Television, newspapers, news apps, radio, even social media – you can’t escape the dire economic forecast that the media are bombarding us with. Recent reports include Australia’s expected economic growth to be slashed for this year and next year. And, it isn’t just Australia, but the whole world. Recently, the World Economic Outlook predicted that Australia would grow at 1.7 percent down from a predicted 2.1 percent. Treasurer Josh Frydenberg commented “…We do face headwinds with the IMF World Economic Outlook confirming that global economic growth has slowed with ‘rising trade and geopolitical tensions taking a toll on business confidence, investment decisions, and global trade.”
Every week or so there is news about the federal and state governments taking measures to try and boost the housing industry. Stamp duty cuts, easing foreign ownership regulations, reviewing building codes. I’m sure that tomorrow, the week after and the month after that the reports will continue to be the same.
I was interested in finding out the reality of the situation. What is really going on in the industry? Instead of listening to the media I stumbled across a report from IBISWorld on C1492 – Wooden Structural Component Manufacturing in Australia (WSCM). If you’ve never heard of it before, IBISWorld provides researched, reliable and current business information on over 700 industries and top companies in Australia and New Zealand. Their analysis on the current and future outlooks for an industry can provide vital information that can help a business strategically plan for the current and future market. SO with a highlighter and pen I started ploughing through the 32 pages of information. I would encourage you to source a copy and read it for yourself, alternatively, I’ve noted my highlights as they relate to the timber frame and truss industry.
- Despite high revenue volatility, the WSCM industry has grown over the past five years, boosted by increased demand from housing and certain non-residential construction sectors.
- Industry revenue increased at an annualised 3.3% over the five years through to 2018-2019.
- Industry is forecast to return to strong growth in 2020-21 as housing construction volumes recover.
- Revenue is projected to increase at an annualised 2.4% over the five years through 2023-24 to $6.5 billion.
- In 2019, 95% of industry firms employ fewer than 20 people.
- Industry wages have fallen with revenue, however due to competition, savings have generally been passed on to the customer.
- Employment numbers are expected to increase at an annualised rate of 0.9% over the next five years.
Raw Material – Timber
- Accounts for 46.4% of revenue in 2018/19 FY; decline from the past five years.
- A possible reduction in timber volumes due to availability of plantation trees could increase timber purchase costs over the next five years.
- Capital investment has grown. Firms that failed to invest or differentiate their products have likely closed over the past five years.
- Capital intensity in the industry is considered medium.
- In 2018/19 FY for every dollar spent on labour the industry invest $0.19 in capital plant and equipment.
- Manufacturers of industry products that compete heavily with substitute materials (steel) are likely to report weaker margins over the next five years, as price competition remains fierce.
Products & Markets
WSCM has a total revenue of $5.7bn
- Roof Trusses- account for 13.2% of the industry = $752,400,000
- Wooden wall and window frames- 6.1% of the industry = $347,700,000
- Combination of roof trusses and wall/window frames = 19.3% = 1,100,100,000
- $1.1 bn
Key Success Factors
- Access to highly skilled workforce- create product in a given time frame
- Supply contracts in place for key inputs
- Established contacts in key building and construction markets- better ability to gain repeat business and attract new clients
- Investment in capital machinery to improve operational processes
- Higher product variation provides an advantage
Recently, FTMA has sent a census to all Frame and Truss manufacturers in Australia. This census is important! Having a clear picture of where our industry currently stands is vital to promoting the importance of prefabricated manufacturing and specifically timber within the building industry. When available the information could be used to better inform groups like IBISWorld regarding our specific sector within the whole Wood component manufacturing industry.
For FTMA census data provided will allow the board to make strategic decisions based on actual data for the industry. Including:
- Information to improve effectiveness of
- Lobbying the government;
- Interacting with the building industry;
- Interacting with the unions and
- Interacting with suppliers to the F&T industry.
- Creating clearer aims for project collaboration.
- Promoting the F&T industry.
- Allocation of resources including money and time.
Forest and Wood Products Australia have the Ultimate Renewable campaign – lets back it up with the figures, the statistics and the data to show that what we do is important to the Australian economy and the future sustainability of our country.
This Biz Buzz article was written and provided by Shelena Serrano, Vekta Automation and former FTMA Board Member.