A surge of purchasing activity at the end of last year surprised many people in the wood machinery sector but provided a welcome boost to business prior to the new year. Strong demand for equipment persisted throughout January and quotation levels remained high, although some manufacturers and suppliers said they noticed this fall away gradually throughout February.
However, one contact said that, as the end of the financial year looms for some firms at the end of January, it is not uncommon for a flurry of spending to occur, followed by a dip in February. ‘The market can fluctuate periodically all the way up to April, when accounts become due again,’ he said.
Demand for wood finishing equipment in Ireland shows no signs of flagging, with one contact identifying it as a big growth area for his company thanks to a policy of ‘supplying the right equipment with the right service and back-up as well’.
Describing the impact of the festive upturn as ‘phenomenal’, a supplier gave his thoughts on how the bonanza came about. He said his company had held three key board meetings in September, October and November last year. At the first, it was decided to put everything ‘on hold’ while the markets absorbed the shock of the terrorist attacks in the US; in October, when the US was attacking Afghanistan in a campaign of unknown duration, the future remained too uncertain for the board to change strategy; but by the third meeting, money was finally released for spending.
Boom in orders
He believes this effect, replicated across many sectors of UK industry, resulted in the boom in orders for wood machinery. ‘The market went absolutely bananas and it wasn’t just us, colleagues in the trade have cited the same effect,’ said the supplier.
Some equipment manufacturers based in countries that have signed-up to the euro are reported to be struggling a little, perhaps because of a stiffer competitive environment brought about by a new level of transparency in financial transactions. ‘Generally speaking, the market is positive, even though most of the suppliers in Europe are suffering a bit,’ reported one contact whose firm is active in the European markets. ‘We are taking steps forward to continually improve and obtain market share.’
Another contact, who invested a significant sum in purchasing a wood machinery company last year, said its profitability had been so good that he had already made his money back. ‘We are doing OK. We’re doing a lot of export work and we are really, really busy on spare parts and consumables. We are getting faxes nearly every day for parts. The UK market is quite good for us because we have kept ourselves very flexible – and I think that is the battle. If you are not flexible, you cut your chances of making a sale, pro rata.’
Spare parts services, described as ‘easy money and good profit’ by another contact, have proved to be a lifeline for many companies experiencing weak demand for new equipment – a fact not unnoticed by larger manufacturers on the Continent, who are said to be knocking out machines at close to cost price, with the eventual aim of making a killing on spares. The contact said that, in this respect, the behaviour of some machinery makers is beginning to resemble that of car manufacturers.
Aggressive climate
Suppliers of finishing equipment to the UK joinery sector are likely to see positive effects from the fact that fewer people can afford to move house and are choosing instead to renovate their existing property, it is reported, but generally, most manufacturers are gearing themselves up for a ‘very aggressive’ business climate in 2002.
One contact, who said he had a good year last year, disputed the claims of some in the industry that orders currently abound. He believes the market, in terms of actual purchasing, is flat. ‘There are a lot of people talking and doing an awful lot of running around trying to find out how they can make production better but very few are getting the authorisation to spend at the moment. It is not that the business is going anywhere else, people are just not placing orders. All this rubbish the government keeps putting out isn’t reflected in confidence among machinery buyers, certainly.’
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“Some equipment manufacturers based in countries that have signed up to the euro are reported to be struggling a little, perhaps because of a stiffer competitive environment brought about by a new level of transparency in financial transactions” |
He added: ‘I think generally it is quiet but it depends what you can turn your hand to. We have the new side, spare parts, consumables, second-hand, re-building and repair work, so there isn’t a bit of the market we can’t get something out of.’
One contributor stressed the importance of investing in the provision of efficient service and deliveries in order to maintain a competitive market position. ‘You put your money where your mouth is. We have a showroom set up and, importantly, we maintain stock, so that we can provide next-day delivery. If you are prepared to invest in having machinery sitting here, people will buy it.’
Engaged in a similar investment strategy, another contact said customers had reacted very positively to his new showroom and were visiting on a regular basis, giving him a chance to impress them with his set-up. ‘We see a very positive future. There is an impression in the market that most of the difficulties affecting trade won’t set themselves right with the world until about June, although we are still seeing a very positive trend on enquiries and sales.
‘Government statistics and other data say that there has been a good rise in the output of kitchen makers and people like that and all this should translate through to more furniture being sold and, ultimately, more machines,’ he added.
Promotions
Realising that effective marketing and after-sales services were likely to be even more important in sustaining future profitability, a number of manufacturers are increasing their investment in promotional activities. ‘You can’t just sell from leaflets,’ said one. ‘And people don’t want to wait six or eight weeks for a £40,000 machinery order anymore.’
A UK-based agent for an overseas machinery maker said his firm still benefited significantly from favourable exchange rates on some transactions, rendering imported equipment cheaper than UK-made alternatives. He added that the advent of the euro had made business a lot easier. ‘In the past, UK buyers trying to work out how much a machine cost by weighing so many million lira against so many Deutschmarks resulted in a lot of confusion,’ he explained. ‘When we dropped out of the ERM the pound went strong against the lira and weak against the Deutschmark and suddenly there was a 40% price difference. Now we have a euro price on our side and a euro price on their side and any currency fluctuations that do occur between the pound and the euro affect the Germans just as much as the Italians. That difference can never arise again and it is a tremendous bonus for us.’
The majority of machinery suppliers may have accepted the euro with good grace but a lot of their customers are apparently more reluctant, preferring to have prices quoted in sterling if given an option. The agent said he always offered a machinery price in euros too, to give customers the advantage of the exchange rate on the day of the deal. ‘If the exchange rate has gone the right way for the customer, he gets it cheaper; if it has gone the wrong way, he pays a little bit more. It’s down to his timing.’
Wood machinery manufacturers are looking forward to Woodmex – one of the highlights of the year for the industry – which takes place from November 17-20.
A Woodworking Machinery Suppliers Association spokesperson said the show was ‘absolutely booked out and being anticipated very positively’ by the trade.
