Moulding and Millwork Companies Report Business is Up

March 11th, 2013 by DWM Magazine

The Friday agenda at the Moulding and Millwork Producers Association (MMPA) annual meeting in Scottsdale, Ariz., took on the heavy issues facing MMPA members. The Thursday sessions painted a (mostly) rosy picture of the overall economy, noting the bright statistics and forecasts for residential construction. Friday’s agenda aimed squarely at addressing how those trends are impacting the moulding and millwork market.

The early session featured Jerry Bach of Safety Center Inc. His presentation focused on strategies for hiring and retaining employees from the Z Generation, categorized as those born between 1994 and 2004. With a national unemployment rate of 7.7 percent, it seems unfathomable that finding quality workers would be such a huge issue to MMPA members. Factors such as location play a role. “In Montana it is hard to come by labor, especially the kind we need,” said Geri Freeman of Plum Creek.

Another factor is the extension of unemployment benefits. Workers may choose to delay re-entering the work force or chose not come back at all, as noted by John Morrison of Sunset Moulding Company.

For younger workers, according to Bach, the type of work can be monotonous and not necessarily appealing to a new generation of hyper-connected “speed demons” with short attention spans. Bach’s session ultimately offered strategies to appeal to the new generation by understanding how they think (quickly, independently and with smartphone in hand) and what they want out of their careers (constant learning, genuine contribution, fast pace with the opportunity to do different things).

The next session, courtesy of Scott Biesecker of CPA firm Turlington & Company LLP, touched on two convoluted issues that face all American businesses: the American Taxpayer Relief Act of 2012 and Obamacare. In an entertaining presentation mixed with stats and personal opinions, Biesecker noted the health care changes and their effects are yet unclear. He noted that conspiracy theories and skepticism abound, but it remains to be seen how it will play out and what are the consequences. Regarding the tax situation, he was reassuring. “This tax act is not going to hurt as much as you think.” On what our politicians need to do, he was crystal clear. “Something has to be done about Congress playing chicken with the economy.”

Friday Afternoon Workshops

In the afternoon, MMPA members led discussions. Morrison led an around-the-room pulse-taking session on the market by asking moulding and millwork companies, paint companies and machinery manufacturers to talk about what’s happening in their markets.

“Business has picked up substantially over the past six to 10 months,” said Bob Heskett of West Coast Machinery. Robert Slater of Stiles Machinery agreed. “Business is definitely up. We saw this trend starting back in January 2012. We had a huge IWF [International Wood Fair show] and that continued for 30 days afterward.” Clause Staalner of Brookhuis added, “It’s great to see the industry smile again. Business across the board seems to be good.”

The wood and MDF suppliers noted the same trend. “The last couple months have been picking up,” said Jim Cadwell, Regal Custom Millwork. “We’re seeing a healthy demand,” said Allen Dyer of East Coast Moulding Company. “Markets are coming back. We’re even seeing some custom homes come back in the mountains.”

Very evidently, demand for moulding and millwork products is back.

Where’s the Wood?

As building sites lay vacant and hammers lay silent through the housing drought, many domestic saw mills shut down. “Mills weren’t just mothballed,” said Morrison. “They were taken out.” His sense is that it may take three or four years before the supply will catch up. “Demand is flexible, but supply is not,” added Gian Carlo Marodin of Araupel SA.

For the wood and MDF companies, it was a near consensus that the biggest challenge facing the industry this year, and for the next few years, is the availability of raw materials. Foreign and domestic wood supply is challenged to meet demand from an improving housing industry.

“There’s more demand and not enough supply, and we don’t see that changing anytime soon,” said Freeman.

Suppliers such as Arauco Wood Products continue to source material and meet demand as best as possible. Arauco’s Mark Young noted that his company doesn’t take it lightly that they can’t fulfill their customers demand.

Where the additional supply will come from is not an issue of consensus. Overseas supplies from countries such as Chile and Brazil will continue to grow, according to Marodin, and domestic mills must get lines up and running.

Around the Table

Late afternoon, the round table discussion moderated by Al Delbridge of East Coast Moulding Co. and MMPA vice president, was designed to tackle, among other issues, the supply shortage and work out solutions.

Allocated only so much product, moulding and millwork producers must carefully address pricing issues and not get too far down the road while prices remain volatile.

Craig Young of TLC Mouldings, on the topic of being pressured by customers to price out a project six months down the road, said simply “Don’t do it.”

While the pipeline issues continue to challenge moulding and millwork producers, it isn’t necessarily apparent to their customers. Most agree they need to take care of their best customers first, even if it means cutting ties with smaller, or difficult, customers.

And what if supply doesn’t catch up in time? As prices rise and inventory shrinks, it will be important to communicate to customers what’s happening. Cliff Stokes of Pacific MDF noted his company decided to exhibit at the International Builders’ Show this past February so they could interface directly with builders, and make them aware of the supply issues they face.

Since volume is not the achievable goal, success depends on getting the right customers and helping them grow, on educating the supply chain about the situation, and dealing with the delicate issue of price increases down the chain.

On issues of capacity and production, the group aimed to quantify how much additional moulding production they were capable of handling by answering a hypothetical question – if supply were not an issue, how much more could you take on? Answers varied from 10-30 percent, depending on which companies would be willing to add a third shift (a couple) and which companies felt they had enough or could hire enough employees with the right skills (one or two).

In summing up the state of the industry, Morrison noted that in recent meetings going back a few years, concerns had been about trucking, a sagging economy and managing major cash flow issues. It was a different tune today.

“Profit is no longer a dirty word,” added Young.

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