Sales - quarter-on-quarter

The recovery in sales appears to be continuing. A balance* of 55% of window fabricators (the difference between 60% who sold more windows and doors, and the 5% who sold less) sold more windows and doors in the last three months (July to September) compared with the previous three months (April to June).

More large and mid-sized firms (net 61%) experienced growth than small companies (50%). Those in the North (net 70%) and Midlands (61%) did better than firms in the South (39%).

Commercial, trade and retail fabricators (net 56%) all reported an improvement.

*The difference between the percentage of companies reporting an increase over those reporting a decrease is the net balance.

July - September 2006 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	58%	7%	35%	100%	54
Medium	66%	3%	31%	100%	29
Large	59%	0%	41%	100%	17
Total	60%	5%	35%	100%	100

July - September 2006 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	46%	8%	46%	100%	39
Midlands	64%	4%	32%	100%	28
North	73%	3%	24%	100%	33
Total	60%	5%	35%	100%	100

Sales - year-on-year

Sales are also recovering compared with the same period last year. A net 36% of companies sold more windows in July to September 2006 compared with the same three months of 2005 (chart 1). Mid-sized firms (net 48%) did best but large (35%) and small companies (30%) also experienced growth.

Fabricators across the country (36%) reported improvements.

A balance of 50% of retail fabricators reported better sales. Commercial (305) and trade fabricators (32%) also did well.

Stocks

A net 14% of fabricators increased stock levels compared with three months ago.

More large (24%) and mid-sized firms (17%) built up stocks than small fabricators. While those in the North (30%) and Midlands (25%) increased stock levels, 8% of firms in the South cut back.

Commercial (30%) and retail fabricators (15%) raised stocks over the period but a balance of 3% of trade firms cut back.

Employment

A balance of 6% of fabricators took on more staff compared with three months ago. Firms of all sizes increased their staffing. The North and Midlands recruited more, but 3% of those in the South cut back.

Orders

Orders are also up compared with three months ago with a net 41% of fabricators reporting fuller books. Large firms (net 53%) and those in the South (46%) picked up most.

Capacity

Forty four percent of fabricators say they are now working at capacity.

Raw materials

A net 69% of fabricators reported a rise in purchase costs of materials compared with three months ago (chart 2). Small fabricators (80%) and those in the North and Midlands (72%) were affected most.

Prices

On balance a fifth of fabricators put up prices compared with three months ago (chart 6). Small firms (26%) and those in the South and Midlands (24%) were most active in raising prices.

Price expectations

A net 55% of fabricators also expect to have put up prices in the next 12 months compared with the previous 12 months.

Investment intentions

On balance 1% of fabricators interviewed expect to spend less on new plant and machinery over the next 12 months compared with the previous 12 months. All fabricators expect to cut back with the exception of mid-sized firms (16%) and those in the South (21%) who plan to invest more.

Outlook

Expectations for the next quarter are good with a net 10% of fabricators forecasting an increase in sales in October to December compared with the previous three months. Large (net 29%) and small firms (15%) expect a rise but a balance of 10% of mid-sized companies expect sales to drop.

While trade fabricators (net 17%) expect sales to expand, retail firms anticipate no change and commercial companies (4%) forecast a fall.

On balance a third of fabricators also expect to sell more in the next three months compared with the same three months of 2005 (chart 8). Firms of all size, type and in all regions are confident that they will do better.

Prospects

A net 8% of fabricators are more confident now about the overall prospects for the window industry than three months ago.

Large fabricators (net 35%) are considerably more optimistic than small firms (6%). Mid-sized companies (4%) are less confident than three months ago. Fabricators in the South and North (11%) are positive but on balance, an equal number of those in the Midlands think things will get better as think things will get worse.

Profitability

With a pick up in sales and expectations, it is not surprising that a net 41% of fabricators also expect profits to improve over the next 12 months compared with the previous 12 months.

Companies of all size, type and in all regions are looking forward to better times.

Problems

Supplier price rises (72%), price cutting in the market and margin squeeze (68%) were the main problems facing fabricators over the last three months.

The single biggest problem over the last three months was price cutting, mentioned by 22% of those interviewed.

Comment

"There is no doubt that a greater degree of confidence has returned to the consumer trade market, particularly those selling into Southern England" comments Winston Duguid, Managing Director of WHS Halo who sponsor this report. "Rising house prices, historically low cost home improvements loans, and the increase in the number of housing transactions have all combined to give a consumer market that will be up on last year.

"The Public Sector market is much more difficult to call. A large number of schemes have gone ahead in the North of England but elsewhere central government appears to be postponing expenditure deliberately. Whether this postponement is until April 2007 or not is too difficult to call at present. The housebuilders results vary tremendously, but amongst them there should be growth in 2006 in this sector as well.

"Perhaps what is most interesting and confusing about this quarter's results are the comments about price increases and profitability. Many manufacturers are getting their price increases through to fabricators and many fabricators are getting their price up to end users, and expect profitability to increase in the next twelve months. Yet others are still cutting prices in the market place on arithmetic that just does not stack up. With raw materials now likely to be high for the foreseeable future only those players in the supply chain who are successful in passing through price can survive, let alone finance new investment."

The WHS Halo Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by WHS Halo in conjunction with The Fabricator. The aim is to keep a finger on the market pulse, and to monitor fabricators' views and expectations of market movements. The survey covers a representative sample of 100 window fabricators. Telephone interviews took place between the 5th and 17th October 2006 across a balanced spread of size of firm, geographical area and type of fabricator. For survey details or a copy of the full report call Jenny Reilly, Michael Rigby Associates 01 453 521 621. © Copyright Michael Rigby Associates 2006