Irish Window Market Quarterly Trends report

Better Times Ahead

Overview

“'The Celtic Tiger' was running out of steam well before the events of September 11th last year as the US and world economies faltered and slowed,” says Mike Rigby, whose company produced this survey. “The close relationship between the US and Irish economies create Irish boom time when the US powerhouse storms ahead, and swift and painful adjustments, particularly in IT, when the US stutters to a halt. GDP growth of 10.5% in 2000, dropped to 4.4% in 2001, and could fall to 3.9% this year. Unemployment is forecast to exceed 5%, averaging 4.7% for the year.”

“While this sounds like gloomy news for Ireland, it is a softer landing than many anticipated, and growth is still high compared to other more mature economies. With the US now getting quickly into its stride again, Ireland should soon feel the benefits. Indeed some firms are already on the rebound and looking to grow fast again.”

“The introduction of the Euro in January, the investigation of drug company Elan's accounting practices and its share price woes, and the fraud at Allied Irish Bank ensured that 2002 started with a bang. All three could have far reaching repercussions. But one thing is certain. Ireland is now a very different economy from ten years ago. It's more mature, attractive, confident and robust, better able to cope with adversity, attractive to investment from the US and the EU. A return to growth will start from a higher and stronger base than before. That's good news indeed for fabricators and installers.”

Sales

Nineteen per cent of fabricators reported increased sales in the three months to February. Fifty per cent recorded a decrease and 31% 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, overall just more than three in ten fabricators reported decreased sales in the last three months. The picture is similar across all sizes of company except medium sized firms who reported an increase (net 9%). Fabricators in the South recorded a more widespread drop in sales (net -38%) than those in the North (-9%). Commercial fabricators saw little change in sales compared with retail firms (-42%) and trade specialists (-29%) who recorded steep drops.

Dec-Feb 2002 sales compared with the previous three months by size of firm

SIZE	Increase	Decrease	Same	Total	Base
Small	12%	46%	42%	100%	50
Small Medium	21%	61%	18%	100%	28
Medium	36%	27%	37%	100%	11
Large	27%	64%	9%	100%	11
Total	19%	50%	31%	100%	100

Dec-Feb 2002 sales compared with the previous three months by region

AREA	Increase	Decrease	Same	Total	Base
Ulster	35%	43%	22%	100%	23
Munster	18%	41%	41%	100%	22
Leinster	14%	59%	27%	100%	44
Connaught	9%	45%	46%	100%	11
Total	19%	50%	31%	100%	100

Year-on-year the picture is not so stark with a net -4% of fabricators reporting lower sales. Smaller fabricators suffered more than larger firms. Trade fabricators (net 12%) are ahead, with retail specialists recording the most widespread decreases (-12%).

Comparing the last twelve months as a whole with the previous twelve months the picture is more positive again. Overall a net 43% of fabricators interviewed reported a rise in sales in the twelve months to February. Medium and large outlets (net 68%) did better than small and small to medium sized companies (36%).

Firms in Munster, Ulster and Leinster (55%, 52% and 41% respectively) are ahead compared with companies in Connaught (9%). More trade specialists (net 82%) and commercial specialists (60%) grew sales than retail firms (24%).

Employment

Overall a net -5% cut staffing levels compared with three months ago. Large companies (net -46%) cut back compared with medium sized companies (36%) who took on more staff. Regionally there was little difference in employment trends although firms in Munster (14%) were more buoyant.

Capacity

Thirty-seven per cent of firms interviewed are working at capacity. More commercial fabricators (net 45%) and retail firms (net 41%) are working at capacity than trade specialists (12%).

Prices

Overall a net 5% of fabricators put up their prices in the three months to February. Small firms lifted their prices (8%) while large and medium sized companies cut back or held prices. Trade fabricators (net -12%) reduced selling prices while retail fabricators (14%) increased them.

Price Expectations

A balance of two in five fabricators plan higher prices in the next twelve months compared with the previous twelve. The smaller the company the more widespread the expectation of increased prices. More than twice as many firms in the South (net 46%) expect to up prices compared with fabricators in the North (22%). Commercial and retail specialists forecast increased prices (net 46%) while trade fabricators (0%) expect little change.

Raw materials

A net 41% of fabricators reported an increase in the purchase cost of materials compared with three months ago. The picture is similar across company size and region. Retail specialists and commercial firms saw buying prices rise more than trade specialists.

Value Installed

Fifty-eight per cent of fabricators who install, reported an average installation value of under 3,000 Euros per week per fitting team in the last three months. Just under twenty per cent installed over 8,000 Euros.

Outlook

Looking ahead, a balance of more than three in five fabricators expect increased sales in the next three months. Firms in Munster are more bullish with a net 82% forecasting growth compared with Ulster, Leinster and Connaught (57%, 52% and 64% respectively). The picture is similar across size of company. Trade fabricators are also more bullish (77%) than retail or commercial companies (59% and 50% respectively).

Taking the next twelve months as a whole a net 19% of those interviewed forecast sales growth. Expectations are strongest in Munster (net 36%) in contrast with firms in Connaught (-27%) who forecast a drop in sales. More trade specialists (net 53%) expect sales to increase in the twelve month period to February 2003, than commercial (25%) or retail firms (10%).

Investment Intentions

A balance of just under one in five fabricators plan to invest more in the next twelve months. The larger the company the more widespread the intention. More commercial fabricators (net 25%) plan to invest than trade and retail companies (18% and 14% respectively).

Prospects

Overall a net 10% of companies interviewed are more confident now than three months ago. Firms in the South (net 14%) are more bullish than those in the North (-4%). Commercial firms (35%) are more optimistic than trade or retail specialists (-6%).

Profitability

A balance of just over one in ten firms interviewed expect profits to increase in the next twelve months. The larger the company the more widespread the expectation. Fabricators in Ulster and Munster (net 27%) are more confident profits will increase than companies in Leinster and Connaught (5% and -9% respectively).

Problems

The main problems faced by firms over the last three months are low sales volume, price cutting in the market and squeezed margins.

The single biggest problem experienced by fabricators in the last three months was price cutting.

Comment

Nicholas Cotter, Managing Director of National Profiles, distributor of the WHS Halo windows system in Ireland, and joint sponsors of this survey, comments: “Ireland's economy took a bit of a battering last year, but the country is preparing to get back on track as the global economy picks up. Still, Ireland was not as badly affected in 2001 as some had feared.”

“Now as the US economy bounces back more quickly and more strongly than anyone had hoped, expectations of a return to faster growth seem quite reasonable. This is reflected in fabricators' recovering confidence and their investment forecasts for the next twelve months.”

Sam Kennedy, Marketing Director of WHS Halo who co-sponsor this survey, reflects: “In quieter times and during recession marketing is often the first to go. And when times get really tough quality of product and service are next in line. Yet those who cut back and compromise to gain a little in the short term run the risk of leaving the field to their more active competitors who make up ground fast when better times return.”

“Supplying attractive products that meet homeowners wants, rather than just their needs is the key to long term profitable growth. Wants not needs drive consumer spending. Needs and 'have-to-buy' products are focused on price. But when we want something we persuade ourselves that what we want is worth every euro of the premium asked. Contrary to popular belief wants are a far better bet than needs when we have to compete for a share of the consumer's wallet. Look to your products and look to their wants.”

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 8th and the 13th March 2002 across a balanced spread of size of firm, geographical area and type of firm. Numbers employed was used 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, 2002 For more information contact Helen Ahern on (01453) 521621.