Ebb and Flow

S & M Sakamoto Inc. sees sales plummet, but there's no need to worry

August, 2005

Even though his company had a 42 percent decrease in gross revenues, Gerard Sakamoto doesn’t seem very worried about the future of his business. The president of S & M Sakamoto Inc., a general contractor specializing in commercial construction, saw sales plummet from $33.2 million in 2003 to $19.2 million in 2004, the second-largest-percentage drop in the Hawaii Business’ Top 250. The decrease nearly took the company off the list, landing it at No. 245.

“It was just one of those years that we didn’t have a normal volume,” says Sakamoto. “Some of our major projects in 2004 didn’t complete as expected. There were change orders and other things that dragged on and on.”

Sakamoto, unfazed, says that that is the nature of the beast. Contractors and other construction-related business know the start date of a project, but its finish is left to the mercy of the construction gods. For medium-size construction companies like Sakamoto, which juggle several largish projects every year, delays could mean a very volatile balance sheet. Indeed, even in the middle of a construction boom, five of the top 10 and 10 of the top 20 companies with the largest sales drops in the Top 250 were construction-related businesses.

“We’re optimistic that the economy will to be strong with the continued good performance of the visitor industry and increased military spending,” says Sakamoto. “It’s a better market than it was several years ago. There aren’t too many new commercial buildings going up, so we are doing a lot of infrastructure repair and renovation work, which makes up about 20 to 30 percent of our jobs.

In S & M Sakamoto’s case, the company is already back on track. According to Dennis Ideta, Sakamoto’s vice president of finance, the general contractor has already posted $25 million in gross revenues in FY 2005 and is projected to earn the same in 2006.

“The $19 million was a blip. It took us right at our break-even point, but we’re right back where we should be,” says Ideta. “We are finishing up the City and County’s aquatics and tennis complex in Waipio, and we’re scheduled to start an intermodal facility for Handivans on Middle St.”

According to Ideta, the dip in sales wasn’t a cause for alarm because companies like S & M Sakamoto, which weathered the decade-long construction slump have learned to operate leaner and meaner. The contractor has slimmed down from a high of 100 employees in the early ’90s to 35 employees today. Much of the work is subcontracted, so any decrease in the amount of works has far less affect on the company’s bottom line.

“The kind of work we do ebbs and flows between the city, the state and the federal governments,” says Ideta. “We aren’t large and don’t intend on growing much. We’re comfortable about what happened this past year, and what’s coming up now. Who knows what will follow the year after that.”

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David K. Choo