Timber prices have risen sharply over the past 12 months, with supply shortages already hitting the headlines just as the global economy begins to recover in earnest. The industry is now in the midst of resultant inflationary pressure.
On the demand side, DIY enthusiasts and homeowners are increasingly looking to expand and improve the homes they have spent the last 18 months isolated in. Elsewhere, the stimulus pumped into the economy is leading to a boom in demand from the UK construction industry with housebuilding and civil engineering project in record demand as
On the supply side, climate change is driving a sharp increase in frequency and intensity of forest fires while record low winter temperatures have decimated tree numbers in key producer countries. Pest infestations such as emerald ash borer and gypsy moths have also continued to ravage forestry from North America to Northern Europe. Sweden, which supplies almost half of the UK’s structural wood, is reporting its lowest stock in 20 years.
With the ongoing shipping container crisis adding to the cost of timber, price inflation is being further fuelled by a scarcity driven spike in transport costs. For UK companies, this global phenomenon is made worse by Brexit related disruption, from paperwork to the shortage of lorries to move stock around Britain.
The UK is one of the world’s biggest importers and users of timber but has the lowest forest cover in Europe. The government, clearly seeing the commercial and environmental benefits of UK grown timber, has committed to trebling tree planting rates by the end of this Parliament and creating many more woodlands. However, matching supply with demand purely from British grown timber could take decades to come to fruition.
Clearly, timber is one of the “hot” commodities coming out of the pandemic. Could there be an increased wave of takeovers as companies take the price gold rush in the market as an opportunity to consolidate their position for the coming decades?
Leading analysts Plimsoll have taken a close look at performance in key parts of the UK timber sector to see where there is financial peril, where opportunities lie, and where acquisitions prospects can be found:
|
|
% of companies in financial difficulty |
% of companies ripe for takeover |
| Arboriculture |
24% |
38% |
| Forestry machines |
21% |
51% |
| Sawmilling |
20% |
48% |
| Timber harvesting |
21% |
29% |
| Timber importers |
14% |
24% |
| Timber merchants |
12% |
42% |
| Tree growers |
24% |
55% |
| Wood recycling |
31% |
37% |
| Woodworking Machinery |
19% |
45% |
Plimsoll offers several proprietary ratings of each individual company. Firstly, the Plimsoll Rating measures each company on their financial health and ability to absorb shocks. Secondly, Plimsoll rates companies on their attractiveness for takeover.
The table above shows wood recycling is the niche within the timber sector with the highest proportion of companies rated as “Danger” by Plimsoll, followed by arboriculture and tree growers. What is it in these industries that is compromising financial performance to such an extent while those involved in selling and importing appear to be faring so much better?
The table also shows that recent market conditions have left many companies across the timber sector ripe for takeover. A rating of “highly attractive” from Plimsoll indicates a company with a sizeable difference between their current and potential value, often with ageing owners and a simple structure. Tree growers have the highest proportion of companies with such a rating and are the industry that may have the most acquisitions over the next few years. Could the number of domestic growers shrink as the market consolidates into fewer, larger companies to meet domestic demand?
Whatever your market, Plimsoll can provide the analysis you need to ensure your business is financially prepared for shocks, getting the most from its investments and balancing commercial success with longevity. Knowing how your company is really performing, how you compare to others in your key markets and who is exposed, will be key knowledge heading into 2022.
We can also help you to find the best acquisition prospects based on your specific criteria. Plimsoll’s clients are presented with all the options instantly so they never miss an opportunity or waste time and resources on fruitless searches.
To find out more about Plimsoll and our analytical platform, why not book a demo with one of our team today? Visit www.plimsoll.co.uk or call 01642 626400 to find out more.