MRO Magazine

Despite wage rate challenges, high-profit PT distributors get higher employee performance

Chicago, Ill. -- Aug. 14, 2001 -- The Power Transmission Distributors Association (PTDA) recently announced the res...


Industry

August 14, 2001
By MRO Magazine
MRO Magazine

Chicago, Ill. — Aug. 14, 2001 — The Power Transmission Distributors Association (PTDA) recently announced the results of its 2001 PT Distributor Performance Report (based on 2000 data). Revealing the profit challenges and opportunities in the power transmission/motion control (PT/MC) industry, the report suggests that the typical PTDA distributor continues to produce only adequate profits, while the most successful firms are using a business model that will continue to produce superior performance.

Following a theme of disproportion between categories, the typical PTDA distributor grew only 4.3 per cent in 2000, following 2.5 per cent in growth in 1999, while sales growth for the high-profit firms was 6.8 per cent, revealing both a gain in market share and better profits.

High-profit firms reported a pre-tax return on assets (ROA) of 13.3 per cent, demonstrating above average performance, while the typical PT/MC distributor reported ROA of only 4.8 per cent.

With respect to the bottom line, the median profit margin for typical power transmission/motion control (PT/MC) distributors was 1.6 per cent in 2000, while high-profit firms produced a bottom line of 4.6 per cent growth, earning close to three times as much profit.

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As documented in the report, high-profit firm’s ability to combine critical profit variables is greater than that of typical firms producing significantly better performance in return on assets. While all firms in the PT/MC industry face wage rate challenges, high-profit firms better offset this challenge with higher employee performance.

High-profit firms also are driving higher profitability through better expense control. Total operating expenses as a per cent of net sales was 23.1 per cent for high-profit firms, compared to 24.8 per cent for typical firms.

The PT Distributor Performance Report, conducted annually by PTDA in partnership with an unbiased third-party vendor, is a compilation of operational statistics from over 50 PTDA members throughout North America. It examines five-year distributor performance trends in return on investment, income statement, gross margin-related expenses, balance sheet, financial ratios, asset productivity ratios, growth and cash
sufficiency ratios, operations profile and employee productivity ratios.

Data is reported for typical PT/MC distributors and high-profit firms (top 25 per cent of firms based on ROA). Data also is reported for four U.S. regions and Canada, and four sales volume categories, ranging from less than $5 million to $20 million and over. Additional breakouts include MRO versus OEM and product mix (percentage of sales by bearings, power transmission and other).

The report is designed for distributors seeking information to benchmark their company’s performance against that of their competitors, as well as manufacturers looking to obtain insight into the operational and business needs of their distributors.

The report is available for purchase to PTDA members for US$149.95, and to non-members for US$299.95. For more information, contact PTDA at 312-876-9461, or visit www.ptda.org.