by Ashley Burleson, Membership and Analytics Director
As the industry heads into a new year, the theme that stands out for 2019 is one of maintaining performance, according to the most recent State of the Industry Report released by the Manufacturers Association for Plastics Processors (MAPP). This is not to be confused with stagnation. On the contrary, many plastics companies experienced incredible growth over the last few years, and these companies now are working to maintain these high levels of performance.
Overall, major economic indicators are pointing to a solid year for plastics companies. While the anticipated sales numbers for Q1 2019 and the rest of the year are not as high as 2018, the industry still is expecting sales to increase an average of 10 percent overall.
For nearly 20 years, MAPP has been collecting information on fourth-quarter performance metrics, such as quoting, backlog, inventory, shipments, sales and profits. While the industry frequently reports slower business conditions during the fourth quarter, comparing fourth-quarter to third-quarter performance offers the ability to gauge momentum heading into a new year, especially when examining historic data trends.
Performance in the fourth quarter of 2018 remained relatively unchanged when compared to the third quarter, and this reflects similar trends to Q4 2017 and overall historic averages. Eighty-two percent of companies reported that Q4 2018 quoting either increased or remained steady when compared to the previous quarter. While percent of jobs received vs. jobs quoted is slightly below Q4 2017, 56% of survey respondents indicated they received at least 5% or more of jobs quoted. Additionally, 77% of companies remarked that backlog also either increased or stayed about the same during the final quarter of 2018.
Looking forward into 2019, processors are anticipating sales to grow throughout the first quarter and to continue that trend the entire year. In the first quarter, 59% reported that sales should increase when compared to Q1 2018, and only 14% anticipated any decrease in sales when compared to one year ago. When predicting sales growth for the next 12 months, nearly three-fourths of processors (73%) anticipated an increase in sales, and only one in 10 expected sales to decrease over the rest of the year.
While sales are expected to increase – or at least remain steady – the same cannot be said about profits. Current profit levels for companies are being hurt by increased competition, customer demands, the cost of labor, healthcare costs and increasing prices for raw materials. However, as plastics companies plan their year, many are focused on automation, continuous improvement initiatives and new business developments, with the goal of combating current barriers to higher profit margins.
However, as with all challenges, there are new opportunities to which plastics executives are turning their attention. For instance, when asked what major activities were planned for 2019, 39% of survey respondents reported plans for the implementation of additional automation/robotics. Another 16% indicated plans for new continuous improvement initiatives. Presumably, many of these plans will be employed to help reduce reliance on direct labor, especially in a tightened labor market, and increase efficiency and profitability.
Overall, all major indicators suggest that the industry will maintain its steady, high performance throughout 2019. Those organizations that commit to solving major labor and efficiency issues with new technology and innovative solutions likely will finish the year ahead of their competition.
More information on MAPP’s State of the Industry Report or to purchase this year’s report: www.mappinc.com