Window manufacturers aren't deluding themselves by thinking the market has turned around just because of strong sales in the last two months of 2010, when consumers rushed to buy replacement windows before the $1,500 federal energy tax credit expired.
2012 is the year that has been thrown around by economists as the year that sales levels would get close to pre-downturn numbers. But I would have thought that 2010 would have had to have been better for that to happen, said Kyle Hendren, marketing director for Salt Lake City-based Amsco Windows, where vinyl windows bring in the bulk of sales. So that recovery might not possibly occur until 2013.
The numbers support that concern.
In the new-home building market, sales of casement, double-hung and other residential windows with plastic frames which account for 92 percent of plastic window sales slumped to $2.77 billion in 2009, down from $3.63 billion in 2004, according to the most recent Windows & Doors study by Freedonia Group Inc. in Cleveland.
There was a boom at the end of the year on the remodeling side because of the expiring tax credit, but without the energy tax credit in 2011, I'm not sure the consumer will still be willing to pay the premium for energy-efficient products, Hendren said in a January interview at the International Builders Show in Orlando. There is still a lot of price resistance.
As a result, most vinyl window manufacturers have turned their focus on the replacement market, taken steps to reduce costs, and expanded their geographic markets to stay positioned to capitalize on opportunities when the market rebounds.
Amsco isn't the only company window manufacturer being extremely cautious about what shape any recovery might take in 2011 even though Freedonia projects in that same study that sales will increase 10 percent each year and reach $4.14 billion by 2014 and $5.26 billion by 2019.
While we had one of the strongest Decembers we ever had, the economic forecasts we look at were telling us that a downturn was coming in the first half of 2011 compared to the first half of 2010, said Mark Parrish, president and CEO of Deceuninck North America LLC, which makes windows and decking.
So while we were experiencing a strong November and December, we had to ask ourselves, 'Is that coming from a strong economy, or from a fabricated incentive?' said Parrish. The market is slowly turning around, but it is hard to assess.
Ninety-eight percent of the products made by Deceuninck North America which has a 550,000-square-foot manufacturing plant in Monroe, Ohio are for private-label products.
Roger Murphy, president of Pensacola, Fla.-based U S Block Windows Inc. which does business as Hy-Lite, a U.S. Block Windows Co. said he believes things are in line for an improvement in building and construction because of low mortgage rates, low interest rates and low home prices. But first, employment figures must improve, Murphy said.
We see acceleration in sales, he said. But the real driver will be the unemployment situation. That seems to be the last piece of the puzzle to fall back into place.
Still, many window manufacturers see a better 2011, after a 2010 that was either just slightly better than or flat compared with 2009, as opposed to the larger pickup many thought would occur last year.
2011 is going to look a lot like 2010. Our leading indicators suggest an improvement in the latter half of the year, said Parrish.
We could start to pick up again in the second half as the housing sector starts the long journey home to get back to 2004 levels by 2014, he said. In the grand scheme of things, this has been a lot slower recovery than after any recession in the post-Vietnam War era because both new construction and repair and replacement dipped, and that's what has been so catastrophic.
Our product pretty much mirrors the rest of the window market, said Murphy, whose company makes fixed, operable and decorative acrylic block and glass windows. In the first four months of 2010, sales to new construction were good and then the new-home tax credit expired, and so did sales to the new-construction market. We were flat in 2009. We were down in new construction, but the remodeling market picked us up.
We were up in the single digits over 2009, but mostly because we went into new territories, said Amsco's Hendren.
One company more optimistic than some others is Simonton Building Products Inc. in Parkersburg, W.Va., which in 2010 became the first window company to be rated highest in both builder and remodeler satisfaction for residential windows and patio doors, and highest in customer satisfaction among window and patio door manufacturers in the same year in separate surveys from J.D. Power & Associates of Thousand Oaks, Calif.
Sales were better in 2010 than in 2009, and 2009 was better than 2008, when the economy collapsed late in the year, said Gary Pember, vice president of marketing for Simonton. We have taken share from others. It was a very good year for us and we expect to have a growth year again in 2011 and take more share, he said.
We brought in good talent, and invested for growth during the downslide, developing windows with more style, windows that bring in more ambient light and windows that offer improved energy performance, said Pember. There is no better time to take market share than when the market is decompressed, so we continued to invest in new products and programs that resonated with customer and consumer needs.
For example, Simonton found that consumers wanted the energy credit, but had no idea how to get it, said Pember.
So we gave consumers who bought our products a free coupon to get their taxes prepared by H&R Block, he said. That program also helped contractors that were looking for a way to convince consumers to buy energy-efficient windows.
In 2011, Simonton plans to leverage its J.D. Power awards significantly, Pember said. That gives contractors a leg up when it comes to credibility that other [window] companies can't provide them.
With new-construction sales still depressed, many window companies are concentrating their sales efforts in the remodeling market.
We are focusing our sales and marketing effort in the replacement market, said U S Block's Murphy, even though historically 90-95 percent of the block window market has been driven by new construction.
Window manufacturers are also providing more color and glass options for their products, while continuing to tighten their belts to improve their cost structure, become more efficient and expand their geographic reach.
Expanding into new territories is one of our objectives, said Hendren. We went into California, Nevada, Colorado and Arizona last year and we are going to expand into the Midwest sometime this year.
He said Amsco, a privately owned company with a single plant in Salt Lake, also will be introducing a new composite window this year that will move the company into federal apartment complexes.
It is more of a commercial-grade window to get us into larger housing projects, said Hendren. It is a blend of thermoplastic resins that is manufactured to look like a wood window.
In a similar vein, Deceuninck introduced at the builders show its new Zendow window system for customers looking for a window with increased rigidity and strength that also minimizes the profile area of the window to increase the amount of light entering the room.
Consumers are looking for more style, more lighting, more thermal performance and energy savings that will drive significantly improved performance for new windows, agreed Pember. They are looking for comfort, security and aesthetics.
Pember also said Simonton is concentrating on improving manufacturing efficiency.
We are vertically integrated and do our own extrusion, so we are driving costs out of manufacturing, he said. We are continuing to be more efficient in our use of labor and machines.
That's what Hy-Lite also has done.
We have standardized some [frame systems] to have fewer stock-keeping units, and are looking at how we can reduce the amount of material and still maintain structural strength, said Murphy.
We have trimmed and tightened and made improvements in manufacturing efficiency.
No one is certain when the rebound in building and construction markets will occur. But companies are ready to grab the opportunities.
There are some strong opportunities in new construction because it can't get any lower than it is, said Pember. There are also good opportunities to get people to replace existing windows and upgrade with thermal-efficient windows and style-driven windows.
Murphy agreed. We are ready to ramp up and go when the economy picks up.