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Quarterly Trend Report
Window fabricators forecast strong sales
Sales
Fifty eight percent of window fabricators we spoke to in July increased window sales in April to June compared with the last three months. Eleven percent saw sales drop and 31% reported no change.The difference between the number of companies reporting an increase over those reporting a decrease is the net balance, expressed as a percentage. A positive net balance indicates growth, a net balance of zero implies little has changed.
On this basis, a net 47% of firms improved sales in the last three months (chart 1). Increases were similar across fabricators of all sizes and types. More fabricators in the North (net 65%) reported sales ahead quarter-on-quarter, compared with 43% in the South and 29% in the Midlands.
April - June 2004 sales compared with the previous three months - by size
| SIZE | Increase | Decrease | Same | Total | Base |
| Small | 57% | 9% | 34% | 100% | 53 |
| Medium | 55% | 7% | 38% | 100% | 29 |
| Large | 67% | 22% | 11% | 100% | 18 |
| Total | 58% | 11% | 31% | 100% | 100 |
April - June 2004 sales compared with the previous three months - by area
| AREA | Increase | Decrease | Same | Total | Base |
| South | 55% | 12% | 33% | 100% | 42 |
| Midlands | 50% | 21% | 29% | 100% | 24 |
| North | 68% | 3% | 29% | 100% | 34 |
| Total | 58% | 11% | 31% | 100% | 100 |
Compared with the same three months of last year, a net 38% of window companies improved sales (chart 2). Fabricators in the North and in the Midlands (net 59% and 46% respectively) were ahead of those in the South (net 17%). More small and medium-sized firms (net 42%) improved sales than large companies (net 22%). Commercial fabricators (net 58%) were ahead of trade (net 47%) and retail specialists (23%).
Mix of Business
Twenty two percent of windows and doors produced in the quarter went into conservatories (chart 3).
Stocks
A net 17% of window fabricators increased stocks compared with three months ago.
Employment
A net 19% of companies took on staff in the last three months (chart 4). Large firms and those in the North were most active.
Orders
A balance of just over one in two fabricators had fuller order books in the 3 months to June compared with the previous 3 months (chart 5). Fabricators in the North (net 68%) and medium-sized companies report the most widespread increases. Commercial fabricators in particular did well.
Capacity
Forty-eight percent of fabricators worked at capacity during April to June (chart 6).
Prices
A net 23% of window fabricators increased their selling prices in the last three months compared with the previous three months (chart 7). Increases were similar across the board with more trade fabricators reporting price increases than others.
Raw materials
A net 76% of companies reported increased purchase costs of raw materials compared with 3 months ago (chart 7). Purchase costs were up for all fabricators across the country. Looking at size of fabricator, a net 86% of medium-sized and 83% of large companies saw costs rise. All types of fabricator were affected.
Price expectations
A net 61% of window companies expect to up selling prices in the next 12 months compared with the previous 12 months. All types of firms expect to raise prices with the Midlands (net 75%) and trade fabricators (74%) ahead of others.
Investment intentions
A balance of just under one in three window companies plan to invest in machinery and buildings in the next 12 months compared with the previous 12 months (chart 8).
Outlook
Forecasts are bullish for the next 3 months compared with the previous 3 months with just under one in two window fabricators forecasting higher sales over the period. More medium-sized companies and fabricators in the Midlands (net 55%) expect to improve sales, with trade and retail fabricators also looking to grow (53%).
Sales Expectations
Expectations for the next 3 months compared with the same 3 months of last year are also strong with a net 48% of companies expecting sales to increase (chart 9). More small firms (net 55%) and fabricators in the North (net 62%) expect growth.
Prospects
A net 10% of window fabricators are more confident now than last quarter (see chart 9) but large firms and those in the Midlands were less confident about future prospects (net -11% and -4% respectively).
Profitability
Just under a net one in two window fabricators expect to improve profits in the next 12 months compared with the previous 12 months. Expectations are high across the board with small and medium-sized firms, and fabricators in the North (net 59%) notably positive about future profits.
Problems
The single biggest problem was supplier price rises, mentioned by 17% of fabricators. Fabricators were most affected by margin squeeze, poor profitability and price cutting in the market.
Comment
“The second quarter continued to be tough for many players in the trade/retail sectors,” comments Winston Duguid, Director of Bowater Building Products, who sponsor this report. “The good news is that it wasn't just the window industry that suffered; information from other direct sell home improvement market data, including kitchens and bathrooms, suggest that higher ticket home improvements in general are feeling the pinch. In a way this is precisely what the Bank of England is hoping to achieve with its higher interest rate movements. Household debt is running at an unsustainable level and needs to be corrected now rather than later - the longer it is left the more pain there will be for all of us.“Conversely public sector demand, on the back of the Decent Homes Standard, is really gaining momentum. Again this is not peculiar to windows - roofing, bathrooms, kitchens and insulation are all benefiting with lead times going out. For the first time in many years the serious public sector fabricators could be at full throttle as we enter the final quarter of this year. Housebuilders too remain relatively strong with PPG3's implementation already seeing a migration to higher density accommodation.
“The news on raw material increases is increasingly worrying. Steel has seen some horrendous increases on the back of strong Chinese demand and some shortages have occurred. More worryingly the steel mills have not negotiated on the increases that they have put through and to make matters worse have unilaterally drawn in credit terms. Oil and ethylene continue to be at high levels and the prognosis from informed individuals such as the Chief Executive of BP, Lord Browne, is that they look set to remain relatively high in the foreseeable future. Everyone in the supply chain from resin compounder to extruder, from fabricator to installer, and yes the ultimate user, consumer or registered social landlord will need to share these medium term raw material increases. One thing is for sure that the period we have now entered of higher raw materials will act as a further impetus in the increasing consolidation of extruders and fabricators that is currently taking place. In such a climate companies and brands that are built on substance are a far better partnering prospect than those that have had to discount heavily to get their market share.
“The observation of John Ruskin in 1860 has never been more poignant.” “It is unwise to pay too much, but it is unwise to pay too little. When you pay too much, you lose a little money - that is all. When you pay too little, you sometimes lose everything, because the thing that you bought was incapable of doing the thing that it was meant to do. The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better”.
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The Bowater Building Products Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by Bowater Building Products in conjunction with Fabrication and Glazing Industries. 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 1st and the 7th July 2004 across a balanced spread of size of firm, geographical area and type of fabricator. Numbers employed was used as an indication of company size. The categories are small (1-19 employees), medium (20-49) and large (over 50 employees).
© Copyright Michael Rigby Associates 2004 |
