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

WHAT HAS CHANGED IN CERAMIC TILE DISTRIBUTION? April 18, 2011. Introduction. The Recession. The Recession has strongly affected the ceramic tile market. New Housing Construction (thousand of units). -79%. +38%. Source: U.S. Department of Housing and Urban Development. Excess Supply.

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

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

  2. Introduction 1

  3. The Recession The Recession has strongly affected the ceramic tile market 2

  4. New Housing Construction (thousand of units) -79% +38% Source: U.S. Department of Housing and Urban Development 3

  5. Excess Supply Existing Homes + New Homes Source: Census Bureau, NAR, BofA-Merrill Lynch Global Research With the Recession came an excessive supply of housing 4

  6. Housing Prices …This made housing prices go down Source: S&P/Case-Shiller Home Price Indices 5

  7. Easy Money by the FED In order to help the economy the Federal Reserve reduced interest rates to almost ZERO 6

  8. Federal Funds Rate Source: Board of Governors of Federal Reserve System 7

  9. Who Suffered People with savings were financially hurt 8

  10. 30 Years Mortgage Rates Source: Board of Governors of Federal Reserve System Mortgage rates are lower than ever 9

  11. Consumer Behavior The lowest mortgage rates in history are not enough of an incentive for consumers to buy homes 10

  12. Remodeling Market The sector that has benefited most from the weakness of new construction has been REMODELING 11

  13. Remodeling • When people cannot afford a new home they remodel the old one 12

  14. Remodeling Trend Remodeling Activity is up from 2010… 13

  15. Ceramic Tile Consumption Source: Board of Governors of Federal Reserve System From 2006 to 2011 the ceramic tile market contracted by 39% 14

  16. Ceramic Tile Consumption (1994-2011) -39% Source: U.S. Department of Commerce 15

  17. Imports Market Share • Before the recession imports made up about 80% of U.S. Tile Consumption • In 2011 the percentage was below 70% 16

  18. U.S. Ceramic Tile Imports -48% Million Sq. Ft. Source: U.S. Department of Commerce 17

  19. Changes in Distribution The deep recession in the housing sector and the decline of ceramic tile imports contributed to changes in distribution 18

  20. Contractors, Dealers and Distributors During the recession the number of tile Contractors, Dealers, and Distributors’ outlets declined 19

  21. Contractors and Dealers in2008 in2011 - 23.5% Source: D.Grosser & Associates,ltd 20

  22. Distributors in2008 1,713 in2011 1,353 - 21.0% Source: D.Grosser & Associates,ltd 21

  23. Tile Contractors and Dealers Source: D.Grosser & Associates,ltd 22

  24. Ceramic Tile Distributors Source: D.Grosser & Associates,ltd 23

  25. Distributors 24 Results of a survey conducted in January 2011: Florida, California, Texas, New York, N. Carolina, and S. Carolina

  26. Florida 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 25

  27. California Some increases in sales (5% - 25%) But also decreases (5% - 50%) Most sales are for remodeling Some new non residential construction 26

  28. Texas A majority of distributors reported sales increases Some increase in non residential construction Good market for non residential remodeling 27

  29. New York Most distributors reported flat or lower sales Very little new construction Most sales to remodeling 28

  30. N.Carolina-S.Carolina Some increases in sales But also decreases Mostly remodeling Little new construction 29

  31. Home Centers Source: D.Grosser & Associates,ltd 30

  32. Home Centers, Retailers and Distributors Source: D.Grosser & Associates,ltd 31

  33. Carpet & Rug Retailers and Distributors Source: D.Grosser & Associates,ltd 32

  34. U.S. Tile Market The U.S. Dollar lost value vs. the Euro Imports lost market share due to a weak Dollar U.S. manufacturing gained market share 33

  35. Foreign Direct Investment There are 6 Italian owned tile plants in the U.S.: Marazzi (3), Florim, Iris-Stonepeak, and Panaria-Florida Tile 34

  36. Market Share of Italian Manufacturers • 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 35

  37. Ceramic Tile Consumption by Sector 36

  38. Change in U.S. Tile Distributors 37

  39. U.S. Tile Distribution U.S. Tile Manufacturers Foreign Tile Manufacturers Production U.S. Manufacturers’ Showrroms Tile Distributors Flooring Distributors Wholesale Flooring Retailers Tile Retailers Home Centers Retail New Residential Construction 20% Residential Improvement 43% Non-Residential Cons./Improvement 37% Final Destination 38

  40. 39

  41. The Future 40

  42. Thank You! Donato GrosserD. Grosser & Associates, Ltd. 11 Broadway, Suite 630New York, NY 10004Email: d@grosserconsulting.com Questions?

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