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...
By Staff July 1, 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