Special Mouldings Millwork Report
by Tara Taffera

When members of the Moulding and Millwork Producers Association (MMPA) met in Isle of Palms, S.C, in March, members learned what they can expect from the moulding market in the coming years. How to take advantage of certain tax credits in play, what look out for in an upcoming health care bill, and how to minimize plant losses also were discussed. Members also were given the opportunity to visit ECMD Inc.’s distribution center in nearby Sommerville, S.C. (see below *).

In addition, attendees were able to attend Productivity Information Exchange (PIE) meetings. Various MMPA members met individually with a gamut of the moulding and millwork industry, in suites, providing a chance for attendees to ask suppliers questions about anything of interest to them. These meetings are not meant to be selling opportunities, according to MMPA.

A few of the suppliers represented included Weinig, 3M, Stiles and Sherwin-Williams, and attendees said they found the exchanges extremely productive.

For example, in a meeting with Sherwin-Williams, Louis Voorhees of Tidewater Lumber and Moulding, Greenville, S.C., was able to pick the brain of industry veteran Hal Shackelford regarding what it would take to set up a finishing operation in-house.
Voorhess currently farms the process out and says there are no immediate plans to change this process.

“Farming out is not such a bad thing when things are slow,” he said. “Doing it [painting] in-house is something we may grow into and I was looking for options.”

Voorhees added that the overall meeting was very productive and he is glad he finally took advantage of a fellow MMPA member’s advice to attend.

“Ted [Smith, president Smith Millwork], always encouraged me to come and I didn’t have any excuse as this was in my backyard,” said Voorhees.

The MMPA’s next winter meeting will be held March 19-22 in Coronado, Calif., at the Loews Coronado Bay Resort.

For more on the MMPA meeting, see the articles on the following pages for what you missed and how you can stay informed on these important issues.

Industry Projects Slight Increase for Moulding Market in 2011
Mark Young of Arauco USA presented a market overview of supply and finished products for the moulding industry in 2011 and beyond.

Young started out saying that “2010 was a lost year.”

“Demand was about half of what it was at its peak,” he said. “Retail remains the market leader with more than 60 percent share. Five years ago, it was the opposite. Today retail is a huge part of the market. The big-box stores are dictating and influencing what is going on in the market.”

Regarding moulding pricing, Young said the following materials’ prices bottomed out in 2009; he also offered forecasts for these for the years ahead:

• Solid Pine: Expected to increase through 2013.

• Fingerjoint: Expected to settle back in before increasing through 2012.

• MDF: Expected to increase through 2012.
He added that there will be a shortage of pine fiber in 2010 and beyond. “MDF will gain consumption market share due to pine shortages,” he said.

Consolidation continues as 84 Lumber, ProBuild and Stock Building Supply closed more than 1,200 locations collectively between 2008 and 2010.

While Young said he believes the crisis is over for the market, he pointed out that the financial markets are still fragile and the banks have stringent lending and covenant requirements. He added that renovation and remodeling looks to be the main driver for 2011.

“Two-thirds of the housing stock is 25 years old, which bodes well for remodeling,” he said.

Future challenges include low housing start numbers and a lack of cash flow in the millwork industry. The purchasing behavior of dealer and retailer channels, decisions when to add capacity with increasing demand, and the shortage of pine fiber, which will occur as global consumption improves, was also discussed.

Young pointed out that capacity utilization in U.S. wood products manufacturing was 62.3 percent in January, compared with a 7-year historical average of about 72 percent.

“Most everyone is underutilized,” said Young.

*EastCoast Mouldings: Company Made from a Different Mold
EastCoast Mouldings, a division of ECMD Inc., serves 11 states in the Southeast from its distribution center in Summerville, S.C. President Al Delbridge said the company operates as a supply chain manager, seeking efficiencies outside the boundaries of the company.

“We make sure that we align the correct product with the most capable and efficient manufacturer,” said Delbridge to MMPA attendees who visited the facility during the group’s recent meeting.

He explained that the company utilizes an uncommon business model.

“We serve as an importer, manufacturer, distributor and retail service organization,” said Delbridge. “We try to understand what happens below us and above us in the supply chain.”

In fact, many parts of its model are uncommon—but all work to the advantage of the company, which employs more than 500 people.

ECMD serves two-step distributors, one-step distributors, pro chains, independent dealers, home center retailers and even sells to other distributors outside its current distribution area.

Regarding logistics, Delbridge also said the company is responsible for fleet management as it operates three distribution centers in one logistics model. And when it comes to loading its trucks, EastCoast opts to do it indoors.

“We unload indoors, store indoors and load indoors,” said Delbridge. “We use curtain-side trailers so the product is covered even while the customer is unloading their product. This is uncommon, particularly with board distributors.”

Walk through the plant and you will see mouldings from a number of offshore producers, including Polincay, Araupel, Arauco, Zeni and Masisa—to name a few. Domestically you will see the names of Sierra Pacific, PacTrim and among others.

It is a lot to keep track of—in fact, Delbridge said ECMD stocks more than 600 various mouldings profiles and over 280 board items, and ECMD stores a CAD image of every profile. Additionally, an employee checks one unit of every profile in each container as it enters the facility.

Safety is a Constant Priority
“The safety of employees is something we constantly struggle with,” said Delbridge. “We place a tremendous emphasis on safety.”

In fact, the company just started utilizing a piece of equipment it developed and coined “the Hijacker.” The equipment is designed to help reduce soft tissue damage in the lower back and will help employees move mouldings from a horizontal to vertical position.

“We can’t put all products on there, but we will begin with our 70 most frequently picked items,” said Delbridge.

He also made reference to the hot and humid South Carolina climate, which takes its toll on employees as well.

“It’s a tough work environment so anything we can do to reduce sweat equity, we aim to do,” he said.

Again, the business model may be uncommon, but is one that has proven successful for this moulding company.

Tax Laws Can Aid in Equipment Financing
It was evident that the MMPA members in attendance during Scott Biesecker’s session detailing the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 were hit with a case of on tax overload over all the items to keep on top of when it comes to taxes. Biesecker, is a CPA, with Turlington and Co. in Lexington, N.C.

Biesecker started with some good news—that there are tax benefits for the industry when it comes to equipment purchases. Under the bonus depreciation plan, companies can deduct up to two million dollars for new equipment purchases.

He pointed out that, while many believe this tax incentive can only be utilized for new equipment, it can be used for refurbishing used equipment as well.

“Ownership has to begin with you so you can refurbish under this,” he said.

He also detailed the 179 deduction in which profitable companies can write off $500,000 for new and used equipment purchases, as long as they are profitable.

Bonus deprecation and the 179 deduction also were discussed during a presentation by Thomas Strickfaden of C.R. Onsrud regarding financing equipment.

“There is financing availability and people need to take advantage of it,” he said.

Finally, Biesecker offered some practical, important advice for attendees.

“If I leave you with anything, remember this, review your wills with your CPA,” he said. “The wording of the will could produce different effects. Look into your futures now and start planning.”

Are You Preventing a Loss?
It may not be a topic many want to think about but it is a crucial one, according to Howard Twining, director of loss prevention at the Lumbermens Writing Alliance.

“I’m here to prevent the next claim,” he told attendees.
He stressed that for a successful loss prevention program, “top management has to buy into any program to get folks to follow it.” And the latter is not always an easy task.

“The human element is a tough nut to crack,” said Twining. “They have a ‘What’s in it for me?’ attitude. They don’t care about you.”

When it comes to preventing losses, Twining said the first key is examining your own facility.

“Sometimes it costs money to do it right,” he said. “There is a cost of doing business. You have to move with the times and build a business that is survivable.”

Although there are many types of losses a business might endure, such as snow loads, much of Twining’s presentation focused on fire as this is the primary source of loss.

Specific causes include: hot work (cutting, grinding, welding), electrical equipment, friction, explosion/sparks and arson.

“We didn’t use to worry much about arson but the percentage is getting larger,” said Twining.

“Many businesses that suffer a significant fire may never re-open,” he added. “And of businesses that do re-open credible statistics show that many close within three years.”

This is attributed to loss of inventory, loss of market share, loss of customer confidence, decline in employee morale and attitude and the loss of a trained workforce during the rebuild.

“Employees may leave and then not want to come back,” he said.

If you don’t think your company can suffer, think again.

“I have been told, ‘Our sawdust won’t burn. We never had a fire before. Cigarettes can’t cause fires,’” said Twining.

It all starts with prevention: employee training, preventative maintenance, good housekeeping, smoking controls and a hot works permit program.

DWM
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