It seems appropriate to say g’day for this first AKD update in FTMA news this year and open with a quote from the famous philosopher Mike Tyson – “Everyone has a plan, that is until they get punched in the face”. Certainly, with the bushfire at the start of the year and now CoVid-19, it feels like two consecutive punches to the face!
At these times of increasing uncertainty and challenge, AKD welcomes the opportunity to provide this update from our perspective with FTMA members.
AKD Tumut started up after the annual end of year shut in a state of “business as un-usual”. To have the mill start up with only a week’s delay is a real credit to the team at AKD Tumut and our key supply chain partnerships in that region, following the significant disruption. Currently, AKD Tumut has somewhere between 9 to 18 months of salvage logs to process.
We have an experienced and capable team focused on recovering as much timber as possible and continuing to meet the required product standards and our customers’ expectations regarding supply and service reliability. We appreciate FTMA news which previously addressed concerns regarding any product quality issues and provided technical updates on blue stain.
After the salvage process, our long-term log volume is uncertain and at this stage, we anticipate the log volume will reduce by 30-40%, maybe more as the Greenhills and Bago plantations have been destroyed. AKD is planning for these scenarios currently and as you would hopefully appreciate there could be significant personal and community impact if this is the case for AKD Tumut.
However, we will negate the supply impact at one mill with our expansion and improvement plans at our other four sawmills. This includes incremental processing efficiency at our Colac mill which already services the East Coast, and the significant increase already planned at our Caboolture mill. At this stage, we believe the overall upside v downside is about equal in terms of timber supply.
Seeing the commitment and resilience of the AKD team is what inspires us to get these plans right. It is in the long-term interest of our stakeholders – our people, our communities, our customers, our shareholders and our suppliers.
I am personally proud of how the AKD Tumut team has maintained supply reliability to our customers following the fires, and we encourage the market to support our regional communities and keep them healthy – “Made in Australia, By Australians, For Australians,”.
Outlook for Building Activity with COVID-19
As we plan for a longer-term impact at Tumut, we are all currently being confronted with revised economic and building forecasts and trying to understand the timing and extent of a potential building downturn due to the COVID-19 pandemic.
Business disruption due to supply chain impacts in the construction sector, particularly non-residential, is now seeming less likely and that’s due to our supply chain’s responsible approach to social distancing and hygiene rules. No time for complacency on this!
Having local supplies helps reduce the risk of supply chain dislocation as global markets deal with the pandemic at different stages and with different government policy approaches. Learnings from previous crisis such as SARS and the GFC include proactive monetary by government instruments to ensure global financial markets continue to operate and facilitate economic activity.
The focus now has moved to demand disruptions and potential demand shocks in our supply chain over the coming months. Demand-drivers for new housing are showing early signals of significant negative reaction – consumer and business confidence being the key drivers and for owner occupiers the big concern is job security.
We believe that March 2020 new dwelling approvals may hold up a level of demand in terms of new dwelling commencements in this current quarter, June’20. However, beyond this, without any initiatives to build consumer confidence, demand for new housing may come to a standstill for several quarters.
You, as our fabricator customers are closer to the action with your builder relationships and we know that the early lead signals for late March and now April has been negligible, with minimal new house sale deposits being taken over recent weeks. That doesn’t bode well for demand for our businesses from June onwards, if not earlier.
AKD believes that a combination of demand stimulus and support for housing, as well as initiatives on supply management are required to keep our sector viable and survive this crisis. We are working hard on putting these arguments and recommendations to government and standing alongside other building material companies and building industry associations.
No question that the COVID-19 pandemic is shaking the global economy to its core, and a downturn for the Australian economy is being forecast for the coming 2 to 3 quarters. However, there is also clearly a point of recovery – just a matter of when and how quickly.
For now, AKD would like to applaud Kersten on her proactive updates and advice on COVID-19 to fabricator members and sponsors. She has been a leading example amongst industry associations of adding real value to members in terms of information and communication in uncertain and rapidly changing times. AKD also welcomed the opportunity to take up the hand sanitiser bulk offer too – thank you.
Doing Business – With Social Distancing
So, big challenges above to get through, but that makes me turn to another famous quote – “The ultimate measure of a person is not where he stands in moments of comfort and convenience but where he stands at times of challenge and controversy,” Martin Luther King.
This quote is personally important to me, it is the whole concept that we often think of as “Fairweather Friends”, we often see people’s true character in difficult and stressful times. So on that note we invite you to stand with us together – that may be metaphorically for a while with our new way of life with COVID-19. We are open for business and we are here to support our customers and the wider industry, and we think it’s critical in a crisis to have clear communication and focus on relationships. AKD is here for the long term, we are invested. Sustainable business is about people dealing with people, respectfully and honestly, especially when times feel tough.
We understand we are part of a vital supply chain and that maintaining a level of new house building activity is key to all of us surviving this crisis. We also believe that it’s a time when national economies and businesses will and should give preference to supporting locally made and so we ask you to consider your approach to this. This will help ensure we have a viable industry at the end of this.
We welcome your feedback and any suggestions on how we can make doing business easier, particularly in these challenging and uncertain times! #inthistogether