Quarterly Trends Report

Window fabricators forecast strong sales

Sales

Thirty-six percent of window fabricators we spoke to in April increased window sales in January to March compared with the last three months. Twenty-two percent saw sales drop and 42% 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 firms improved sales in the last three months (chart 1). Fabricators in the North and Midlands (24% and 21%) increased sales in contrast to the South who saw no change. Large firms (32%) increased sales followed by medium and small fabricators (19% and 6%). More companies who make more than 300 frames a week improved. Commercial fabricators (33%) were ahead of others.

January-March 2004 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	29%	24%	47%	100%	55
Medium	39%	19%	42%	100%	26
Large	53%	21%	26%	100%	19
Total	36%	22%	42%	100%	100

January-March 2004 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	29%	29%	42%	100%	38
Midlands	42%	21%	37%	100%	24
North	35%	11%	54%	100%	37
Total	36%	22%	42%	100%	100

Compared with the same three months of last year, a net 31% of companies improved sales (chart 2). Fabricators in the North (44%) were ahead of the Midlands (29%) and the South (21%). More medium sized companies (42%) improved than small and large firms (28%). Firms who produce 125-300 frames a week saw most of the increase. Retail fabricators (35%) are just ahead of others. Thirty-five percent of companies who reported growth saw increases of 10-15% and 27% increases of more than 20%.

Mix of Business

Nineteen percent of windows and doors produced in the quarter went into conservatories.

Stocks

A net 7% of firms increased stock levels. The picture is split with the South and those who make less than 50 frames a week decreasing stocks. Medium sized firms saw no change but all others built up stock.

Employment

A net 12% of companies employed more staff in the last three months (chart 4). The North recruited most actively.

Orders

Orders increased for a net 31% of firms we spoke to (chart 5). The North (41%) was ahead of other regions. Volume of orders grew with size of fabricator. More firms who make more than 300 frames a week (59%) increased orders compared with three months ago. Trade fabricators were strongest.

Capacity

Thirty-one percent of fabricators say they worked at capacity in January-March (chart 6).

Prices

A net 9% of companies increased their selling prices compared with the previous quarter (chart 7). The North and small firms were most successful in putting up prices. Firms who make 125-300 frames a week dropped prices, others improved. More commercial fabricators increased prices.

Raw materials

The increase in selling prices does not reflect the change in purchase costs of raw materials. A net 54% of companies say their purchase prices increased in the last quarter (chart 7). The North and small and medium sized fabricators were hardest hit. But those who make less than 50 frames a week and retail fabricators also suffered.

Price expectations

Just under a net one in two expect to increase prices in the next 12 months compared with the previous year. All companies expect prices to go up, but the South (56%) and commercial fabricators (63%) are particularly set to raise prices.

Investment intentions

Just over a net one in four plan to invest in machinery and buildings in the next 12 months compared with the previous 12 months (chart 8). More firms in the South and medium sized companies plan to spend. Retail and trade fabricators are actively looking to invest.

Outlook

The outlook is healthy with a net 53% of fabricators expecting to sell more in the next three months compared with the previous three months. The Midlands have the healthiest outlook (71%) followed by the South (59%) and North (35%). More medium sized firms (74%) expect to sell more in the next quarter than small (47%) and large (42%). Fabricators who make more than 300 frames a week are most bullish (84%). Trade fabricators (78%) expect to sell more than others.

Sales expectations are also high for the next three months compared with the same time last year. A net 49% of firms interviewed expect to sell more. More companies in the Midlands, and medium sized companies expect to improve sales. But also more firms who make more than 300 frames a week expect to sell more than others (73%). Trade fabricators (59%) expect most activity but commercial and retail firms are also looking to grow.

Prospects

A net 14% of companies are more confident than they were last quarter (chart 9). The North (27%) is more positive than other regions. Medium sized fabricators (23%) are just ahead of large fabricators (21%) followed by small (7%). More fabricators who make 125-300 frames a week are positive. But firms who make less than 50 frames a week have a negative outlook (-4%). Commercial fabricators (21%) are ahead of others.

Profitability

Just under a net one in two expect to improve profits in the next 12 months compared with the previous 12 months. Expectations are high across the board but the South and medium sized fabricators are particularly positive about future profits. Firms who make more than 300 frames a week and both retail and trade fabricators are particularly positive.

Problems

Fabricators were most affected by price cutting, margin squeeze and supplier price rises this quarter. The single biggest problem was lack of skilled staff, mentioned by 22% of fabricators.

Comment

“This survey's findings are encouraging as many trade suppliers have reported a disappointing first quarter in comparison to 2003 and 2002", comments Winston Duguid, Managing Director of the UK Commercial Division of Bowater Windows, who sponsor this report. “Both the Public and New Build Sectors are relatively buoyant for the time of year but some parts of the consumer end user part of our industry are reporting trickier trading conditions. If we exclude conservatories then direct sell windows are down possibly by as much as 10% in the first quarter of 2004 against 2003. This decline is not to do with saturation but follows a similar pattern to the kitchen and bathroom direct sell market; in other words it is linked to housing transactions, consumer confidence, interest rate movements and other general macro economic stimuli rather than window industry specific issues. Conservatories seem to be in a different category as far as consumers are concerned. Consumers are purchasing conservatories whether they are moving house or not (it's genuine lifestyle). With the prospect of interest rate increases and the inevitable end of the house price boom (the only question being whether it is a hard or soft landing) it could be time to batten down the hatches on discretionary spend in one's business.

“The potential double whammy as sales stutter is input prices. The widely reported steel price hike, primarily because of China's rapidly increasing consumption is very worrying unless one's steel suppliers are very solid. Similarly, the PVCu extruders are facing substantial cost escalation with resin and other materials necessary for the extrusion process. Most extruders have pragmatically passed on some of the increases, those that haven't face a possibly much larger increase to their customers at a later stage or risk ending up in Carey Street.”

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 1st and the 8th April 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 Further information: 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