Industries face low margins

Plant engineers who have to buy construction and maintenance supplies are facing a veritable minefield of negotiation problems. That's because a whopping seven industries are suffering under-record or near-record-low manufacturing margins, as evidenced by the F and F- grades in our margin table. Topping the list of troubled industries, the current-carrying wiring devices (SIC 3644) industry sa...

05/06/2003


Plant engineers who have to buy construction and maintenance supplies are facing a veritable minefield of negotiation problems. That's because a whopping seven industries are suffering under-record or near-record-low manufacturing margins, as evidenced by the F and F- grades in our margin table.

Topping the list of troubled industries, the current-carrying wiring devices (SIC 3644) industry saw its average costs rise 3.3% between February 2002 and February 2003. Meanwhile, the prices charged for wiring products rose just 0.7%. This cost/price escalation mismatch lopped off $1.25 from industry margins for every $100 worth of product sold. Now, manufacturers in SIC 3644 are under pressure to hike prices anywhere between 2.2% and 4.1% in order to get margins back to year-ago or 5-yr average levels.

Producers of metal partitions and fixtures (SIC 2542) also sport an F- grade in our cost table. Margins here are at an all-time record low. Looking at the February 2003 data compared to a year ago, we see the cause for the margin meltdown: a huge 5.6% cost hike coupled with a meager 0.1% price increase. To get margins back in line with average levels, makers of metal shelving must hike tags by anywhere from 3.5% to 4.8%.

Now the question remains what leverage will suppliers in these industries have to stick it to the buyers? In the case of metal fixtures, the answer is not much. Here the end markets that buy metal fixtures continue to shrink, down 2.8% in the 12-month period ending February 2003. On the other hand, end markets for wiring devices have begun to grow again, up 1.8% in the 12-months ending February. This demand strength may embolden wire makers to try to push through price hikes.

Price/cost/demand roundup

Average Product Prices

Average Product Prices

Direct Mfg. Costs

Direct Mfg. Costs

Growth in U.S. End Markets

Growth in U.S. End Markets

Industry

SIC

Nov 02

Feb 03

Costs are...

Grade

Nov 02

Feb 03


the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs.

General Sawmills and Planing Mills

2421

-1.46

-1.34

rising

D

-0.60

-0.70

Millwork

2431

0.62

0.10

rising

B

-2.13

-1.81

Hardwood Veneer and Plywood

2435

0.02

-0.09

rising

C

-1.17

-0.80

Softwood Veneer and Plywood

2436

-3.17

-3.67

rising

D

-1.17

-0.80

Metal Partitions and Fixtures

2542

-0.78

-0.72

stable

F-

-1.85

-2.83

Paints and Allied Products

2851

1.50

1.43

rising

C

-0.16

0.82

Flat Glass

3211

-2.83

-1.87

rising

F

4.52

7.80

Other Structural Clay Products

3259

4.12

5.23

rising

B

-2.10

-1.80

Gypsum Products

3275

7.64

7.95

rising

D

-2.50

-2.87

Mineral Wool

3296

0.67

0.49

rising

F

-1.33

0.06

Steel Pipe and Tubes

3317

2.47

5.81

stable

A+

-1.36

0.71

Plumbing Fittings and Brass Goods

3432

-0.25

0.35

stable

D

-2.58

-2.20

Metal Doors, Sash and Trim

3442

0.59

0.62

stable

C

-2.44

-2.60

Sheet Metal Work

3444

0.74

1.54

stable

F

1.83

4.10

Refrigeration and Heating Equipment

3585

0.41

0.33

stable

F

-0.25

0.55

Current-Carrying Wiring Devices

3643

-0.65

-0.10

rising

F-

-0.19

1.81

Noncurrent-Carrying Wiring Devices

3644

1.34

1.54

rising

F

-0.19

1.81

Commercial Lighting Fixtures

3646

-0.34

-0.26

stable

D

-1.51

-1.54

Environmental Controls

3822

0.06

0.27

stable

F

-1.88

-1.74





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