Control suppliers, users' sales up, profits down

Now in its record-breaking ninth year of expansion, the overall U.S. economy performed well in 1998, spurred by a blazing fourth quarter. The industrial controls sector and most of its user-industries didn't equal the nation's overall success, but did outpace the All-Industry Composite (AIC) of the 900 companies in Business Week magazine's Corporate Sales Scoreboard.

07/01/1999


Now in its record-breaking ninth year of expansion, the overall U.S. economy performed well in 1998, spurred by a blazing fourth quarter. The industrial controls sector and most of its user-industries didn't equal the nation's overall success, but did outpace the All-Industry Composite (AIC) of the 900 companies in Business Week magazine's Corporate Sales Scoreboard. During fourth quarter 1998 (4Q98), AIC increased only 6% compared to 4Q97, while profits decreased 3% for the same quarters.

In a year-to-year comparison, however, AIC did a little better posting a 6% sales hike and a meager 2% profit increase in 1998. This was better than the Fortune 500's performance, in which sales shrank 4% and profits fell 2% for 1998 following an 8% jump the year before. Five of the scoreboard's user industries improved or matched AIC sales figures, though they also had mixed profits. A user industries' composite showed an 11% drop in profits overall.

The paper industry rode its usual roller coaster in 1998. Though sales hardly changed, paper's profits shot up 144%, which made up for a 67% decrease in 1997.

Meanwhile, bad news for two steel manufacturers dragged down the whole metals group. Similarly, declining profits in the chemicals and oil and gas groups may also hinder performance in the controls field. Profits often trigger capital expenditures in the chemical , oil, and gas sectors, which frequently spend more on control equipment than other industries.

However, the dark cloud of higher at-the-pump prices due to OPEC's production cutback in 1Q99 may produce a silver lining of higher crude prices for the oil companies. This could allow more expansion and control equipment expenditures.

Data for the supplier industries were also mixed. Instruments sales increased a healthy 10%, while electrical products sales were down to an anemic 1%. Profits for these instruments were up 26% and down 37% for electrical products. Composites for the supplier industries were a little more hopeful with total sales up 5% and profits down only 6%.

All indications are that the U.S. economy's current expansion will continue for the rest of 1999. If the user industries can capitalize on this, it would trickle down to a better picture for the industrial controls supplier industries.





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