Equipment Manufacturers’ Outlook—Before and After The Economic Downturn
By Michelle Keller
Forest products equipment manufacturers recently shared their comments and forecasts with National Hardwood Magazine regarding business activity before and after the economic challenges of the recession.
Some experienced little to no differences in their markets while others noted drop-offs in orders and lead times, and a few even reported increases in business during the peak of the downturn.
Mike Goldston, CPA, president and majority owner of Brewco Inc., located in Central City, Ky., offered, “Over the past 36 months we’ve literally doubled our inventory in order to minimize lead times. In 2009 we were down to nine employees, today we are back up to 32. The best year this company has ever had was in 2006 and 2009 was the worst year. In 2010 through 2012 we’ve steadily increased, however we’re not back to the levels of 2006 yet, but we’re getting there.”
Goldston indicated that while part of the reason for the increase in business may be because equipment has been neglected, another reason, at least for his operation, is availability of diversified products. “We made the decision to diversify our product offerings, which has helped us a great deal. Overall I think every company has been sitting on lots of cash due to the economic uncertainty. The housing market is picking back up and nobody wants to stay on the sidelines. It’s time to get with it.”
Brewco Inc. offers sawmill, stave mill, railway and pallet mill equipment. The company’s staff is comprised of sawmillers, engineers, electricians, programmers and people that were raised in the forest products industry.
Frances Cooper, COO, Cooper Machine Company Inc., Wadley, Ga., said, “We are at the same level of employees before and after the recession. We expect to be hiring for several positions soon. We build custom equipment so we don’t keep inventory, but we have found that things are picking up greatly in the last month or so. Our lead times are starting to expand and we feel it will continue this year.”
Cooper Machine has been in the business of improving sawmill production for over 45 years and has remained at the forefront of sawmill innovations and design.
“We have been very fortunate to have the amount of work on the books that we do at this time,” Dan Mathews, president of SII Dry Kilns in Lexington, N.C., said. “If not for some recession-forced diversification and a number of very loyal customers/friends, we could easily have been among the casualties of the ‘great recession.’ In early 2008 we were about three to four months out on delivery of equipment, but by 2009 we would have been at a three week pace, if there had been a sale to make.
“Today, we are around four to five months out on delivery of equipment, which is both good and bad,” Mathews continued. “After the downturn we have all suffered through, it is nice to have the backlog. However, our sales team has to work very hard to keep sales coming in when equipment of lesser cost and quality may be available with shorter lead times. It is extremely important to remind customers that a few months’ longer wait for the proper equipment may be one of the smartest moves you can make. Potential downtime issues resulting from lower quality equipment can easily exceed the few extra months of waiting time in the first few years of operation.”
Mathews indicated SII Dry Kilns’ inventory levels are still slightly lower than they were pre-recession. “Our inventory levels are running about 15 percent below where they were in 2007. However, as raw material delivery times begin to stretch out, we will increase those levels to meet or exceed previous levels,” he commented.
“We are actually operating with a full staff at this time. We were forced to make considerable reductions in staff during the recession like everyone else. However, the process of bringing in new energetic workers alongside our seasoned veterans has improved our capabilities. We are proud to be able to employ a workforce that is committed to proving that American workers can still compete with anyone in the world.”
SII Dry Kilns provides innovative design and manufacturing of both Hardwood and softwood dry kilns, predryers, kiln control systems, pallet heat treaters and firewood kilns. The company also provides installation and service. SII Dry Kilns has over 1,500 kilns in operation worldwide.
In McMinnville, Tenn., Tommy Stiles, president of A.W. Stiles Contractors Inc., said, “Our area of expertise is dry kilns, predryers, Walnut steamers, boilers and basically any product utilized in the process of drying a stick of lumber. In 2008 we had the biggest year our company has had to date in terms of revenue. 2009 was the worst year we ever experienced from a revenue standpoint. By the grace of God, 2010 beat 2008 and we’ve continued to grow from that point.
“In ’08 we averaged about 15 full-time employees. Since then we’ve actually doubled our workforce and we currently work with 29 full-time field employees and two full-time office personnel. In 2009, we learned our strengths and weaknesses just as everyone else did. We’ve increased sales, yet reduced our margins, which works out well for our customers. Lower margins for us have resulted in a larger workload.”
Stiles touched on the fact that through no choice of their own, many lumber suppliers neglected their manufacturing equipment due to a decrease in sales and profit margins. “As we all know, 2009 was a time when equipment was ‘patched’ and neglected in many cases,” he explained. “As the market naturally balanced itself, and survival of the fittest kicked in, our workload picked up quickly. All of the neglected kilns from 2009 had to be repaired, the normal 2010 projects had to be addressed and folks had to start covering the demand that had previously been absorbed by companies that had been dissolved.”
When asked about former and current lead times, Stiles said, “We used to have significant lead times. We still do in some aspects. However, with the additional workforce we have in place, we can normally get to customers faster than we did in 2008 and before. Lead times usually play a role in whether or not you get big jobs and small projects too. This is another area we feel has helped us push sales further than before.”
Stiles said another area the company has enhanced is in efficiency of inventory. “We have a better grasp of what customers want and need, so we do try to keep supplies shelved, especially for emergencies. Since the recession, we have had the opportunity to meet new suppliers for our raw materials, which broadens our shopping abilities. We do our best to shop materials for our customers, which also allows us to remain competitive.
“The metal industry has tightened up just as much as the lumber market,” he continued. “Vendors want our business and they’ll go the extra mile to get it. We have suppliers that we’ve developed personal relationships with, which goes a long way when you’re in a pinch. Through developing these relationships, the vendors learn what we need and actually care about getting raw materials to us quickly. A lot of them keep our high turnover products on their floor just because they know it’s not a matter of ‘if’, but a matter of ‘when’ we are going to place an order.”
Currently, business conditions are good for A.W. Stiles. According to Stiles, the future is bright. “We’ve been blessed to be able to earn the business and gain such a large customer base. As long as our customers are improving and in many cases today, expanding, then we will expand with them. In the mid-1970’s, we began applying kiln coating to masonry kilns here in McMinnville. Since then, we’ve developed into a full line dry kiln manufacturer. We’ve picked up a lot of business since January of 2013 and 99 percent of our customers have a positive outlook for the year to come. We thank our customers for the opportunity to earn their business and we look forward to helping folks improve their companies throughout the year.”