Volume 47, Issue 9 - November/December 2008

Feature

Tough Times
Millwork Distributors Trod Through
by Drew Vass


It seems every trade show these days is preceded by a buzz of uncertainty. Exhibitors operating under tighter budgets are eminently concerned about slow booth traffic and those that do choose to proceed do so with a mood of cautious optimism. But members of the Association of Millwork Distributors (AMD) were perhaps braced with a little more caution than usual for the association’s annual show held October 11-16, in Kissimmee, Fla.

The millwork industry has been hit hard by the current economic and housing crises. While millwork products are used widely in the commercial segment, which has managed to hold on, there’s no debating the product’s stronghold is within residential construction, which undoubtedly remains in the tank. But, the fact is, according to many of this year’s attendees, no economic situation would prevent them from attending or exhibiting at the annual event.

“This will be the ‘bell ringer’ year,” said Randall Roedl with Woodfold Manufacturing Inc. during the event. “It’s a true test for how dedicated people really are.” Roedl commented that his company had been able to meet and shake hands with many of its customers and business partners, which he says serves as the event’s essence.

“We never come here expecting to do a lot of business,” explained Marshall Steves, Jr. of Steves and Sons. “It’s not really about that to us.” Steves and Sons sent a whopping 35 employees to the show this year. The company’s booth featured an elaborate set-up that reflected the show’s central theme: “Knowledge in the Palms,” with palm trees and even custom-made surfboard doors.

“It’s just a good place to come together with little to no pressure,” Steves added. Like Roedl, Steves agrees the most important element of the show is rubbing elbows with business partners and customers. “You’re not worried about accomplishing anything so much as you’re here to meet face-to-face with those with whom you do business,” he added.

Early School Bell
Sunday featured a full line-up of consecutive educational sessions. You might expect a session scheduled for 7:45 a.m. in the morning to be desolate; but that was not the case during the president of International Wood Markets Group Inc. in Vancouver, B.C., Canada, Russell Taylor’s discussion on the state of the wood import and export markets. The session, labeled “Moulding and Millwork Trends around the World,” also had the question “When/How will the U.S. Market Rebound?” in its title. The latter topic had attendees sitting on the edge of their chairs in anticipation. With a cloud of economic woes and uncertainty looming over the show, it comes as no surprise that sessions with words like “market” or “housing” drew standing room-only crowds.

Taylor focused largely on the import/export practices of Russia and China, explaining that an expected tax increase on Russia’s export side could have a significant impact on markets worldwide. Historical changes to log export taxes for Russia include an increase from 6.5 to 20 percent in July 2007 and a further increase to 25 percent in April of 2008. 

Taylor warned that, though it’s uncertain whether or not it will go as scheduled, January 2009 could bring rates as high as 80 percent. This could have a significant impact on domestic distributors and dealers as Russia is responsible for supplying 40 percent of the world’s softwood log export supply and 30 percent of its hardwood. Combined with a shrinking timber supply, the situation could impact lumber and millwork prices significantly. But not all effects are expected to be negative for domestic millwork providers. Russia’s biggest customer continues to be China. While China has slowly but surely carved a niche for itself in the millwork industry, the country has little to no domestic wood resources. As prices increase on the supply side, inevitably China will be forced to increase export prices to compensate, while U.S. companies have an advantage with greater access to domestic timber.

Standing Room Only
The event’s final educational session drew the largest crowd—not surprisingly, as it was labeled “The Long and Short of the Housing Outlook.” Dr. Eric S. Belsky, the executive director for the Joint Center for Housing Studies, led the session.

“This is a tough spot to be in, given the fact that it’s the end of the day and I think you want to hear an upbeat message,” Belsky explained. “But it’s very hard for me to manufacture an upbeat message for you.”

Belsky was faced with a difficult and changing subject. Not only was it nearly impossible to predict exactly what will happen in the coming months and years, he said key indicators are currently changing on a daily, if not hourly, basis.“

You almost have to check the news several times a day in order to keep up with this subject,” he said. He was forthright in explaining that distributors would need to hunker down as a break in the downturn wasn’t in the very near future. But Belsky also managed to break up the bad news with humor..

“What you could find is that whatever we’re going through is like throwing up,” Belsky said, followed by several chuckles. “And you know, when you throw up, all of the sudden you feel great afterwards,” he added, leading to the punchline. “Except, we’ve been dry heaving for months and quarters now.” The room burst into laughter.

Belsky said there is no simple and immediate answer to a situation largely fueled by overstock in the housing industry and home foreclosures. The market will have to purge much of its existing stock before the construction industry will be able to fire up to past levels. But clearing stock also requires new and additional loans. With banks tightening down on lending practices, the two issues have a detrimental effect on one another. Furthermore, he cited poorly performing loans as a major factor in the market’s current dilemma.

“Sub-prime mortgages accounted for about a quarter of the loan volume in 2005-2006,” he said. “In six months after the loan originated, each year’s book of business was performing worse and worse, to the extent that you have this 2006 book of business in which almost a third of them were facing serious delinquencies. And where we are now doesn’t look any better.”

As for how long the housing market will remain in its current condition, no presenter was able to make firm comment. Some suggested 2010 may bring somewhat of a turnaround, while others said a full recovery isn’t likely to rear its head until 2012. 

“As for the global financial crisis, the short answer is it’s just going to delay things a little bit,” Taylor said. “The market will come back; we just have to be patient.”

There was a resounding question among attendees pertaining to how future crises like the present could be prevented. Newt Gingrich, the event’s opening session speaker, offered a simple bit of advice on the matter by stating that: “Not everyone can afford to own a home. And you simply don’t loan money to those who can’t.”

Millwork distributors are preparing to endure the current market as long as it takes. Most say that business is weak, but steady, and they’re focusing on developing the relationships they have and the future.

The Biggest Job of All
In addition to providing unparalleled networking opportunities for millwork distributors, the annual show provided its usual healthy dose of reprieve. At a time that is no doubt stressful for industry members, the shows many cocktail hours, fine meals and entertainment provided a much needed break from the economic buzz that pervaded the event.

The grand finale included stunning performances by Cirque Odyssey. As performers flung themselves through the air or performed intriguing acts of superhuman physique, there wasn’t a frown in sight. While 2008 has been a trying year for millwork distributors, it was no cakewalk for association management and staff, as they were charged with the responsibility of helping AMD’s members clear their minds of the industry’s woes. And for six days in Kissimmee, they triumphed.

Next year’s AMD Convention will be held October 7-12, 2009, at the Marriott Riverwalk Hotel and the Henry B. Gonzalez Convention Center in San Antonio. 


On the Show Floor
If you were one of the missing faces on the show floor, 
here’s a bit of what you missed out on:

Savvy Software
Today’s business environment demands that you operate as close to peak efficiency as possible—and with the lowest operating costs. Savvy millwork and building materials distribution companies are looking at every aspect of their operations to see what they can do to reduce expenses.

Dispatch and delivery operations are one area that bears a closer look. Ponderosa Enterprise Resource Planning (ERP) software, produced by Smithfield, R.I.—based Computer Associates Inc., provides just the right tools to help. Dispatchers get a real-time view of available delivery resources and sales representatives can commit to tight customer delivery times with the confidence that the resources will be available to meet those commitments.
www.caisoft.com/solutions/ponderosa

An Easy Alternative
Laurie Coleman, president and inventor of Pole Wrap, exhibited at this year’s show to attract new distributors for her unique, easy-to-use product. Developed right in her own basement, Pole Wrap is a unique wrapping option and can even be used as wainscoting.

Cherry, maple, oak or MDF strips are adhered to a flexible backing that allows the installer to roll this item up and cut it to length in a standard miter saw. The wrap can then be held in place and scored with a utility knife for proper circumference or width.

Coleman says the response to her product was tremendous at AMD.

“I sent out press releases simply saying come look at Pole Wrap at the AMD show,” Coleman says. “I put a sample in the package, a brochure and my business card. I can’t tell you how many of those people came looking for me.”
www.polewrap.com 

Affordable Promotions
In an increasingly competitive market, you can’t afford to cut back on advertising and promotions. If the budget is tighter, you simply have to find a cheaper way to promote your company’s brand and image. 

“We’re an alternative to more costly programs,” Susan Jenkins, vice president and chief financial officer for Casual Wear Unlimited, explains. “We go in and try to help companies save money. In this economy, and especially with mom-and-pop companies, they need to save every penny they can. My goal is to educate the consumer and help him find a way to promote himself without spending a lot.”
www.uniformspro.com

Super Green MDF Mouldings
While Moulding & Millwork Inc. is well known for its poplar, red oak and maple species, the company chose to bring attention to one of its newest MDF products at this year’s show. 

SPERO mouldings are designed to meet the demands of your toughest green customers. They’re made from 100-percent recycled wood fiber that is SCS certified and originally harvested from responsibly managed SFI certified forests. They feature a Platinum Prime™, smooth, paint-and-go finish and precise tolerance standards.
www.mouldingandmillwork.com 


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