James Donaldson & Sons, the venerable Scottish timber business, has seen sales to big national housebuilders fall by around a third in the current year providing further evidence of how the downturn in the sector is hurting suppliers.

James Donaldson & Sons, the venerable Scottish timber business, has seen sales to big national housebuilders fall by around a third in the current year providing further evidence of how the downturn in the sector is hurting suppliers.

However, with demand for timber holding up in other areas, directors expect the family-owned firm to enjoy another profitable period, following a surge in earnings in the latest financial year.

Speaking after Donaldson & Sons announced that pre-tax profits rose 44% to £3m in the year to March, chairman and chief executive Neil Donaldson admitted that the slowdown in the private housebuilding market had exacted a heavy toll in the core area of supplying trusses to big housebuilders. The company's eight centres across the UK have the capacity to produce 20,000 timber-trussed rafters weekly.

In the first quarter of the current year, sales to national firms fell by 25% to 33% on the same period last year, in a trend directors expect to continue for 12 to 18 months.

"We do not expect there to be any significant improvement," said Donaldson, whose great-great-grandfather founded the business in 1860.

However, he said sales to builders of publicly funded social and affordable housing had increased. A number of significant projects have been approved recently.

Sales of timber to merchants across the UK have held up well. Turnover at the MGM timber retailing operation acquired in 2005, which has 12 branches across Scotland, is ahead of last year.

Donaldson said small local players seemed to be faring better than big fish. The Markinch, Fife-based firm was well-placed to handle tough times after growing sales around 30% to £97m in the year to March.

"The work that has been done to place us on a solid footing, such as ensuring robust margins, is going to be at the heart of how we grow in what are turbulent economic conditions."

Donaldson believes there could be opportunities to expand into new areas, possibly through acquisition, if the market settles as he expects in around 18 months.