Summary
• Fire door label sales were up 35% in the first quarter.
• Two problems are rising costs and slow payments.
• Prospects in the residential door market are uncertain.
• Bespoke joiners are faring better than mass market producers.
With little recovery in the housebuilding market expected before 2013 – and that, according to the latest forecast from the Construction Products Association, will be only modest growth – joinery manufacturers are facing another couple of tough years.
Bespoke producers are finding it slightly easier than the mass manufacturers, who are so dependent on the new housing market, but everyone TTJ spoke to this week admitted that the market was far from rosy.
One piece of good news from the British Woodworking Federation is that fire door label sales are 40% ahead of expectations. “We expected another drop but we’re actually ahead of where we were last year,” said chief executive Richard Lambert.
First-quarter sales were 35% up on 2010 and Mr Lambert expects a 25% improvement over the whole year.
However, the rest of the joinery market remains tough and Mr Lambert said the sector had moved from being “cautiously optimistic to being just cautious”.
After what for many had been the slowest first quarter they could remember, things had picked up slightly but businesses remained under pressure.
“A lot of people are having to work really hard to get work; they’re under pressure with what they’ve got; and there’s not a lot coming down the track,” said Mr Lambert.
Since the start of the year, 20 BWF member companies have ceased trading, either voluntarily or through being forced out. That compares with 38 for the whole of last year, and around 9-12 in the heydays of 2006-2007.
However, Mr Lambert was quick to point out that “it’s not gloom and doom; no-one is thinking it’s going to collapse around us” but “nothing is easy”.
Cash flow problems
Adding to joiners’ concerns are rising costs and late payments by some customers.
“The whole cash flow issue started to sharpen in the first quarter,” said Mr Lambert. “And banks are much tighter on credit and overdrafts. You hear all this stuff from banks that they’re working to help small business but the people I talk to don’t see it.”
Added to this is price pressure from housebuilders and distributors. After the Egan Report in 1998 supply chain management and integration improved but since the recession, contractors had “reverted to type”. “They’ve gone back to squeezing things as hard as they can,” said Mr Lambert.
While one contact said that in the window market the mass manufacturers were “suffering like hell”, his order books were good, although tighter finance meant some customers were slower to commit.
He and others agreed that, although the market is difficult, quality timber windows are always in demand and those companies that had diversified in terms of products or customer base had sustained a better level of business.
Sales drive
They were also putting a lot of energy into getting business. “We’re working hard from a sales point of view to keep on what we’re doing, exploring every avenue,” said one joiner. “Every minute of every day we’re turning over stones and seeing what’s under there. So we’re optimistic for ourselves because we’re doing all the right things, but the market generally is still very poor. We need a surge in housebuilding.”
Those that relied on the large housebuilders were finding it harder to push through cost increases but several bespoke manufacturers said they had successfully passed the increases on to customers.
“You’re scared of losing market share, and we’d absorbed a lot of costs but at the end of last year we decided, if we lose market share, so be it – make sure we put the prices in right; if people go away because we’re too dear we’ll have to scale back accordingly. And fortunately, because we’re doing a lot on marketing and sales, it’s not really affected us,” one contact told TTJ.
Margins tight
Some architectural joiners reported that work had picked up slightly but the orders – and the margins – were small.
“Each year we could do with one large job and fill it in with bits and pieces, but at the moment we only have the bits and pieces; there’s no really large job and none in the pipeline,” said a contact.
Joiners in the sector were “scratching around for their own survival”, he said, and some were cutting their prices to dangerously low levels.
Interest rates
He was concerned that any interest rate rise later this year may make customers more cautious with their money, but a window and door producer thought higher interest rates were exactly what the sector needed.
“We need interest rates to go up a bit so it improves sterling’s position against the euro. And with a higher interest rate banks will relax lending rules and get the housing market moving a bit,” he said. “The rate needs to go up half a point to get confidence in sterling and then it will help people like us who are buying locks and door blanks from Europe.”
But with little prospect of an improvement in the housing market or the economy – and the effects of the public spending cuts still to be felt – the joinery market is expected to remain difficult next year. One contact tried to be philosophical: “It’s anyone’s guess; there are so many imponderables. I can only do what footballers tell you – take one day at a time.”
