Quarterly Trends Report

Window fabricators expect more profit in the next 12 months

Sales

Thirty-eight percent of window fabricators who took part in this survey increased sales of windows in October to December compared with the previous three months. Twenty-four percent saw sales drop and 38% saw 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 14% of companies increased sales over the three months. Companies in the Midlands and North (20% and 25%) increased sales. But the South saw no change. Medium sized firms (19%) outperformed small (15%) and large (5%) companies. Commercial fabricators saw most improvement.

October - December 2003 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	33%	18%	49%	100%	55
Medium	50%	31%	19%	100%	26
Large	37%	32%	31%	100%	19
Total	38%	24%	38%	100%	100

October - December 2003 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	29%	29%	42%	100%	38
Midlands	37%	17%	46%	100%	30
North	50%	25%	25%	100%	32
Total	38%	24%	38%	100%	100

Compared with the same time last year a net 46% of fabricators increased sales. Companies in the Midlands (59%) were ahead of the North (44%) and the South (38%). All sizes of fabricators reported growth. Firms who produce more than 300 frames a week did best. Forty-one percent of fabricators who saw growth reported increases of 20% or more.

Stocks

Stock levels went up in a net 8% of firms compared with three months ago. Companies in the South and commercial fabricators especially built up stock.

Employment

A net 16% of firms took on more staff in October to December compared with three months ago (Chart 2). Firms in the North and large companies were most active in recruiting.

Orders

A net 23% saw bigger order volumes compared with three months ago (Chart 3). The North saw most growth in volume (41%) with those in the Midlands just behind (34%). More large companies and those firms who fabricate 125-300 frames a week increased orders. Commercial fabricators were strongest.

Capacity

Forty percent of fabricators we spoke to worked at capacity in the quarter (Chart 4).

Prices

A net 12% of fabricators put up their prices compared with three months ago (Chart 5). Companies in the North (16%), medium sized companies (15%) and those who make less than 50 frames a week (18%) were most successful in hiking prices. More trade fabricators increased prices.

Raw materials

The limited increases in prices do not reflect the rise in raw material prices (Chart 5).

A net 35% of firms said their costs were higher in the last three months compared with the previous three. Companies in the South, those who produce less than 50 frames a week and retail firms were hardest hit.

Price expectations

Profit expectations are high with more than a net one in two fabricators expecting more profit in the next 12 months compared with the previous 12 months. Fabricators in the South, medium sized firms and those who fabricate more than 300 frames a week especially expect higher profits.

Investment intentions

A net 40% of fabricators plan to invest more in the next 12 months compared with the previous 12 months (Chart 6). More companies plan to spend on plant and machinery in the South and Midlands (47%) compared with the North (25%). Medium sized firms appear to be holding back. Those who produce between 125-300 frames a week expect to invest more than others.

Outlook

A net 43% of fabricators expect to sell more in the next three months compared with the previous three months. The North (59%) is more confident than the South (42%) and the Midlands (27%). Large companies (68%) expect to sell more than medium-sized (54%) and small (29%). Sales expectations grow with size of production. Retail fabricators are most bullish.

Sales expectations are high across the board for the next three months compared with the same time last year (58%). Companies in the South, small firms and those who produce between 50-125 frames a week have the highest expectations. More retail fabricators expect to sell more.

Mix of Business

Nineteen percent of windows and doors produced in the quarter went into conservatories (Chart 7).

Prospects

Just under a net one in three are more optimistic now than three months ago (Chart 8).

Prospect remain high across the board but trade fabricators (56%) are most optimistic for the next three months.

Profitability

More than a net one in two of the fabricators we spoke to expect higher profits in the next 12 months than the previous 12 months. Especially the South, medium sized firms and those who fabricate more than 300 frames a week expect higher profits.

Problems

Price cutting, margin squeeze and slow payments & bad debts were the main problems for fabricators this quarter. But the single biggest problem was lack of skilled staff, highlighted by 19% of those interviewed.

Comment

“The industry ended the year in better shape than many had feared at the beginning of 2003”, comments Winston Duguid, Managing Director of the UK Commercial Division of Bowater Windows, who sponsor this report. “The direct sell market held up better than expected for windows, and conservatories carried on with their inexorable rise, even the Iraqi conflict had little effect. The housebuilder sector saw a flat year for volumes but saw improved penetration for PVC-u; the public sector was much improved with seemingly a disproportionately high amount of spend being north of the River Trent.

“There is little evidence to suspect 2004 will be much different for demand, although the slow down in housing transactions in the second half of 2003 may lead to a lower direct sell market during 2004. Housing transactions, interest rate movements, consumer confidence and disposable income are all major influences in the direct sell market. Elsewhere the transfer of housing stock in the public sector and the implementation of the Decent Homes Standard by 2010 will remain key drivers.

“It is perhaps other issues that may dominate 2004. Some of the extrusion input prices, most noticeably resin, are reaching levels that some extruders will have to pass on. The pressure on commodities such as steel is also growing with the dramatic increase in the Chinese economy being blamed. The environment is also coming more to the fore with more attention on recycling and post consumer waste.

“Having made a voluntary commitment the UK PVC-u window industry's determination to meet that commitment is at best patchy. The targets set are real and necessary and those not taking the issue seriously enough could suffer as they find themselves left behind. 2004 will also probably see a further increase in the amount of businesses changing hands. The number of extrusion companies that the fabricator can choose from will continue to decline as acquisitions take out some of the smaller players whilst a generation of fabricating entrepreneurs that started in the industry in the eighties are looking at, and implementing, their exit strategies.”

The Bowater Windows Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by Bowater Windows Ltd 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 5th and the 8th January 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 Full report: Kirsten Storgaard, Michael Rigby Associates (01453) 521621 or download the full report from www.521621.com Quarterly Trends index Home | Terms & Conditions | Privacy policy | Contact us | Links | Site map | Search PR & Marketing | Consultancy | Market Research | News & Press | Market Information | About us © Michael Rigby Associates, 1991-2007 Michael Rigby Associates is the trading name of Michael Rigby Ltd. Registered Office: 15 Market Street, Wotton-under-Edge, Gloucestershire GL12 7AE - Registered in England no. 4690666