Quarterly Trend Survey

Overview

"In spite of the foot and mouth epidemic, the UK's economy is in good shape," writes Mike Rigby, whose company produced this report. "On the other side of the Atlantic things are looking better than expected, and the fears of a US recession have proved as yet unfounded. The US economy usually responds well to a cut in interest rates, a fact that Alan Greenspan, Chairman of the Federal Reserve, has banked on with an unprecedented flurry of interest rate cuts."

"The UK's economy tends to follow the US, so this is mixed news for us, and the prospects for Europe are starting to weaken. Although we can expect a slowdown in the economy, it looks like we have been spared another recession, at least for the time being. However, a sharp and prolonged downturn in the US economy could take us down with it. It all hinges on the confidence and spending of the US consumer."

"As I write this, the date of the General Election has been confirmed. What impact this will have on our home economy remains to be seen, but it is likely that the present Government will succeed in gaining a second term in office. On the up side, this may mean incentives for businesses, but this is balanced out by the introduction of yet more regulations, red tape and bureaucracy. Public opinion is that the Government could have handled both the fuel crisis and the foot and mouth crisis better, but whether this will adversely affect the results of the General Election will become apparent shortly."

"Property prices are showing a slow but steady increase and the RMI market is also healthy. However, house building could do with the promised fillip of significant development. On the whole, the outlook for the next few months is more positive than the merchants of doom may suggest."

Plaster Sales

Sales of plaster were up in the three months February to April compared with the previous quarter, with more than four in ten builders' merchants reporting growth. This compares with just over one in ten outlets seeing a drop over the period.

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 28% of merchants had higher sales of plaster in the three months to April. Fabricators of all sizes across the UK saw increases, with large outlets (35%) and merchants in the Midlands and Scotland (36%) slightly ahead.

The picture is similar compared with the same three months of last year, with a net 30% of outlets recording higher plaster sales. In terms of size, smaller outlets and merchants with lower annual sales volumes saw more widespread increases than larger merchants.

More merchants in Scotland (net 43%) reported year-on-year improvements than other regions. Outlets belonging to national chains were slightly ahead of independent merchants, with a net 34% and 27% respectively seeing increases.

February to April sales of plaster compared with the previous 3 months by area

Area	Increase	Decrease	Stay the same	Total	Base
South	43%	18%	39%	100%	40
Midlands	48%	12%	40%	100%	25
North	33%	14%	53%	100%	21
Scotland	43%	7%	50%	100%	14
Total	42%	14%	44%	100%	100

February to April sales of plaster compared with the same 3 months of last year by area

Area	Increase	Decrease	Stay the same	Total	Base
South	45%	17%	38%	100%	40
Midlands	48%	24%	28%	100%	25
North	47%	14%	39%	100%	21
Scotland	50%	7%	43%	100%	14
Total	47%	17%	36%	100%	100

Plasterboard Sales

Sales of plasterboard were even stronger in the three months February to April compared with the previous quarter, with a net 44% of outlets recording increases. Large and medium sized outlets saw most of the growth (49%), compared with 38% small merchants. In terms of annual plasterboard sales through a single outlet, a net 70% of merchants selling more than 150,000m2 saw sales grow, compared with 42% selling less than this.

A balance of more than one in two outlets across the country recorded higher plasterboard sales over the period with the exception of merchants in the North where just 14% reported sales ahead.

Year-on-year sales were also strong with a net 40% of outlets seeing growth. The pattern is repeated across merchants of all sizes in all regions, with outlets in the Midlands (52%) and independent merchants (45%) leading the way.

Just under four out of five builders' merchants enjoying year-on-year plasterboard growth attributed it to stronger sales to the new build housing sector.

February to April sales of plasterboard compared with the previous 3 months by area

Area	Increase	Decrease	Stay the same	Total	Base
South	58%	8%	34%	100%	40
Midlands	60%	8%	32%	100%	25
North	33%	19%	48%	100%	21
Scotland	57%	0%	43%	100%	14
Total	53%	9%	38%	100%	100

February to April sales of plasterboard compared with the same 3 months of last year by area

Area	Increase	Decrease	Stay the same	Total	Base
South	55%	15%	30%	100%	40
Midlands	64%	12%	24%	100%	25
North	48%	24%	28%	100%	21
Scotland	57%	14%	29%	100%	14
Total	56%	16%	28%	100%	100

Stocks

Two in five merchants increased stocks of plasterboard in the three months to April, with none of those interviewed cutting back. This could be one of the results of recent supplier strikes.

Plaster Prices

A balance of 58% of outlets put up prices of plaster in the three months February to April. This pattern is repeated across outlets of all sizes across the country with a net 81% of merchants in North reporting the most activity.

Plasterboard Prices

A balance of just over one in two outlets interviewed raised prices of plasterboard in the last three months compared with the previous three. Large merchants (net 60%), and those in the North (71%) recorded the most activity. More independent merchants (55%) increased prices than outlets belonging to national chain outlets (46%).

Quarterly Sales Forecasts

Plaster

Merchants' forecasts for plaster are up again this survey, with a balance of seven in ten outlets expecting sales to grow in the next three months compared with the previous three. Expectations are strong across the board, but particularly among medium sized outlets, those selling in excess of 150,000m2 pa (80%) and merchants in the North (81%).

Outlets belonging to national chains have stronger quarter-on-quarter forecasts than independent merchants - a net 79% and 65% respectively.

Plasterboard

Builders merchants' forecasts for plasterboard are also strong with a net three in four outlets we talked to expecting growth in the three months May to July. As with plaster, merchants of all sizes across the country expect increases, with few outlets interviewed expecting a decrease. At worst, individual merchants are expecting no change. Small outlets and merchants in Scotland are slightly less bullish than others.

Just under nine out of ten branches belonging to national chains forecast growth over the next three months with none of those interviewed expecting a drop. This compares with just under seven in ten independents.

Year on Year Sales Forecasts

Plaster

Compared with the same three months of last year, merchants' expectations for plaster are also positive, with a balance of three in five merchants interviewed anticipating growth in the three months May to July. Outlets belonging to national chains (net 71%), and builders' merchants in the Midlands (76%) are most upbeat.

Plasterboard

Plasterboard forecasts are also strong year-on-year, with a net 62% of merchants expecting growth in the next three months compared with the same three months of last year. In terms of size and annual volume sold through a single outlet, the larger the merchant the stronger the expectations with a net 70% of large concerns and 90% of outlets selling in excess of 150,000m2 per annum forecasting growth. Merchants in the Midlands were particularly positive.

Prospects

Confidence in the plaster and plasterboard market continues to rise this quarter, with a net 52% of merchants interviewed more optimistic now than three months ago. The picture is similar across outlets of all sizes, with small merchants slightly ahead. The regional response is however very different, with a net 81% of outlets in the North, 64% in the Midlands and 48% in the South more confident now than three months ago. This contrasts with equal numbers of merchants in Scotland more and less confident. Independent merchants (net 61%) are more bullish than national chain outlets (37%).

Special products

Just under one in five merchants reported particular trends in their local area. The majority of comments relate to specialist application boards, as well as growing demand for boards with tapered edges.

Problems

Last quarter's plaster shortages have continued to impact on merchants' ability to sell and supply in the last three months, with just over three in ten outlets still saying this is a problem.

The impact of Government on Merchanting

All those who took part in the survey were asked: Since the Government came into power in 1997, has business productivity increased, decreased or stayed the same?"

Seven in ten builders' merchants reported an increase in productivity over the period, but of these, three quarters attributed it to their own hard work rather than to anything that the Government has done.

Regional Focus on Plasterboard

South

• A balance of one in two saw sales up in February to April compared with the previous quarter. Net 40% grew sales compared with the same period twelve months ago.
• Three quarters forecast higher quarter-on-quarter sales and more than half expect year-on-year sales to be up
• A balance of just under one in two put up prices over the last three months
• Just over half are more confident about market prospects than three months ago

Midlands

• A net 52% increased sales in February to April compared with the previous three months and with the same quarter last year
• Just under four in five expect sales to increase quarter-on-quarter and year-on-year
• A balance of one in two put up prices compared with the previous three months
• Just under two thirds are more confident now than three months ago with none of those interviewed saying they are less optimistic

North

• Fewer merchants in the North recorded increases compared with the rest of the country both quarter-on-quarter (net 14%) and year-on-year (24%)
• In contrast, more merchants in the North (net 81%) forecast quarter-on-quarter increases
• Year-on-year sales forecasts are also strong (net 67%)
• More merchants in the North (net 71%) increased selling prices over the quarter with none of those interviewed cutting back
• Confidence in future prospects was significantly higher than in the rest of the country (net 81%)

Scotland

• More merchants in Scotland increased sales quarter-on-quarter than in other regions (net 57%) with none of those interviewed recording a drop
• Year-on-year sales were also strong with a net 43% seeing growth
• Slightly less bullish other regions in their forecasts but still ahead - a net 64% quarter-on-quarter and 50% year-on-year
• Fewer merchants in Scotland increased prices over the last three months than elsewhere - a net 36%
• Also bucking the trend in the rest of the country confidence is in the balance with those more confident balanced by those less so

Comment

Keiran Hehir, Sales & Marketing Director of Lafarge Plasterboard, who sponsor the Quarterly Trends Survey, comments: "In recent months building materials have shrugged off a series of onslaughts from flooding and bad weather to the near collapse of the road transport and the rail network. Foot and mouth rapidly grew into an epidemic that turned large parts of the country into no-go areas. What started as a farming nightmare had a quick knock-on to the rural economy and beyond as tourists avoided the countryside in general. Even the airlines and airports blamed the epidemic for a fall in business, and building materials consumption has suffered too."

"With the epidemic over and an end in sight, it is back in business, but it may take months, if not years, for parts of the rural economy to recover. Once we are clear of the election both merchants and suppliers will need to prepare for the exciting opportunities the new Document L Regulations will bring. However, as this survey found, just over one in two merchants are aware of the implications and opportunities. Many are still not aware or have given it little thought. But the potential benefits are enormous for those who work closely with their suppliers and take action now."

The Lafarge Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by Lafarge Plasterboard Products 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 plaster and plasterboard products. Michael Rigby Associates specialises in providing market information and monitoring services to the building products industries. The survey covers a representative sample of 100 builders' merchant outlets. Telephone interviews took place between the 1st and the 4th May 2001 across a balanced spread of size and type of merchant and geographical area. Numbers employed and volume of plasterboard sold is 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). Further information: Fiona Lund, Michael Rigby Associates (01453) 521621 Full copies of the Lafarge Report can be obtained from www.rigby-research.co.uk.