More Insights on 2012

 

 

 

Filip Geeraert

 

Deceuninck North America

 

Monroe, Ohio

 

As Window & Door prepared its annual forecast issue, industry executives shared their thoughts and predictions for the coming year in much more depth than could be gathered together in one article. In "More Insights on 2012," we present their detailed answers to questions about the coming year.

 

First, let’s start with the most general question for a forecast piece. What do you expect 2012? Will 2012 finally be “the year” we start seeing some turnaround, or is recovery further off than that?

Looking to 2012...it is really like a crystal ball and it changes every day. Whatever we think today may be different in a couple of months. We expect that 2012 will be, let’s say, even with 2011. We’re not over optimistic, but neither are we pessimistic. There are, of course, a lot of uncertainties.

I would probably mention three things:

  • First of all...the economy. It remains very fragile and we do not know how the U.S. will react depending on what’s going on in Europe. Europe is really going to recession, that’s what I’m afraid of. Greece, Italy, Spain—how that will impact the U.S., that’s an unknown but it can be serious. We’ve seen it in the past.
  • Second, financing toward fabricators and in general is still very limited. The banks say they’re lending again, but it’s so strict. For the building industry, [lenders] already have a negative mindset and almost impossible to get new financing in the building products industry.
  • Third, raw material price increases [are a factor that could impact 2012]—especially the additives. We could see the price … for total additives being 50 percent higher than what they used to be at end of 2010. These are three elements which really impact our industry and our fabricators.

What will new construction look like in 2012?

In general, for new construction in 2012, I don’t see any growth at all. Sometime we see some signals [of growth]. When we look at our fabricators from a regional point of view, some fabricators within the same region are doing better than others and the difference is huge. Whether new construction or remodeling, we see some fabricators that are doing plus 20 percent [compared to last year] and the others doing minus 20 percent—and they’re operating in the same market. I don’t believe in wide-spread growth as of yet, but the product offering and how people go to market becomes even more important.

What about remodeling/replacement work? What is likely to drive business in this segment?

With remodeling and replacement, in those areas, the energy codes become more important. People want more energy efficient window systems to reduce their energy bill. From the consumer point of view, in the vinyl window fabrication market we do see some growth opportunities, especially by taking market share from aluminum fabricators. They have more pressure on them because of the energy codes, so it’s a huge opportunity for our [vinyl] fabricators.

In the light commercial, which is dominated by aluminum fabricators today, it’s also a sentiment that is likely to grow in the market. In light commercial, restoring apartment buildings, schools and hospitals, government, there are still government grants to [enable these buildings to] hit energy codes.

From a people point of view, for young adults who do not want to build or buy a house, they’re going back to renting housing. Apartment building owners do refurbish those apartments because that is a market segment that is growing.

Where we see opportunity, especially, is that we are in the process of finalizing a complete product line which meets impact. It’s made especially for the coastal areas. We have a segment of fabricators who are already certified to meet codes in coastal areas, especially Florida, and that may be an opportunity [for other fabricators as well].

Generally the codes are very stringent and you’re now seeing that in some states, more codes are being formulated or proposed to be more stringent. Those who are prepared or well-positioned to provide high-performance window systems have some opportunity in 2012 and years ahead.

What’s going to be happening with energy efficiency in the coming year? Is the industry focus on ramped-up Energy Star requirements? Are retail channels gaining traction with “whole home performance” efforts? Is the industry chasing triple panes and other means of better energy performance numbers?

With energy efficiency, the request for it goes beyond windows. The full house is what people are looking for. The industry is looking to have a complete energy efficient house, whether you’re talking about the roofing, the siding, windows and all that. This is a major change and I would say it’s coming from what was happening in Europe—that focus on energy.

Looking at our market, with windows certainly, there is a push [for energy efficiency]. The problem our fabricators and we ourselves have as an extruder company is lack of clarity on the codes. Every year, the government comes up with new codes. Over the summer and fall [of 2011], we thought we’d focus more on R-5 minimum requirements and now we see [a push for] R-4. Though I do believe we’re heading toward R-5 and you see a lot of fabricators heading for those numbers.

The problem I see today...again linked to one of the challenges I mentioned...is the financing or the cost. Although the consumers want the most high performing window system, it has to be affordable. And today, because of the uncertainty, people look at the value proposition and see what they can afford today, rather than shooting for the highest performance numbers.

On a (hopefully) positive note, do you see any particular product segments or geographic regions outperforming the industry as a whole?

As we thought of a vision and strategy [for our company], it focuses on building a sustainable home. It’s a very broad concept and built on three pillars—innovation, design, and sustainability. It’s a framework we want to repeat every year with every product line. That way, customers get used to the fact that Deceuninck offering something new will always hit all three pillars.

In innovation, the thermal reinforcement [system we offer], is more energy efficient. It’s a system that’s 80 percent glass fiber, and 20 percent soy-based resin. We partnered with Bayer for that and we have a five-year exclusive, which gives us a lot of options for our customers in the energy [category]. Our customers have a complete replacement for the aluminum [they currently use] without the need for re-certification. It offers 700 percent better thermal performance—that’s huge, especially in current market conditions.

In the pillar of design—this becomes more and more import. In 2011, we introduced an Americanized version of a tilt/turn system. We included the screen. Tilt/turn is common and Europe but it doesn’t provide the screen slot. By Americanizing it, it gives you an option to offer an R-7 [window system] but it’s also designed to meet DP 80. So for impact it provides an option in certain coastal areas.

For sustainability—this becomes more important all the time. We want to play a role in reducing the scrap we produce and focus on recycling. We partnered with JPI, one of the top recyclers in United States, who will be getting all the end dust so we can re-introduce it to the [manufacturing] process. On sustainability, we would also like to offer our fabricators the Green Circle certification.

We like to focus on these three pillars and provide something to the market to help our fabricators meet or exceed codes or perform requirements, and also be considered innovators in the industry.

Will certain regions outperform others?

Honestly it’s very difficult to say which regions are performing stronger than others because within each we have fabricators or customers who are strong and those who are lacking. We see the Southeast as opportunity, and other coastal areas, because of the code requirements. I do believe still a huge opportunity there, and that’s a growth market.

Everywhere there are major cities, light commercial can play a role. I do see major opportunity in those areas as well.

Is your company likely to be hiring, laying off, or maintaining the status quo in 2012?

In general, from an industry point of view, I do believe we’ll be relatively flat. At Deceuninck, since August we are in a better position and we’re running overtime. That’s probably exceptional for the industry. At Deceuninck, we anticipate we may be hiring some people early in the year but too early to see if that’s significant or sustainable.

Do you have anything else to add?

We are cautiously optimistic about 2012 but there are so many variables. So we remain, at this point, cautiously optimistic.  When we talk to customers, they are cautiously optimistic too. They have some good things going their way. Most of our customers can offer at least an R-5 product line, which is important. They have a huge portfolio they can offer. They are able to offer colors to play a role in competing. And then there are options to expand in their sales by going toward light commercial.

Deceuninck North America was able, in 2011, to play offense and defense at the same time. We played defense by making sure we “right sized” early in the year. On the other hand, we played offense by introducing three new product lines based on the three pillars. We were able to do that from concept to introduction in less than three months—that’s rather exceptional.

To play offense and defense in a downturn market is the only way for survival and to be well positioned for the time in 2013 when the market starts picking up again. We do believe we are well positioned. We have created a platform from a vision point of view and our customers know what to expect from Deceuninck. We will be pushing our organization and the industry to go to the next level and I think that’s important.

 

Window & Door's "More Insights on 2012" also features questions and answers about the coming year from the following people: