Volume 14, Issue 8- October 2013
With the Win-door North America show fast approaching, it is a good time to consider the Canadian door and window market, compared to the United States. When the U.S. was in a major downturn these past few years, Canadian window manufacturers, wood and vinyl alike, were churning out consistent bottom-line profits and cash flow, and were excited about the opportunities ahead of them. They must be forgiven for having a few chuckles at this country’s expense. They had watched our runaway real estate market with a sense that it would end badly that only seems to be endowed upon those not entirely swept up in a given market.
Escaping the Bubble
Leader in Exports
Sales of Canadian building products to the U.S. are aided by the abundance of natural resources in Canada, especially wood. Also, the Canadian currency tends to fluctuate against the U.S. dollar in long, slow-moving cycles with plenty of time for adjustment. Shipping distances between Canada and the U.S. are brief in comparison to any other major world market. Thus, there is no doubt that Canada will remain a key trade partner in the door and window industry, despite the rise in prevalence of Chinese imports in this segment.
Like U.S., Highs and Lows
Other companies that serve the wide expanses between Canada’s booming cities report slower sales. There is a sense that Canadian consumers are pausing for breath and making careful decisions regarding building and remodeling homes. In other words, their market was slow and steady when ours was whipped into a froth of excess. Our market is now in recovery and the Canadian market is doing well in pockets and rolling along slowly in others. That sounds like the makings of an excellent hedge against a pure exposure to the U.S. market. Manufacturers on both sides of the border would likely find that reaching across to serve customers in the adjacent market would not only result in an interesting pollination of product trends and marketing methods, but it would provide a lower overall volatility to earnings. These two highly intertwined markets send clear signals as to the opportunities for growth in each. Manufacturers can assess the two markets in rolling six-month cycles and decide where to commit their resources in the coming months in order to maximize opportunities.
Michael Collins is an investment banker and a partner in Building Industry Advisors. He specializes in mergers and acquisitions in the door and window industry.