Good, but not great

By Staff -- Industrial Distribution, 10/1/2000

It's been a year of ups and downs for many in the fluid power industry, as strong results in the first few months of the year were followed by a slowdown over the summer.

That's according to the State of the Fluid Power Industry report, conducted each month by the National Fluid Power Assn.

The NFPA survey polls distributors and manufacturers about current and future economic conditions-specifically, orders, shipments, and employment and inventory levels. Companies polled early in the year listed conditions as great, but things began to slow in June, with results recorded as "still good, but ... no longer perceived as great." The NFPA survey showed further declines in July, with orders slipping by double-digit figures and shipments seeing more modest declines.

"There was a notable deterioration in attitudes this month," the July survey noted.

The conditions generally reflect what Hal Kemp, vice president of Orton Industries in Atlanta, is seeing in the Southeast. Despite the peaks and valleys of this year's market, Kemp expects to finish the year 10 to 12 percent ahead of 1999.

"This year's been a strange year ... a year of peaks and valleys and no consistency," says Kemp, noting that January and February were soft, while June was a record year in sales and margin dollars for Orton. "Then, in July, it was like the bottom fell out. Business conditions were horrible."

The ups and downs are attributable to the softness in many of the industries Orton serves-pulp and paper, and the steel industry, for instance. That's been balanced by an upswing in Orton's MRO business, says Kemp, due to customers' plant expansions and the health of the aerospace industry. In addition, some of Orton's auto industry customers have placed sizable orders for delivery next year, which indicates a good long-term outlook.

"Fluid power in general hasn't been bad and hasn't been great," says Kemp. "We see good things ahead. Our backlog is building and we're looking at finishing the year off extremely strong."

The economic conditions in the Southeast-as well as in other parts of the country-are compounded by the challenge of growing in a continuing tight labor market, rising customer demands, and the Internet economy.

Alan Blaker, CEO of Fluid-Air Components in Portland, Oreg., notes other similarities in fluid power distribution across the nation. Blaker is this year's president of the Fluid Power Distributors Assn. and he notes an important shift in product mix for fluid power distributors in the last 10 to 15 years.

More companies have expanded beyond selling mainly hydraulic equipment to include electronic and pneumatic products, Blaker explains. The shift to motion control elements, he says, is a boon to companies serving the electronic and other high-tech markets.

"Most fluid power distributors are doing something relative to control," says Blaker. "It's almost like a counter strategy to the large national houses ... They have moved more into the problem-solving, customer-needs oriented [business], rather than trying to be a commodity house."

Blaker expects fluid power markets to hold steady the rest of the year.

"As long as interest rates don't move," he says, "the next several months should be OK."