Specialist
Former Senior Executive at Travis Perkins plc
Agenda
- Demand impact from the novel coronavirus pandemic and expected recovery across DIY and trade, and renovation and new build
- Fixed vs variable cost base across manufacturers
- Fixed vs variable cost base across distributors
- Distributor-manufacturer relationships, price and term pressure during downturn
- Buying behaviour for high quality vs low costs in a demand recovery across products
Questions
1.
What is your perspective on the magnitude of demand declines you are expecting as a result of the coronavirus pandemic across the three main customer categories of infrastructure, new build and renovation across Europe?
2.
Do you have a view on the infrastructure side, on what levels of demand we are expecting for 2020 compared to 2019?
3.
What difference in magnitude are you expecting for the recovery in new build vs renovation?
4.
What is the margin for a distributor across RMI [repair, maintenance and improvement]?
5.
If we separate the product mix into its elements, how much do you think that will lower margins by, given the change?
6.
Could you give an estimate of the margin decline you are expecting? How do you break that down between product mix, volume impact, fixed cost and the price impact?
7.
How are you expecting the retail segments and the trade segments to perform? Do you split that similarly to how you view new builds vs renovations?
8.
We have discussed the UK specifically. Do you have any views on how to push that out towards the whole of Europe, and any alterations you would make across the rest of the European countries?
9.
Why are you expecting the Netherlands and Scandinavia to recover faster than France and Germany?
10.
How are you expecting demand to decline across the primary structural products, first fit, second fit and finishing products? What recovery delays would you expect between the categories?
11.
Are you expecting customers to take lower quality products at a lower price rather than pay for higher quality products in recovery?
12.
Kingspan, the panel insulation, has a strong strategy of increasing the level of quality of its insulation for its customers. Are you expecting that strategy to be significantly impacted during the recovery?
13.
How do you think about some of the more specialised Hvac insulation players such as Armacell?
14.
Could you expect customers, particularly around this Hvac insulation, to move down the quality scale to some of the cheaper players?
15.
What do you think about some of the carpet players and the vinyl tile players, Victoria and Gerflor? What are the other two?
16.
Are you expecting the structural players, Marshalls, Ibstock, to perform relatively well in the recovery?
17.
Within the second fit and the finishing products, are there any big names that you think will be particularly hard pressed to convince customers to stay with quality products in a particularly fragmented market?
18.
What are your views on Polypipe in a recovery?
19.
What are your views on the German players, Graf, Monier and Raab Karcher? What are your views on the German construction market and how are you expecting those players to perform?
20.
How would you think about comparing 2020 to 2008?
21.
Which supply chains have been most disrupted across the market? Which ones would you expect to take the longest to get back up to speed in a potential recovery?
22.
What is your view on the changing dynamics between distributors and manufacturers and their relationships over time? What expectations do you have for the coronavirus pandemic, if anything, to change those relationships, or accelerate change?
23.
You mention on the heavy side, manufacturers should be in a good position, predominantly as a result of how consolidated they are. Are you expecting other segments of manufacturers to consolidate and put increased pressure on distributors?
24.
Are you expecting accelerated consolidation as a result of the coronavirus pandemic?
25.
Do you have anything in mind that would be potentially consolidating, such as particular areas?
26.
How much better pricing would you expect to have through the distributors?
27.
Where do you think customer loyalty lies? Are there any distributions that still have significant customer relations or are they all largely with manufacturers?
28.
Considering the demand downturn over the next couple of months, what do you think is the fixed vs variable cost structure across the different distributors? Which players typically have the most and the least flexible cost bases?
29.
How much higher is the fixed cost base for a retail distributor?
30.
How do you think about the fixed vs variable costs of some of the key players that we highlighted, such as Ibstock and Marshalls?
31.
Do you have any indication from these heavy-end players on what the fixed vs variable would be?
32.
How will manufacturers respond and what drop through rates would they get from a reduced demand output? Do you have any way of thinking about that across the major players that we have mentioned?
33.
Are you expecting there to be significant consolidation or significant acquisitions during this downturn, or at least catalysed by this downturn?
34.
What are your longer-term views on the performance of the DIY segment? I know we talked before the call about some of the struggles being faced there. How are you expecting this to be impacted by the coronavirus pandemic, and are you expecting any structural changes as a result?
35.
How do you reconcile the two comments about the structural declines of DIY and the performance of Screwfix and Toolstation?
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