Valve makers win in margin game

The list of industries in our factory operating materials and supplies report that are enjoying above-average margins is growing. Last time we reported on these industries we mentioned two with A+ margin ratings: wooden pallets (SIC 2448) and ball and roller bearings (SIC 3562). Now six more industries are reporting record high (A+) or near-record high (A) inflation-adjusted manufacturing marg...

07/01/2001


The list of industries in our factory operating materials and supplies report that are enjoying above-average margins is growing. Last time we reported on these industries we mentioned two with A+ margin ratings: wooden pallets (SIC 2448) and ball and roller bearings (SIC 3562). Now six more industries are reporting record high (A+) or near-record high (A) inflation-adjusted manufacturing margins.

All the industries that manufacture valves are in the high-margin ranks. For example, in April 2001 the average price index in the industrial valves industry (SIC 3491) stood 30.1% higher than in 1991. Meanwhile, direct manufacturing costs in SIC 3491 were only 14.2% above 1991 levels. That price/cost escalation mismatch appears to have dropped an inflation-related bonus to the valve industry's bottom line.

The industry that makes miscellaneous valves and pipe fittings not elsewhere classified (SIC 3494) also enjoys an inflation bonus. This industry makes boiler couplings, metal Y bends, metal plumbing valves, and other products. Here, too, prices are up 25.6% from 1991 levels, and costs are up just 13% over the same time period. That mismatch was especially severe in the last 12 months; prices are up 7.8% between April 2001 and April 2000 while costs are up just 1.6%.

Price/cost/demand roundup

Industry

SIC

Average Product Prices

Average Product Prices

Direct Mfg. Costs

Direct Mfg. Costs

Growth in U.S. End Markets

Growth in U.S. End Markets


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.

Wood pallets and skids

2448

0.08

0.33

Stable

A

1.98

-0.10

Polishes and sanitation goods

2842

2.33

0.82

Rising

F

3.22

2.84

Surface active agents

2843

1.51

2.55

Rising

F

0.01

-1.37

Adhesives and sealants

2891

1.56

2.55

Stable

D

14.24

11.69

Lubricating oils and greases

2992

7.60

8.50

Rising

D

10.42

8.61

Rubber and plastics hose and belting

3052

0.44

1.45

Stable

B

6.28

3.78

Abrasive products

3291

-0.06

-0.11

Stable

F

15.78

13.24

Steel wire and related products

3315

-0.43

-0.48

Rising

F

4.36

2.62

Copper rolling and drawing

3351

6.20

3.35

Falling

C

38.83

34.90

Nonferrous wire drawing and insulating

3357

6.03

4.29

Falling

D

38.09

34.24

Heating equipment, except electric

3433

1.19

1.28

Stable

A

2.64

0.86

Fabricated plate work, boiler shops

3443

1.16

1.29

Stable

A

6.32

4.45

Bolts, nuts, rivets, and washers

3452

-0.16

-0.08

Stable

D

4.53

2.82

Industrial valves

3491

1.27

1.56

Stable

A

4.17

2.76

Fluid power valves and hose fittings

3492

1.52

1.54

Rising

A

4.17

2.76

Other valves and pipe fittings

3494

1.18

1.22

Stable

A+

4.17

2.76

Miscellaneous fabricated wire products

3496

0.00

-0.01

Stable

B

11.08

8.64

Fabricated pipe and fittings

3498

3.14

2.47

Stable

A

4.17

2.76

Ball and roller bearings

3562

1.41

1.67

Stable

A+

8.44

6.12





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