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Confidence stays high for timber windows
Overview“The World economy continues to look strong as we enter the second quarter of 2007,” says Mike Rigby, whose company Rigby Research produced this report. “Japan, the world’s second largest economy, is growing more quickly than expected. Australia’s economy is beginning to pick up too. The US is also looking stronger. Although the US housing market and house building is weak, strong consumer spending should continue to support growth.”
“In the UK, three interest rate rises since August have cooled the housing market enough to stabilise house price inflation. Debt levels and house prices affect the decisions consumers make and their confidence in the economy, but with prices stabilising, confidence should return.”
“Strengthening consumer confidence means that home improvements should do well, which is good news for timber windows which add to the aesthetics of a home and can add value to a property. With more homeowners staying put and improving their homes rather than moving, 2007 should be a good year for timber.”
SalesA net* of 35% of timber window manufacturers increased sales in the last six months (September 2006 - February 2007) compared with the previous six months (March - August 2006) - see chart 1. Ninety-three percent of those reporting a rise saw growth of 10% or more. Mid-sized firms (net 44%) did best but small and large companies (33%) also improved. Manufacturers in the South and Midlands (net 42%) saw growth as did 22% in the North.
* The difference between the percentage of companies reporting an increase over those reporting a decrease is the net balance.
A balance of 41% of manufacturers also reported better sales in the last six months compared with the same six months of the previous year (chart 1). Eighty-four percent of those who sold more reported growth of 10% or more. Large firms (net 59%) did better than small and mid-sized manufacturers (37%). By region, those in the South (net 52%) did better than those in the North and Midlands (33%).
September 2006 – February 2007 sales compared with the previous six months by company size
September 2006 – February 2007 sales compared with the previous six months by region
ForecastsForecasts for the next six months are good. On balance just under half of manufacturers interviewed expect to sell more timber windows in the next six months (March - August 2007) compared with the previous six months (September 2006 - February 2007) - see chart 2. Large firms (net 71%) are most confident but small (48%) and mid-sized companies (35%) are also positive. Manufacturers across the country are confident of increased sales.
Year-on-year expectations are also positive, with a balance of 60% of manufacturers forecasting better sales in March - August 2007 compared with the same six months of 2006 (chart 2). Firms of all sizes and in all regions are optimistic with none of those interviewed forecasting a drop.
ProfitsA net 52% of manufacturers expect profits to increase over the next six months compared with the previous six months (chart 3). Mid-sized firms (net 65%) showed most confidence but small (50%) and large companies (41%) are also upbeat. Manufacturers in the South (net 57%) are slightly more positive than those in the Midlands and North (48%).
“Previously, consumers were convinced that PVC-U was the only option but now they know otherwise and recognise the quality and aesthetic appeal of timber windows.
Also as customers are coming to expect their windows to be energy efficient, energy ratings will have a massive impact on sales of timber windows in the future.”
Mr Bernard Rump, Proprietor
Atrium Conservatories, Kington
Order VolumesA net 48% of manufacturers reported fuller order books compared with six months ago (chart 4). Mid-sized firms (net 57%) and those in the Midlands (55%) did better than other company sizes or regions.
EmploymentOn balance, 18% of firms took on more staff compared with six months ago (chart 5). Manufacturers of all sizes and in all regions increased their workforce, particularly large companies (net 24%) and firms in the South (26%).
“Our customers are increasingly aware of the environmental issues surrounding timber. It will therefore become more and more important to prove that the timber being used comes from a sustainable source.
We have also noticed that our customers are choosing timber as opposed to PVC-U because of its aesthetic appeal.”
Mr Dominic Williams, Managing Director
D & P Joinery and Glazing Ltd, Ross-on-Wye
Buying PricesA balance of 92% of manufacturers reported higher purchase costs over the last six months (chart 6). The picture is similar across the board with very few firms reporting a fall.
PricesTo counter rising costs, a net 63% of companies put prices up compared with six months ago (chart 6). More mid-sized firms (net 78%) raised prices than small or large manufacturers (59%). Prices increased across the country especially in the South (net 69%) but those in the North and Midlands (59%) also raised prices.
ProspectsManufacturers are confident with a net 43% more optimistic now about the overall prospects for the timber window market than six months ago (chart 7). Mid-sized firms (net 57%) are more positive than small (40%) and large manufacturers (35%). Those in the Midlands (net 50%) are slightly more optimistic than those in the South (43%) and North (39%).
Investment intentionsOn balance, a quarter of manufacturers interviewed expect to invest more on plant and machinery over the next 12 months compared with the previous 12 months (chart 8). More mid-sized firms (net 30%) and companies in the Midlands (36%) are looking to invest than other company sizes or regions.
Window types and stylesLooking at styles, 60% are casement, 31% are vertical sliding sash, 4% reversible-pivot, 3% are tilt-turn and other styles account for 2% (chart 9).
Manufacturers report that ninety percent of softwood windows and 84% of hardwood windows now come from a certified or approved sustainable source.
ProblemsSupplier price rises (59%), slow payments and bad debts (45%), and margin squeeze (44%) were the main problems facing manufacturers over the last six months. However, lack of skilled staff was the single biggest problem, mentioned by 20% of those interviewed (chart 10).
Comment“If rising costs aren’t dampening optimism in the timber window market, you begin to wonder what will.” said BWF Chief Executive Richard Lambert. “Although timber windows sell on quality and aesthetics rather than price, increasing costs are usually seen as squeezing margins. The fact that a majority of manufacturers had the confidence to increase their prices as a result of the cost, and the overall measure of confidence remains strong is an indication of the strength of the market.”
“Could it be that the timber window market is moving forward from the plateau of the past few years? Perhaps, but I hope no one is complacent enough to think that this market trend is inevitable. Our competitors will not meekly accept the lost business and incursion into their market share, so we need to look on this as a start on which we can build, reinforcing our strengths while continuing to tackle the areas which might prove vulnerable in future.”
“We know that specifiers and consumers still have doubts about using timber windows, and as an industry, we have to address those concerns head on. It’s not enough for individual companies to take comfort from the belief – however justified - that their product is superior and that they can win the business. This is a battle for the industry to fight together to shape the perceptions of the whole market. As Benjamin Franklin said to his revolutionary colleagues, “Gentlemen, we must all hang together. For if we do not, I promise you we shall all hang separately.”