Market Recap: RISI Crow’s Construction Materials Cost Index
A price index of lumber and panels used in actual construction for Aug. 5, 2011
*Western – regional species perimeter foundation; Southern – regional species slab construction.
Crow’s Market Recap — A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report.
Lumber: In SPF, buyers stood firmly on the sidelines after watching futures dive early and hearing rumors of canceled orders from China. Mills reported a slow sales week and followed downward 2×4 #2&Btr prices established earlier by jittery secondaries. Although with less force than in previous weeks, Southern Pine lumber prices continued to edge higher. Price increases for #2 items were often limited to around $5. Sluggish sales in Coastal species forced producers to make more outgoing calls, trying to match offerings with buyers’ needs. Much of the deterioration in prices occurred in narrow widths. Wide widths in green Doug Fir were in tight supply. Market activity at Inland mills was quiet this week with mixed signals coming from the field. Producers with modest order files were content to stay at quoted levels, while those with inventory on the ground were open to slight counters. Most Ponderosa Pine producers report a firm but unchanged price for Moulding and Better, although a couple have indicated a slight softening in that market. Prices for Radiata Pine Moulding and Shop were firm with a limited supply of those items available. Ponderosa Pine board producers reported an uneventful week, as buyers made minimal purchases. Some weakness was reported for Idaho White Pine Standard boards. Eastern White Pine producers say their customers do not have much in the way of inventory and are buying as needed. Buying patterns in the Western Red Cedar market persisted, as buyers continued to fill inventory holes, often demanding prompt ship times.
Panels: A slower sales pace in the Southern Pine plywood market shortened the length of ship times moderately, but prices were firm to modestly higher. Mill order files were through the first half of the month for most items and sometimes extended to the end of August. Sales in Western Fir plywood were also slower. Mills adjusted prices modestly higher in some instances. In OSB, modest price increases were reported from most regions. Concerns were voiced by more than one market participant that the potential for a two-tier market is developing. A continued firmness in the Canadian plywood markets kept control in the hands of the mills. However, the momentum seems to have quieted somewhat. Secondary wood is being offered at less than mill asking prices. Buyers continued to absorb recent price increases instituted by producers of particleboard and MDF. Some pricing continued to be pushed higher, but much of it was in an effort to catch up with the rest of the market.
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Up against bad weather, Scotts stumbles in Q3
The challenges from unfriendly weather hit Scotts Miracle-Gro hard in the quarter ended July 2, as sales declined 10% to $1.06 billion.
The decline was driven primarily by poor weather across most of the United States throughout the duration of the lawn and garden season, as well as a more competitive promotional landscape and changes in certain retailer strategies within the mass merchandise channel, the Marysville, Ohio-based company said.
"Through mid-March, consumer purchases of our products in the U.S. were up 13%t, but then the situation changed dramatically," said Jim Hagedorn, chairman and CEO. "The challenges we saw from weather this year are unparalleled during my life-long tenure in this industry. The fact that consumer purchases have been impacted more than we expected is also negatively affecting both sales and gross margin rate."
Net income declined 37% to $11.6 million.
The company said it now expects its adjusted earnings for the year to be in a range of $2.95 to $3.05 per share, compared with the analyst target of $3.19.
"While I am disappointed with the results we are announcing today, I remain confident in our category, our brands, our strategy and our team. That continued confidence in our long-term strategy is reflected in the decision by our board of directors to increase our dividend by 20%. We remain committed to a strategy of using our financial flexibility to drive long-term growth, while also returning cash to shareholders."
One bright spot was Scotts LawnService, which saw an increase in revenue of 1% to $82.4 million.
"We are extremely pleased with the progress of Scotts LawnService, and we continue to see it as an important element of our future success," Hagedorn said. "With the improvements to the business model, we believe SLS can continue to drive growth on both the top and bottom lines."