CIPH Pulse Conducted December 2017 PART 1: Member Predictions for 2018
Member Predictions for 2018 Results from Wholesalers 2018 will bring an upward trend for my business Which market do you think will be the hottest in 2018? 1 47% 35% Strongly Agree Somewhat Agree Neither Agree nor Disagree 29% 12% 24% 24% 12% Government Industrial Residential Commercial None in Particular We have acquired more warehouse space, hired several new staff to target previously untapped markets, and acquired new product lines. 2017 was improved, so hoping for a continued trend in 2018. I think we will again see very different markets across Canada, but overall very similar to 2017. Election year in Ontario will have an impact in Q3, Q4. may start slowly but definitely get much busier as the year goes along. We have several large commercial projects lined up for 2018. RNC and R&R will stay strong in 2018. Municipal and provincial governments are on an infrastructure spending frenzy. CIPH Pulse Conducted December 2017
Here s what you said in 2017: 2017 will bring an upward trend for my business Which market do you think will be the hottest in 2017? 23% Strongly Agree Somewhat Agree 31% Government Industrial 54% Neither Agree nor Disagree Somewhat Disagree Residential Commercial None in Particular 3 Predictions of cold weather for Q1 will affect progress on new construction. n/a. CIPH Pulse Conducted December 2016
Member Predictions for 2018 Results from Wholesalers What is the biggest challenge your business will face in 2018? 12% Workforce & Talent Acquisition 24% Economy Competition 65% We have several large commercial projects lined up for 2018. RNC and R&R will stay strong in 2018. Municipal and provincial governments are on an infrastructure spending frenzy. CIPH Pulse Conducted December 2017
Here s what you said in 2017: What is the biggest challenge your business will face in 2017? 31% Workforce & Talent Acquisition Economy Competition 46% Codes/Standards/ Regulations Out of province competitors. CIPH Pulse Conducted December 2016
Member Predictions for 2018 Results from Wholesalers What predictions do you have for the industry in 2018? 2018 is looking promising, the economy looks like it should remain steady with slight growth. We plan to grow our business by growing our market share. Government rebates will drive business in the residential HVAC market. Similar results to the previous two-years and once the provincial election in Ontario is decided more of the same spending just in different areas. CPI increases will begin to show up in quarterly reporting. I believe that even tough our market will be busy in 2018 the margins will continue to be the challenge. CIPH Pulse Conducted December 2017
Member Predictions for 2018 Results from Manufacturers 2018 will bring an upward trend for my business Which market do you think will be the hottest in 2018? 14% 4% 4% 1 Strongly Agree Somewhat Agree 14% 14% 4% Government Industrial 61% Neither Agree nor Disagree Somewhat Disagree Other 29% 29% 11% Residential Commercial None in Particular Other Other (specify): Not sure, waiting for NAFTA and trade deals. It will be very hard to increase profitability. Positive but muted. We expect volumes to be consistent or slightly higher with 2017 levels. Barring any geopolitical issues, should continue to be a good year, but there is anxiety that overshadows the business. Depends on the housing market. Gained market share in a market that hasn't grown. The Cdn. economy will step back a bit. Canadians are overspending right now and another interest rate hike will slow things down. Costs from suppliers are going up. The first 6 months will be better than 2017 but still in the dark for the 2nd half of 2018. Good 4 year trend - expect renovation spending to support hardware market. Other (specify): Renovations (3 responses). Waterworks. Within government, are they going to release infrastructure money promised in past statements? First 6 months commercial will be great. Might slow down in second half. Residential should be steady - not the greatest but not the worst. Renovation spending will increase sharply.
Here s what you said in 2017: 2017 will bring an upward trend for my business Which market do you think will be the hottest in 2017? 4% 26% Strongly Agree Somewhat Agree 4% Government Industrial 22% 33% Neither Agree nor Disagree Somewhat Disagree Other 4 19% Residential Commercial None in Particular Other (specify): Upward trend dependent on new housing continuing. Tankless water heaters are a growing segment in Canada. We are taking market share. Think outside the box and look for potential opportunities. Increased uncertainty around the housing market is providing more downside risk than upside. We expect the market to be up slightly, but market share gains with innovative new products will be the main driver of our growth. Growth from our new products not the economy. I feel a swing in more commercial development within Canada will take place vs. other countries. ICI should be more active IF the Federal Government follows through with infrastructure spending as promised a year ago. Will see some infrastructure money flow in 2017, and will impact all markets above with the exception of residential and industrial. If governments commit to infrastructure spending, this could lead to a better Canadian outlook.
Member Predictions for 2018 Results from Manufacturers What is the biggest challenge your business will face in 2018? 4% 7% Workforce & Talent Acquisition 14% 14% 32% Codes/Standards/ Regulations Economy Competition 2 Other No particular challenge Other (specify): Cheaper imports. Dumping. It is becoming more and more difficult to ship across Canada and keep a good profitability. All of the above impact the coming years, however specifically for 2018, we get one more year before having to prepare for many changes in codes/standards/regulations, competitive landscape, digital growth etc. Similar challenges to 2017 and may see the economy begin to slow down with US slowing in latter half and heading into 2019. There are a lot of knock off competitors as well. Really looking forward to the Canada/China Free Trade Deal - So much for North American Manufacturers. Federal mortgage rules changing? Potential NAFTA outcomes and buy USA could have negative impacts. CIPH Pulse Conducted December 2017
Here s what you said in 2017: What is the biggest challenge your business will face in 2017? 4% 19% Workforce & Talent Acquisition 25% Codes/Standards/ Regulations Economy 44% Competition Other Other (specify): Continued pressure on profit from foreign exchange fluctuations. We have been looking for a regional sales manager for 8 months to no avail as yet. Training and developing skills in the younger generation takes time. Succession planning is very important within companies. Economy is good in most provinces but still a challenge in others for all of 2017. Aggressive foreign competitors continue to limit much needed price increases. Too many competitors fighting for this market. CIPH Pulse Conducted December 2016
Member Predictions for 2018 Results from Manufacturers What predictions do you have for the industry in 2018? First 6 months should be good but still in the dark for the last 6 months. I believe this all hinges on the 232 steel issue and import duties imposed by the US market which heavily influences Canada. Watershed year, recognize that market dynamics are changing and move forward. Interest rates continue to rise. Housing will soften. Efficiency and GHG will dominate Government agendas. New Government to come in Ontario. Stable. Not much change, other than what governments may impose. Strong start and then tail off. First 6 months commercial will be great might slow down in second half. Residential should be steady not the greatest but not the worst. Renovation spending will increase sharply. Moderate growth overall of 2-3%. 3 to 5% growth overall on the residential side. CIPH Pulse Conducted December 2017
Member Predictions for 2018 Results from Master Distributors 2018 will bring an upward trend for my business Which market do you think will be the hottest in 2018 33% 67% Somewhat Agree Somewhat Disagree 33% 50% Commercial Healthcare None in Particular 17% n/a. Lots of promises by the government to help spend on infrastructure... we will see if this comes true on their campaign promises. CIPH Pulse Conducted December 2017
Here s what you said in 2017: 2017 will bring an upward trend for my business Which market do you think will be the hottest in 2017? 14% 2 Strongly Agree Somewhat Agree Industrial Residential Healthcare 86% 42% None in Particular An uptick or downturn for all Canadian business will depend on the USA economy and the influence of Donald Trump either negative or positive policies. n/a. CIPH Pulse Conducted December 2016
Member Predictions for 2018 Results from Master Distributors What is the biggest challenge your business will face in 2018? 33% Workforce & Talent Acquisition 67% Economy Lots of potential changes, i.e. NAFTA and how that can impact imported goods from both Mexico and USA. Raw material cost increases continuing to escalate. Should this continue to happen it is only a matter of time before price increases follow. CIPH Pulse Conducted December 2017
Here s what you said in 2017: What is the biggest challenge your business will face in 2017? 14% Economy 29% 57% Competition Codes/Standards/ Regulations Too much regulation & government bureaucracy. CIPH Pulse Conducted December 2016
Member Predictions for 2018 Results from Master Distributors What predictions do you have for the industry in 2018? Very competitive with offshore product. Increased awareness of the Internet of Things and more consolidation in the wholesale industry in Canada. We will see an increased amount of talent retiring and a shortage of people entering the profession. Raw material especially steel increases continue to show no signs of slowing down. This continues to impact manufacturing costs which at some point will have to be passed along to the end user. Moderate increases. Downward pressure on pricing. CIPH Pulse Conducted December 2017
Member Predictions for 2018 Results from Agents 2018 will bring an upward trend for my business Which market do you think will be the hottest in 2018? 14% Strongly Agree Somewhat Agree 23% 2 Industrial Healthcare Residential 86% 62% Neither Agree nor Disagree Somewhat Disagree Strongly Agree 31% 42% 31% Healthcare Commercial None Note in in Particular Other It will be a continuation of 2017 - which is a strong trend. We see 2018 as a continuation of 2017's - moderate upward growth trend. Other (specify): Multi-family Residential. Healthcare and Residential.
Here s what you said in 2017: 2017 will bring an upward trend for my business Which market do you think will be the hottest in 2017? 5% 5% 16% 16% 86% 14% Strongly Agree 16% 21% Somewhat Agree 2 26% 37% Neither Agree nor Disagree Somewhat Disagree Strongly Agree 26% 42% 26% 5% Industrial Government Residential Healthcare Commercial None Note in in Particular Other Other Other (specify): Depends on the BC Election. We are expecting some residential and commercial rebound in the Alberta market while Ontario and East remains strong. As my business is developing and expanding, I will create new opportunities. As the oil industry goes, so goes Canada's economy. There have been some indicators to suggest economy could be going in the right direction...oil/pipelines/u.s. election is done. However, the machine turns slowly and my sense is 2018 would be the year we will see benefit from changes to the economy in 2017. Other (specify): Pot farms and windmills. Commercial Investment Development and Infrastructure funding implementation expected to lead the markets. I think the government will have to provide a base of projects to keep the economy from going backwards. Even though our current governments accelerate into debt at a pace not seen since the war, they are not spending on infrastructure or anything that will employ people or consume goods from our industry. That is a very regional question. We will see light commercial, education and industrial steady. Housing/multi may take better part of 2017 to start showing positive results.
Member Predictions for 2018 Results from Agents What is the biggest challenge your business will face in 2018? 23% Workforce & Talent Acquisition Codes/Standards/ Regulations 46% 23% Economy Competition Qualified, experienced talent at a reasonable salary is getting harder to find. CIPH Pulse Conducted December 2017
Here s what you said in 2017: What is the biggest challenge your business will face in 2017? 10% 5% 5% 21% Workforce & Talent Acquisition Codes/Standards/ Regulations 16% Economy Competition 42% None in particular Other Other: Correction in the housing market is stalling construction. Continuous pressure on Pricing. Federal and Provincial appliance efficiency standardization and compliance with U.S. standards will be a challenge in 2017. Carbon taxing/net zero policies will also provide challenges for 2017 growth and profit. Have to fight for every job...unfortunately price seems to supersede quality. As the pie shrinks (economy) the fight over each piece of it gets nasty (competition). CIPH Pulse Conducted December 2016
Member Predictions for 2018 Results from Agents What predictions do you have for the industry in 2018? Discussions with the largest builders in our province indicate that 2018 is going to be a tough year with declining starts. Strong first half with dark clouds in the near future. The Toronto and Vancouver Condo markets will continue to grow. Price increases due to NAFTA issues longer lead times for commodity products. CIPH Pulse Conducted December 2017
PART 2: What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2018?
What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2018? Over 10% 5% to 10% 3% to 5% -3% to +3% -3% to -5% 6% 7% 1 23% 11% 33% 3 31% 29% 47% 46% 50% Plumbing: Wholesalers Manufacturers Master Distributors Agents -5% to -10% 9% Below 10% n/a 6% 14% 17% 0 20 40 60 80 Percent CIPH Pulse December 2017
What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2018? Over 10% 5% to 10% 3% to 5% -3% to +3% -3% to -5% 6% 7% 4% 7% 13% 33% 23% 31% 23% 33% 23% 23% 3 Hydronics: Wholesalers Manufacturers Master Distributors Agents -5% to -10% 7% Below 10% n/a 13% 33% 56% 0 20 40 60 80 Percent CIPH Pulse December 2017
What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2018? Over 10% 4% 7% 5% to 10% 3% to 5% -3% to +3% -3% to -5% 13% 17% 20% 16% 27% 3 Waterworks: Wholesalers Manufacturers Master Distributors Agents -5% to -10% Below 10% n/a 43% 46% 72% 83% 0 20 40 60 80 Percent CIPH Pulse December 2017
What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2018? Over 10% 7% 5% to 10% 3% to 5% -3% to +3% -3% to -5% 13% 12% 17% 20% 4% 20% 4% 50% IPVF: Wholesalers Manufacturers Master Distributors Agents -5% to -10% Below 10% n/a 40% 62% 33% 81% 0 20 40 60 80 Percent CIPH Pulse December 2017
What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2017? Over 10% 5% to 10% 3% to 5% -3% to +3% -3% to -5% 6% 13% 19% 17% 17% 13% 4% 23% 31% 13% 31% HVAC/R: Wholesalers Manufacturers Master Distributors Agents -5% to -10% 17% Below 10% n/a 31% 50% 63% 0 20 40 60 80 Percent CIPH Pulse December 2017
What is your forecast on Canadian Sales through Wholesale Distribution for the following products in the 1st half of 2018? COMMENTS Wholesalers: Recent hiring of several new staff will allow us to call on new customers and grow our market share. First year since 2009 that I am personally concerned about the economic outlook for next year. Manufacturers: New construction is the risk factor. Expect 2018 to have similar flavor as 2017 with 2019/2020 beginning to see appearance of recessionary economic conditions on Global basis. Master Distributors: n/a Agents: City of Vancouver banning gas will affect hydronic heating as the builders switch to electric heat. Predicting sales increases but a slight reduction in margins. CIPH Pulse December 2017