Manufacturers invest in productivity to compete in uncertain economy
The financial prospects of Canadian manufacturers in three industries — chemicals, non-metallic mineral products and plastics and rubber products — are improving. Expanding industrial activity in North America has been a key driver of growth, but the ongoing development of new markets and innovative new products have also contributed to stronger performances.
These findings are from the Canadian Industrial Profile-Winter 2012, published by The Conference Board of Canada in association with the Business Development Bank of Canada (BDC).
“What we are seeing with BDC clients in these manufacturing sectors corroborates the conclusions of the industrial profiles: companies are in better financial health today than they were two years ago. Also, a high percentage of new BDC loans to these companies was for the purpose of increasing their production capacity and improving their productivity. That’s an encouraging sign,” said Pierre Cleroux, vice-president of economic analysis with the BDC.
“The market opportunities are there. The performance of companies in the manufacturing sector will, however, depend on their leaders’ ability to identify and take advantage of these opportunities. Because of the prevailing global competition, it is crucial for entrepreneurs to continue their efforts to offer innovative products, find new markets and introduce ways of improving their productivity.”
“The manufacturing sector in North America is growing, which bodes well for these three industries. Much of their output supplies other industries and manufacturers. However, with the Canadian dollar at parity, manufacturers will need to be innovative with their product offerings and where they are selling if they are to fully benefit from improving market conditions,” said Michael Burt, director of industrial economic trends with the Conference Board of Canada.
Plastic and Rubber Products Industry
While dependent on construction activity and the manufacturing sector—notably motor vehicles—for much of its sales, the industry has found new markets both in terms of customers and products. Technological development continues to broaden the potential uses of plastic as a substitute for other materials. Moreover, Canadian firms are looking outside North America for growth opportunities. Plastics companies are also partnering with chemical producers to develop and use bioplastics. The industry’s improving performance will allow profitability to double in 2012, to $831 million.
Non-Metallic Mineral Products Industry
Industry demand primarily comes from the Canadian construction industry. The near-term outlook for the construction sector is mixed – residential construction remains solid, but government stimulus programs are coming to an end, which is dragging on non-residential expenditures. As a result, the industry will experience only modest growth in 2012, but will improve progressively along with construction demand in the following years.
Total output and employment will not return to its pre-recession production until 2013, but the industry is poised for steady growth throughout the next five years. Rising demand for a variety of chemicals used in different manufacturing processes bodes well for the industry. Emphasis on the development of advanced specialty chemicals will help the industry stay competitive since they often benefit from patent protection.
The publications are available at www.e-library.ca. BDC clients who wish to receive a copy of the profiles free of charge can contact their BDC account manager.