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Economy, End of ITC case helping sales

by Matthew Spieler

Ask people from just about any sector and they will say since December, sales have been steadily picking up. While this is welcome news for anyone who has suffered through the economic downturn, for those in the wood business, it is a breath of fresh air.

As one of the hardest categories of products—flooring or otherwise—hit by the recession thanks to being tied so closely to the housing market, among other factors, a positive growth trend could not have come at a better time. Though final figures for 2011 are not yet available, most experts said the year should have ended slightly better than 2010, which would be the first time the wood category finished in the black since 2006 when the industry reached its peak in sales at more than $2.5 billion.

In fact, between 2006 and 2010, wood sales were off approximately 40%, so any gain is considered a victory—even if it only amounts to a few percentage points. And throw in the first quarter of 2012, which many said continued the trend they saw starting late last year, and it is enough to make people smile.

“We are up nicely to start the year,” said Dan Natkin, Mannington’s director of wood and laminate business. A number of factors are coming into play—a slight rebound in the remodel and builder businesses, and some renewed confidence among retailers. Add to that the success of our product introductions and we are up in the high single digits to start 2012.”

Drew Hash, vice president of product and category management for Shaw, noted, “While sales are satisfactory, we are seeing positive consumer sentiment slowly returning.” As such, he added, “We continue to be realistic yet optimistic regarding business projections.”

Hash said the company has taken the approach of “relying on creating beautiful products that stand the test of time to create long-term consumer satisfaction,” because this philosophy has shown a penchant for success. “In the last year alone, we’ve had a 30% growth in our Epic offerings, which now includes nearly 100 SKUs in 35 styles.”

Randy Cox of Verde Flooring, said, “business has been picking up in the last three to four months, especially the high end items. The remodel business has really increased as people are fixing up their homes realizing they’re not going to be selling them and will be living in them a few more years.”

When it comes to wood sales, new home sales, the remodel/replacement market, new home and residential construction along with sales of existing homes is often looked at as a key barometer as builders, renters and sellers like to use wood floors recognizing they provide a strong selling point.

A warmer than average winter has helped spur construction as well as overall sales, housing industry experts said. According to the U.S. Commerce Department, sales of new homes in February jumped more than 11% compared with the same month last year and the median new home price jumped 8.3% to an eight-month high. Compared with February last year, the rise was 6.2%.

And, looking ahead, permits for future projects approached a three-and-a-half-year high.

Stephen Van Anden, chief marketing officer for Prudential Real Estate, said, “There is still a desire for homeownership, and as we see continued improvement in the job market, there is going to be an unleashing of pent-up demand.”

Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, N.C., told Reuters’ Lucia Mutikani, “Mindful that more healing needs to be done, we expect new home sales in 2012 to post their first annual increase in seven years, rising 12%.”

ITC decision

While an uptick in the housing market is certainly good news for anyone in the wood flooring business, the final determination by the U.S. government in the year-long antidumping case seemed to allow everyone to once again breathe and get back to business.

Brought on by a handful of prominent American engineered wood companies against Chinese imports, the International Trade Commission (ITC) voted in November to uphold the antidumping and countervailing duties set by the Department of Commerce (DOC) (FCNews, Nov. 14).

Though the DOC rates amounted to importers of record having to pay additional fees ranging from slightly less than 4% to just under 5% for most and upwards of more than 85% for a few—not to mention posting bonds—most executives said the amounts were not enough to put a permanent stop to business.

It should be noted, though the final rates have been set, both sides are appealing different aspects, from an individual company saying calculation errors were made (something the DOC admitted to when it adjusted its preliminary rates) to having the entire case dismissed and even having the rates be adjusted upward. Most people are going under the assumption when the smoke clears, the rates will be similar enough to what they are now so as not to cause the industry-wide panic set off when the case was first announced in late 2010 (FCNews, Nov. 8/15).

At the recent Domotex asia/ChinaFloor (DACF) show in Shanghai (see story on page one) executives told FCNews it was time to get back to business.

Franky Helmons, general manager of SiHe Wood, which supplies Verde Floors among others, admitted last year, “There was a great deal of uncertainty. But now it is time to move forward. We will certainly monitor the situation, but there is nothing we can do. The important thing is to have business now.”

Adding to what Helmons told FCNews about the types of products his company sells, Thomas Baert, president and CEO of ChinaFloors, said, “Our products are mostly in the premium range where people can make money so the percentages are not enough to cause widespread problems. Chinese producers like ourselves mainly make products not made in the U.S. which is why we were the ones who opened the doors to numerous innovations, from true handscraped to various finishes the big American companies couldn’t do on their large assembly lines.”

Made in USA

While the antidumping case is far from over, companies such as Mannington and Shaw said their push to promote products made in America are helping to spur sales.

“We feature the Made in USA label on all domestically produced products,” Mannington’s Natkin said. “In certain areas of the country and with several key customers, this has become a selling point. We are hearing more and more from the consumer base as well about made in the USA. This plays well for those of us with domestic manufacturing.”

Hash said the combination of American made for the company’s Shaw and Anderson branded products, added to a strong environmental story are helping to push sales as evidenced by its Epic products, pointing to the company getting all its wood products cradle-to-cradle certified, which was “no easy task. These types of accomplishments are so important to telling our story and expressing our dedication to protecting sustainably-managed American forests.”

He added, “In the year ahead, we will continue bringing our Made Right Here story to the forefront. This is an important part of our product development…[as] we are extremely proud our hardwood products are made in the USA.”