrete, and stop supplying enterprises that do not meet the standards to meet green requirements. For small, weak enterprises to do the transformation and upgrading or guide the merger.

(3). Strengthen market self-discipline, the establishment of self-discipline working group, advocate orderly competition, so that the rational return of concrete prices, so as to ensure the quality and improve the level of research and development of new technologies. Only in this way can enterprises operate normally and healthily. Not rely on market self-discipline price return, after all, the reduction is limited.

(4). strengthen the internal refinement of enterprise management, clear responsibilities, standardize the operating process, increase the quality, production safety, the control of receivables, so that the positive development of enterprises, mutual supervision of various departments, improve the management level of enterprises, reduce production costs.

(5). enterprise positioning is clear, do not operate blindly. Many operators lack of effective assessment of their own corporate capacity, resulting in no matter how far away the site, no matter how much advances, no matter how harsh the payment terms, all eat into the final production can not keep up, capital shortage, so in the community high-interest financing, further increasing the financial costs. Therefore, enterprises should be pragmatic operation, steady development.

summary

Competition in the market is cruel, we should adjust our mentality, constantly sum up experiences and optimize business ideas. There are many regional concrete industry is still full of vitality, it is worth learning and learning from. Some concrete enterprises in the fierce market competition in the vitality of the business, unique in the industry. Ideas determine the way out, self-control, only continuous innovation and exploration, timely adjustment of business ideas, enterprises can develop healthily.