WHAT HAS CHANGED IN CERAMIC TILE DISTRIBUTION? April 18, 2011

WHAT HAS CHANGED IN CERAMIC TILE DISTRIBUTION?

April 18, 2011

The Recession has strongly affected the ceramic tile market

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-79%

+38%

Source: U.S. Department of Housing and Urban Development

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With the Recession came an excessive supply of housing

Existing Homes + New Homes

Source: Census Bureau, NAR, BofA-Merrill Lynch Global Research

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…This made housing prices go down

Source: S&P/Case-Shiller Home Price Indices

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In order to help the economy the Federal Reserve reduced interest rates to almost ZERO

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Source: Board of Governors of Federal Reserve System

People with savings were financially hurt

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Mortgage rates are lower than ever

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The lowest mortgage rates in history are not enough of an incentive for consumers to buy homes

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The sector that has benefited most from the weakness of new construction has been REMODELING

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When people cannot afford a new home they remodel the old one

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Remodeling Activity is up from 2010…

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From 2006 to 2011 the ceramic tile market contracted by 39%

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Source: U.S. Department of Commerce

-39%

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• Before the recession imports made up about 80% of U.S. Tile Consumption

• In 2011 the percentage was below 70%

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Million Sq. Ft.

Source: U.S. Department of Commerce

-48%

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The deep recession in the housing sector and the decline of ceramic tile imports contributed to changes in distribution

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During the recession the number of tile Contractors, Dealers, and Distributors’ outlets declined

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Source: D.Grosser & Associates,ltd

in 2008

in 2011

- 23.5%

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1,713

in 2008

1,353

in 2011


- 21.0%

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States 2008 2011 % Change 2008-2011

California 3,205 2,600 -18.9%

Florida 2,459 1,796 -27.0%

Texas 1,553 1,174 -24.4%

New York 874 721 -17.5%

North Carolina 771 560 -27.4%

New Jersey 628 527 -16.1%

Arizona 569 389 -31.6%

Georgia 589 391 -33.6%

South Carolina 314 218 -30.6%

Other 10,763 8,254 -23.3%

U.S.A. 21,725 16,630 -23.5%


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States 2008 2011 % Change 2008-2011

California 307 255 -16.9%

Florida 213 132 -38.0%

Texas 136 99 -27.2%

New Jersey 77 81 +5.2%

New York 92 61 -33.7%

Arizona 62 41 -33.9%

Georgia 52 36 -30.8%

North Carolina 39 33 -15.4%

South Carolina 20 26 +30.0%

Other 715 589 -17.6%

U.S.A. 1,713 1,353 -21.0%

Results of a survey conducted in January 2011:

Florida, California, Texas, New York, N. Carolina, and S. Carolina

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• 50% of Distributors said sales were flat or down

• Two distributors reported 50% increase in sales

• Sales were down because many retail stores went out of business

• Most sales were for remodeling projects

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• Some increases in sales (5% - 25%)

• But also decreases (5% - 50%)

• Most sales are for remodeling

• Some new non residential construction

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• A majority of distributors reported sales increases

• Some increase in non residential construction

• Good market for non residential remodeling

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• Most distributors reported flat or lower sales

• Very little new construction• Most sales to remodeling

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• Some increases in sales• But also decreases• Mostly remodeling• Little new construction

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Home Centers

2008 2011% Change 2008-2011

2,052 2,195 +7.0%

1,647 1,797 +9.1%

261 262 +0.4%


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2008 2010 2011% Change 2008-2011

Home Centers

6,986 6,802 7,226 +3.4%

Tile Retailers and

Contractors21,725 16,805 16,630 -23.5%

Tile Distributors

1,713 1,382 1,353 -21.0%


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2008 2011% Change 2008-2011

Carpet Rug Retailers

25,720 20,460 -20.5%

Carpet Rug Distributors

1,540 1,286 -16.5%


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• The U.S. Dollar lost value vs. the Euro

• Imports lost market share due to a weak Dollar

• U.S. manufacturing gained market share

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There are 6 Italian owned tile plants in the U.S.: Marazzi (3), Florim, Iris-Stonepeak, and Panaria-Florida Tile

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• These plants make up about 50% of U.S. ceramic tile production

• These companies invested in the U.S. due mainly to weakness of the Dollar

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Sector 2006 Percentage 2011 Percentage

New Residential Construction 40% 20%

Residential Improvement 29% 43%

Non-Residential Cons./Improvement 31% 37%

TOTAL 100% 100%

U.S. Tile ManufacturersU.S. Tile Manufacturers ProductionForeign Tile ManufacturersForeign Tile Manufacturers

U.S. Manufacturers’ U.S. Manufacturers’ ShowrromsShowrroms Tile DistributorsTile Distributors Flooring Flooring

DistributorsDistributors

Home CentersHome CentersTile Tile RetailersRetailersFlooring RetailersFlooring Retailers

New Residential

Construction20%20%

Residential

Improvement

43%

Non-Residential Cons./Improvement

37%

Wholesale

Retail

Final Destination

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Donato GrosserD. Grosser & Associates, Ltd.

11 Broadway, Suite 630New York, NY 10004

Email: [email protected]

Questions?

WHAT HAS CHANGED IN CERAMIC TILE DISTRIBUTION? April 18, 2011

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