Larry Rybacki, President, SIGMA Corporation, Shares Thoughts on 2020

First of all, I want to wish all of you (employees and customers) a very happy and healthy New Year. We at SIGMA Corp are grateful to the 320 plus employees and their families for all they do to make us a better and more efficient company. Through hard work and dedication and some “fun” along the way we have built a strong organization that is committed to the Water, Sewer, Fire Protection, Industrial, and Plumbing Industries. However, we all realize the key to success lies with you, our customers and as we reflect on year end reviews we are truly grateful for the friendship and support you have shown all of us–and especially me–throughout the years. From the bottom of my heart – Thank You!

When I look back on 2019, I see a year that was challenging to say the least. The Industry was “flat” to down as many of us manufacturers were “up” slightly in sales but in terms of units or pounds shipped we were actually down slightly. A typical year in the Water Works Industry is between 3-4% growth, but not 2019 as housing was better but still not “normal” (at about 1.25 million homes). Public or government related work was OK but far from strong and far less than what is needed.

Flat has become the new normal and that’s disappointing. All of us like growth to create opportunities for our people, to fund capital expenditures, and provide for research and development.  From 1959 – 2019, the average yearly housing starts were 1.45 million and many of you have heard me talk about this as the “number of units the Water Works Industry needs to be strong”.  The housing market peaked in 1972 (not 2006 as many people think) at over 2.3 million, and bottomed out in 2009 where they numbered under 500,000.

Why talk so much about housing and single family homes in particular?  Simple, it’s our lifeblood. In good times housing is about 65% of our business but since 2008 it’s been between 30% and 50%. There is good news on the horizon however.

  • There is a shortage of homes nationwide and supply and demand has a way of creating opportunities.
  • Almost 5 million millennials will be turning 30 years old this year. Typically most first time home buyers are between the ages of 30 and 40.
  • Contrary to what many people think, not all millennials want to live in the heart of our major cities. When they get married, pay down their student debt, and start a family, the majority will migrate to the suburbs and buy a home.
  • Affordable housing – Areas that can provide affordable housing will continue to flourish. These include the Southeast (Florida, Georgia, North and South Carolina, Tennessee, etc.), the Southwest (Texas, Oklahoma, Louisiana, and Arkansas), and parts of the Midwest (Ohio, Indiana, Michigan, Wisconsin, and Minnesota). The challenge is the West (especially California), and the Northeast, where a real estate bubble has been created.
  • Infrastructure spend – The one thing that both parties agree on will become a reality sometime in the near future, but more than likely not in 2020.

All in all the “Polish” crystal ball sees 2020 as more of the same.  I see it as very similar to 2019 with a slight uptick in housing and consistent public spend so the new “normal” will be in effect.

In conclusion, I want to wish all of you a belated Happy Holiday Season and wish you all a very satisfying and rewarding 2020!

Thank you,