Due to the AKD’s team’s early actions, proactive engagement, teamwork, and disciplined physical distancing, we have had no positive cases at any of our sites. I am proud of how the team has come together to keep each other safe. But unfortunately, due to the ongoing consequences of the Covid-19 pandemic to the Australian economy, last week AKD began a consultation process with our staff. AKD is looking to reduce sawmill production across the country through a series of production measures to be implemented in response to the dire construction forecasts.
This is a significant step for our business as we manage the impact of the pandemic. This decision has not being taken lightly as it directly impacts on our people, their families and our communities. It does not seem right to me to “announce” this serious news because of its personal and significant impact on our employees. Therefore the intention is to provide you our simple view of what AKD is thinking and doing. It’s not perfect and we may not be right, because like you, we are attempting to predict the future. We believe that continuing to share our experiences and listen to others is a key ingredient for us all to get through this completely unique and once in a lifetime situation.
Demand for our products has been solid in March and April, but a forecast decline in housing starts in the second half of 2020 is extremely concerning. The rationale for this belief is the significant increase in unemployment and the significant decrease in population growth with no immigration. I think we are all in agreement that the levels of construction activity in Australia will seriously decline unless the governments intervene. The production changes announced this past week prepare us for the looming decline in demand, and ensure that the business is resilient and ready for a period of reduced activity. AKD has also been very active in making these changes public, as we have sought construction stimulus support from the State and Commonwealth governments.
It is important that our customers understand that whilst the changes will reduce Sawmill production at Colac, Caboolture and Oberon (green log conversion), there will be no impact on AKD’s ability to maintain finished goods supply to customers. AKD’s inventory and ongoing dry Finished Goods production is sufficient to continue to support our customers at current levels for the immediate future. The changes are about reducing our ‘green WIP” inventory in our business for sales that we do not think will occur from July onward.
The changes we have made are expected to remain in place for several months, however we will continue to monitor housing starts and the demand for our products and adjust as required. We will work closely with the workforce, unions, suppliers, customers, and communities during the implementation of these changes to minimise the impact to the extent possible. If we have got this wrong, we can easily bring our production levels back up, or reduce them appropriately, we will react to the market signals.
As I write this note for FTMA News, I am thinking of what message do I want to leave you with. I am assuming here that we are all on the same page about jointly facing a seriously declining market. So the message is to buy ‘Australian made’; this is about Australians protecting and rebuilding our economy first.
Now is the time to be working with the people that employ fellow Australians like you do. Now is the time to favour local supply chains that will offer more security of cost and supply reliability during this crisis. Now is the time to support our collective domestic supply chains for many different aspects of our lives, now is the time to look after Australia first. I do not normally encourage support for my competitors, but even if you do not buy from AKD at least you should buy your timber from another domestic producer.
On Anzac Day, I watched a TV program on Kokoda, and it bought back memories of my experience last year. It made me think of the four pillars at the Isurava War Memorial and of the Australian diggers who fought in that brutal campaign. Our lives are not at risk, but I believe we can draw on the comparison and recognise some of the traits that we are all going to need in the coming months – Courage, Mateship, Sacrifice and Endurance.
We are in this together.
Stay safe & let’s keep communicating and sharing our experiences in these difficult times. Thank you for your support.
This was written and provided by Shane Vicary, CEO of AKD