BC Flooring Industry COVID-19 Update March 31, 2020

This is Rob, CEO at Word of Mouth Floors, and we need your help. More specifically, because our local BC industry needs your help. We need to keep communication high and share what we can share to help each other make good decisions.

Difficult, unprecedented times we are facing. I am trying to create an update specifically for BC flooring industry folks, builders / contractors / designers effected by this COVID-19 situation. Here is my ask: please take the time to respond to these three questions (below). The fourth question is if you are willing to be an ongoing contributor to this weekly newsletter to update the BC flooring industry and those affected somehow by the flooring industry. It is pretty clear that what effects flooring could also equally affect other building material supply chains. So, the updates in this regular email newsletter can be useful in all aspects of the BC construction industry.

Below is the first newsletter. Skip to that if you want to read the type of regional specific + global updates I am talking about.

We live and work in Richmond, BC and primarily service Greater Vancouver, Fraser Valley & Vancouver Island. I’d love to have your input from this region but would also really appreciate feedback / updates from other regions. I spend a lot of time in the Interior (Vernon, Lake Country, Kelowna areas) as I have family there, would love to hear from you in this region. A simple sentence or two on what you are seeing or what way your business has been affected would be beneficial and worth sharing.

email me at rob@wordofmouthfloors.com


Please answer these 3 Questions (takes under 1 minute):

(1) What region is your primary business?

(2) What percentage of your business has been affected by Covid-19 disruptions? Just a rough estimation using this guideline, pick one:

100% = Closed doors, almost all activity has stopped

75% = closed or partial hours open, reduced staff or meaningful staff layoffs, dramatic reduction in new business leads & expenditures

50% = partial shutdown, not meaningful staff changes, team working as before or effectively working from home, minor reduction in new business leads & expenditures

25% = not much has changed, some minor changes with adjustments for social distancing, some minor adjustments in cash flow and projected expenditures

0% = business as usual, or, we are busier today than we were before

(3) Supply chain / access to products for Q2 operations, pick one:

(a) No disruption

(b) Some disruption, but projecting minor impact to our business in Q2

(c) Disruption, in Q2 we will lose business because of supply chain issues

(d) Huge disruption, Q2 business will materially be affected because of supply chain delays, cancellations, or other issues

This is a critical week as we hit month-end. With news being reported that the unemployment rate is expected to grow to 15% by year-end, and a large percentage of Canadians are already living dangerously close to being unable to service their personal debt, then month-end is a very stressful time. For personal and business owners alike, the situation can move from difficult to dire. The full impact of this on our businesses and the economy as a whole is near impossible to predict. All we can do is attempt to be as well informed as possible, remain optimistic, exhibit grit, and keep being creative for the health of our businesses and our families.ies.ell them (and us) that many regular buyers of containers have canceled orders. European and Chinese factory owners have told me they have seen North American business orders drop materially. Add in the fact that delays already occurred because of the Chinese New Year and the Wuhan outbreak, so I feel that this points to a clear upcoming inventory issue in the next two quarters. With interest very low, and demand being pent up because of current business disruptions, I predict many suppliers to be out of stock or struggling to service business on the other side of this crisis.


BC Flooring Industry Covid-19 Update - March 30, 2020

Goal of this newsletter is to try and share relevant regional and international news that may be timely or useful for your business.

Trudeau update:

75% wage subsidy: this morning Mr. Trudeau clarified some of his statements made last Friday to state that all businesses that have seen revenues reduced by 30% or more from the Coronavirus crisis will qualify for this subsidy. Regardless of business size, so 2 employees or 2,000 employees, the businesses qualify equally. The cap is up to ~$58,700 and to a maximum of $847 per week per employee. It is not clear (as of March 30th morning) on the specifics of how to apply for this and the exact criteria to qualify.



https://www.cbc.ca/news/politics/trudeau-covid19-business-supports-1.5514558

$40,000 interest free small business loan (with 25% non repayable). Details for this are still rolling in, but in discussions with various business owners I have heard that all banks will launch this at the same time. So expect that in approx. 2 to 3 weeks that online loan forms will start showing up on RBC, Td, etc websites. Until then, it is a holding partner. One criteria appears to be that you must have paid out $50,000 to $1,000,000 in wages in 2019.

Example of what RBC is posting:

https://www.rbc.com/covid-19/business.html



BDC – I spoke with BDC and they stated that they will accept online applications for up to $100,000 loans. As of Friday March 27th you must have been in business for over 24 months to qualify. Criteria for application is on a case by case basis.


Industry News:

Mohawk (NTSE: MHK) the largest flooring company in the world, just stated in a stock market filing that they will have meaningful reduction in business in the coming months. They have shutdown a plant in Pennsylvania and expect further supply chain disruptions. Mohawk does not have a huge presence in BC… but, if they are negatively affected you can expect that Shaw and Armstrong are as well.

Industry news:

Mohawk (NTSE: MHK) the largest flooring company in the world, just stated in a stock market filing that they will have meaningful reduction in business in the coming months. They have shutdown a plant in Pennsylvania and expect further supplychain disruptions. Mohawk does not have a huge presence in BC… but, if they are negatively affected you can expect that Shaw and Armstrong are as well.

https://seekingalpha.com/filing/4906126

Mohawk Industries, Inc. (“Mohawk” or the “Company”) is providing the follow update on business conditions, actions being taken in response to the COVID-19 pandemic and the strength of its balance sheet. The spread of COVID-19 is having an increasing impact on the economies where the Company operates around the world. The broad measures being taken by governments, businesses and others across the globe to limit its spread are adversely affecting the Company and its customers. The ultimate magnitude the COVID-19 pandemic will have on the Company’s operating results will be determined by the length of time it continues to spread, as well as governmental regulations and other measures taken in response.

Due to these factors impacting the Company’s manufacturing, employees and demand, parts of the Company’s operations have curtailed or suspended production, with Europe being the most impacted in the first quarter. Presently, most of the facilities which have suspended operations are satisfying customer demand by delivering products from existing inventories. In the United States, a small plant in Pennsylvania has been closed due to local state restrictions. Given these disruptions, Mohawk’s financial results for the first quarter of 2020 will be lower than previously expected.

One major Canadian Vendor (both manufacturer and importer selling $10’s of millions in annual revenues), national distribution in both Canada and USA, (with meaningful business in BC), stated to me March 27th : they have increased their buying of containers of flooring to service both Canada and USA. They have seen a large slow down in business the past two weeks, but are expecting a huge bounce back after this crisis. My company, Word of Mouth Floors, is the same, we have ordered more containers than we have ever ordered in our history. But both our company and this other large Vendor (head office back East) have confirmed that factories are tell them (and us) that many regular buyers of containers have cancelled orders. European and Chinese factory owners have told me they have seen North American business orders drop materially. Add in the fact that delays already occurred because of Chinese New Year and the Wuhan outbreak, so I feel that this points to a clear upcoming inventory issue in the next two quarters. With interest very low, and demand being pent up because of current business disruptions, I predict many suppliers to be out of stock or struggling to service business on the other side of this crisis.

Cash flow is getting very tight for most in BC construction industry, but supply chains will be disrupted. Prepare as best you can upstream in your specific supply chains.

Not in BC, but in Alberta and Ontario - Mattamy Homes Canada www.MattamyHomes.com , one of the largest home builders in Canada, closed it’s doors for March. Their website says ‘we are committed to resuming operations and getting customers into their homes as quickly as conditions safely permit’. Is that soon? Remains to be seen. But having maybe the largest home builder in Canada shut its doors and pause operations has a massive impact to the Canadian construction scene. Not directly on BC, but the effects certainly can be felt all over Canada.

Here is an update from American Institute of Architects discussing the impact their membership is facing. The report was released March 31st 20202 but the survey was conducted March 23rd. The scope of this update and the survey they conducted focuses on the impact seen on architecture firms across in the U.S.A.

Not exactly an update on BC, but, conclusions should be drawn to our own backyard. And it is amazing to think that even if they did this survey one week later, the results likely would have been more drastic:

A recent AIA survey found that 50% of architecture firms reported fewer new design projects for March-as of the March 23 survey date-as compared to their expectations entering the month. In terms of work on active projects, the overwhelming majority of architecture firms (83%) are anticipating a decline in revenue for March relative to their expectations heading into the month, with over a third of firms estimating that their revenue will be at least 10% below expectations. This situation is anticipated to worsen in April, with 94% of firms expecting revenue declines, and over half of firms (57%) anticipating that the revenue falloff will exceed 10%.

“Like most other businesses, U.S. architecture firms are heading into uncharted waters regarding what the economy holds in store for them as the COVID-19 pandemic plays out globally,” said AIA chief economist, Kermit Baker, PhD. “Different businesses are feeling the impact of the slowdown differently.”

Beyond billing activity, just under half of firms (48%) indicated that all, or almost all, of their staff are now working remotely, while 31% reported that some of their staff are working remotely. Few firms reported a major impact to their staff due to family/personal reasons, but 15% of firms said that at least some of their staff are currently unable to work at all.

This is a critical week as we hit month end. With news being reported that unemployment rate is expected to grow to 15% by year end, and a large percentage of Canadians are already living dangerously close to being unable to service their personal debt, then month end is a very stressful time. For personal and business owners alike, the situation can move from difficult to dire. The full impact of this on our businesses and the economy as a whole is near impossible to predict. All we can do is attempt to be as well informed as possible, remain optimistic, exhibit grit, and keep being creative for the health of our businesses and our families.

Please reach out to me with ideas / updates / relevant information I can share with our peers in future newsletters. We are all in this together, let’s try and keep each other informed and help the British Columbia economy survive as best we can.

Take care, be safe, chat soon.

Cheers,

Rob Banks

CEO

Word of Mouth Floors

Richmond, BC, Canada

rob@wordofmouthfloors.com

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