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Quarterly Trends Report
Positive outlook for cement sales in 2002
Overview
“Despite high consumer spending the UK economy stopped growing in the fourth quarter of 2001 for the first time in a decade,“ writes Mike Rigby whose company produced this report. “Overall GDP remained unchanged from the third quarter and was only 1.7% up on the year. Service sector output increased 0.7% in the quarter, the slowest growth since the beginning of 2000. Manufacturing output was down 1.7%. Economists were forced to accept that the UK had not after all evaded the influence of recession in the US.”“More recently Alan Greenspan, chairman of the Federal Reserve, has begun to talk more positively about a gradual revival of the US economy. Consumer confidence is falling against a backdrop of high consumer debt and fear of rising unemployment. The tide of recession is turning but the US hasn't reached dry land just yet.”
“At home the monetary policy committee of the Bank of England has left interest rates unchanged at 4%, even though underlying inflation recently jumped from 1.9% to 2.6%, above the government's 2.5% target.”
“In the UK too household debt is high and growing at its fastest rate for 11 years according to figures for January released by the Bank of England. But if unemployment rises or consumer confidence falls, high levels of debt will have a serious impact on the strong consumer spending that has bolstered the UK economy over recent months. Imminent increases in interest rates are therefore unlikely.”
“Consumer confidence remains strong, although retail sales fell for the second month in a row in January.”
“The property market continues to be resilient. New mortgage lending in January was 36% up on January 2001 and, according to Nationwide Building Society, prices jumped 1.6% in February, 14% up on February 2001 prices.”
“Good news too for manufacturing which grew for the first time since February last year. ”
“As in the US the Treasury, Bank of England and forecasters are predicting a slow recovery and growth.”
Highlights This Quarter
- A net 7% of builders' merchants recorded higher cement sales during the three months December to February compared with the previous quarter.
- Large outlets (a net 27%) were ahead of medium sized merchants (5%) and small outlets (-3%) who saw sales fall away.
- Branches in Scotland (net 47%) outperformed all other regions where quarter-on-quarter sales were softer. In the Midlands a net 4% of merchants recorded increases, merchants in the North saw no change but in the South a net -3% saw sales drop.
- A net 38% of builders' merchants recorded sales up in the months December to February compared with the same period last year.
- A balance of just over one in two outlets in Scotland and the Midlands reported more widespread increases year-on-year compared with other regions.
- Expectations are high. A net 78% forecast higher sales quarter-on-quarter and 57% expect sales to be up year-on-year.
- More than six out of ten outlets expect to put up selling prices over the next 12 months.
Cement Sales - Overall Trends
Thirty four per cent of builders' merchants saw sales of cement increase in the period December to February 2002 compared with the previous three months. Twenty seven per cent of outlets recorded a drop and thirty nine percent stayed the same.
A useful way to look at the results is by the net balance of merchants reporting either way. If, for example, 60% of merchants saw an increase in sales and 40% a decrease, the outcome would be a net balance of +20%. A net balance of zero implies that little has changed.
On this basis, a net 7% of builders' merchants had higher cement sales in the three months December to February compared with the previous three months, as seen in chart 1.
Branches belonging to national chains were ahead of individual outlets (net 16% and 2% respectively).
Year-on-year sales were more positive with a net 38% of all builders' merchants recording growth in cement sales over the period. There was no real difference between national chains and independents.
Nearly seven in ten merchants attribute growth to an increase in sales to general builders.
Sales by Size of Merchant
Quarter-on-quarter sales grow with size of outlet. Large merchants (27%) were ahead of medium sized outlets (5%) with small merchants suffering a drop in sales (-3%). Year-on-year sales show a different picture with medium sized merchants ahead (46%) followed by large outlets (36%) and small merchants at 31%.
December-February Cement sales volume compared with the previous three months by size of outlet
| SIZE OF OUTLET | Increase | Decrease | Same | Total | Base |
| Small | 35% | 38% | 27% | 100% | 37 |
| Medium | 29% | 25% | 46% | 100% | 41 |
| Large | 41% | 14% | 45% | 100% | 22 |
| Total | 34% | 27% | 39% | 100% | 100 |
December-February Cement sales volume compared with the same three months of last year by size of outlet
| SIZE OF OUTLET | Increase | Decrease | Same | Total | Base |
| Small | 42% | 11% | 47% | 100% | 37 |
| Medium | 56% | 10% | 34% | 100% | 41 |
| Large | 55% | 18% | 27% | 100% | 22 |
| Total | 51% | 12% | 37% | 100% | 100 |
Sales by Tonnage
Looking at quarter-on-quarter figures sales rose in merchants selling more than 1000 tonnes of cement annually (a net 21%), compared to those selling less than 300 tonnes per annum (11%). In contrast outlets selling between 300-1000 tonnes a year actually recorded a fall in sales (-11%).Year-on-year comparisons show little difference between merchants.
Sales by Region
Regionally the picture is split. Merchants in Scotland are well ahead of other regions where sales were muted compared with the previous quarter. A net 4% of outlets in the Midlands increased sales. Merchants in the North saw no change, while a net -3% saw sales fall away in the South.
December-February Cement sales volume compared with the previous three months by area
| AREA | Increase | Decrease | Same | Total | Base |
| South | 26% | 28% | 46% | 100% | 39 |
| Midlands | 36% | 32% | 32% | 100% | 25 |
| North | 33% | 33% | 34% | 100% | 21 |
| Scotland | 53% | 7% | 40% | 100% | 15 |
| Total | 34% | 27% | 39% | 100% | 100 |
December-February Cement sales volume compared with the same three months of last year by area
| AREA | Increase | Decrease | Same | Total | Base |
| South | 37% | 8% | 55% | 100% | 39 |
| Midlands | 60% | 12% | 28% | 100% | 25 |
| North | 52% | 19% | 29% | 100% | 21 |
| Scotland | 67% | 13% | 20% | 100% | 15 |
| Total | 51% | 12% | 37% | 100% | 100 |
December-February Merchant Sales Volume of Cement by Customer Type and Region
| House Builders | General Builders | Tradesmen | DIY | Total | |
| South | 17% | 37% | 27% | 19% | 100% |
| Midlands | 14% | 38% | 22% | 26% | 100% |
| North | 19% | 41% | 23% | 17% | 100% |
| Scotland | 37% | 37% | 18% | 8% | 100% |
Product mix
Eight out of ten outlets we spoke to sell Ordinary Portland Cement. Almost seven out of ten sell air-entrained and just over three out of ten merchants sell masonry cement.
Types of cement product sold by outlet size
| Small | Medium | Large | All | |
| Ordinary Portland | 70% | 88% | 82% | 80% |
| General Purpose Air Entrained | 54% | 71% | 82% | 67% |
| Masonry | 11% | 44% | 55% | 34% |
| Other | 49% | 54% | 50% | 51% |
“Over the last year we have seen the dry mixed products market grow by 10-15%. Dry mixed products often replace self mixing sand and cement because there is less waste. It also has the advantage that it only takes one man to do the job. Many of our major customers like the Railways are taking to this product. But also others (Site Fencing companies and the MOD) are looking to cut costs because even if dry mixed products initially are more expensive, they end up being more cost effective.”Mr Gary Clitheroe, Purchasing Manager
C & W Berry Ltd, Preston
Quarterly sales forecasts
Expectations are high across the board with a net 78% of builders' merchants expecting to increase sales over the next three months. Large outlets, national chains and merchants in the Midlands have higher expectations than others. Chart 4 shows the strong seasonal trend.
Year-on-Year sales forecasts
Year-on-year sales forecasts show 57% of merchants more positive in their forecasts compared with the same time last year.The larger the size of the outlet the stronger the forecast. Builders' merchants across the country expect growth, with outlets in the Midlands leading the way.
Just over seven in ten merchants forecasting higher cement sales expect the growth to come from sales to general builders.
Looking to the next 12 months a balance of two in three merchants expect to increase sales. General optimism, DIY and more work in local areas are given as the main reasons for increased sales.
“Over the last year we have seen sales of dry mixed products increase by 30% and we expect the market to continue growing. It is ideal for the DIY market as it takes away the problem of how much sand to cement. You just add water and away you go! This product definitely adds value to our cement market.”Mr Steve Washbrook, Branch Manager
LL Building Supplies, Gwynedd
Price forecasts
A net 62% of outlets expect to hike their selling prices in the next 12 months (see chart 6). More large and small merchants (73% and 68% respectively) are planning increases in comparison with a net 51% of medium sized outlets. More nationals (74%) expect prices to go up than independents (55%). Merchants with a lower annual throughput of cement are most likely to put up prices in the next 12 months.
Almost all expect to put up prices in response to supplier price rises. But a few also say they are looking to improve margins.
Prospects
Overall a net 23% of builders' merchants are more optimistic about the cement market than three months ago.Both small and large outlets (27%) are more confident than medium size merchants (17%). Merchants in the Midlands and the North (32% and 29%) are the most optimistic. Branches belonging to national chains are slightly more optimistic (29%) than independent outlets (19%).
A generally better start to the year than people anticipated appears to be the main reason for continued confidence.
“Although dry mixed products are mainly geared towards the DIY market, we have experienced small builders buying it. There is less time involved, because it sets quicker and there is also less mixing involved which in turn saves money.”Mr Mark Stewart , Branch Manager“We expect our sales of this product will increase in the future, and although we sell 5, 10 and 25 kg bags the latter is the most popular.”
Builder Center, Coppul, Lancashire
Problems
Not many merchants experienced problems in the last three months December to February, but foreign imports were mentioned and price cutting.
Internet usage
The Internet is now used by 19% of merchants on a daily basis and 14% say they use it weekly. Thirteen per cent of merchants hardly ever use it and 53% say they never use it.Of those merchants who use the internet 15% use it to place orders with their suppliers. More than one in three say customers can order from their website.
Comment
“Customers are becoming more knowledgeable and demanding, and markets are becoming increasingly competitive,” comments Derek Mayhew, Marketing Manager of Castle Cement who sponsor this survey. “And product benefits, product innovation and meaningful differentiation between products become ever more vital ingredients in achieving customer satisfaction and success.”“As with all new products some people are reluctant to change their ways and try new materials until everyone else has proved their worth, but dry mixed products appear to be more convincing than most new products as some of the merchants taking part in this survey have reported. Seen by some as aimed initially at the DIY or small builder market it is proving its value across the board, regardless of size of firm or project. Yes the product does cost a little more, but savings in material from less waste, savings in time and convenience mean lower job costs for large and small. It's a convincing proposition.”
“Manufacturers and merchants must stay focused on what customers want and how they can meet those needs. For merchants, innovative products that save time, effort and a significant proportion of the total job cost are persuasive in swinging customers across from traditional materials. Benefits like these pack a real punch in competitive markets and create great customer satisfaction and the ability to stay ahead in a competitive environment.”
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The Castle Cement Report, a quarterly trends survey, is produced by Michael Rigby Associates, and sponsored by Castle Cement Ltd in conjunction with Builders' Merchants News. The aim is to keep a finger on the market pulse, and to monitor merchants' views and expectations of market movements in cement products. Michael Rigby Associates specialises in research based marketing and consultancy for the home improvement, building materials and window markets in the UK and Europe. The survey covers a representative sample of 100 builders' merchant outlets. Telephone interviews took place between the 5th and 8th March 2002 across a balanced spread of size and type of merchant and geographical area. Numbers employed was used as an indication of size. The size categories of merchant outlets are small (1-9 employees), medium (10-25 employees) and large (over 25 employees). © Michael Rigby Associates, 2002 For further information contact Kirsten Storgaard, Michael Rigby Associates, tel: (01453) 521621 |
