Joinery sales volumes rising, but further increases in overheads continue to dampen expectations

The most recent BWF State of Trade Survey results point to a slow recovery for joinery manufacturers that risks being suffocated by rising overheads.

The results for Q4 give some indication that joinery sales are heading in the right direction, but conditions remain uncertain for many businesses. According to our survey of joinery manufacturers, the amount of capacity companies are utilising remains low, with demand by far the most significant constraint on activity as rising fuel, energy and raw material costs push up unit prices. The Office of National Statistics (ONS) recently reporting that construction output grew by 0.9% in Q4, halting a long decline first seen in the third quarter of 2011.

It is encouraging news that, on balance, respondents reported and anticipated an increase in sales volumes, and there is some evidence of businesses varying their investment decisions and investing in areas where they had held back in the previous quarter. ‘Private housing’ was designated the most important market sector by 50% of respondents in our survey, followed by ‘commercial’ with 28%. The ONS figures had reported that the private housing and infrastructure sectors provided the greatest contribution to the construction sector increase in the fourth quarter, growing by 5.9% and 4.2% respectively, and offsetting a decline in new public non-housing work and private housing repair & maintenance, which fell by 4.9% and 4.8% respectively.

Key points from the BWF State of Trade Survey include:

– A balance of 19% of the joinery manufacturers responding anticipated a rise in sales volumes over the next quarter, with 13% on balance having reported a rise in the previous quarter.

– The proportion of respondents that have been or anticipated to be operating at over 90% capacity, has remained at around 20%. This is still low, but represents an increase of around 5% on the Q2 figures.

– Order books for future work still rarely extend beyond 3 months.

– High fuel and energy costs are becoming more of an issue. They have increased in the last year at a higher rate than previously noted – by over 5% for 50% and 56% of respondents respectively – and continue to push up unit costs.

– Raw material costs are also increasing for 80% of respondents, with half of those noting an increase of more than 5%.

– The previous survey had seen businesses set to reduce investment in production equipment and customer research, with spending in e-business frozen, whereas this Q4 survey saw plans for a spending increase in all three of these categories.

A wide range of BWF members responded to the survey, with a number of different product types and company sizes represented. Look out for the 2013 Q1 survey in the next few weeks.

BWF members will be able to view the full 2012 Q4 report simply by logging in below.