Subscribers weather economic times well
With all the talk about recession, tight credit, and general tough economic conditions permeating the media and most business discussions, Control Engineering decided to conduct an economic survey of its subscribers to learn first-hand what its audience is experiencing. The goal of the survey was to determine how U.
With all the talk about recession, tight credit, and general tough economic conditions permeating the media and most business discussions, Control Engineering decided to conduct an economic survey of its subscribers to learn first-hand what its audience is experiencing. The goal of the survey was to determine how U.S.-based manufacturers—typically the first group negatively impacted by an economic downturn—are faring economically, how they are responding to marketplace conditions, and if there are any bright spots to be detected.
Though many respondents said they were experiencing tough times, a surprising number of subscribers indicate that their businesses are performing very well.
When asked to characterize the impact of current economic conditions on customer orders, 67% of respondents state that business activity has remained level or increased over the past year. Likewise, 61% claim that capital spending has stayed the course or increased over the past year.
Despite the widely held gloomy outlook for the economy, nearly half of respondents (46%) felt that the current economic conditions presented opportunities for their businesses. Though no one area stood out among survey responses indicating a general source for such opportunities, 16% mentioned they have increased exports, while another 12% are taking advantage of an uptick in energy-related business. Another 10% are discovering opportunities through a focus on efficiencies and another 10% report they are able to take advantage of competitors weakened by economic conditions.
More than any one area, exports appear to account for the greatest portion of the economic activity sustaining manufacturers in the current environment. Fully one-third of respondents mention their organizations have experienced an increase in orders from non-North American operations. Of those, more than half attribute this to the increase in global currency values against the U.S. dollar. Others attribute the increase in exports to higher global demand in general (as a result of developing economies).
Though an increasing number of global manufacturers are producing more competitive goods on a regular basis, many respondents report that much of the export increase they have experienced comes as a result of buyers seeking the recognized quality of North American manufactured products.
Not all respondents painted a bright picture, however, and credit issues received most of the blame: 36% of respondents noted that tighter credit conditions have impacted their business operations, primarily affecting new projects and purchases.
When asked what specific areas of their business have been most negatively impacted by economic conditions, nearly one-quarter of respondents mentioned that sales/orders are down compared to last year, while 15% cited cost increases for raw materials and energy. Three percent of respondents claim that the biggest negative impact of the current economy is the affect on attracting and retaining key people.
Current and planned automation projects have also taken a hit. Almost one-third of respondents mention that automation projects have been suspended. Though more than half of respondents say their budget for automation has not changed in the last year, 34% of respondents report a decrease.
Reported increases and decreases in automation budgets appear to mirror each other. Of those respondents experiencing an increase to their automation budget, 35% mentioned this increase was greater than 15%. Likewise, of those respondents experiencing a decrease to their automation budget, 36% mentioned the decrease was greater than 15%.
As an interesting side note, despite the significant number of respondents citing negative impacts to their business due to the economy, only 17% say their company is taking advantage of the depreciation deduction offered in the 2008 U.S. Economic Stimulus Act. This legislation, which reenacted the 50 percent bonus depreciation for 2008, could help offset some of the economy’s negative impacts on capital equipment intensive manufacturers.
David Greenfield , Control Engineering Editorial Director, can be reached at firstname.lastname@example.org . To see a copy of the survey report, visit
Public sector revenues grow dramatically
Public measurement, control, and automation companies have been doing quite well over the past few years, according to a presentation delivered at the 2008 MCAA Industry Forum by Edward Curry, partner, Curry & Hurd LLC.
Between 2006 and 2007, public measurement, control, and automation companies have experienced significant revenue growth, with many companies experiencing gains in excess of 20%, according to Curry. These gains are a result of both acquisition and underlying growth, he said.
Operating income for these companies grew, on average, by 33.3% and operating income as a percent of revenue increased from 12.4% to 13%.
In the past, the ability to collect 10% of revenues from operating income was achieved only by the highest-performing public companies in this sector, said Curry. Between 2006 and 2007, however, most public companies in this sector reported income well above this threshold.
Reasons cited for this improvement focus on a convergence of factors ranging from energy-related issues, global expansion, foreign exchange rates, and operating leverage after cost restructuring (following acquisitions).
Curry noted that, amid all the increases in income, research and development expenditures as a percent of revenues in these large public companies has been decreasing. Rather than allocating income to grow R&D organically, Curry suggested that these companies are, instead, acquiring it.
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