SYDNEY, June 3 (Reuters) - Australian hardware chain
Bunnings expects elevated timber prices to squeeze its margins
for up to another year, its managing director said on Thursday,
as a boom in home improvement and construction drives a surge in
"We think about timber (and) we've probably got another six
to 12 months of some challenge," Michael Schneider said in an
investor briefing hosted by Bunnings owner Wesfarmers Ltd
"Feedstock is in a reasonably good space, but getting it
through the mills and, clearly, the strong demand is putting
pressure on," added Schneider, using the term for raw timber
that is processed into usable wood products.
Amid restrictions on movement to stop the spread of
COVID-19, people around the world are looking for bigger homes
or embarking on renovation projects, sapping supply and driving
up market prices for the most important component, timber.
Supported by government stimulus payments, Australian
approvals to build now houses leapt 67% to a record high in the
month of April, compared to the same month a year earlier in the
initial stages of pandemic-induced lockdowns. The United States
recorded similar figures.
NASDAQ-listed lumber futures have quadrupled in a year,
according to the U.S. exchange's website.
Schneider said Bunnings, which dominates Australian home
improvement with 50% market share and no close rival, was
reluctant to put up shelf prices and hoped to tackle the margin
pressure by cutting costs.
"We do a lot of work with our suppliers to look at ways that
we can offset costs through improved efficiencies in supply
chain or volume purchases," he said.
(Reporting by Byron Kaye; Editing by Muralikumar Anantharaman
and Stephen Coates)