Industry News
Building and construction suppliers leery
6 years, 5 months ago Posted in: Industry News 0

Consensus of most building suppliers: until everyone else feels confident, we will not be!

By Mike Verespej | PLASTICS NEWS STAFF

ORLANDO, FLA. (Feb. 15, 10:40 a.m. ET) — Unlike a year ago when building and construction suppliers believed that a turnaround was in sight, there is a larger dose of caution and wariness among company executives about how and when the market and the economy will pick up — and how much.

Except for decking manufacturers —- most of which expect double-digit growth — many companies are expecting only a slight pickup and are concerned that housing markets won’t begin to recover until unemployment drops.

“We are excited about 2011, regardless of what happens. We expect the economy to rebound and expect a good influx of new business,” said Mark Hansen, vice president of DaVinci Roofscapes LLC in Kansas City, Kansas.

“But still we are cautious and not expecting a straight uptick in sales,” Hansen said at the International Builders Show in Orlando, held Jan. 12-15. “We are still worried about whether it is going to be a choppy year like last year, which wasn’t the year we expected it to be. It’s hard to predict; there are a lot of variables.”

Mark Orcutt of Woodbridge, Ontario-based Royal Group Inc., which extrudes products like siding, window and door profiles and fencing, underscored that U.S. housing values have been declining for 53 or 54 months. “You don’t have that consumer confidence and people are not comfortable about their job security because manufacturers are not investing,” said Orcutt, who is Royal’s executive vice president of building products.

Kyle Hendren, marketing director for Amsco Windows in Salt Lake City, agreed with that assessment. “You’ve got the housing market in the doldrums, unemployment still high, employers skittish and consumer confidence up and down,” said Hendren, whose firm makes vinyl, fiberglass and thermoplastic windows — with vinyl making up the bulk of its sales.

Employers are delaying investments and that, in turn, is holding back consumer spending and jobs growth, he said.

“Unemployment growth has stayed high and all manufacturing has been forced to get back to the basics,” said Roger Murphy, president of U S Block Windows Inc. in Pensacola, Fla. “That has forced all companies to take a lean approach” to business, including the size of their workforce, he said.

“The real driver will be the unemployment situation. So our biggest concern at this point would be something on the economic side that dampens consumer confidence and the economy” and keeps jobs growth from taking place.

As a result, at least in the short-term, people are going to be wary even when sales increase, said Peter Kotiadis, president and CEO of Tech-Wood North America in Greenwood, N.C., whose Tech-Plank siding for homes is made from polypropylene and oriented long-strand pinewood fibers.

“Everyone this year, going forward, will question whether any increase is real,” said Kotiadis. “I think that every forecast that forecasts strong growth will be given a hard look. Management teams will be conservative and hold back because they don’t want to get caught again” preparing for sales that don’t materialize or come to a halt like they did in 2010.

“2010 was a busy, but challenging year,” said Kotiadis, whose company began manufacturing Tech-Plank in November 2009. “We actually hit our sales numbers, but that number was very, very, very low. I wouldn’t consider it a grand achievement.”

But he and others that make products for the building and construction markets are encouraged by early signs in the market.

“We believe … the markets will start to get back to normal,” Kotiadis said. Among the positive signs: more requests for quotes and projects, more elaborate projects and a willingness on the part of distributors to carry some inventory — unlike last year when many distributors and dealers carried little or no inventory as they felt manufacturers had available capacity to quickly produce what was needed, he said.

Royal’s Orcutt agreed that the market is going to turn around. “I just can’t tell you when,” he said.

“Our business grew in 2010. I’m not expecting great shakes in 2011, but I think market demand is going to be growing.” Orcutt said he expects to see some growth in all five categories in the building products group. “I am not expecting double-digit growth.”

The story is altogether different for decking makers. Companies like TimberTech, Azek, Fiberon and Advanced Environmental Recycling Technologies — which makes MoistureShield decking— all are predicting robust growth, after seeing similar growth in 2010.

Brent Gwatney, VP MoistureShield sales and marketing, AERT

“We are looking to increase sales another 20-30 percent this year,” after seeing an increase of 28 percent in 2010, said Brent Gwatney, vice president of sales and marketing for AERT’s MoistureShield brand. “Our strength has been on the remodeling side. But we think the economy is going to improve a bit and that there will be a little bit of an upswing in the housing markets.”

Mike Gori, director of product management for Azek Building Products Inc. in Scranton, Pa., is equally optimistic. “Our sales have been up in double digits, well above the industry average year after year, and all of this has played out even during an economic downturn,” said Gori. “We are expecting double-digit growth well above the industry average again in 2011.”

That’s also the assessment of Stu Kemper, CEO of PVC and composites decking manufacturer TimberTech in Wilmington, Ohio.

‘We had double-digit growth the past two years, and 2011 will be better than 2010 and accelerate as the year progresses,” he said. “The industry growth will be somewhere in the 8-10 percent range, but we expect to far exceed that. We feel we have a strong economy growing again.”

But even Kemper said some trepidation will remain about which way the economy will go until both it and jobs are rising simultaneously.

“Unemployment needs to trend downward because fear is our greatest enemy,” Kemper said. “I’d like to see some good news and it has to be a pattern of things you hear on a constant basis. When people feel comfortable, I am confident that people with access to money will make purchases and things will loosen up.”

SOURCE: PLASTICS NEWS

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