BMHC: back to basics

Before this housing downturn is over, Building Materials Holding Corp. (BMHC) may transform itself back into a chain of western lumberyards offering basic installed services and trusses. Comments made by BMHC executives during a Nov. 6 analysts’ call portend a curtailment of non-traditional construction services like plumbing, electrical and concrete work. Market departures have already changed the geographical face of the San Francisco-based pro dealer, which pulled out of the Mid-Atlantic and Florida markets this year. Its eastern border now stops at Chicago.

BMHC is also closing or consolidating locations in some of its western states, a move that will reduce overhead expenses and help raise money to fund operations. The sale of surplus properties and facilities is expected to produce a net gain of $45 million during the next 24 months. The following BMHC locations are slated for closure:

Southern California: The company is negotiating to sell a SelectBuild location in Colton that provided concrete services. If the sale falls through, the operation will close, according to company officials. A reload center in Mira Loma will close in early December and be put up for sale.

Northern California: A Dixon, Calif., location that provided concrete services through SelectBuild has been closed.

Colorado: A door shop and millwork facility in Fort Collins and a wall panel plant in Greeley are being moved to other BMHC facilities.

Washington State: A Puget Sound distribution center is being relocated.

Excess vehicles and equipment from previous closures brought in $4.2 million during the third quarter, the company reported, and this round of consolidations will undoubtedly raise more funds. Maintaining liquidity is top-of-mind for BMHC officials, who are disinclined to support any non-profitable business models. Although the company has kept Select Build as its name for construction services, the division’s back office has been completely integrated with BMC West’s. But BMHC president and chief operating officer Stan Wilson says there are other changes in store for the former stand-alone division.

“We’re repositioning our sales efforts, particularly with SelectBuild, to become a more sales-oriented operation versus an order-taking operation during the good times,” Wilson told analysts on Nov.6.

“We’re finding out what our customers’ new purchasing strategic objectives are, and we’re lining ourselves up with those, which is a major difference from the way we used to operate.”

BMHC is also moving away from SelectBuild’s attempt to offer builders an all-inclusive package of construction services. “We are reducing those,” Wilson said. “We’re sticking with our core businesses, which is framing, lumber products, millwork and trusses and [related] trades. They need to be contributing to income, or we will exit some of those trades.”

Michael Mahre, president and CEO of Select Build until April 2008, acknowledged that the SelectBuild model—a single point of contact providing some or all of a project’s labor needs—is no longer relevant to the current home-building industry.

“In today’s market, builders aren’t as focused on process efficiencies,” Mahre told Home Channel News. “They’re looking for the lowest cost provider.”

But Mahre believes that production home builders will be looking for “a single construction entity” once the cycle swings back up, especially since many firms have laid off their own project managers. “The faster build times and the more efficient supply chain of the SelectBuild model will become valuable once again,” he said.

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