The report’s findings, based on 90% of the industry, found that average product price inflation rose by 4% in 2009 as manufacturers sought to protect margins, resulting in a polarisation between those builders merchants who are more willing to operate on a value-led strategy with lower margins; and those operations that have actively avoided less profitable contracts. MTW suggest that increasingly the smaller local and regional merchants are positioning themselves at the lower value end of the market in late 2009, whereas the larger nationals have withstood rising pricing pressure to the extent where they are less inclined to supply to contracts which offer lower margins.
The report highlights a brighter future for the builders’ merchants market, with business and consumer confidence slowly returning in a number of key end use sectors, with demand returning led by public sector projects, domestic RMI activity and increasingly, the housebuilding sector. Nevertheless, MTW highlight the need for cautious optimism, with a number of remaining downsides in the market cited which are likely to dampen any prospect of rapid value growth, particularly given the likelihood of a cut in public capital expenditure in the near term. According to the report, around 8% of builders merchants remain in the ‘at risk’ category, underlining the fragility of the market in 2009 and into 2010.
During 2009, demand shifted toward lightside building products as the market became more reliant on the domestic and smaller scale commercial RMI sector. With housebuilders now increasingly opening up ‘mothballed’
According to the report, pricing pressures should ease in the near term as average product inflation falls from current levels of 4% to around 2-3% by early 2010, although profitability is likely to decline by around 25% over the full year. However, much of this contraction is derived from lower performance in the first 3 quarters of the year, with a much improved trading environment likely in Q4 2009 as volume demand returns from some key end use sectors such as housebuilding and RMI. Whilst there remains some concern that outside the Olympics construction activity, capital expenditure in public sector construction may decline, prospects are for market growth at, or just below inflationary levels for 2010 with a gradual upturn thereafter.
The report provides a comprehensive review of the UK builders’ merchants market in 2009 and forecasts sales to 2013 and provides sales estimates enabling market share estimation. The report package also includes mailing, telephone and contact details, providing comprehensive industry analysis and a useful sales & marketing tool. The report is available to purchase from GBP375 from MTW Research’s website www.marketresearchreports.co.uk where a free sample is available to download or by calling 08456 524324.
