PTDA members expect flat margins
By Staff -- Industrial Distribution, 4/1/1999
Forecasts have darkened a bit as the power transmission industry's slump continues.In a recent market outlook report, members of the Power Transmission Distributors Assn. said they expect profit margins will remain flat despite sales gains this year. Rising personnel
costs should be an increasing factor squeezing profits.
On average, 59 distributors and 60 manufacturing companies indicate that their sales should increase slightly -- from two to eight percent -- this year. Only 14 percent of distributors and 12 percent of suppliers expect revenues to increase more than 10 percent, and about a third of each group expects revenues to rise between five to 9.9 percent.
Meanwhile, 12 percent of distributors and 15 percent of manufacturers expect sales decreases of 12 and 15 percent, respectively.
When surveyed in December, slightly more than half of the manufacturers said a period of economic growth had already ended, compared to 44 percent of distributors. Many distributors (18 percent) said they expect growth to end in the fourth quarter rather than earlier this year, while many manufacturers believe a summer slowdown is more likely.
"It's still real spotty. There are certain industries that seem to be less affected than others," says Patrick Frater, treasurer of the PTDA and president of Northwest Power Products, Inc. in Eagan, Minn. "From a customers' standpoint, we're trying to isolate those that are getting some business and work with them, but a lot of our traditional customers are very slow yet."
Doug Savage, president of Bearing Service Inc. in Livonia, Mich., and current PTDA president, says that with many end users in -- or close to -- recession, distributors face more pressure not to make mistakes.
"There's a survival thing going on, especially with independent distributors," he says. "The customers are unwilling to take sloppiness."
Scott MacPherson, president of U.S. Bearings and Drives in Portland, Oreg., said that during their February winter meeting, members of the Bearing Specialists Assn. reported flat activity as well.
"I don't see anything new coming on stream" for large capital projects, he says, "but some sectors like food processing are still coming on strong, and the [road] aggregate industry ... You can't do the old shotgun approach anymore. You have to be pretty specific."
Still, MacPherson says, "We had a pretty damn good run. We had years with back to back 30 percent growth."
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