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Survey Says: The Metalforming Industry is Strong

By: Bob Dobrowsky

Saturday, March 01, 2014
 

Management, quality, productivity metricsThe 2013 Precision Metalforming Association (PMA) Benchmarking Report for the Metalforming Industry shows that the overall health of the industry is strong. While concerns about the future still exist, there’s much to be positive about. Here’s an overview.

Survey Background

Seventy-nine companies participated in PMA’s annual survey, which monitors more than 50 separate metrics in the areas of management, quality and productivity. Survey participants represent a broad cross-section of the metalforming industry.

Industry served• Some 40 percent of respondents primarily supply the automotive industry. Industrial/consumer hardware and agriculture/off-high were the next highest industries represented, comprising approximately 10 percent each.

• Close to 40 percent have sales from $20 to $49 million, and 20 percent record sales exceeding $50 million.

• 39 percent of survey participants employ between 100 and 249 annual revenues in millionsassociates, 19 percent employ 50 to 99 associates and 15 percent have 20 to 49 employees; 85 percent have a nonunion workforce.

The survey helps companies benchmark their performance against the industry average for a number of financial and operational metrics. Survey participants also can compare their performance against best-in-class performers (companies in the 90th percentile for a given metric) and the most profitable performers (those companies with the highest number of employeesaverage profitability).

Volumes and Repeat Participants

Are volumes up compared to the prior year? To find out, PMA tracks the results of repeat participants. A total of 60 companies participated in both the 2013 and 2012 surveys. These 60 companies report a combined total value of shipments (sales) of $2.3 billion in 2013, nearly a 10-percent climb from 2012 sales of $2.1 billion

comparison of total sales repeat participantsIndustry Profitability

The survey tracks profitability by measuring earnings before interest and taxes (EBIT), viewed as an equivalent to a company’s operating income. Average EBIT consistently has ranged from 5 to 6 percent of sales for the last 10 years, with the exception of the years impacted by the economic downturn in 2008 and 2009. The most profitable companies report average EBIT in the range of 13 to 25 percent of sales over the same 10-yr. period.

EBIT as a percent of salesOne question that comes up every year: “What kinds of companies comprise the most profitable group?” Characteristics of the most profitable companies in 2013 include:

• All nonunion;

• The majority had 100 to 250 employees;

• All had less than $50 million in annual sales; and

2013 EBIT as a percentage of sales by industry served• The majority did not supply the automotive industry; more companies supplied the medical industry in the most profitable group than any other industry.

Another common question: “What’s the profitability for automotive suppliers versus non-automotive?” In 2013, the profitability of automotive companies averaged 4.4 percent, below the 5.3-percent industry average. Nonautomotive companies yielded an average profitability of 6.1 percent.

companies reporting negative earningsThe survey also tracks the number of companies with negative earnings. This metric has decreased steadily over the last several years. In 2010, close to 40 percent of survey participants reported negative earnings. In 2013, that number dropped to 9 percent.

Forecast for 2014

An informal poll of PMA members who attended recent district meetings indicated that most expect 2014 to be another good year, with increased sales and steady profitability. However, there are concerns.

Chief among these concerns: the continuing lack of qualified employees, closely followed by capacity constraints. Many companies have maximized plant capacity and would need to expand to sustain significant growth. Expansion can be a difficult decision because it requires the contribution of capital to the business. Owners may be reluctant to put more money into play—content to maintain the status quo, which hasn’t been a particularly bad strategy the last few years. We’ll have to wait and see how this plays out over the coming year. MF

 

See also: Precision Metalforming Association

Related Enterprise Zones: Management


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