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National Profiles

Fabricatorsí sales pick up in the second quarter

Overview

“"The Celtic Tiger is roaring back,“ comments Mike Rigby, whose company produced this survey. "Forecast to grow 3.8% this year, the Irish economy is expected to outperform growth in the UK, France, Germany, Spain or Italy. The European Commission has it on course to return to growth of about 5% by 2005-6. This is a remarkable performance when you consider that 15 years ago, Ireland had a GDP per capita less than two thirds that of Britain. Now it has a higher GDP per capita than Britain or Germany.

“The signs look robust for construction too. The Bank of Ireland's chief economist, Dr Dan McLaughlin was recently quoted as saying Ireland is in the 'golden age of construction'. And the statistics, he says, more than back him up with over 200,000 employed in the construction industry. That's more than double the numbers employed in 1995. Although growth in the sector has slowed, it still achieved 4% growth in 2003.”

Sales

Twenty five percent of window and door fabricators increased sales in the three months December to February compared with the previous three months. Thirty seven percent saw sales drop and thirty eight percent recorded no change.

A useful way to look at this is by the net balance of fabricators reporting either way. The difference between the number of companies reporting an increase over those reporting a decrease is the net balance, expressed as an percentage. A positive net balance indicates growth, a net balance of zero implies little has changed.

On this basis, sales were down on the previous three months with a net -12% of fabricators reporting decreases during December to February (chart 1). Both small and large firms slipped back while medium sized companies increased sales. Connaught did better (net 14%) in the period, but other regions slipped back. Large fabricators (net -31%) and firms in Ulster and Leinster (-14% and -18% respectively) reported the most widespread slow down. A net 8% of commercial fabricators reported sales ahead of the previous three months. This contrasts with a net -22% of retail firms recording a decrease. Trade specialists saw no change.

Compared with the same three months last year the picture is healthier with a net 14% of firms we spoke to increasing sales (chart 2). A robust net 46% of large fabricators saw growth over the period, but small, small-medium and medium companies were also ahead.

A net 29% companies in Ulster and Connaught, and 13% in Leinster recorded higher sales compared with the same three months of last year. This contrasts with a net -5% in Munster seeing sales down. As with quarter on quarter sales, commercial fabricators (19%) enjoyed more widespread growth than retail (11%) or trade specialists (8%). Comparing the last twelve months sales with the previous twelve months, sales are up across the board with a balance of one in four fabricators recording an increase. Large companies (net 54%), firms in Ulster (52%), trade specialists (62%) and companies producing over 300 frames per week (61%) enjoyed most of the action. Only firms producing less than 50 frames per week were down in the last twelve months compared with the previous twelve.

Employment

A net -1% of fabricators took on less staff in November-January compared with the previous three months (chart 3). Large fabricators (8%), firms in Munster (5%) and retail specialists (2%) bucked the trend by employing more staff.

Capacity

Just over two in five fabricators we interviewed were working at capacity (chart 4).

Prices

Fabricators overall held prices in the three months to March compared with three months ago. But large firms (net -31%) and fabricators producing over 700 frames per week (net -33%) dropped them. Companies in Ulster and Munster (5%) put up prices over the three months, compared with -15% in Leinster and Connaught reporting a decrease (chart 5).

Raw Materials

As in the last survey, the movement in selling prices in the last three months is not reflected in the buying price trends (chart 5). A net 15% recorded higher purchase costs in the period, especially among small firms, fabricators in Ulster and trade specialists.

Price Expectations

Just under one in four fabricators expect to put up their prices in the next 12 months compared with the previous 12 months. Small and medium sized firms have the strongest intentions with just under half expecting to put up their prices over the next 12 months.

Installed Value

One in four of the fabricators we interviewed who install achieved less than 10,000 Euros a week per fitting team. Just under one in five achieved over 15,000 Euros (chart 6).

Outlook

Despite sales being down in the last three months compared with previous three, fabricators' expectations are strong. A net 62% are forecasting growth over the three months March to May (chart 7).

Just under half also expect sales to pick up in the next 12 months compared with the previous 12 months (chart 8). The picture is similar across fabricators of all size and type across all regions.

Investment

A net 18% of the fabricators we spoke to plan to invest in plant and machinery in the next 12 months (chart 9). Plans for investment increase with size of fabricator.

Market Prospects

Confidence reflects fabricators' strong sales expectations with a net 35% more positive in their outlook than three months ago. Small firms (net 44%) are more confident compared with other size of fabricators. Forecasts from companies in Munster (50%) are ahead of other regions. A net 46% of commercial specialists are more bullish, compared with 35% of retail firms and 15% of trade fabricators.

Profitability

In line with confidence, a net 26% of firms expect their profits to improve in the next twelve months compared with the previous twelve months. More small-medium sized firms (61%) expect profits to pick up compared with small (14%), medium (25%) and large (8%) companies. Fabricators across all regions, except Connaught which expects no change, forecast higher profits. The higher the weekly production of frames the higher expectations are for profits. Retail fabricators take a gloomier view than commercial or trade specialists.

Problems

Fabricators report the usual bug bears faced over the last three months. Problems include price cutting in the market, margin squeeze, slow payment and bad debt and a lacked of skilled staff.

The single biggest problem continues to be price cutting named as the single biggest problem by 16% of firms interviewed.

Comment

Nicholas Cotter, Managing Director of National Profiles, distributor of the WHS Halo windows system in Ireland, and joint sponsors of this survey, comments: “On time complete deliveries, high quality products, appropriate stocks to support customer growth, and flexible and reliable service are obvious essentials that fabricators require from their supplier. But equally importantly, customers need to work with a supplier who really understands the markets in which they operate. Being a fabricator in Ireland brings with it its own particular set of challenges and issues, and professional suppliers can make the difference. Fabricators need to ensure they are working with a supplier who can offer the advice and support that's relevant to the market. What works elsewhere does not necessarily translate to the Irish market.“

Sam Kennedy, Marketing Director of WHS Halo who co-sponsor this survey, reflects: “Business is about more than product and service. Successful companies know that a confident mind set and positive attitude can drive businesses forward. As the results of this survey show, although sales dipped compared with the previous three months, fabricators of all sizes across Ireland are taking the long view. They are planning to invest and confidently forecasting higher sales and better profitability over the coming twelve months. If they work closely in partnership with suppliers who have the right products and expertise they will be well placed to benefit from a reawakened Celtic Tiger.“

The National Profiles Quarterly Trend Report is produced by Michael Rigby Associates and sponsored by WHS Halo and National Profiles in conjunction with Window Industries Ireland. The aim is to keep a finger on the market pulse, and to monitor fabricators' views and expectations of market movements.

Michael Rigby Associates specialises in marketing research, PR and marketing in the window and home improvements markets.

The survey covers a representative sample of 100 window fabricators. Telephone interviews took place in March 2004 across a balanced spread of size of firm, geographical area and type of firm. Numbers employed was used as an indication of company size. The categories are small (1-9 employees), small-medium (10-19), medium (20-49) and large (over 50 employees)

Further information: Kirsten Storgaard, Michael Rigby Associates (01453) 521621 © Copyright Michael Rigby Associates 2004

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