HARDI Reports Good August,But Tough 4th Quarter Ahead

Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR average distributor sales for August 2011 up 7.9% from the same month last year, an improvement from last month’s 4.9% growth, but not enough to stem a sixth-month decline in the annual distributor growth rate.

HARDI’s Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report showed growth in all eight North American regions, three of which experienced double digit improvement compared to August 2010. U.S.-only distributor sales growth averaged of 8.1% for the month. Despite concerns from manufacturers and others of inventory depletions within the channel, inventory levels were reported up in every North American region for the fourth consecutive month.

Days Sales Outstanding (a measure of how quickly customers pay their bills) saw its best improvement of the year with a 6% decrease from the previous month. Distributor productivity reflected by sales per employee backtracked for the second consecutive month continuing to indicate that July and August failed to meet most distributor expectations.

“The economy is in a definitive Phase C (slower growth) trend and so is the average HARDI member, but not without some positives. Looking at the latest data release, the ongoing improvement from 2010 sales numbers is encouraging to see despite its slowing rate. Another promising trend that has developed over the past three months has been the drop in Days Sales Outstanding. The Average Day's Credit Sales in Accounts Receivable has fallen by an average of around ten days since June (from 56 days to 46 days). Quicker payment turnaround leads to improved cash flow, something we can all appreciate and should be striving for in a Phase C economic environment,” says HARDI economist, Andrew Duguay of the Institute for Trend Research (ITR).

“This might have been our Western region’s best month in about two years in terms of growth rate, and all of North America exceeded my expectation for what I saw as a challenging August,” responds HARDI Executive Vice President and COO Talbot Gee. “But with impossible fourth quarter comparables to last year’s record months in November and December during the tax credit bubble, August sales up just 7.9% should signal distributors and their suppliers to prepare for a potential negative year end growth rate.”

“Despite eye-popping growth of R-22 unitary sales, overall unitary volumes are failing to keep pace with last year,” Gee says. “I fear we may have underestimated the R-22 impact, but over-estimated total unitary volumes for 2011 which is likely to depress distributor sales dollars and margins.”

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