Several major HVAC manufacturers recently reported their quarterly results for the April-June period and reflected how most contractors experienced this past spring — a collapse in April and May followed by a June that was hot in terms of both residential sales and weather. Manufacturers, like contractors, remain uncertain about the rest of the year and are finding it challenging to meet demand.
The first full month of the coronavirus pandemic and state lockdowns proved difficult for most manufacturers. May was a little better. Then came June, when the economy started moving again and temperatures reached record highs. Residential sales jumped.
Carrier saw its best month ever for residential orders in June. Trane reported record bookings in June. Lennox reported residential sales were up 7 percent in June. Modine said the upward trend continued through July.
“That’s not unexpected when you get that kind of heat,” said Emerson CEO David Farr.
Robert Sharp, executive president of Emerson Commercial & Residential Solutions, said more consumers experienced the heat while working from home. They wanted to improve their comfort and had little else to spend on this year.
“You’ve got a lot of people sitting at home and sitting on a pretty significant pile of cash,” Sharp said. “I don’t see any reason why this won’t continue through the season.”
Farr said now the goal becomes delivering on the demand and not missing the bounce. That means focusing on making sure factories can meet demand.
"The severe drop in customer demand and resulting plant shutdowns in the first quarter caused by COVID-19 appears to be behind us, but many of our manufacturing facilities continue to operate at well below normal capacity," said Modine Interim Chief Executive Officer Michael Lucareli.
Emerson also dealt with a number of production issues in its latest quarter. The company stopped production at some facilities for cleaning. It also had to shut down a plant in Mexico at the request of the local government. Farr said now Emerson needs to ensure employees don’t feel the need to take unnecessary risks and come in when they are sick.
“The key issue is we have to keep those plants running and we have to keep them running safely,” he said. “It’s one thing to run a plant full out when you are not in a COVID environment. When you have a COVID environment, you have to be very, very careful to not stress the workforce and have something get in there and half the plant comes down with COVID.”
Adding to the challenge is the number of distributors that have been disrupted by the pandemic. So even if Emerson produces the needed equipment, it’s sometimes difficult to get it to contractors.
The good news on the residential side offset weakness in the commercial sector. All the manufacturers reported lower commercial demand, although they see signs for hope. Modine announced it would allocate more resources for data centers, which grow in importance as people conduct more activity online, ranging from working to grocery shopping. Carrier reported strong demand for its OptiClean portable negative air machine on the commercial side. Carrier CEO David Gitlin expects an increased investment in IAQ in general to continue even if the pandemic subsides.
“Even post-vaccine, whenever that comes, society is shining a light on the criticality of the health and safety of indoor air environments,” Gitlin said.
Carrier reports more demand for digital controls as commercial clients realize there could be times when they have limited physical access to their buildings. Carrier executives also expect more service work from commercial clients.
“Services typically hold up better than equipment in a downturn as owners look to extend the life of existing equipment and we’re seeing signs of that during this pandemic,” said Dave Regnery, Trane’s chief operating officer.
Trane CEO Michael Lamach said the economy is slowly progressing forward, but the sit remains tenuous and provides limited visibility. Other executives echoed that opinion.
“COVID cases continue to rise and economic visibility is uncertain,” Gitlin said. “Therefore, we will continue to focus on what we control, effectively managing the business during times of uncertainty and remaining flexible and opportunistic.”
Sharp said the large amount of variables, ranging from volatility in cases to uncertainty about responses, makes it difficult to forecast too far into the future.
“There’s a lot of noise in the system right now,” he said.