ORLANDO, FLA. (March 21, 1:20 p.m. ET) — Despite a sluggish end to 2011, decking manufacturers are optimistic that 2012 will bring their companies and the industry improved sales.
“The market looks a little better, a little rosier,” said Bill Ross, senior vice president of sales for Fiberon LLC, in an interview at the International Builders Show, held Feb. 8-11 in Orlando. “I'm cautiously optimistic and we're kind of bullish.”
“The decking market is going to be pretty flat, but we expect sales of our MoistureShield decking to grow 25-30 percent at a minimum in 2012,” said Brent Gwatney, vice president of sales and marketing for Advanced Environmental Recycling Technologies Inc.'s MoistureShield-brand decking.
That would make it four consecutive years that MoistureShield's sales have grown by 20 percent or more, he said.
“You have to grow by taking market share away from others,” said Gwatney. “And we have a price-point product in a price-point market and that makes our product very attractive in the market.”
In addition, the company has expanded its distribution network, which he said will give another boost to sales.
In late February, AERT added Denver-based ProBuild Holdings Inc. — which claims to be the nation's largest supplier of building materials, with more than 450 locations — as a distributor for MoistureShield just two months after it inked a deal with Lumbermens Merchandising Corp., a distributor that operates in the Northeast.
TimberTech Ltd. CEO Stu Kemper said he believes 2012 will be a good year for his Wilmington, Ohio, company.
“In 2011, the alterative decking and railing market was flat or slightly below 2010 levels,” Kemper said. “But fortunately, our sales went up in 2011 and we expect to grow in the high single digits in 2012. The vibe is clearly up in the marketplace for the decking category.”
That's good news for decking manufacturers after the slowdown in the second half of 2011 that was triggered when both dealers and distributors reduced their levels of inventory in May.
That led to a decline in overall decking sales. It also increased the quoted price of composite and PVC decks by as much as 30 percent whenever those dealers and distributors needed to make special orders for customers because their own inventory levels were low.
Possibly related to that second-half slowdown, or maybe because there were a number of strong product introductions at DeckExpo this past October, composite decking companies, for the most part, limited their product introductions to new colors for decking, the addition of deck lighting packages, or extensions to trim and railing lines.
The main exceptions:
* Tamko Building Products Inc. officially unveiled its EverGrain Envision decking, a compression molded composite deck board that is capped on the top and both sides.
* Azek Building Products Inc. began the national rollout of rubber/plastic composite pavers that it will be distributing and marketing as part of a strategic alliance it formed last August with Vast Enterprises LCC in Minneapolis.
* AERT said it “probably” will expand its product line and introduce a coextruded handrail and/or an aluminum handrail. It expects to reach a decision by the end of March.
In addition, Springdale, Ark.-based AERT said its much-anticipated NanoShield decking is likely to hit the marketplace in early 2014.
“We will have production up and running by the beginning of the fourth quarter of this year,” said Gwatney. “We're working on a variety of formulations to determine which one is the best to use initially.”
NanoShield's fibers are coated to protect the decking from fading, scratching or marring. “It will be a high-end product to compete with cellular PVC and capstock composites,” he said.
Unlike most makers of wood-plastic composite decking, AERT doesn't cap its deck boards, which are made from a minimum of 95 percent recycled wood and recycled polyethylene, with that recycled PE supplied by the company's plastic film recycling plant in Watts, Okla.
“We don't need to cap our product because we have never had a product recall,” said Gwatney. “So we don't have that extra cost and that gives us an edge in price that helps us gain share” from companies that have switched to capped products to achieve the performance that the marketplace demands.
Gwatney said AERT's biggest challenge right now is “just trying to keep up with demand.”
“Everyone has low inventories and now that the economy has turned, everyone wants product quicker, especially because the milder weather is allowing people to build decks earlier in the year,” he said.
That's been the same experience at TimberTech.
“Our typical first-quarter inventories have been depleted,” said Kemper of TimberTech, which just prior to the builders show introduced LED deck lights, latex paints for consumers who want to paint the ends of deck boards, lower prices for its railing lines, and three new colors for its capped composite Earthwood Evolutions decking.
“People have been able to break ground and build in a lot of markets where they normally can't build” during January, February and March, he said. That may be pulling some sales earlier into the year, but that's okay with Kemper.
“Anything that helps the deck-building season to start earlier gives us a boost,” Kemper said. “We welcome that.” He said he also expects a boost from the new colors in Earthwood Evolutions capped composite decking, which he said had the most successful decking product launch in the company's history.
With the exception of AERT's MoistureShield decking — which continues to gain share as an uncapped product — capped composites in general continue to gain share on other products in the composites and cellular PVC category and spark new products in the composites decking category.
“Our color blends have been well-received,” said Ron Cook, communications director for Tamko, which officially unveiled EverGrain Envision at IBS. Envision is the first capped product in Joplin, Mo.-based Tamko's EverGrain decking line. Tamko derives 80 percent of its sales from roofing products.
“Our compression molding process gives us deep, repeated colors, a deeper grain and texture, and the opportunity to create unique colors,” said Cook. “This is a high-end board that we are excited about.”
“The trend is still toward capped [PVC and wood-plastic] composites at the expense of uncapped PVC and uncapped composites,” agreed Ross of Fiberon, which introduced several new colors of decking at the IBS show.
“We think we will have a pull-through to a good year because of increased distribution and increased capped composite sales,” Ross said. “There will be growth overall for the industry. People are looking for a 5-6 percent sales increase.”
Ross didn't make any specific projection for Fiberon in 2012. But he said 2011 sales were “up” over sales levels from 2010, which was a double-digit growth year for the New London, N.C., company.
Similarly, Mike Gori, product management director for Azek of Scranton, Pa., said he expects “growth and a good year in 2012.”
“We have come through a tough, tough downturn as an industry,” he said.
At IBS, Azek introduced deck-rail lighting options, trim moldings, a one-piece window and door trim, and colors for its decking — in addition to showcasing the rubber-composite pavers from its manufacturing partner, Vast Enterprises.
Beyond the challenge of filling the industry's depleted inventory pipelines, the biggest challenges, decking executives said, continue to be cost-related.
Material and logistics costs are rising with increased oil prices, and wood decks have a growing cost advantage over composites. The reason? The price of wood remains at very low levels because of the record low number of housing starts in 2011 — the third straight year housing starts have set that dubious record.
“Costs are one of the main challenges,” said AERT's Gwatney. “But our plastics film recycling plant [in Watts] continues to give us access to a low-cost raw material supply” that others don't have. “But logistics costs are becoming an issue. Just getting the product back and forth is more costly.”
To control its costs, TimberTech said it is maximizing the use of its coextrusion technology and its investments in manufacturing.
“We have economies of scale that we can use to lower manufacturing costs,” Kemper said. “And we have developed coextrusion processes to put the goodies [coatings] on the surface, which enables us to lower the cost of the substrate.
“Our move to coextrusion has helped us immensely,” Kemper said. “We've been able to eliminate waste and inefficiency in manufacturing. And once you have the ability to coextrude, you can also design your products for different price points.
“We have made efficiency gains” that translate into savings “in the seven figures.”
In addition, he said, TimberTech has been able to incorporate recycled PVC into its PVC decking and recycled PE into its wood-plastic composite decking “to replace and trade out high-cost virgin polyethylene and virgin PVC.”
“We have 70-75 percent recycled content” in some products, Kemper said.
Despite current market sluggishness, Kemper is bullish on the future of composite decking.
“Right now, it is challenging for everyone,” he said. “But I expect the category to have significant growth over the next three to five years. The future is bright.”
Gwatney agreed: “If financing becomes more readily available, we will see the decking industry explode over the next few years. People are tired of putting things off, and want to retain the value of their home.”
Cleveland market research firm Freedonia Group Inc., in a report published in February, projects demand for wood-plastic composite and plastic lumber will grow more than 13 percent per year to $5.4 billion by 2015.
That report projects that sales of WPC lumber will grow by more than 16 percent annually to more than $2.5 billion by 2015, and demand for plastic lumber will rise nearly 11 percent annually to more than $2.8 billion by 2015.
Kemper said TimberTech will continue to “cover the category,” making and selling PVC, composite and capped composite decking, and railings and other accessories.
“Unless the markets shift substantially,” he said, “we are committed to all the businesses we are in today.”