Tough timesFurniture manufacturing industry still facing a difficult road ahead

Source – BFM State of Trade Survey and annual Financial Ratios Survey - June 2010

State of trade survey - The industry is no more optimistic about the general business situation than it was at the beginning of the year, with the volume of output in the 4 months to June falling slightly on balance and fewer companies exporting now than at any time in the last two years, despite a favourable currency. 50% of companies expect to implement short time working as we go though the summer.

Financial ratios survey - It would appear that sales have decreased from their level in June 2009 and that companies have been better able of late to control overheads. And, even though there has been an increase in material costs, this is unlikely to account for the large rise in the direct labour/material costs ratio shown in the survey. The suggestion is that companies are holding on to more staff than they need to meet the volume of sales produced, despite measures to reduce direct labour costs through short time working and lay off, as well as pay freezes. Perhaps, however, it has got to a stage where industry feels that direct costs need to be addressed again as the state of trade survey shows that nearly 1/3 rd intend to make redundancies in the coming months. While ¾ of the industry was returning some profit, ¼ of the sample reported either making a loss or being at a breakeven position.

Ratios used in the survey:

Direct labour and materials as % of sales

Total overheads as % of sales

Distribution costs as % of sales

Net profit as % of sales