Where is the HVAC industry going?
It can be very hard to predict the future. Despite the fact that there are a lot of unknowns, there are some reliable leading indicators.
Recently, I started looking at some of the elements of the supply chain in the construction industry and found some interesting statistics.
There are not many public corporations that focus on sheet metal, plumbing and/or HVAC, but there are some which have this segment of the industry within their portfolios.
There are the major retail chains such as Home Depot and Lowe’s and there are the major painting suppliers like Sherwin-Williams and of course there are the major brands in heating and cooling systems:
• United Technology Corp. is involved in a wide variety of businesses including Carrier, Bryant, Keeprite, Otis and Automated Logic.
• Johnson Controls (JCI) carries not only Johnson Controls but also York products.
• Lennox, Siemens, Burnham and Honeywell are all brands in their own right.
• Daikin Industries are the owners of Goodman.
• Ingersoll Rand makes Trane and American Standard
• Mitsubishi Electric
Why is this information important?
Well, here is what I found when I researched their share prices from September 2012 to September 2013:
The North American corporations have outperformed the Nasdaq composite 48 percent compared with 33 percent. That’s almost 50 percent better for those corporations involved in the HVAC industry. The Japanese firms have shown stronger results.
Obviously a lot of major investors believe that these corporations are going to be very successful and that’s great news for those of us who rely on these brands for our success.
These are the brands that make the industry successful, but never forget the people who make these brands successful.
I believe we are heading for one of the most profitable periods in our history and that will make up for a lot of the misery of the past five years. Don’t get caught short; position yourself for success.
A caution for all the mechanical trades is to make sure you don’t fill up with cheap work. What tends to happen is work comes out and we are so hungry that we fill up as quickly as we can. Astute contractors take their time and when many competitors are full with low-margin work, they choose the better jobs and get higher prices. Take your time; there is a lot of work coming out over the next few years. Your maxim should be “less work, more money.”
Ronald Coleman is a Vancouver, British Columbia-based professional accountant, author, certified management consultant and professional speaker who specializes in working with construction contractors. Contact him at Ronald@ronaldcoleman.ca or see www.ronaldcoleman.ca on the Internet.