Irish Window Market Quarterly Trends report

Modest hope for improving sales

Overview

“The Irish economy is not doing well compared with The Celtic Tiger years, but compared with elsewhere the figures make good reading,” says Mike Rigby, whose company produced this survey. “Ireland had the highest annual inflation rate in the Euro zone in July at 4.2% compared to the average of 1.9% and it's expected to remain above the euro average this year and next year, as is output.”

“Growth is forecast to be 3.4% this year and 4.7% next year in real GDP terms. Industrial production rose 4% in June, bringing the rise in the three months April-June to 3.7% on the previous three months.”

“Public finances have deteriorated on the basis of high expenditure growth and a modest tax return over the first half of 2002.”

“Ireland's social partnership agreement, the national triennial wage-setting deal is also under scrutiny. Widely regarded as the basis for the Celtic Tiger economic boom it succeeded in bringing stability and attracting foreign investment. In the last two years cracks have appeared in the partnership and it no longer seems to be working.”

“The better prospects for Irish growth forecast for 2003 depend on a recovery in world trade volumes and in strong growth in the major economies. This is beginning to look less likely particularly if America picks a fight with Iraq.”

Sales

Twenty-eight per cent of fabricators recorded increased sales in the last three months compared to the previous three months. Twenty-two per cent decreased sales and 50% 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 sales were more muted with a net 6% of fabricators reporting increased sales in the three months to June. Small and medium-sized firms by number of employee and weekly production recorded decreased sales in the period while large and small-medium sized companies reported an increase.

Companies in Ulster (net 39%) are ahead of all other regions. Net -6% of firms in Munster and Leinster saw a drop while fabricators in Connaught saw little change. Retail specialists (11%) are ahead.

April-June 2002 sales compared with the previous three months by size of firm

SIZE	Increase	Decrease	Same	Total	Base
Small	24%	25%	51%	100%	55
Small Medium	35%	23%	42%	100%	26
Medium	0%	20%	80%	100%	10
Large	67%	0%	33%	100%	9
Total	28%	22%	50%	100%	100

April-June 2002 sales compared with the previous three months by region

AREA	Increase	Decrease	Same	Total	Base
Ulster	46%	8%	46%	100%	26
Munster	27%	32%	41%	100%	22
Leinster	19%	26%	55%	100%	42
Connaught	20%	20%	60%	100%	10
Total	28%	22%	50%	100%	100

Year-on-year the picture is more subdued. A net -15% of fabricators reported a decrease. More small-medium sized companies (net -31%) recorded a drop in sales than small firms (-13%) and fabricators employing more than twenty people, who saw little change. As with quarter-on-quarter sales fabricators in Ulster (net 12%) witnessed improved sales compared with all other regions who recorded a drop. Munster and Leinster (net -27%) recorded the most widespread decrease. Companies producing in excess of 300 frames per week (40%) are ahead of all other size of company who reported a drop in sales.

Taking the last twelve months against the previous twelve months a net -9% of fabricators reported a fall in sales. Medium sized firms bucked the trend with a net 30% recording growth in the period. This compares with large firms who saw little change and small-medium and small companies who recorded a drop. Fabricators in Ulster (23%) reported increased sales compared with those in all other regions who saw sales fall. Firms producing in excess of 300 frames per week saw sales increase compared with those producing less than that. Commercial and trade specialists recorded an increase in sales compared with retail firms who suffered a drop (-25%).

Employment

A net 6% of fabricators reported an increase in their number of employees in the last three months compared with the previous three. Large fabricators (44%) were most active compared with small and medium sized companies (6% and 10% respectively) and small-medium sized companies who lost staff. Firms in Ulster (15%) are ahead of those in Leinster (7%), Munster where fabricators reported little change and Connaught where firms decreased staffing levels. Fabricators producing over 300 frames per week and those producing between 50 and 125 frames per week are more active than all other size of firm whose employment levels fell.

Capacity

Just less than one in two fabricators are working at capacity.

Prices

A balance of just under one in ten fabricators raised prices in the three months to June. Small and small-medium sized firms (net 12%) put up prices compared with medium and large fabricators who held their prices. The picture is similar across all regions. Commercial and retail specialists (12% and 9% respectively) reported a rise compared with net -9% trade fabricators cutting their prices.

Raw materials

Overall a balance of just under one in two fabricators had to pay more for their materials in the three months to June compared with the previous three months. Small firms were subject to the most widespread increases. Companies in Leinster and Munster (62% and 59%) reported an increase compared with a net 50% of fabricators in Connaught and 12% in Ulster. None of those interviewed in Munster and Connaught recorded a fall in costs. Commercial fabricators (55%) were hit more than retail and trade fabricators (43% and 18% respectively).

Price Expectations

A net 36% of fabricators expect to up their selling prices in the next twelve months compared with the previous twelve. Large and small firms (44% and 40% respectively) give the strongest forecasts for price increases. More companies in Leinster (50%) expect to put up their prices with none of those interviewed in the region expecting a drop.

Value Installed

Fifteen per cent of fabricators who install, reported an average installation value of between €10,000 and €11,000 per week per fitting team in the last three months.

Outlook

Overall expectations are high with a net 28% of fabricators forecasting higher sales in the next three months compared with the previous three. Significantly more fabricators employing more than ten people expect improved sales compared with firms employing less than ten. Companies in Munster (50%) are most bullish about sales. The larger the company by weekly production the more widespread the expectation for growth with no fabricators interviewed producing more than 125 frames per week forecasting a drop. More trade specialists (55%) forecast increases compared with retail and commercial fabricators (32% and 14% respectively).

A balance of just under one in five fabricators expect higher sales in the next twelve months compared with the previous twelve. The larger the company the more widespread the expectations. Ulster (net 39%) is more bullish than other regions. Fabricators in Connaught expect little change. A net 46% of trade specialists are budgeting for an increase in sales compared with 22% of commercial fabricators and 7% of retails firms.

Investment

A net 18% of fabricators plan to spend more on equipment in the next twelve months compared with the previous twelve. Medium sized firms reported the strongest investment plans . Fabricators in Connaught (net 40%) plan to invest more than companies in Leinster (29%), Ulster (19%). Companies in Munster (-14%) expect to cut investment spending. The larger the company by weekly production the more widespread the expectation for increased spending. More trade specialists (46%) plan to invest compared with retail and commercial firms (18% and 10% respectively).

Prospects

There was little change in optimism in the last three months compared with the previous three. Large companies (67%) are the most optimistic compared with three months ago (-20%). Regionally the picture is similar but confidence fell in Connaught. Only retail specialists are more optimistic.

Profitability

A balance of 14% of fabricators expect their profits to pick up in the next twelve months compared with the previous twelve. The larger the company the more widespread the expectation. Firms in Ulster (net 39%) have the highest expectations. In contrast -7% of firms in Leinster forecast a drop in profits (-7%). Significantly more trade and commercial fabricators expect to improve profits than retail specialists (2%).

Problems

Fabricators reported margin squeeze, price cutting in the market and slow payments and bad debts as their main problems in the last three months.

The single biggest problem was price cutting.

Comment

Nicholas Cotter, Managing Director of National Profiles, distributor of the WHS Halo window system in Ireland, and sponsor of this survey, comments: “The slowdown has been felt across the board in building activity and home improvements. Large groups such as Grafton, owners of Chadwicks and Woodies in Ireland have offset the slowdown by expanding rapidly in the UK where it now has more than 200 merchant outlets. Those who are focused solely on the Irish market felt the impact more severely.”

“But, as the survey shows, while fabricators are down compared with the same period last year, the market has picked up compared with the previous three months. Expectations too are brightening with fabricators seeing a better performance in the coming months. As ever in Ireland, the flexibility and quality of supply will be a critical factor in enabling fabricators to exploit the upturn to the full.”

Sam Kennedy, Marketing Director of WHS Halo who co-sponsor this survey, comments: “Forecasting is a fickle business. Most of the events that make a big difference and will wedge the market up or down are outside our control. We have no influence on the events that drive the US and little enough on Europe's economy. But we are not dried leaves in the high wind. What we sell, how we price and sell it has a major - and in fact - the deciding influence on how well we do. The decisions we take decide our future. Choose commodity products with no USPs or reasons to buy them in preference to another and you face even more price pressure. Fabricators need every advantage that's going in a downturn - the best products and the best service to ensure you come out on top.”

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 19th July and 7th August 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, Michael Rigby Associates, tel (01453) 521621.