While the past year was eventful it will quickly fade into obscurity as this year progresses. Phillip Ross asked some wholesalers how they forecast the next 12 months.
The year just passed saw some significant stresses placed on the HVACR industry, but 2012 promises to be much more stressful with the upcoming Refrigerant Levy, global economic woes and general uncertainty likely to affect all sectors in the next 12 months and beyond.
In between a rock and a hard place are the industry’s middlemen: wholesalers. If any sector has to be on top of what is happening and what is about to happen, it is the companies that sit in the middle of the supply chain.
What are the wholesalers views on the past year and how do they foresee the next? Given the introduction of the federal government’s Refrigerant Levy in June, what is their SWOT (strengths, weaknesses, opportunities, threats) analysis?
CCN asked some wholesalers to respond.
That was the year that was
Earthquakes, floods and overseas disasters all heavily affected the HVACR industry in 2011.
Australia’s biggest wholesaler, Heatcraft, probably understated the year just past when managing director, Bill Moltner, says the year was “challenging overall due to subdued conditions”.
A year that started off with floods in Queensland and Victoria, bushfires in Western Australia, earthquakes in New Zealand and a cool summer overall led to clients being “careful in deploying their funds”, Moltner says.
Patton Australia’s general manager, Stuart Smith, agrees, but says “over the past few months the momentum has picked up so we are expecting a strong finish to the year”.
General manager of Airefrig, Stephen Cross, also saw the latter half of the year showing some improvement. “The 2011 year has been a tough year for the HVAC industry with the economy slowing down and company finances tightening up in the first half of this year.
“The second half of 2011 ... started to see more movement in the industry with companies starting to look at new projects.”
With the tightening of financing, Moltner agrees that some small to medium businesses were limited in their access to capital.
Jatinder Masson, Heatcraft’s national sales manager, also saw some improvement but notes it was not universal.
“The supermarket sector has been mixed in their investments,” he says. “This year has also seen issues on the price of copper and 2012 looks to force examination of new refrigerants.”
Indeed, 2012 is at the forefront of most wholesaler’s plans.
Elephant in the room
Of all the industries to be affected by the introduction of the government’s Refrigerant Levy on 1 July 2012, wholesalers will probably be the hardest hit.
This challenge is exacerbated by wholesalers finding that customers are looking to them for answers to their questions as well.
“There is a huge need for education, especially regarding the refrigerant levy,” Moltner says. “This is a significant concern that pulls into other concerns leading to more sophisticated investment decisions.”
Heatcraft, however, is well placed to share information and solutions within its branch network, he says. US parent company Lennox has a huge bank of information from the US government levy placed on CFCs back in the ‘90s, as well as the current push by companies such as Walmart to make its supply chain sustainable.
For Masson, “contractors see 2012 as a mega change in industry: which refrigerant to go for, how will the levy affect the business, do we retrofit or use some sort of ‘bolt-on’ equipment?”
The questions come from all areas of the industry. Leon Miller, Heatcraft’s general manager wholesale, is also fielding questions from the commercial building sector. “Who pays?,” Miller asks. “The building owner or the capex owner?”
While there is much uncertainty, Masson stresses, that one thing is certain: “whatever the argument, a decision has to be made.”
Heatcraft has been working on its research and development to assist clients, leading to the new Fridgebox with its microchannel high efficiency coils and the efficient WRC units, utilising variable speed drive fans and water pumps.
For most service contractors and end-users it will usually involve a stepping up in processes to see what delivers the most energy reduction for the least cost, Heatcraft’s marketing director, Gavin Tory, says. “Most will look at minimising energy consumption via refinements and upgrades.”
Stuart Smith confirms that Patton is also looking at the best path for purchasers. The refrigerant levy will generate a change in the refrigerants we use and, therefore, there will be a greater move to R134A.
“Many of the packaged units available will need to be modified to line up with the different refrigerants. There will also be a greater requirement for capacity control to ensure systems are operating at their peak efficiency.”
Airefrig is actively sourcing new product to offer, Cross says. “Over the next year, we will continue to expand our range of products including Enthalpy condensing units, refrigerant monitors, variable speed drive, LED lights and energy saving controls running refrigeration systems,” he says.
“These products are all aimed at energy efficiency and the carbon tax, which are going to have a big effect on the HVAC industry.”
What’s the SWOT
Given the prevailing conditions and the upcoming pressures, what do our suppliers think are the strengths, weaknesses, opportunities and threats for the upcoming year?
All agree that the underlying fundamentals of the HVACR industry is strong. Industry will always need refrigeration and air conditioning, so while current growth is subdued it is still growing, which augurs well for servicing, according to Heatcraft.
Airefrig’s Cross agrees. “The strength of the HVAC industry’s market is we are always searching for the most efficient and market-leading ways to do things and I believe with
the approaching carbon tax, there will be many opportunities on improving energy efficiency to areas of the HVAC industry.”
In fact the only weakness that could be identified is that supply to the industry may find it difficult to keep up with the rate of growth. “Rate of change is a challenge,” says Heatcraft’s Miller, “especially in attracting good talent across all sectors of trade and industry.”
Positivity is the hallmark of all good business and for Airefrig, Heatcraft and Patton to remain in business for so long, they are constantly finding opportunities in any situation.
“We are committed to growth in Australia over the next five years,” Smith says.
“This will be achieved by a mixture of 100 per cent owned branches and joint ventures in regional areas. We are constantly looking for opportunities to establish joint ventures and welcome enquiries from personnel within the industry who would like to partner us in a JV operation.”
For Cross, the future was just as bright. “Airefrig Australia has continued to grow over the past 12 months, opening a new branch in Padstow, NSW, building a new condensing unit assembly facility in Bayswater, Western Australia, and looking at opening a new outlet around mid-June in Sydney.”
Heatcraft stresses its push for better information for the industry. “Misinformation
is a cancerous thing,” Miller says. His company takes the opportunities to support TAFE and Worldskills as well as constantly producing publications, updating the website and presenting the Heatcraft roadshows.
The idea is to build business skills, Masson says. “Some business are agile but some are not; we can only do our bit but they need to plan and negotiate a path.”
Tory agrees. “It is about a good management of risk. Getting it right reduces any threats.”
On the product side, the company is constantly updating its range, moving its products more and more towards ‘plug and play’.
All three wholesalers will be at the next ARBS in Melbourne, from 7 to 9 May.
Possibly the final word belongs to Masson who, while specifically describing Heatcraft, may actually have spoken for all wholesalers: “we are here for the long haul to support business.”