Irish Window Market Quarterly Trends report

Sales are down but hopes are high for the next 12 months

Overview

“With the world's attention on Iraq, a split UN and a deeply divided Europe, the outlook is far from settled," says Mike Rigby, whose company produced this survey. “Although markets and oil prices stabilised once war was declared, the real cost to the economy and human life is anyone's guess.

“One of the more certain factors is that the global economy is weaker than expected, and recovery is postponed to late 2003 at the earliest. The US economy is stuttering, Germany is in dire straights, and business and consumer confidence in the UK is slipping as performance weakens. For Ireland, deeply embedded in the fortunes of the world economy, there is little cause to cheer and slim chance of a return to high growth rates. Indeed as data for 2002 becomes available it suggests that Ireland ended the year on a downward trend which continued in to the first two months of this year.

“But, not all is gloom. Interest rates at a fifty-year low may yet help to stimulate enough investment and consumer spending to kick start sluggish growth. 2003 won't be easy, but a quick ending to the war in Iraq would go a long way to easing a recovery in Ireland and the world economy.”

Sales

Twelve percent of fabricators recorded an increase in sales in the last three months compared with the previous three months. Forty-two percent saw sales drop and forty-six percent stayed the same.

A useful way to look at this is by the net balance of fabricators reporting either way. If, for example, 60% of fabricators saw an increase in sales and 40% a decrease, the net balance would be +20%. Reverse the figures and it would be a net -20%. A balance of zero implies that little has changed.

On this basis, sales were down across the board with a net -30% of fabricators reporting a drop in the three months to march. Fewer medium sized firms by number of employees (-7%) recorded a drop in sales compared with large (-20%) and small-medium sized companies (-36%), see chart 1.

Looking at company size by volume of frames manufactured, only firms producing between 300-700 frames a week recorded increased sales. A net -8% of companies in Ulster saw sales fall compared with Connaught (-20%), Leinster (-36%) and Munster (-48%). Retail companies (-38%) were worse hit than commercial (-22%) and trade firms (-13%).

December 02-February 03 sales compared with the previous three months by size of firm

SIZE(by no. of employee)	Increase	Decrease	Same	Total	Base
Small(1-9)	4%	38%	58%	100%	50
Small Medium(10-19)	15%	54%	31%	100%	26
Medium (20-49)	29%	36%	36%	100%	14
Large (over 50)	20%	40%	40%	100%	10
Total	12%	42%	46%	100%	100

December 02-February 03 sales compared with the previous three months by region

AREA	Increase	Decrease	Same	Total	Base
Ulster	24%	32%	44%	100%	25
Munster	0%	48%	52%	100%	21
Leinster	9%	46%	45%	100%	44
Connaught	20%	40%	40%	100%	10
Total	12%	42%	46%	100%	100

The picture is less severe compared with the same three month period last year, although a net -11% of those we spoke to recorded a drop. Small firms were the hardest hit. Medium sized companies recorded increased sales and large firms saw no change. Looking at size by number of frames the lower the weekly output the harder hit companies were. Ulster was the only region recording year-on-year growth (36%). Trade fabricators bucked the trend and recorded growth but others reported a drop. Retail firms saw the biggest fall.

Compared with the gloomy quarterly performances, sales in the last twelve months as a whole compared with the previous twelve are positive across the board. A balance of just over one in four fabricators recorded growth. Small-medium sized firms (54%) did better than medium sized companies (43%). Ten percent of small and large companies also recorded increases. Sales were stronger in Ulster (44%) and Connaught (40%). The bounce-back was weaker in Munster (29%) and Leinster (11%). More firms with a weekly output of 300-700 frames (60%) grew sales over the twelve months, as did those with a weekly production of 125-300 frames (50%).

Employment

Staff levels droppped (-2%)in the last three months compared with the previous three. The picture is split with small-medium (4%) and medium (7%) taking on staff in contrast to small (-4%) and large firms (-20%) who cut back.

Capacity

Just thirty-five percent of fabricators say they are working at capacity.

Prices

A balance of under one in twenty fabricators increased prices compared with three months ago. But many more had to absorb higher buying prices (see chart 2). More small-medium firms put up prices compared with large companies (-20%) who cut prices. Connaught, Munster and Ulster (net 20%, 14% and 4% respectively) raised prices with only Leinster (-5%) out of line. Firms producing 300-700 frames a week were most successful in hiking prices. Retail fabricators managed increases compared with commercial fabricators who dropped their prices over the quarter.

Raw Materials

Just under two in five fabricators had to pay more for their materials compared with three months ago, (chart 2). Small companies were most affected. More fabricators in Connaught suffered cost increases then elsewhere. Only 6% of trade fabricators recorded higher costs compared with a balance of more than one in two retail specialists.

Price Expectations

One in three window companies expect to increase prices in the next twelve months compared with the previous twelve. Small (46%) and large firms (40%) expect to be the most active. More companies in Munster and more retail fabricators expect to hike prices.

Value Installed

Twenty four percent of fabricators who install achieved average installation vaues of more than 15,000 Euros, as seen in chart 3.

Outlook

Sales may have been down in the last three months, but expected sales in the next three months are high with a net 56% of firms expecting to sell more (chart 4). There are only small differences between size of firm. In Connaught a net 90% forecast growth followed by Ulster (64%), Munster (52%) then Leinster (46%). Companies who produce in excess of 300 frames a week expect to do best. A net 75% of trade fabricators expect better sales compared with retail (64%) and commercial fabricators (38%).

A balance of one in five expect higher sales over the next 12 months compared with the previous 12 months. Medium sized companies (57%) are most buoyant. Fabricators in Ulster are most positive (52%) in contrast to Leinster where a net -5% expect sales to fall in the next 12 months. Firms producing more than 300 frames a week are most optimistic. A net 69% of trade fabricators expect to grow compared with 16% of commercial and 10% of retail specialists.

Investment

A net 13% of fabricators plan to spend more on equipment in the next twelve months compared with the previous twelve. Medium sized firms have the strongest investment plans. Fabricators in Ulster and Leinster plan to invest, but fabricators in Munster and Connaught plan to cut spending. (See chart 5)

Market Prospects

Confidence is lower than three months ago with a net -4% less positive in their outlook. Medium sized companies remain positive while large firms see no change. But small and small-medium sized companies are more negative than they were three months ago. Munster is positive but Connaught takes a negative view. Only trade fabricators are more optimistic (31%).

Profitability

More than a net one in five expect their profits to pick up in the next twelve months compared with the previous twelve. The larger the company the more widespread expectations are for increased profits. No drops in profit are expected by those producing more than 300 frames a week. The regions are split again with Ulster (48%) ahead of other regions. Leinster is the only region to forecast a drop in profits. Trade fabricators are most positive.

Problems

Price cutting, margin squeeze and lack of confidence in the market were the main problems in the last three months.

The single biggest problem was low sales volume and price cutting in the market, both mentioned by 17% of respondents.

Comment

Nicholas Cotter, Managing Director of National Profiles, distributor of the WHS Halo window system in Ireland, and sponsor of this survey, comments “The supply chain is an ever present issue for fabricators in Ireland. Without an effective Irish supply base lead times are longer and more variable, the cost of shipping has to be factored in, and the consequences of order errors or out of stock situations far more important. In good times and bad the supply chain can make trading more difficult than it should be. Fabricators dealing direct with overseas suppliers may also find a lack of understanding of the Irish market a serious handicap. Good stock levels, reliable deliveries, close and attentive relationships and a good market understanding are the foundations of any good business.”

Sam Kennedy, Marketing Director of WHS Halo who co-sponsor this survey, comments: "There is much talk of market saturation in the UK replacement window market, but the situation in Ireland is little different. When most of the timber and aluminium windows that can be replaced have been replaced by longer lasting PVC, what then? Only the most attractive, secure and highest performing windows will persuade homeowners to take out their older PVC windows. And that's a call for windows with Esthetique."

The National Profiles Quarterly Trend Report is produced by Michael Rigby Associates and sponsored by WHS Halo and National Profiles in conjunction with Window Industries Ireland. The aim is to keep a finger on the market pulse, and to monitor fabricators' views and expectations of market movements. Michael Rigby Associates specialises in marketing research, PR and marketing in the window and home improvements markets. The survey covers a representative sample of 100 window fabricators. Telephone interviews took place between the 7th and 13th March 2003 across a balanced spread of size of firm, geographical area and type of firm. Numbers employed was used as an indication of company size. The categories are small (1-9 employees), small-medium (10-19), medium (20-49) and large (over 50 employees) © Michael Rigby Associates, 2003 For further information contact Kirsten Storgaard on (01453) 521621.