MRO Magazine


PTDA members project optimistic 2001 results

Chicago, Ill., March 6, 2001 - The Power Transmission Distributors Association's 2001 Member Forecast projects upbe...

Chicago, Ill., March 6, 2001 – The Power Transmission Distributors Association’s 2001 Member Forecast projects upbeat business projections for the coming year despite signs and widespread talk of an economic downturn.

Pessimism is clearly more evident in 2001 than it was in 2000 for PTDA member firms. For instance, 68.4% of distribution firms and 70.6% of manufacturers say the U.S. and Canadian economies currently are in a period of decline.

However, most survey respondents believe the downturn will be short-lived, with a rebound occurring by summer. Some individual distribution managers claim their firms are being hampered by a sluggish marketplace while others seem to have found strategies for coping and even prospering.

80% of the 60 distributor member companies who responded to the survey project sales increases for the coming year; 35% of the distributors expect sales growth of 10% or greater.

Meanwhile, 31.7% anticipate sales increases of 5% to 9.9%. Another 13.3% say the gains will be under 5%. Only 11.7% expect completely flat sales, while just 8.3% project drop-offs.

The overall forecast was somewhat more positive last year, when 90% of all distributors expected sales increases, 4% envisioned a flat market and 6% anticipated losses.

Several distributors reported that they started preparing last year to navigate the current economic turbulence. By having refocused sales, marketing and service strategies in 2000, they expect to weather–and even excel in–the existing rocky business climate.

Manufacturers’ outlooks for 2001 are more guarded than distributors’. While nearly three-fourths (73.7%) of manufacturers expect sales increases in 2001, the amounts are more tempered than in 2000. For the coming year, 10.5% of manufacturer survey respondents forecast sales gains of 10% or more. Last year, 37% of the manufacturers projected sales growth of greater than 10%.

For 2001, 34.2% of manufacturers anticipate 5% to 9.9% sales increases (as opposed to 39% in 2000). Another 29% forecast improvement under 4.9% (as opposed to 16% in 2000).

However, the number of manufacturers expecting the coming year to be difficult, if not painful, has grown from 2000.

13% expect sales to remain constant in 2001 (as opposed to 6% in 2000) and another 13% anticipate sales dips (as opposed to only 2% in 2000). A handful of PTDA allied member firms are girding for sales drop-offs of between 10% and 14.9%, but that may not spell disaster for them.

Many power transmission/motion control (PT/MC) distributors and manufacturers have been struggling to maintain existing gross margins levels for over a decade. Although there are some notable exceptions in 2001, 55% of distributor survey respondents and 44.7% of manufacturer respondents expect margins to remain flat.

All of the of distributors (31.7%) who forecast margin improvements in 2001 expect the gains to be substantial. Of this group, nearly a third expect margin increases of more than 15%. Most of the remaining distributors anticipate margins to improve by at least 10%. No distributor forecasting a margin increase in 2001 thinks it will be less than 8%.

By comparison, in 1999, no distributors forecast margin increases of 10% or more. In 2000, however, 29% of distributors projected margin increases of 10% or more.

Among distributors (13.3%) who predict margin erosion in 2001, more than half say the slip will be under 2%. Most of the rest are projecting slides under 4.9%. In 2000, by comparison, 19% of survey distributor respondents expected margin drops.

A similar 2001 margin forecast scenario applies to manufacturers. Nearly a third (31.6%) expect margin gains of more than 10%. Of this group, half anticipate improvement greater than 15%.

In 1999, only 3% of manufacturer survey respondents forecast margin growth higher than 10%. Last year, 44% aimed for that level of improvement.

For 2001, a handful of manufacturers (10.5%) also envision margin gains in the 2% to 7.9% range. Of the 13.2% who expect margin deterioration, three-fifths say it will be under 2%. The remainder expect 2% to 4.9% drops.

Despite the specter of an economic downturn (in the U.S.), few surveyed PTDA members expect to cut employees in 2001. Half of the distributors and 42.1% of manufacturers expect employment levels to remain constant.

Among distributors, one third expect to add employees, while 16.7% project reductions, mostly under 2%.

Among manufacturers, half expect to add workers. Of those companies, 50% plan to increase their workforces by 10% or more. Meanwhile, 7.8% of manufacturers expect to reduce their employee rosters.

For those firms looking to add or replace employees, finding qualified workers remains a challenge.

When it comes to inventory levels for 2001, distributors and manufacturers seem equally divided about their plans. Among distributors, 36.7% expect to increase inventory, 28.3% plan to maintain current levels and 35% hope to decrease it. Among manufacturers, 39.5% forecast increased inventory levels, 23.7% plan to keep it steady and 36.8% plan decreases.

Meanwhile, the foundation of the PT/MC product distribution channel shows continued signs of strengthening, despite the economic slump and the emergence of e-commerce. More than half of surveyed distributors (52.5%) plan to add new supplier lines in 2001. Only 13.6% say they’ll trim lines.

At the same time, 52.6% of manufacturers expect to establish new distributor partnerships in the coming year. Only 15.8% plan to reduce their networks.