The latest CAB State of the Market figures for Q4, 2014 continued to highlight a positive long term outlook for the aluminium in building sector despite rising cost factors with 89% net balance of companies expecting a rise in sales for the year ahead.
- 95% of CAB members, on balance reported a rise in sales over the past year.
- Members reported that they anticipate sales rising over the next quarter (72%) and the next 12 months (89%).
- Costs continued to rise with 74% net balance reporting a rise in costs in the last 12 months and 78% expecting a rise over the next year.
- Wages & salaries (74% net balance) were reported for the 3rd successive quarter as the major cost factor closely followed by Raw materials (68%), with Fuel Costs negative on balance (-26%)
- 40% net balance of companies expected to operate at over 90% of capacity over the next 12 months, the same as in Q3.
- Headcount increase for the year ahead slowed (53% net balance) compared to 87% in Q3 but was similar to the wider construction sector figure of 61% net balance.
- Demand (39%) and Capacity (28%) were once again factors ‘likely constraints on activity over the next 12 months’. Encouragingly 17% of respondents stated ‘No constraints’
The survey represents another strong quarter for the sector with confidence in forward demand which was supported by a strong continuing commitment to capital investment. The latter should not be underestimated in terms of looking to signs of our sector’s long term recovery and stability. In each of the quarters in 2014, there has been a greater commitment (or at least equal) to investment across all the metrics for the 12 months ahead. The metrics being: Property, plant/equipment, customer research, R & D, Product improvement and e-business. In Q4, 2014, the three leading areas for increasing capital investment in the year ahead were, Plant & Equipment (63% net balance), Product Improvement (63% net balance) and Customer Research (53% net balance).
With increased sales activity, inevitably almost, costs are rising with wages the biggest factor for the third successive quarter. The other key drivers were raw materials and energy costs. Fuel costs were negative on balance for the second successive quarter.
While there is no doubt increased activity across the aluminium in building sector (fabricators are increasingly reporting healthy order books into the second half of 2015) there appears to have been a degree of evening out in the final quarter of the year. Interestingly, the net balance of CAB members operating at over 90% capacity remained at 40% for the second successive quarter falling from the Q2, 2014 high of 57%. Likely constraints on activity in Q4 reflect a similar outlook to those back in Q1.
In the wider construction sector, the Construction Products Association latest industry forecasts are for construction output to have grown by 4.8% in 2014 with projected growth in 2015 of 5.3%. This is primarily due to recovery in private housing and commercial sectors in addition to a return to growth in public sector construction. Some of this growth can be attributed to the National Infrastructure Plan. A number of commentators are however forecasting a period of ‘uncertainty’ around the time of the May General Election.
There have now been six consecutive quarters of increasing tender prices but the benefits of these have to great extent been undermined by higher costs eroding the benefits.
CAB’s unique quarterly State of the Market Surveys provide an insight into current and expected trends in the aluminium in building sector. Each quarter CAB members complete a personalised version of the questionnaire which is then integrated into the wider Construction Products Association (CPA) survey. This utilises a balance of respondents to assess results and identify trends. A positive balance of respondents means that the percentage of firms reporting a rise is more than the proportion of firms that report a decline.
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