Ceramic floor and wall tile : a manufacturing opportunity in Georgia

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CERAMIC FLOOR AND WALL

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T A MANUFACTURING .~:_:
OPPORTUNITY IN GEORGIA

Project B-140-14
CERAMIC FLOOR AND WALL TILE A Manufacturing Opportunity in Georgia
Prepared for The Georgia Department of Commerce
by Walter Kennon Research Economist
and William E. Durrett Research Assistant
Industrial Development Branch Engineering Experiment Station Georgia Institute of Technology
December, 1958

Foreword
This report points up some of the excellent opportunities in the ceramic tile industry in Georgia. It presents the findings of an industry-wide survey, undertaken to provide the basic information on the market, plant size, capital, and profits. The analysis reveals that Georgia is an excellent location. Proximity to a large, expanding market and to raw materials, an~ favorable gas rates are three important factors.
This is the first in a series of studies on the ceramic industry. With its resources and other advantages, Georgia is a good location for the manufacture of other ceramic products: sanitary ware, electrical porcelain, and missile ceramics, for example, all have possibilities for development in Georgia.
Subsequent studies will be related to other research in progress at the Industrial Development Branch, to the diversification needs of established industry, and to the interests which may be evidenced by business firms, development groups or individuals in the further evaluation of specific opportunities.
Comments on the report are invited.
Kenneth C. Wagner, Head Industrial Development Branch
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Acknowledgments
A report such as this depends in large measure on the cooperation of many people in the industry, trade associations, and others, as well as the various units of the Engineering Experiment Station.
Some of the local contractors and tile distributors gave valuable information about the industry which prompted the market study. Mr. Robert Baker, the Mosaic Tile Company; Mr. A. W. Cook, Cook Tile Company; Mr. D. W. Dunaphant, Southern Construction Company of Atlanta, Incorporated; Mr. G. R. Hirt, Stylon of Georgia; and Mr. Richard Naiman, Naiman Construction Company were especially helpful.
The Mosaic Tile Company, National Tile Company, Olean Tile Company, and Stylon Corporation furnished the photographs incorporated in the report. Valuable information concerning some of the more technical aspects of tile manufacturing, as well as data on capital, profits, and plant size were provided by various executives of equipment manufacturers. These include: Mr. Philip Dressler, Swindell-Dresser Corporation; Mr. J. T. Robson, Allied Engineering Division of Ferro Corporation; and Mr. T. W. Shook, Harrop Ceramic Service Company.
National Tile Company and Stylon Corporation furnished financial statements which were helpful in determining capital requirements and expected profits for a manufacturer.
We would like to thank Mr. John Peterson of the Industrial Development Branch, and Atlanta Gas Light Company for data on gas rates and gas lines in the State.
Trade associations, both local and national, were very helpful. Associated General Contractors of America; Clay Products Institute; The Contractor's Association of America, Incorporated; Home Builders Association of Metropolitan Atlanta; National Association of Home Builders; The Producers' Council, Incorporated; Southern Tile Contractors Association, Incorporated; and Tile Council of America provided directories of tile manufacturers and distributors which aided in making the various questionnaire surveys.
Miss Nell Lea and Mr. Albert E. Spivey of the regional offices of the
Bureau of Labor Statistics and the F. w. Dodge Corporation, respectively, sup-
Plied construction data on which the market projections are based.
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In addition, we appreciate the time and effort spent by the manufacturers, contractors, and clay companies in completing questionnaires for the market survey. Without their assistance much of the basic data for this study could not have been obtained.
We are, indeed, grateful to the various members of the Industrial Development Branch staff who assisted in gathering data, in statistical analysis, and in drafting the manuscript. We would especially like to thank Dr. George Whitlatch for reviewing the manuscript and helping with many of the technical details. We would also like to thank Mr. Eugene Queen for his statistical analysis work. For editorial services Mr. Robert Bullock, Research Assistant; Dr. Ernst W. Swanson, Senior Research Economist; and Dr. Kenneth C. Wagner, Head of the Industrial Development Branch were all very helpful. Mrs. Annie F. Edwards and Mrs. Betty Jaffe patiently prepared the final report. The Photographic Laboratory and other members of the Engineering Experiment Station also provided valuable assistance in making this report possible.
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Table of Contents

Foreword
Acknowledgments
Introduction
Surrnnary
Some Illustrations of Ceramic Floor and Wall Tile
I. The National and Six-State Markets National Sales National Forecast The Regional Market Regional Forecast
II. Competition Suppliers for the Southeastern Market Manufacturers in the Southeast Company Sales Product Quality
III. Profits and Capital Analysis of Financial Statements Capital Profit
IV. Manufacturing Tile in Georgia Low Gas Rates Raw Materials Labor and Technical Assistance Transportation and Distribution Facilities
Appendices
A - Multiple Correlation for Predicting Tile Sales from Construction
B - Projections of Construction

Page
i
ii 1 2 4
11
16
25
28
31 32

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liaps

l. The Location of Major Gas Lines and Producing

Counties of Ceramic Floor and Wall Tile Raw

Materials

3

2. Manufacturing Source of Tile Sold in the

Six-State Harket

17

Charts

1. Floor and Wall Tile, Value of Products Manu-

factured United States Total

12

2. Residential Construction in the United States

34

3. Non-Residential Construction in the United States _ 35

Tables

1. Market Estimate for Floor and Wall Tile

14

2. Sales and Capacities of Tile Manufacturing

Plants in the Southeast

18

3. Market Penetration for Various National

Companies

19

4. Estimated Sales for a Tile Company Locating

in Georgia

21

5. Market Penetrations of National Sales by South-

eastern Tile Companies

22

6. Company Sales Estimate Based on Penetration of

National Market

23

7. Profits and Capital for National Floor and

Wall Tile Companies

26

8. Hultiple Correlation for Predicting Tile Sales

from Construction

31

9. Construction in the United States

33

-v-

Introduction Georgia is the center of an expanding southeastern tile market in which most of the total volume is purchased from outside the region. Since the manufacture of many products of the ceramics industry is becoming increasingly market-oriented, a general survey of the industry was made. Certain products were determined to be likely prospects for Georgia's growing economy. Among these was floor and wall tile, which appears to have a good potential in Georgia. In addition to growing markets, Georgia has an abundant supply of clay and favorable gas rates. In fact, tile manufacturing seems to be a "natural" for Georgia. This report analyzes the market for floor and wall tile, the capital requirements, and the profits to be expected in establishing a plant in Georgia. A more detailed study of other factors can be made at a later date, depending on the interest shown in this initial study by established firms or entrepreneurs. In this sense, this report is preliminary to the more detailed analysis needed for the actual selection of a plant location.
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Surmnary
Georgia, in the center of a $13 million tile market, provides an outstanding potential for a ceramic floor and wall tile manufacturer. New family formations and the trend toward multiple baths are expected to generate an even greater market for tile within the next few years through increased construction activity.
A market survey shows that a Georgia-located plant can reasonably expect initial sales of $400,000 to $900,000 in the formative years from the Southeastern market. After the firm is established and has developed marketing channels, it can expect sales between $1 and $3 million.
Profits are attractive. A 20 per cent return on the capital investment is typical in the industry. Yet this is conservative. One of the major national companies has consistently experienced larger returns.
The capital investment of between $800,000 and $2,000,000 is required to reach the full potential of long term sales. With a 20 per cent return a plant of this size would have a profit of $160,000 to $400,000. But this is the long run capital requirement when the organization and markets are fully developed. An entrepreneur can enter the business with about $460,000. This amount would be enough for a one-kiln operation. Additions can easily be made later as sales and production increase.
Natural gas, a major component of cost and a principal determinant of location, is cheaper in Georgia than in any other location east of Mississippi. A rather wide area of the State has especially favorable rates. This area is on a gas line going from west to east through about the center of the State.
The same area is a major source of clay used for the raw material in tile manufacturing. In fact, Georgia is the largest source of kaolin clay in the world. Ceramic grade feldspar is mined in Georgia with an additional supply in western North Carolina. Ball clays can be shipped in from Tennessee and Kentucky.
The major gas lines serving the State, the clay deposits, and the source of other raw materials are shown on Map 1.
There is a good labor supply not only of the rank and file workers but of highly trained engineers. Georgia Tech provices graduate ceramic engineers and has research men and facilities available for consultation and research on technical problems.
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MAP 1. THE LOCATION OF MAJOR GAS LINES AND PRODUCING COUNTIES OF
CERAMIC FLOOR AND WALL TILE RAW MATERIALS. TALC FELDSPAR KAOLIN FLINT
- - - =NATURAL GAS LINES (most favorable rates}
- --
-3-

SOME ILLUSTRATIONS
of
CERAMIC FLOOR AND WALL TILE
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-5-

-6-

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I

I 00
I

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I. THE NATIONAL AND SIX-STATE MARKETS

The total Southeastern market for tile is forecast at $12.9 million in 1960, $14.5 million in 1965, and $15.4 million in 197o.l1 While this market
--10 per cent of the national total--is large, it can be easily reached by a
Georgia plant.

National Sales

Data on floor and wall tile sales for the United States are available for the years 1947 through 1957, with the exception of 1948 when the data were not collected by the Department of Commerce.
Unfortunately, data on tile sales are not analyzed by region. Total construction, including tile installation, is analyzed by type and is available for all years by region with some exceptions. Furthennore, construction is an industry which receives a considerable amount of attention witl1 economic analyses and forecasts made by others. Therefore, instead of estimating and projecting tile sales directly, total construction is analyzed and tile is related to construction. The result is that for every residential construction dollar approximately one-third of a cent is spent for tile, and for every non-residential construction dollar about one-half of a cent is spent for tile. By relying upon this relationship between tile sales and construc-
ti on, f orecasts can b e rna de an d reg1.ona 1 mark ets can be est1mate d .2-I

National Forecast

National residential and non-residential construction can be forecast
by the usual statistical methods. The forecast so derived is as follows:~/

1960 1965 1970

Residential (Million Dollars)
$19,275 20,040 20,302

:.ron-Residential (Million Dollars)
$16,457 19,231 20,900

11 These estimates of compnny soles nnd the totnl Southeastern market
lte based upon tht stntistica1. <mnlysis of published dato and the answers ~tC:eived from quvstionnoires sent to manuL1c..:turcrs ond mnjor distributors . 11 the Southenst.
f
!,I The technic .1! dcli1ils of this relati onship <He found in App endix A.
}./ The tl'c..:hnic ;il dt~ L n i l s o f th i s r l' Ll ti o ns hip ilrl' f o und in Appendix B.

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120
100
Vi 80
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0 60
_.
! :w_:>.
<> 40
20

CHART I FLOOR AND WALL TILE Value Of Products Manufactured
U. S. Total

1947

1948 1949 1950 1951 1952 1953 1954 1955 1956
SOURCE: 1954 Censu s of Manufacturin g and Fa cts for Indu s try - U. S. Department of Commerce

1957

-12-

The Regional Market

In view of the fact that over three-fourths of the tile used in the six state region comes from other regions, a new manufacturer can reasonably expect to capture some of this market in his formative years. Later, as marketing channels develop, more distant market areas can be reached. Therefore initially, and perhaps even as the business develops, the six state Southeastern Regionl/ will be the supporting market. These are the states near to and with good transportation facilities from Ge orgia. Furthermore, this region is generally the area served by other firms in Georgia.
Although tile sales are not available by state or r e gion, construction
costs by state are available.~/ The percentages of state to total United
States construction are as follows:

Alabama Florida Georgia North Carolina South Carolina Tennessee
Total

1.0%
s.o
1.5
1.0
o.s -l-.O-
10.0%

These are rather typical percentages and vary from year to year. But they have no discernable trend. That is, although the dollar amount of the market for tile in the Southeast is increasing, the proportion of the market to the national total is constant. These state percentages can therefore be used to estimate the future regional market from the national total.

Regional Forecast

Future tile sales by state and r e gion can now be estimated. From the Projection of construction, the total for the United States is estimated; from the relationship between construction and tile sales, total tile sales are calculated; and finally, from the proportion of the region to the total United States, regional tile sales are predicted. These forecasts are summarized in Table 1.

ll Alabama, Florida, Georgia, North Carolina, South Carolina, and
Tennessee.
l ~/ Bureau of Labor Statistics, Construction Review. For the period b939 through 1952 there is a detailed analysis of construction by state and
Y tYPe of construction. After 1952 building permits by state are available.

-13-

Table 1 MARKET ESTIMATE FOR FLOOR AND WALL TILE

Residential Non-Residential

United States Total Construction (million dollars)

1960

1965

1970

$19,275 16,457

$20,040 19,231

$20,302 20,900

United States Total

Estimate of Floor and Wall Tile Sales Total U. S.
(million dollars)

1960

1965

1970

$128.9

$144.9

$15 3. 9

Alabama Florida Georgia North Carolina South Carolina Tennessee
Total

Per Cent of
u. s. Total
1.0% 5.0 1.5 1.0 0.5 1.0
10.0%

Sales in the Southeast {million dollars2

1960
$1.3 6.5 1.9 1.3 0.6
-1-.3
$12.9

1965
$1.4 7.4 2.2 1.4 0.7 1.4
$14.5

1970
$1.5 7.8 2.3 1.5 0.8
-1-.5
$15.4

-14-

r
Regional forecasts are made for 1960, 1965, and 1970. The 1960 sales are estimated at $12.9 million. The 1965 and 1970 e$timates of $14.5 million and $15.4 million are intermediate and long run prospects, respectively, for the region. Forecasts are not made beyond 1970 because the forecasting method gives estimates which seem too conservative in view of the rapidly expanding economy and, especially, the growing construction industry and the increased family formations.
-15-

II. COMPETITION
Suppliers for the Southeastern Market
Map 2 denotes the sources of manufactured tile for the Southeast. Almost three-fourths of all tile used in the region is manufactured by companies in Ohio and Pennsylvam.a. Other companies located in the Northeast supply smaller but still significant proportions. Thus, New York supplies the region with as much tile as Alabama. New Jersey supplies a little more than Florida, yet Florida uses about five per cent of the national total and is by far the largest market in the Southeast. Even Texas, the only source west of the Mississippi River, accounts for five per cent of the region's consumption.
This means that approximately 86 per cent of the tile used in the six state area is shipped long distances from other regions to the southeastern market. In freight cost a lone there would be considerable savings for a plant locating in Georgia, because this cost is between three and 15 per cent of the total cost of tile.
Manufacture rs in the Southeast
The seven plants now located in the Southeast supply only nine per cent of the tile used in the region. Their locations are indicated on Map 2. Detailed information on sales and production capacity is available for all but one of these plants. The available data are summarized in Table 2. This table shows that tile manufacturers in the region for whom sales data are now available produce at least $10 million per year. Obviously, these plants sell outside the region and sell to only a part of the total regional market. However, even if we assume the extreme position that the regional plants sell all of their product in the region, there will be a sufficient market available for another plant to meet the 1960 demand of approximately $13 million. ~any Sales
There are customer preferences, distribution costs, and other factors to Prevent one company from serving the entire southeastern market. The extent to Which the market can be penetrated by a single manufacturer, however, can
\e ascertained by examining the sales of national companies in comparison to
,total national sales.
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PER CENT OF SIX-STATE

0

MARKET SUPPLIED BY SOURCE STATES

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(/)

.50-25
m6-3

::<
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e LOCATION OF COMPETING

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FIRMS IN THE SOUTHEAST

;;o

{:}?}:J LESS THAN 1

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-4

Table 2
SALES AND CAPACITY OF TILE MANUFACTURING PLANTS IN THE SOUTHEAST

Plant

Location

A

Alabama

B

Florida

c

Florida

D

Florida

E

Mississippi

F

Mississippi

G

North Carolina

Total Accounted For

Annual Sales $2,900,000 600,000 2,250,000 N.A.l/ 750,000 3,000,000 500,000
$10,000,000

Annual Capacity (Square Feet) 6,050,000 1,5oo,ooo 5,000,000 N.A.l/ 7,5oo,ooo 13,000,000 1,100 ,ooo 34' 150,ooo

l/ Not available
Source: Analysis of Questionnaires sent to tile manufacturing companies
in the Southeast for Plants B, c, E, and F. Data from equipment
manufacturer for Plants A and G.

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From Table 3 it appears that it will be difficult for a company to capture as much as 10 per cent of the total southeastern market. On the other hand, a company able to meet competition with a quality product should capture between three and seven per cent of this market.
By applying what are deemed reasonable penetration percentages to the forecast of the total six state southeastern marketJ the expected sales for a company serving this region are derived. See Table 4. This analysis indicates that a company locating in Georgia can expect annual sales of $400,000 to $9001 000 in this immediate market area.
Yet these estimates of sales are conservative. Three of the manufac-
turers in the Southeast (Companies A, c, and F, with sales presented in
Table 2) have sales greater than those indicated by the penetration analysis. These sales are partly attributable to penetration into markets outside the southeastern region. This growth comes with the development of distribution facilities. The penetration of the national market by regional companies is between 0.5 per cent and 2.5 per cent. See Table 5. From this analysis of market penetration it is estimated that a plant in Georgia should be able to sell from $1 to $3 million in the long run. See Table 6.
These sales estimates are in all likelihood quite conservative. The amount of tile used in construction is increasing. There is particularly a noticable increase in the number of baths in residential construction. In 1956 almost half of the homes constructed had more than one bathroom and the majority of these had at least two complete baths. In contrast, in 1950, less than one out of twelve new homes were built with more than one bath.l/ This trend is continuing, with even medium-priced homes having two or at least one-and-a-half baths. This is especially favorable for tile sales because baths in residential construction are the principal use of tile.
Furthermore, the Florida market, estimated at five per cent of the national total, is understated. In this analysis it is assumed that there are no variations among states in tile sales as a proportion of total construction. Yet Florida, with its semi-tropical climate and vacation and retire~nt atmosphere, enjoys greater outdoor living. Relatively more tile for tach dollar of construction is required to meet the needs of such living.

l/ ~Housing and Its Materials 1940-1956, U. s. Department of Labor,

August 1958.

---

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Table 4
ESTIMATED SALES FOR A TILE COMPANY LOCATING IN GEORGIA

Total Six-State Market

1960 $12,900,000

1965 $14,500,000

1970 $15,400,000

Sales at Various Penetrations: (Per Cent) 10 7 5 3 1

$ 1,290,000 903,000 645,000 387,000 129,000

$ 1,450,000 1,015,000 725,000 435' 000 145,000

$ 1,540,000 1,078,000
770 ,ooo
462,000 154,000

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Table 5
MARKET PENETRATIONS OF NATIONAL SALES BY SOUTHEASTERN TILE COMPANIES

United States Sales (1957)
Southeastern Companies A Company - Alabama B Company - Florida
c Company - Florida
D Company - Florida E Company - Mississippi F Company - Mississippi G Company - North Carolina

$115' 500' 000

Sales $2,900,000
600,000 2,250,000
N.A. 750,000
3,ooo,ooo
500,000

Per Cent Penetration 2.5 0.5 1.9 N.A. 0.6 2.6 0.4

Source: U. S. Total: Facts for Industry, U. S. Department of Connnerce
Company Sales: Questionnaire Survey of Southeastern Manufacturers by The Georgia Tech Industrial Development Branch Fall 1958

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Table 6
COMPANY SALES ESTIMATES BASED ON PENETRATION OF THE NATIONAL MARKET

Estimated Floor and Wall Tile Sales for the United States
(million dollars)

1960 $128.9

1965 $144.9

1970 $153.9

Camp any Sales at Various Penetrations of the National Market
(million dollars)

Per Cent Penetration

1960

1965

1970

0.5

$0.6 $0.7 $0.8

1.0

1.3

1.4

1.5

1.5

1.9

2.2

2.3

2.0

2.6

2.9

3.1

2.5

3.2

3.6

3.8

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Product Quality To be successful a manufacturer must compete with the quality standards
of the well-established tile companies. Well-known brand names are important. Since about 50 per cent of tile installation cost is labor and since quality workmanship also depends upon the raw materials, many tile contractors use only well-established brand names where quality is assured. Yet quality and brand name competition can be met hy a relatively small new company. This is evident from the competing firms in the region. Out of the seven firms in the area only two are branches of national firms. The others are medium-sized independent operations.
A manufacturer must not only have good quality, but to stay in business he must keep abreast of the industry in styling, research, and improved equipment when new developments take place. A firm which cannot compete successfully on these points will experience increasing difficulty.
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III. PROFITS AND CAPITAL
Analysis of Financial Statements
Certainly two of the major considerations of an entrepreneur entering the tile busin.ess are the capital required and the returns that can be expected An understanding of these two factors can be obtained from the financial statements of national tile manufacturing companies and data from tile equipment rnanufacturers. For this study financial data of three tile companies were examined. Sales, profits, and assets for each of these companies for the five year period 1953-1957 are summarized in Table 7, along with relevant percentages and ratios.
Capital
As expected the sales, returns, and capital vary among the companies during this five year period. The 1957 recession seems to have especially affected Y and Z Manufacturing Companies. Yet if all companies and years are examined, the typical company has a capital turnover (sales/assets) of 1.3 times per year. This means that a Georgia plant would need assets of approximately $800,000 to $2,300,000 to reach sales of $1 to $3 million by 1965.
However, an entrepreneur can start a tile manufacturing operation with even less capital. A one-kiln operation can produce yearly about 1,400,000
square feet of tile, which amounts to about $600,000 in annual sales.~/ With
initial sales estimated at $400,000 to $900,000, there is a sufficient market to support a one-kiln plant. The capital investment for such a plant would be approximately $460,000 ($600,000 sales divided by 1.3 capital turnover).
As the organization and sales are developed, plant and equipment can be added. In fact, the original building can be constructed with space for ad-
ditional kilns. 'Ihis space will cost about $6,000 per kiln.~/ This size
plant will provide enough capacity for the initial sales plus space for expansion as the sales increase to the long run estimate of $1 to $3 mill~on.
Profit
Although there are variations among companies and years, the annual return on assets for the typical company is 20 per cent. This return is
1/ Data from equipment manufacturers, December 1958.
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Table 7
PROFITS AND CAPITAL FOR NATIONAL FLOOR AND WALL TILE COMPANIES

X Manufacturing Company
Sales Profit Before Interest and Taxes Assets Times Capital Turnover (Sales/Assets) Per Cent Return (Profit/Assets) Per Cent Profit on Sales (Profit/Sales)

1957
$12,273,134 $ 2,914,409 $ 9,207,709
1.33 31.7 23.7

1956
$10,481,161 $ 2,485,684 $ 8,628,911
1.21 28.8 23.7

1955
$8,709,004 $2,307,440 $7,958,231
1.09 29.0 26.5

1954
$8,184,031 $2,112,035 $6,168,301
1.33 34.2 25.8

1953
$8,098,980 $2,048,586 $5,620,270
1.44 36.4 25.3

Y Manufacturin~ ComEan~

I

N
"I '

Sales Profit Before Interest and Taxes

$ 3, 719,621 $ 184,579

$ 4,358,452 $ 526,892

$4,494,346 $ 809,462

$2,970,913 $ 277,420

$2,110,524 $ 61,163

Assets

$ 2,220,166 $ 2,014,297 $2,001,878 $1,677,164 $1,524,109

Times Capital Turnover (Sales/Assets)

1.68

2.16

2.25

1.77

1.38

Per Cent Return (Profit/Assets)

8.3

26.2

40.4

16.5

4.0

Per Cent Profit on Sales (Profit/Sales)

5.0

12.1

18.0

9.3

2.9

Z Manufacturing Com2any
Sales Profit Before Interest and Taxes Assets Times Capital Turnover (Sales/Assets) Per Cent Return (Profit/Assets) Per Cent Profit on Sales (Profit/Sales)

$ 6,044,803 $ 198,415 $ 4,633,361
1.30 4.3
3.3

$ 6,452,681 $ 895,399 $ 4,098,445
1.57 21.8 13.9

$6,048,676 $1,271,105 $3,643,916
1.66 34.9 21.0

$3,899,851 $ 419,643 $2,642,334
1.48
15.9
10.8

$2,163,597 $ 25,005 $2,162,437
1 00 1.2 1.2

Source: Moody's Industrials

.I
further verified by an equipment manufacturer who states that a 20 per cent return can be reasonably expected. Th~s is a very attra t~ve return, but is conservative. In many years the return is greater. In the particular case of Manufacturer X profits have exceeded 20 per cent in each of the last five years.
A 20 per cent return means that the profit would be $160,000 from a $800,000 investment; $400,000 from a $2,000,000 investment. This return is probably too high for an independent company just entering the business, however. In the initial years when organization and markets are being developed, profits are usually low. In fact, there may be losses in this early period. The 20 per cent return represents the long-run goal which might be expected when the company is well established.
Tile manufacturing is not experiencing a "profit squeeze," however. The ratio of profits to sales during the last five years does not show any evidence of decline. During this period the typical company made about a 12 per cent profit on sales, and this return is net after all operating expenses except interest and taxes.
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IV. MANUFACTURING TILE IN GEORGIA
The combination of low gas rates, availability of raw materials, an abundance of unskilled and semi-skilled labor and engineers, and adequate transportation and distribution facilities make Georgia a particularly attractive location for tile manufacturing.
Low Gas Rates
The fuel for firing kilns is one of the major operating outlays. Since fuel cost has rather wide geographic variations, it is one of the major factors determining location. Gas is favored for fuel because it is the easiest to control and is usually the cheapest source. About 88 per cent of all floor and wall tile kilns are fired with gas. In the absense of natural gas pipe lines Florida tile manufacturers use oil, with a cost of about two and eighttenths cents for every dollar of tile sold. In Mississippi where gas is available the cost is only one and seven-tenths cents per dollar of sales.
Georgia is served by two major gas lines from fields in Louisiana and Texas. (See Map 3.) Georgia has favorable gas rates anywhere along these lines. Atlanta, Columbus, Macon, and Augusta especially have good rates in the range of 24 to 29 cents per 1,000 cubic feet, depending on the volume used. For the large quantities required for tile manufacturing an even lower rate can probably be negotiated. These are the most reasonable rates east of the State of Mississippi. Fuelwise a location in Georgia is thus very favorable.
Raw Materials
Georgia is the major source of kaolin, one of the clays used in tile manufacturing.1-/ About 74 per cent of all the kaolin mined in the United States comes from Georgia and is shipped long distances to other regions.2-/ Much of this clay is now shipped to Ohio for tile production. Not only is this type of clay plentiful in Georgia, but it is located in the same areas that enjoy very low gas rates. A plant locating in this area would have the double advantage of both cheap gas and a good source of raw materials with minimum freight rates.
1/ Many types of clay are used in Floor and Wall Tile. J.u some tiles there-are as many as 17.
~/ 1956 Minerals Year Book, Volume 1, u. s. Department of the Interior,
Bureau of Mines, p. 356. -28-

MAP 3. THE LCOECRAATMIIOCNF0LOFOMRAAJONDR WGASLLLTINILEES RAANWD MPARTOEDRUIACLINSG. COUNTIES OF

,-
' DAOI

-TALC
~FELDSPAR

~KAOLIN
[ ::: J FLINT

=NATURAL (most fovorobiGe ArSateLsI)NES

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Other raw materials are available in Georgia. Feldspar of ceramic grade is mined at a location near Macon which is in the low-gas-rate area.
'
There is an additional source in western North Carolina. Ball clays are located in Tennessee and Kentucky.
Labor and Technical Assistance For the most part tile manufacturing requires only semi-skilled and
unskilled labor. The total production personnel requirement for a one-kiln operation is between 25 and 35 employees. This labor supply is readily available. Georgia's labor, with proper training, can provide the necessary skills for floor and wall tile manufacturing.
The Georgia Institute of Technology graduates approximately 20 to 25 men every year in Ceramic Engineering. A survey of alumni 1ndicates that many graduate engineers would locate in the State if there were employment opportun1ties. In addition to the engineering graduates, Georgia Tech has a staff of 10 to 12 ceramic engineers in research or teaching positions. These staff engineers and the facilities of the Engineering Experiment Station are available for research and technical consultation. Transportation and Distribution Facilities
Columbus, Macon, and Augusta are transportation and distribution centers in the vicinity where tile manufacturing is most feasible. These cities have adequate rail and trucking facilities for shipping of raw materials and distributing the finished product.
Georgia has the market, gas, raw materials, labor and distribution facilities for successful tile manufacturing.
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Year
1 91-t 7 1948 191':9 1950 1951 1952 19.53 1951-: 1955 1956 1957

Appendix A
Table 8
MULTIPLE CORRELATION FOR PREDICTING TILE SALES FROM CONSTRUCTION

Value of Tile Manufactured
~million dollars~
X 0
$ 42.0 N A.Y 43.9 61.6 71.3 64.1 71.6 88.5 114.0 116.0 115.5

Residential Construction
~million dollars~
xl
$ 7,735
10' 001 14,445 13,124 13,496 14,333 15,715 18,971 17) 924 17,081

Non-Residential~/
Construction
~million dollars~
x2
$ 3,951
5,558 6,433 8,897 9,403 10,313 11,196 12,223 13,393 14,196

1/ Chni.i:Ung highways, dams, and other heavy engineering construction. 2/ H ..A, - Not available.

Er:Limat:ing Equation- X 0

= (-)

14.738456 + 0.003293SX1 +

0.004871X2

S 1 illidard Error of Estimate: (C:onr.,c ted for Degrees of Freedom)

$8.67179

c,),;-cia.tion Coefficient (R): 0.9522 (Cortected for Degrees of Freedom)

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Appendix B PROJECTIONS OF CONSTRUCTION ACTIVITY
For this analysis, construction was divided between residential and non-residential. Highways, dams, and other heavy engineering types of construction which are obvious non-tile users were omitted. Projections of construction costs can be made to forecast future tile sales. For this purpose construction costs for the last 10 years (1947-57) were examined. These are the most current data and are not distorted by the abnormalities of the war period. Statistical tests based upon difference analysis reveal that the data prior to this period are distorted.
Since both residential and non-residential construction data indicate an orderly growth at a declining rate, some type of second degree logarithmic curve would seem appropriate. However, a second degree polynomial logarithmic projection proved unsatisfactory because the projection reached a maximum in 1962 and then decreased. This peak is not consistent with either theory or experience. Therefore, the Gompertz and Logistic limited growth curves were used. The Gompertz had the more satisfactory fit. See Charts 2 and 3.
These projections are not only satisfactory from a statistical point of view but correspond very closely with those made by others from a detailed consideration of types of construction, national income, and other data.l/
lf Miles 1. Co lean, "The Bullish Outlook for Building, 11 Architectural
Forum, February 1958. The Associated General Contractors of America, Inc., "1956-1965 Con-
str.uction Value Estimates," The Constructor, October 1956.
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Year (Actual)
1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957
(Forecast)
1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

Table 9 CONSTRUCTION IN THE UNITED STATES

Residential (million dollars)
$ 5,126 7,735
10,278 10,001 14,445 13,124 13,496 14,333 15,715 18,971 17' 924 17,081

Non-Residential (million dollars)
$ 3,831 3,951 5,151 5,558 6,433 8,897 9,403 10' 313 11' 196
'. 12,223 13,393 14,196

18,663 19,000 19,275 19,498 19,679 19,826 19,944 20,040 20,117 20,179 20,229 20,269 20,302

14,962 15,738 16,457
17' 118 17' 724 18,275 18 J 777 19,231
19' 640 20,008 20,339 20,635 20,900

Source: Construction Review, u. s. Department of Labor and
U. S. Department of Commerce.
Forecast by Industrial Development Branch.

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CHART 2. RESIDENTIAL CONSTRUCTION IN THE UNITED STATES. 30,000 . . - - - - - - - - - - - - - - - - - - - - - - - - - - - . ,

20,000

TREND*

10,000

9,000

aI:I:): 8,000 <____(.. 7,000
0
Q
u.. 6,000
0

zII) __0__..

5,000

~
4,000

3,000

2,000

*Projection from Gompertz Growth Curve.

1,000 L-L...JL....I~--L...L...L....L....L..L....L..........L....I.-..__.&.......__I!.....IL-.1.....&--L--L--L...I

1945

1950

1955

1960

1965

1970

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CHART 3. NON-RESIDENTIAL CONSTRUCTION IN THE UNITED STATES.
30,000,.-------------------------. 20,000

10,000

9,000

V)

e:::
<(

8,000

_j

_j
0

7,000

0

LL
0

6,000

V)
z
0

_j _j
~

2,000

*Projection from Gompertz Growth Curve.

1,000 L-L..JL....JL-JI....J.....J-.I....J.....L....L-1.-J.-1.-I.....&......&......&.....I......a......a......a..~~....._,

1945

1950

1955

1960

1965

1970

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