Volume 47, Issue 9 - November/December 2008
In the News
Feeling the Credit Crunch
Not only do building products companies know about the downturn in the housing market firsthand, but many of them are also dealing with a tighter credit market.
Mary Anna Oldaker is office manager for Butcher-Layfield Lumber Co. in Weston, W.Va., and she says that the credit crunch has slowed down customer purchases by 10 percent.
“We have some customers who are not paying, some are one month late, while 65 percent are still current,” she says. “It has [also] slowed down our buying because cash flow must be watched.”
Mark Pratt is facing similar struggles in Canada. Pratt is president of Mill Bay Sales & Marketing Inc. in Mill Bay, British Columbia.
Pratt says business if off approximately 50 percent. “Customers are paying on average 60-90 days, but in normal circumstances it would be 10-30 days,” he says.
It’s Not All Bad
Other building product companies don’t seem to be as affected.
Peter Vredenburgh, president of Vredenburgh Lumber Co. in Beardstown, Ill., says that his company has been very busy since late summer and it hasn’t slowed down.
He does admit that his company has a number of customers that have slowed down in their payments.
“We have a number of slow pays already, and a few good ones are slowing down, so I guess … it’s taking a toll,” he says. “I have a lot more people wanting to open accounts, and we are very selective and are turning down a lot of them.”
Les Stenerson, president of Stenerson Lumber in Moorhead, Minn., also says that his company hasn’t been too affected by the credit crunch.“
As a company, we are blessed to be in a good cash position and have little need for borrowed working capital,” he says. “However, I have raised concerns with our banks and have been assured that there is plenty of money available should the need arise. Banks in this area are wondering where this information is coming from that tells the media and the public that there is no money available for banks to lend.”
Stenerson adds that his area in Minnesota has been insulated from the extreme highs and lows of the homebuilding market. “We have worked hard to help our customers be smarter business people and manage their cash and credit lines. We have a dedicated credit manager with 20-plus years of banking experience that has kept us on track,” he says.
Some Good Guidance
Vredenburgh has the following advice for other building product companies.
“As usual, watch expenses, do more outside small jobs for little old ladies (now that we have time), and be careful of new charge accounts,” he says.
Oldaker says she advises that other companies watch their cash flow and keep on top of their charge sales.
Pratt says to concentrate on core business and customer service. “We are not doing any pioneering at present. We are keeping inventories at the lowest possible levels to service our market,” he says.
He also advises that companies should reduce debt if possible. “Watch your receivables carefully. Don’t panic.”
Stenerson says that companies should be realistic about the situation and maintain a positive attitude. “Go after every sale and think ‘outside the box’ more than ever before.”
Stenerson’s company made a written plan years ago, “Steps for Economic Downturn,” and reviewed it with all of its key people and acted on it promptly and responsibly.
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