Optimism for the Year Ahead despite Cost Inflation
May 2015

The latest CAB State of the Market figures for Q1, 2015 continued to highlight a positive long term outlook for the aluminium in building sector despite industry concern over the availability of skilled workers, with wages and salaries being the key driver of cost inflation. 79% net balance of respondents expected sales volume growth for the year ahead.
Headlines:

• 67% 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 (80%) and the next 12 months (79%).

• Costs continued to rise with 46% net balance reporting a rise in costs in the last 12 months (74% in Q4/2014) and 50% expecting a rise over the next year (78% in Q4/2014)

• Wages & salaries (93% net balance) were reported for the 4th successive quarter as the major cost factor closely followed by Raw materials (67%), with Fuel Costs negative on balance (-7%)

• 29% net balance of companies expected to operate at over 90% of capacity over the next 12 months (40% in Q4/2014)

• Headcount increase for the year ahead slowed again (40% net balance) compared to 57% in Q4/2014 but was behind the wider construction sector figure of 67% net balance.

• Demand (33%) and Capacity (20%) were once again factors ‘likely constraints on activity over the next 12 months’. Encouragingly 20% of respondents stated ‘No constraints’ (17% in Q4/2014)

The survey which is likely to have built in some reservations about the May 7 General Election represented 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 had 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. While this no longer continued for Q1, 2015 only Product improvement showed a small year on year reduction. The outstanding area was plant/equipment (80% net balance) followed by property (47% net balance) highlighting increased priorities in these areas.

With increased sales activity, inevitably almost, costs are rising with wages the biggest factor for the fourth successive quarter. The other key drivers were raw materials (67%) and energy costs (33%). Fuel costs were negative on balance for the third 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 further degree of evening out in the first quarter of the year. Interestingly, the net balance of CAB members expecting to operate at over 90% in the 12 months ahead dropped from 40% in Q4/2014 to 29% for the year ahead but this was almost identical to the overall UK Construction sector or 31%, but this also suggests that there is little concern over capacity issues.

With the decisive result of a majority government in the General Election 2015 it will be interesting to see what effect this has on business confidence in our Q2, 2015 Survey.

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.

For further information contact Justin on 01453 828851 or email justin.ratcliffe@c-a-b.org.uk