Specialist
Executive at Essential Cabinetry Holdings Inc
Agenda
- Cabinetworks Group’s growth outlook across brands and demand expectations
- Supply chain, freight and labour – challenges and expectations for relief
- Inflation and pricing impacts
- Competitive landscape and market share trends
- 2022 outlook and potential market disruptors
Questions
1.
How would you describe the impact that coronavirus has had on the cabinet industry? What material industry changes came out of the pandemic?
2.
Moody’s recently downgraded Cabinetworks, reflecting the increased cost in materials, freight and labour – which you just referenced. Could you provide more context on these issues? Which are most concerning to you across material, labour and freight?
3.
Could you quantify the Russian impact? You mentioned partial eliminations of the imports on hardwood, but could you quantify the impact of the Russia-Ukraine conflict on the cabinet industry?
4.
As you mentioned, freight increased to USD 20,000 from USD 3,000-5,000, but could you also quantify the labour and material price increases? Which materials and what cost increases are you seeing alongside labour or wage increases?
5.
Could you elaborate on cabinet manufacturers cost structure? What is typically fixed vs variable costs?
6.
What percentage of sales go through each of the channels you mentioned? What’s a rough estimate?
7.
Could you quantify how pricing has evolved in the last few years? You indicated the price going up but where does it sit today for cabinets vs historical norms?
8.
You said it’s fairly easy to get price on the cost pass-through, but looking forward, do you expect any difficulty for cabinet manufacturers with passing costs on? You mentioned the homebuilders are harder to pass costs on to.
9.
When might supply chain constraints normalise? Would 6-12 months be reasonable?
10.
American Woodmark cited December and January labour absenteeism in its Q3 FY22 earnings call. How would you describe the labour situation for cabinet manufacturers generally? Where are labour issues most pronounced?
11.
Is any particular player more vs less exposed to the labour issues and material costs, or is it roughly the same across the board?
12.
How do you see Cabinetworks positioned in today’s market? You suggested the company sits between MasterBrand and American Woodmark. What are its core strengths and weaknesses across its brands?
13.
Could you elaborate on Cabinetworks’ integration challenges and the implications you’d expect from those over the next 12-24 months?
14.
Why isn’t Cabinetworks in the cash-and-carry business? You described it as a more attractive part of the home centre market. Is it harder to enter that segment?
15.
Are you seeing any notable disruption in Cabinetworks’ quality or brand availability?
16.
Do you expect stronger demand across any of Cabinetworks’ brands or respective target markets over the next 12-24 months?
17.
In the context of the broader competitive landscape, which of the main three players is best-positioned in a recession? Would any player fare better or worse, and why?
18.
You mentioned market share shifts during the 2007-09 recession, but have there been any notable shifts in the last two years, and if so, where? Which player is winning a specific customer group or product line?
19.
What share shifts are you seeing among Fortune Brands, American Woodmark and Cabinetworks? What other competitive dynamics are worth mentioning across those three?
20.
What questions should investors ask Cabinetworks’ management team to evaluate how challenged the company might be?
21.
What would you monitor closely over the next 12-24 months aside from cost pressures and how pricing has evolved?
22.
What could disrupt this industry? Obviously, it would be very detrimental if housing starts fall, but beyond the very obvious setbacks, what are potential industry disruptors? What keeps cabinet industry CEOs up at night?
23.
Is there anything commonly misunderstood or underappreciated about the cabinet industry? What is important to highlight in summary?
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