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Don’t Forget! You Saw it in the
Adverti$$er
April 2022 #14273 Page #35
Record CM Building Industry Net Profits are Coming to an End Sooner Than Most Believe hat a ride it has been for the vast majority of the component manufacturing (CM) for wood trusses and wall panels in North Todd Drummond America the past few years. The demand for new homes outpaced the supply capacity of most homebuilders and those who suppy them. This recordbreaking rate of building supply needs created the perfect storm for many CMs, which created long lead times and virtually a no price limit market, resulting in historic record-breaking net profits. (See my January article, “Record-Breaking EBITA Exceeded Mid-Twenties for Many Component Manufacturing for 2021.”) Sadly, these good times are soon coming to an end. The following three emergent (negative) trends may very well bring an end to this record profitability everyone has been experiencing. What more can your company do to protect and improve net profits beyond capital investments?
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Everyone, and I do mean everyone, is expanding their manufacturing capacities. Last month’s article, “Millions of Dollars for New Equipment and Building Investments are Being Wasted,” explains how many are making costly investment errors. Despite the costly errors by many CMs, the fact remains that all the new equipment and manufacturing facilities expansion will add far more manufacturing capacity to the markets. One should expect all this new equipment coming online to have the effect of shortening the lead times, and therefore competitive pricing, of new orders by late summer. By the time August/ September comes, it will allow the CMs to get their new equipment installed, staffed, and most of the bugs worked out to have a meaningful impact to help their manufacturing capacity expansions. Additional pressure on competitive pricing should grow steadily throughout 2023 with the addition of increasingly more new equipment and facilities expansions coming online. Today, most new orders for new equipment are at least one year from a promised delivery date. All the delayed equipment installs will keep arriving and being added to the CM locations as fast as the equipment dealers can produce and deliver the new equipment. As the continued manufacturing capacity is added to the market, what effect do you think it will have on the demand and supply pricing model? Continued next page
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