News Column

HB 500 Persevere Through Bearish Year

June Issue

Rob Kuznia--HispanicBusiness Magazine

HispanicBusiness Magazine, 30th anniversary, hb 500, hispanicbusiness 500, 2009

For a photo gallery spotlighting HispanicBusiness Magazine's HB500 covers through the years, please
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. For extended coverage of the HispanicBusiness 500, visit www.hispanicbusiness.com/hb500.


With 2007 marking the start of the worst recession since the 1930s -- and with the annual Fortune 500 list recently reporting its worst slump ever -- it would be fair to expect the HispanicBusiness 500 suffered the same fate.

But they didn't.

Although many Hispanic-owned companies are feeling the sting of this economic calamity, the overall revenues of the nation's 500 leading Hispanic-owned firms actually went up, according to the 27th annual survey by HispanTelligence, the research arm of HispanicBusiness Magazine.

To be sure, the gain was a small 0.1 percent, with total revenues inching up to $36.15 billion from $36.13 billion the year before. Modest, yes. But in light of how earnings for the Fortune 500 plunged 85 percent, it's a surprising outcome, and a refreshing piece of good news.

On a broader note, however, the outlook isn't quite as rosy. Despite the miniscule boost in 2008, the year was really a continuation of the stagnation that began in 2007. That year, the HB 500 posted a loss of 0.5 percent. It marked just the third time the directory had witnessed a dip.

The four years before 2007 were an era of meteoric growth, with total revenues rising from $23.1 billion in 2002 to a high-water mark of $36.3 billion in 2006.

In a nutshell, this country's widespread economic downturn -- driven by the historic collapse of the automotive, banking, and construction industries -- has managed to temporarily stymie the upward ramping of the HB 500. But the bad economy has yet to send the HB 500's overall earnings significantly backward.

For the third straight year, the HB 500's top-ranked company was the aptly named Brightstar, a global telecom wholesaler.

But Brightstar's dominance is flagging. The company this year posted a dip in revenue of 2.35 percent, though it still brought in $3.6 billion, which is about $1 billion shy of the smallest company in the Fortune 500.

Medicaid Boosts Molina

Meanwhile, the HB 500's runner-up company, Molina Healthcare, the first HB 500 firm to make the Fortune 1,000 list, cut Brightstar's lead in half, posting an impressive $3.1 billion, a 24 percent increase.

Ironically, the bump is evidence of a bad economy, admitted CEO J. Mario Molina, son of founder C. David Molina. This is because Molina Healthcare serves people who are insured by Medicaid, the U.S. health program for those with limited resources. With the nation's unemployment rate hitting 8.9 percent in April, this includes a rising number of people.

"For every 1 percent that the unemployment level increases, you find another 1 million people eligible for Medicaid," Dr. Molina told HispanicBusiness Magazine. "What we're seeing is a growth on the enrollment side."

But the financial well being of Molina Healthcare is also the result of the 30-year-old company's longstanding tradition of keeping its administrative costs in check.

"You see no corporate jets here, no big off-site meetings, none of that stuff," Dr. Molina said. "I'm not criticizing companies that do that; for our company, it doesn't fit our culture."

Other companies are surviving amid unpredictable market forces. In 2007, the automotive, wholesale, and construction sectors made up nearly 60 percent of the directory's total revenues. In 2008, that amount shrank to just under 50 percent. Also, an unusually large number of firms -- 182 -- posted negative revenue growth in 2008 from the year before. That's compared to 129 in 2007, and just 60 in 2005.

Retail Takes A Big Hit

Worst hit in 2008 was the retail sector, whose overall earnings tumbled by about a third, followed by automotive, whose revenues fell by 21 percent. Layoffs hit the automotive sector hard for the second straight year. Employment in that industry fell by 23.2 percent, to about 5,050 employees. The year before, automotive employment dropped by 10 percent.

This year, 58 new companies were added to the HB 500 list; oddly, it's the same number as the year before.

But if one thing illustrates the kind of year 2008 has been, it's this: For the first time in about a decade, several companies on the HB 500 list -- seven, to be exact -- posted revenues of under $5 million.

Overall employment in the HB 500 dropped significantly for the second consecutive year, falling 2.4 percent last year to 131,894 employees. That's down from 147,465 employees in 2006, the peak of a decade-long continuous climb.

Also, the proportion of CEOs who cited market conditions as top barriers to growth jumped to 55 percent in 2008, up from 41.2 percent in 2007, and just 30.4 percent in 2006. Conversely, those citing "labor shortage" as a top barrier plummeted to 0.4 percent in 2008 from 8.4 percent the year before.
Tight Focus Aids Insurer

The surprising bright spot of this year's list was the financial sector, which posted an impressive 17.2 percent boost in revenues.

Pan-American Life Insurance Co. of New Orleans was among the successful businesses in this category, showing an 11 percent gain in revenue over the previous year, as well as a healthy 6 percent profit.

CEO Jose Suquet attributed the trend-bucking success to a sharpened focus. The company's core mission, he said, is providing work-site benefits to companies in Latin America and the United States that employ large numbers of Hispanics.

"When I got here we were doing too many things," he told HispanicBusiness Magazine. "We sold off any businesses or killed off any initiatives that didn't really fit in with our strategy."

Also showing a surprising uptick was the construction sector, which posted an 8.8 percent gain from 2007. But that might have simply been a market correction, as the construction sector in 2007 experienced a traumatic 23 percent nosedive.

One exemplar in construction this year was Dallas-based Azteca-Omega Group, which boosted revenues by 63 percent, to $87.5 million.

"Some of it is luck, some of it is skill, some of it is being positioned correctly in the marketplace," said Senior Vice President Terry Cassidy, whose company last year won a contract to install steel handrails in the new Dallas Cowboys stadium.

Energy Firms Energized

Mirroring a major movement on the Fortune 500 list -- in which Exxon Mobil dethroned Wal-Mart for the No. 1 spot -- Hispanic-owned energy companies thrived.

It was the only industry in which every one of the top 10 companies brought in more money than the year before. This is in no small part because of sky-high fuel prices, which anyone with an automobile surely remembers.

Topping the HB 500 list in the energy sector was Denver-based Venoco Inc.

To see a gallery of photographer Matt Graves' tour of Venoco Inc., please
click here


Venoco Vice President Mike Edwards said that although oil prices hit a record $147 per barrel in the summer of 2008, they dropped precipitously, to about $44 by the end of the year.

"Still, overall we had a good year," he said, adding that the company also boosted production by more than 10 percent.



Source: HispanicBusiness.com (c) 2009. All rights reserved.


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