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 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%.
|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|
|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|
|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|