Farmers' spending offsets building downturn

Group Business Correspondent

Wednesday 11 July 2012

INCREASED investment by farmers in tractors amid the commodity boom is helping Scot JCB shrug off the effects of the downturn in the housebuilding market, but the recent bad weather has prompted some customers to delay purchases.

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MARK WILLIAMSON

Steve Bryant, managing director of the heavy equipment supplier, said Scot JCB enjoyed good growth in the first half of 2012 when strong markets for commodities like lamb combined with tax changes to encourage farmers to buy kit.

Scot JCB's sales of agricultural equipment increased 10% by volume year-on-year in the first three months when there was good demand for tractors at £90,000 to £100,000 a time. Farmers also bought more of the "Load Alls" used to move heavy items around. The workhorses cost around £50,000 each.Mr Bryant said many farmers were keen to buy equipment before the Annual Investment Allowance tax relief was cut from £100,000 to £25,000 from the start of the new tax year in April.Agricultural sales increased 5% by volume in the first half.However, Mr Bryant said sales this month were not looking as good, "predominantly because of the weather".Some farmers and construction clients are delaying taking delivery of goods so they do not need to pay for them until conditions improve. "(Some) clients are just saying hold it, the site's too much of a mess," said Mr Bryant.However, noting that sales tend to slow during the holiday month of July, Mr Bryant predicted the weather-related disruption would be a temporary blip. He said: "Commodity prices are still very supportive (of farmers)." Mr Bryant still hopes to sell more tractors and Load Alls this year compared to 2011, when JCB sold around 220 units.The company is also benefiting from a surge in investment in wind farms across Scotland, which has increased demand for items such as excavators."That's been good for us," said Mr Bryant, who led a £5 million management buyout of Scot JCB from the former Hewden Stuart in 1998.The company has enjoyed strong demand for equipment for use on infrastructure projects like road building and for facilities connected with the Glasgow Commonwealth Games 2014.The success has helped compensate for tough times in the house-building market, which provided lots of business during the boom that ended in 2007.Mr Bryant said there had been signs of only a modest recovery in the market so far. "Yes, sites are open, yes houses are being built but not in pre-recession volumes," he said.Writing in Scot JCB's 2011 accounts, newly filed at Companies House, the directors said they expected to achieve "satisfactory" sales and profits this year.Scot JCB increased pre-tax profits by 13% in 2011, to £3.1m compared with £2.7m in 2010. Turnover increased by 30% annually, to £86.7m, from £66.4m."The first four months have been very similar to the same period last year, with continuing challenges in the housebuilding sector being offset by a stronger performance from agricultural products and infrastructure projects," wrote directors.Agriculture accounts for around 25% of Scot JCB's business.

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Farmers' spending offsets building downturn

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