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As we head into Q2 for 2021, according to Michael Luz, President and Chief Executive Officer, Viessmann Manufacturing US, the markets in our industry have made a strong turnaround, leading to an optimistic short-term outlook. We continue with our forecast series with major players in the industry. The following is an exclusive Q&A with Luz regarding the economy:

MH: What does the short-term economy look like as it relates to Viessmann?

LUZ: Our short-term outlook for the year is quite optimistic; so far for the first quarter we are trending around 30% higher in revenue in comparison to 2020. We do see a lot of home renovation activity on the residential side driving demand. At the same time, we have not experienced a slowdown in commercial activity this year and right now it is quoting and shipping season in the construction markets.

What do we look at for indicators? We look at trends related to order intake year over year. We look at economic indicators including forecasts on U.S. manufacturing and durable goods wholesaler indices.

MH: How does (has) Viessmann positioned itself from the “fallout” of COVID-19?

LUZ: We expect some levels of normalcy to return to the U.S. and our industry in the second half of this year 2021. Although the pandemic has impacted our sales last year, we have seen a strong rebound that started in Q4 of last year and has continued into the first quarter of this year. Viessmann has not missed a beat supporting its customer base during the pandemic, being available in person where appropriate and needed as well as virtually for technical support, customer training and marketing. As an essential business, our logistics operation has been open continuously through the entire pandemic with all necessary safety protocols in place.

MH: Is the only certainty heading into early 2021 uncertainty? How do you forecast and budget for such uncertainty? (Or is it fairly certain at this point during the pandemic?)

LUZ: As a business we are very much used to operating in an uncertain environment, taking into account many factors that could impact our business starting with raw material prices, potential supply bottlenecks on certain components, potential transportation capacity issues to quickly changing customer preferences. From many years of experience, we take all of those into account and give it our best to produce an accurate forecast. Was it particularly challenging doing this during a once-in-a-generation pandemic? Yes. Did we always get it right? No. Lucky for us and our industry, our markets turned around fairly quickly and have come back strongly.

MH: Without getting overly political, does a change at the presidential level (and congress) change the outlook for your company, if at all? (Infrastructure, regulations, green energy initiatives, etc.)

LUZ: Listening to our economic advisors and their analysis of historical data, federal governments with the same party controlling the White House, the Senate and the House of Representatives have always been phases of solid growth for the U.S. economy. Looking at some of the green initiatives that the current administration is pushing, we are ready for those and very well positioned as a company in the HVAC sector with a vision of “Creating living spaces for generations to come.”

And now, starting for the Los Angeles Lakers, a 5’ 10” forward from South Pasadena, Krikor Chiranian! [cheers and a loud applause ring throughout the Forum.] “Hey, as a young boy I loved basketball and my dream was to play professionally in the NBA,” says Krikor.

But with most young kids dreaming of becoming a professional athlete, reality sets in at some point, and fortunately for Koko, he got a taste of the trades early on, and there was no looking back.

Fun Fact: How do most of you know Krikor as Koko? Koko Drains (@koko.drains) was named after Krikor’s nickname. “My given name is Krikor, and since I can remember, my family would only call me Koko. In my career in drain cleaning, everyone has always known me as, and called me by, Koko. So, it really stuck with me,” says Koko.

Starting in the trades at the age of 20, Koko went on a call for a kitchen sink drain stoppage with his father, a veteran of the plumbing trade for nearly 50 years. “My father had to call on a man named Ole Bugarin to clear the drain stoppage. Ole came out with his Gorlitz Go 50 1/2” cable and cleaned the kitchen drain from the clean out, and I looked at my dad and said, ‘That’s what I want to do.’ There was just something about that moment while watching Ole clear the drain. It opened my eyes to a new part of plumbing that I found appealing and satisfying. I asked Ole if he would hire and teach me, and he did,” says Koko.

Koko worked for a single company for 11 years specializing in drain and sewer cleaning, and became adept to the work very quickly. “With the experience gained my confidence grew.” Says Koko. “One thing led to another, and I was eventually able to go on my own at age 31. As time passed, we became busier, leading to the hiring of my wife and two technicians. I’ve been self-employed for eight years now with plans for continued growth.”

Now, owner of Koko Drains, South Pasadena, Calif., Krikor Chiranian has been self-employed for the past eight years running a successful drain and sewer cleaning business with a side of waste drainage repair and replacement. In addition, Koko also provides camera inspections with marked pipe location, repairs and cleans of drains or sewer pipes by way of cabling and hydro jetting, as well as toilet and garbage disposal installations. As mentioned, Koko also repairs or replaces waste drainage piping, clean-out installation, pipe descaling, as well as trenchless rehabilitation services, and more. His go-to tool is his sewer inspection camera. “The camera tells all within an underground drain pipe, allowing proper diagnosis,” says Koko. Another daily go-to tool is Koko’s hydro jetter, which allows Koko to move a blockage out of a pipe, and, at the same time, cleans the drain or sewer pipe.”

While Ole was instrumental in mentoring Koko early in his career in drain cleaning and other plumbing essentials “teaching him everything he knows,” does Koko himself consider himself a role model for the younger generation entering the trades?

“Absolutely,” says Koko. “We pave the way for future generations. People are influenced mostly by not only what they see, but also by what they hear. To have a successful plan, it’s very important to stop and think before we act—teaching the younger generations the way to honestly and properly accomplish tasks is critical.”

According to Koko, the industry could do a better job promoting more women or minority contractors in the trades, “allowing for the attraction and eventual growth of a more diversified workforce, especially in leadership positions,” says Koko.

Being self-employed and the owner of a business makes it a bit easier to balance work/family time. “My wife schedules our work and personal life events; therefore, my wife schedules time off for me to spend with my family,” says Koko.

The free time is spending time with family, listening to and reading self-development audiobooks/books, and thinking of new ways to improve and grow the business. And, there’s social media. “Social media has allowed us to share our knowledge with others, and we can learn new ways of doing a job through other tradespeople’s perspective,” says Koko. “With social media, the new tools and equipment that are available to contractors are displayed, and they have brought new ideas for our company to utilize and grow. Also, we have made many new friends and customers through social media, building a network of reliable and respectable people.”

In the end, what does Koko love most about his job? “The gratitude our customers show us for getting the job done is the most rewarding. Also, the ability to be in the field, seeing new faces and places. In the trade, we are always seeing and learning something new.”

Southland Industries was founded in Long Beach, California, in 1949 as a Southern California-based supplier of residential heating solutions.  After years of growing organically and expanding their services and capabilities, they are now one of the nation’s largest MEP (mechanical/electrical/plumbing) building systems experts.

Today, Southland has 3,200 employees who serve most of the East and West Coast regions, as well as a Mountain West Division with offices in Tempe, Arizona and Las Vegas. The company’s capabilities encompass everything within each stage of the building lifecycle, including customized engineering, construction, building automation, service, and energy solutions.

“When Southland expanded to the East Coast in the mid-1990s, we were the first true design-build contractor in the area,” explained J. Gilbert, Mid-Atlantic Division plumbing supervisor. Gilbert has been with the company for 12 years and has presided over substantial growth during his tenure.

“At that time, other installers had no choice but to hire outside professional firms for design and engineering work,” continued Gilbert.  “We had that capability in-house, which really set us apart from the competition.  We’re now one of the largest MEP firms in the country.”

According to Mike Dye, senior purchasing agent, much of Southland’s work in the Mid-Atlantic region includes government contracts, data centers, and pharmaceutical and educational customers.  The company’s ability to bring every element of a project into consideration, including building automation and energy solutions, is a big advantage for large corporations and government agencies.

Professional plumbing

In 2017, Southland outgrew its existing offices and fabrication shop in Lorton, VA, and moved to a new facility in Laurel, MD.

The new facility, like all others owned by Southland, is a one-stop-shop for mechanical customers. The building’s 240,000 square feet is occupied by administrative offices, an engineering department, a sheet metal shop, mechanical piping (hydronic) fabrication space, plumbing, and a process piping area.  It houses 100 union workers, including 30 plumbers.

“Southland Industries pre-fabricates components for every single project we’re on, and plumbing pre-fabrication is no exception,” said Gilbert. “The ability to work in a controlled environment, minimize jobsite waste, and reduce onsite labor is a huge advantage.”

One of the company’s most frequently used plumbing products are commercial water closet carriers. As one would expect, they’re used on every job. Dye purchases hundreds each year through local manufacturer’s representative, The Joyce Agency, based in Chantilly, VA.

“The QT QuickTurn™ closet carrier is one of dozens of Watts products we source through Kevin Cerretani at The Joyce Agency,” said Gilbert.  “Its design expedites both the prefabrication process here at the shop and the final installation in the field.”

Plumber Joe Gencavage assembles many of the carrier systems in the fab shop. There, water supply, vent, and waste water piping is cut to length, attached to the carriers, and disassembled for later use in the field.

“The enamel finish on the QT QuickTurn carrier is great, as are the no-hub vent and wastewater connections and the dual threaded boss for supply water pipe support,” said Gencavage. “For install crews, the ability to adjust the face plate left and right makes the job easier. Same goes for the side-facing carrier support legs. It’s a nicely streamlined design.”

The new carrier system was one of several new products brought to Southland by The Joyce Agency in 2019.

Partnered for growth

“We’ve had a strong relationship with Southland for 15 years,” said Cerretani, who’s been with The Joyce Agency for 29 years. “I think that has been one source of success for both companies.”

The Joyce Agency’s plumbing division provides pipe, water closet and lavatory carriers, drainage products, flush valves, plumbing fixtures, sinks, water coolers, electric tankless water heaters, safety equipment, steam components, acid waste piping and laboratory fixtures to Southland. The agency’s main facility in Chantilly has three divisions: plumbing, architectural products, and HVAC.

“We’re very happy with the Watts products and the breadth of their line, but one of the biggest advantages of buying Watts products for us comes through our relationship with The Joyce Agency,” said Gilbert.  “We can count on them to get products to us in a timely manner and provide exceptional service.”

The Joyce Agency represented a different carrier line for 23 years, switching to Watts six years ago. Cerretani has found that many of the costly options offered by other manufacturers are standard features in the Watts line.

“The epoxy coating on the carriers is one example of a Watts standard feature,” said Cerretani.  “Another feature we like on the QT QuickTurn is the O-ring seal and ABS nipple.  Pushing the nipple into place is much faster than threading the nipple into place.”

“The true superstars in the supply chain are the folks in our quotations group, the commercial inside sales group, and our warehouse personnel,” continued Cerretani.  We have an open line of communications with the folks at Southland to streamline the process of product selection, submittals, and providing the right material on time. I’m blessed to work with the professionals at Southland, as well as my Joyce Agency associates.”

“Watts and The Joyce Agency both really set themselves apart when it comes to customer service,” said Dye. “They’re the experts, and we lean on them both during the design phase and beyond.”

When it comes to 2021 industry forecasts, the most resonant word I hear is optimistic. But that word can become hollow if it doesn’t have any substance backing it up. Now I’ve read reports that residential service repair and remodel may remain constant with a slight increase in early 2021. On the other hand, according to AIA info, there is a predicted 5.7% decrease in construction spending—hotels, office buildings, recreation—for 2021, with pent-up demand leading to anticipated growth in 2022.

Mechanical Hub continues its Forecast Series with Brian Fenske, director of commercial business, Navien. According to Fenske, the outlook for the tankless looks strong as the recent southern storms “had a huge impact and pushed new units into the market because of availability.” But Fenske cautions, “Raw materials may become a factor in the future.”

Yet, today, Navien’s suite of tankless and boiler units continues to grow and improve, evidenced by the recent release of its NPE-2 (left) Series tankless water heaters and its NCB-H condensing combi boiler, NFC-H condensing fire tube combi boiler and NFB-H condensing fire tube boiler.

We sat down with Fenske recently and he talked about the state of the industry.

MH: What does the short-term economy look like as it relates to Navien?

FENSKE: I concur with the residential hopes and optimistic outlook, many housing markets remain strong, as well as the economy in general. This drives the new and existing housing and construction improvements, upgrades and replacement markets.

MH: What are some indicators you look at to determine trends, movements, etc.?

FENSKE: I watch several construction reports, mainly commercial being my responsivity and arena. Regarding commercial, nonresidential building starts fell 11% during the month of December, while total nonbuilding starts were 5% lower. This while residential starts were essentially flat over the month of December. Starts were lower in three of the four regions in December; the South Central was the only region to post an increase. For the full year of 2020, total construction starts fell 10% to close to $775 billion. Nonresidential building starts saw the steepest drop, losing 24%, while nonbuilding starts fell 14%. Residential construction starts ended 2020 up 4% thanks to strong single family activity.

MH: I read somewhere that at the rate the U.S. is distributing the vaccine, we should be back to “normal” by 2024. Perhaps that’s a bit overly dramatic, but how does (has) Navien positioned itself from the “fallout” of COVID-19?

FENSKE: Navien continues to do business as usual, as well as adjust to the new ways we all must adhere to, to perform our job and its functions. I myself cannot wait to get back to personal interactions and travel. But in the meantime our adjusted way of life and concerns for everyone’s safety has surely made our business climate a lot different.

MH: Is the only certainty heading into early 2021 uncertainty? How do you forecast and budget for such uncertainty? (Or is it fairly certain at this point during the pandemic?) (Certainly, a lot of certainty here, lol)

FENSKE: My largest concern is mostly that new start construction follows a delayed schedule. If planning is and was off 10-25% in 2020, depending on construction class, this will have a definite effect on the future. As most commercial planning and design is planned 6-18 months into the future, 2021 will surely see a slowdown as an effect of less construction being booked for the future. However, I have to and continue to remain optimistic that retrofit and design build will continue to carry the industry and look forward to a not so much dismal year ahead. Navien will continue to forecast growth in product sales and market share sticking to our plan that we will continue to succeed through our employees, partners and especially our new product offerings in 2021.

MH: Without getting overly political, does a change at the presidential level (and congress) change the outlook for your company, if at all? (Infrastructure, regulations, green energy initiatives, etc.)

FENSKE: There is always concern when there are political changes. I don’t think anyone could pick the perfect president, as well as the members of Congress. We have to watch and observe as well as participate to further the successes of our industry and country.