In the wake of additional uncertainties arising from potential trade tensions, Lumber Depot has adopted new strategies to mitigate risks
Lumber Depot positions for construction sector rebound
As the local construction industry works to correct itself from downturns, hardware retailer Lumber Depot is looking to capitalise on growth opportunities expected to accompany the sector’s revival.
In an interview with the Jamaica Observer on Monday, Major Noel Dawes, managing director of the Papine-based hardware, shared his optimism about the industry’s potential comeback, despite ongoing challenges that continue to impact immediate outcomes. Notwithstanding these challenges, the industry he said is “delicately poised for growth”.
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“People are apprehensive now based on a number of market uncertainties, but with a number of activities including the upcoming election and several other major initiatives expected to come on stream — we remain optimistic about the sector as we continue to look out for its growth and to take advantage of new opportunities as they emerge,” he told Business Observer.
Lumber Depot’s Chairman Jeffrey Hall, expressing similar sentiments in the company’s latest report to shareholders, said the board of management remains committed to maintaining financial capacity as the business goes about executing its expansion and acquisition opportunities which are expected to arise once the sector’s growth resumes.
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Following rapid expansion and back-to-back quarters of growth during the COVID-19 pandemic – the construction industry now plagued by almost years of negative output – sector players are hoping to see a rebound from the 2.1 per cent contraction recorded up to the final quarter of 2024.
Citing upticks in the request and preparation of sales invoices from Diaspora members wanting to undertake or move forward on various housing projects as well as a number of State-led infrastructure improvement works slated to get off the ground in the lead up to the next general election, Dawes said the expectation is for much of these to translate into increased business for the company.
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“With the recent reading of the budget, I think some amount of reassurance will also come out of this as the issuance of loans increase and the level of disposable income [increasing] from some of the tax breaks help to generate more business. As a result, we are cautiously optimistic that we will secure good returns from either of or a combination of these activities,” he noted.
The local construction sector, which he believes is now tapering off from the rapid expansion seen during the height of the pandemic, is expected to return to growth soon, especially as several of its key inputs and supplies experience price reductions between 15-20 per cent.
“If one should look at where we are now to about a year ago, they will realise that items such as steel and two-inch lumber prices have come down significantly. As a result, we have found that even as revenues trend below that of previous years, we are seeing an uptick in the sale of these items. Despite the sector’s slowdown, we are, however, happy that we continue to maintain our growth margins,” Dawes said.
Lumber’s performance, further supported by strong out-turns from its Atlantic Plumbing and Hardware associate company, in which it currently controls a 35 per cent stake, Dawes said, should further help to take the business to new heights. Fresh off its participation in the associate’s initial public offer which closed last week, the company is looking to extract contributions above the over $12 million it secured in year-to-date profit.
At the end of Lumber’s nine-month period ended January, total revenues stood at $1.13 billion — approximately $24 million below that of the comparable period in 2023. Its recorded net profit of almost $119 million represents a $7.3-million decline when compared to the previous year’s out-turn. Quarterly results also showed slight declines, with revenues of $372.3 million and net profit of $34.9 million for the November to January period, marking decreases of 1.2 per cent and 11.4 per cent, respectively.
Despite facing challenges from global shipping disruptions and potential US trade tensions with Canada and China, Lumber Depot is proactively adapting its strategies to mitigate risks. While navigating these uncertainties, the company remains focused on strategic expansion, operational flexibility, and industry trends. According to Dawes, Lumber Depot is optimistic about the construction sector’s recovery and its potential to drive future growth.
“As we continue to stock up on inventory, we are also mindful not to overstock so as to ensure that we can deal with uncontrolled price movements, which can either go up or down at any time. As we, however, look to move forward, we are gearing up to take advantage of those emerging opportunities wherever we can while remaining cautious in our pricing and ordering structures… so it’s a delicate balance that we’re trying to maintain right now,” Dawes said.
Hall added: “We are pleased that despite the current challenges Lumber Depot continues to trade positively and to deliver strong results and, importantly, to maintain excellent service levels and customer endorsements. Our strategy is to consistently offer competitive prices on our products and to maintain our service standards and inventory availability.”
DAWES… we remain optimistic about the sector as we continue to look out for its growth and to take advantage of new opportunities as they emerge (Photo: Karl Mclarty)
