Conveyor prices hang tough
Price declines among manufacturers of factory equipment and tools are relatively rare. The prevailing maxim appears to be: he who keeps prices stable during a downturn will reap the upturn’s margin windfall needed to stay profitable over the long haul. The industries in our quarterly report clearly reflect this rule.
Among 19 industries that we cover in our factory and equipment report, only three (handsaws, metal-cutting machine tools, and transformers) cut their average product prices in 2001. Eight industries enjoy record or near record high margins and certainly have the margin strength to absorb price cuts.
Material handling equipment illustrates the point. Indeed, producers of conveyors and conveying equipment (SIC 3535) have taken an especially strong stance to defend their prices. In the 12 months ending December 2001, average prices increased 1.7%. At the same time, lower prices for steel inputs have reduced per-unit spending on manufacturing by 1.6%. With prices up and costs down, calculations from Thinking Cap Solutions reveal inflation-adjusted margins improved by $2.11 for each $100 worth of product sold. That’s not bad for an industry whose end markets declined 2.9% in 2001. Producers of industrial trucks (SIC 3537) and hoists, cranes and monorails (SIC 3536) also faced similar end market conditions while at the same time enjoying near-record high inflation adjusted margins.
Several other industries saw their end markets slump dramatically between September and December of 2001, especially the industries that make transformers (SIC 3612), motors and generators (SIC 3621), and instruments to measure electricity (SIC 3825).
|Average Product Prices||Direct Mfg. Costs||Growth in U.S. End markets|
|Industry||SIC||Sept 01||Dec 01||Costs are…||Grade||Sept 01||Dec 01|
|Other Hand and Edge Tools||3423||2.17||2.91||stable||A||0.26||-0.96|
|Hand Saws and Saw Blades||3425||-0.25||-0.56||stable||C||-0.70||-1.77|
|Other Power Transmission Equip.||3568||1.70||1.87||stable||A||-4.76||-6.86|
|Conveyors and Conveying Equip.||3535||1.55||1.70||stable||A+||-0.54||-2.85|
|Hoists, Cranes and Monorails||3536||1.87||1.65||stable||A||0.83||-0.55|
|Industrial Trucks and Tractors||3537||1.66||1.37||stable||A||-0.56||-3.17|
|Metal-Cutting Machine Tools||3541||-0.55||-1.98||stable||F-||-1.23||-6.97|
|Machine Tool Accessories||3545||1.75||1.88||stable||B||-2.94||-6.52|
|Power Driven Hand Tools||3546||1.89||2.04||stable||C||0.19||-0.64|
|Pumps and Pumping Equipment||3561||2.13||2.40||stable||A+||-1.57||-2.56|
|Air and Gas Compressors||3563||1.77||1.86||stable||A||-1.57||-2.56|
|Speed Changers, Drives and Gears||3566||2.24||2.11||stable||A||-4.76||-6.86|
|Motors and Generators||3621||0.53||0.46||stable||F||3.92||-2.22|
|Process Control Instruments||3823||1.29||1.49||stable||B||-4.51||-4.38|
|Fluid Meters and Counting Devices||3824||2.01||1.20||stable||C||-4.51||-4.38|
|Instruments to Measure Electricity||3825||0.64||0.58||stable||F-||6.75||-5.51|
|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.|