PT/MC distributors’ 2007 performance on target with forecasts
Chicago, IL -- The Power Transmission Distributors Association (PTDA) recently announced the results of its 2008 PT...
Chicago, IL — The Power Transmission Distributors Association (PTDA) recently announced the results of its 2008 PT Distributor Performance Report (based on 2007 data). Revealing the profit challenges and opportunities in the power transmission/motion control (PT/MC) industry, the report supports the forecasts made by PTDA members in late 2006 of moderate growth in sales with little change in gross margins in 2007.
When asked in October 2006 to forecast sales for 2007, four-fifths (78%) of distribution firms anticipated growth in sales, with 39% of distributor respondents indicating that they expected sales to increase between 5% and 9.9%. The actual sales growth rate for a typical PTDA distributor in 2007, as reported in the 2008 PT Distributor Performance Report, fell at the low end of that range at 5.4%. As for gross margins, exactly half of the respondents expected gross margins to remain constant in 2006. According to the data collected for the PT Distributor Performance Report, the forecast was slightly pessimistic as gross margins for 2007 increased by 0.6%.
In addition to affirming the forecasts, the 2008 PT Distributor Performance Report also suggests that while the typical PTDA distributor generates more sales than the high-profit distributors, the most successful firms continue to exhibit profits that more than double those of the typical firm. With respect to the bottom line, the typical PTDA distributor member generated pre-tax profit of 2.9% on annual sales of $29.3 million, compared to high-profit firms that produced an average profit of 7.6% on sales of $21.9 million. The ability to generate higher profits is not all due to sales growth. While typical PTDA distributors experienced an increase of 5.4% in 2007, high-profit distributors reported a 6.8% gain in sales growth over the same period.
Successfully managing expenses is a primary contributor to a firm’s profitability. High-profit firms reported a pre-tax return on assets (ROA) of 24.3%, while the typical PT/MC distributor reported ROA of only 9.3%. Total operating expenses as a% of net sales was 19.3% for high-profit firms, compared to 23.8% for typical firms.
The PT Distributor Performance Report, conducted annually by PTDA in partnership with the Profit Planning Group of Boulder, Colo., is a compilation of operational statistics from 46 PTDA members throughout North America. This valuable resource examines five-year distributor performance trends in return on investment, income statement, and balance sheet line and examines financial ratios, asset productivity ratios, growth and cash sufficiency ratios and employee productivity ratios.
Data is reported for typical PT/MC distributors and high-profit firms (top 25% of firms based on ROA). Data also is reported for five U.S. regions (Eastern, Southern, Midwest, South Central and Western) and Canada, and four sales volume categories, ranging from less than $10 million to over $75 million. Additional breakouts include machinery, repair and operations (MRO) emphasis versus original equipment manufacturer (OEM) emphasis, 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$169.95 and to non-members for US$299.95. For more information, contact PTDA at 312-516-2100, or visit the PTDA Store at www.ptda.org/store.