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Tough Economy Challenges Hispanic-Owned Firms

Hispanic Business Magazine, News Report, Hildy Medina Posted: Jun 12, 2008

Hispanic-owned businesses have endured turbulent economic times before, but market conditions proved especially bearish for U.S. Hispanic companies in 2007. Revenues for the Hispanic Business 500 -- the top 500 largest Hispanic-owned companies -- have endured turbulent economic times before, but slid backwards 0.6 percent to $36.1 billion. It is the first such dip since 2002, and only the third in the directory's 26-year history. It should come as no surprise that more than 41 percent of CEOs cited market conditions as the top barriers to growth in 2007, according to a survey by our HispanTelligence unit.

How and why did this happen after five years of impressive growth? The answer lies in large part in the makeup of the HB 500. Economic contraction was concentrated in the automotive, wholesale, and construction sectors, which combined represent a hefty 59 percent of the directory's total revenues. The contraction stems to some degree from an economic slowdown in these sectors. Auto sales recently slipped to their lowest annual count in a decade. Prices for industrial commodities, like copper, tin, and steel, are skyrocketing, and home building has been on a steady decline since 2006.

Service Sector Reports Healthiest Gains

The service sector performed better than any other sector nationwide. The service sector's revenues of $8.6 billion make up nearly a quarter of the list's total combined revenues. And that big slice is growing -- revenues in service increased 14.1 percent from the previous year's list.

Service leader, and No.2 on the directory, Molina Healthcare benefited from expanded enrollments and higher premiums in 2007 and saw a healthy revenue growth of 25 percent.

The same can't be said for the wholesale sector, which last year boasted the highest percentage in revenue gains. Wholesale revenues saw a small 4.73 percent increase. The sector leader and the top company on the list, Brightstar Corp., also had a less than stellar year. It reported a small 1.85 percent revenue increase. One reason for that is the slowdown in business, according to R. Marcelo Claure, chairman, CEO, and president of the telecommunications distributor.

"We have certainly seen the economy affect key partners and customers over the past 12 months."

Revenues Down, Unemployment Up

Perhaps most telling of all, overall employment -- a key measure of the economic health of the HB 500 -- fell 8.3 percent in 2007, dropping to 135,079 workers. Nowhere was there a more clear indication of the trying times.

Although the number of construction firms listed grew 10 percent from the previous year, overall revenues tumbled nearly 23 percent to $5.3 billion. This latest drop is even more dramatic when you consider that as recent as 2005, the construction sector accounted for $8.6 billion in revenues. The automotive sector also suffered. While it posted the highest average revenues again this year, sales are down from the prior year. The Hispanic Business 500's auto companies, most of them car sellers, averaged revenues of $176 million apiece in 2007, down from $184.7 million the prior year.

HB 500 sectors responded to the hard times in different ways. Automotive slashed its workforce by nearly 10 percent, while construction maintained employment levels even as it saw its revenues shrink for the second year in a row.

Technology Firms Win Race For Revenue Growth

But broad-brush numbers don't tell the whole story. There were some remarkable success stories amid the general downturn. For example, three construction companies are among the Top 10 firms with the highest percent revenue growth. Nuvo Construction Co. Inc. of Milwaukee, Wisconsin saw its revenue climb nearly 177 percent, while revenues for The Keystone Plus Construction Corp., based in Alexandria, Virginia, were up almost 170 percent. The revenues of H&S Construction & Mechanical Inc. of Elizabeth, New Jersey jumped 120 percent.

IT staffing firms dominated the Top 10. The company reporting the highest percent revenue growth is VisionIT. Headquartered in Detroit, Michigan, the company experienced a whopping 372.7 percent increase in revenue in 2007. The IT staffing sector has increased dramatically in recent years, thanks to an increased demand for technology workers.

Regional Leaders

Among the states with the greatest concentration of Hispanic Business 500 companies, firms in Florida saw revenues decline by 13.6 percent in 2007 with respect to 2006, disrupted mainly by the construction crisis. Among the top 10 states, total revenues in Virginia and Illinois decreased by 1.3 percent and 1.7 percent respectively. In contrast, companies in California and Texas posted rising revenue of 10.6 percent and 16.3 percent, while companies in the Northeast made strong gains in revenues, 34 percent in New York and 21 percent in New Jersey.

For further insights and information on the HB 500, visit: www.hispanicbusiness.com/hb500

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