When it comes to sales, managers of power transmission/motion control companies say 2005 will be a winning year. That's based on manufacturer and distributor responses to the most recent annual member survey conducted by the Power Transmission Distributors Assn.

Nearly all respondents to the 2005 Annual Member Forecast Survey expect to see sales increases over the next 12 months. None of the more than 100 respondents—including 45 distributors and 54 manufacturers—expect sales to decline in 2005.

Specifically, 92 percent of all respondents predicted sales increases, and 8 percent said sales would remain constant.

"2004 was a good year and indications are 2005 will continue to be strong," said Helen Yost, general manager of The Rowland Co., a Philadelphia-based distribution firm. "We're seeing [customer] plants and mills that had been closed down or operating below capacity coming back on line. [They need]maintenance, repair and updating."

"We're very upbeat and very positive for 2005," said Cliff Bannon of Dichtomatic North America, based in Shakopee, Minn. "We're well positioned to take more market share. Our biggest fear is that possible inflation may start to hit in 2005."

Along with general inflation, many PTDA members are monitoring rising materials prices—such as those for steel and oil—that could impact the PT/MC products marketplace. U.S. distributors who sell products made in Europe, Canada or Japan are worried about the plunging U.S. dollar, according to PTDA.

But those concerns aren't dampening hopes for solid performance in the year ahead.

"With the election year now behind us, we foresee continuing moderate business and industry growth in 2005," said Craig Faber, president of Miller Bearings, Inc., a distributor headquartered in Orlando, Fla. "We remain concerned about the volatility of oil and steel prices, but believe general growth will create a favorable business climate."

More than a quarter of survey respondents (26.9 percent) predict sales gains of 10 percent or more. Manufacturers are driving this sentiment: Almost two-fifths (38.9 percent) said their companies' sales would climb that much.

"In 2004, our sales increased over 25 percent," said Carolyn Boldt, president of Manitowoc, Wis.—based Oil-Rite Corp. "We expect growth over the next year of 15 to 17 percent. [Depreciation] tax breaks have allowed us to buy new machinery that made us more automated and helped us."

Meanwhile, 15.6 percent of distributors project sales growth of 10 percent or more.

"For 2005, we again expect double-digit sales growth," said Stephen Philpott, president of Bearing Belt Chain Co., Inc., a distribution firm based in Las Vegas. "We have a great diversity of business that's mostly MRO," Philpott added.

Other specific sales forecast data include:

• Among all survey respondents, 12.5 percent (17.8 percent of distributors, 5.6 percent of manufacturers) said sales will climb from 8 percent to 9.9 percent.
• The largest group of respondents, 40.4 percent, expects 2005 sales increases of 5 percent to 7.9 percent. An almost equal percentage of distributors (42.2 percent) and manufacturers (40.7 percent) predict this growth range.
• More modest sales improvements of 2.0 percent to 4.9 percent have been penciled in by 12.5 percent of the respondents (15.6 percent of distributors, 9.3 percent of manufacturers).
• No respondent expecting a sales increase said the growth would be less than 2 percent.

Members' sales expectations for 2005 generally are more positive than their predictions for 2004. In last year's survey, 83.5 percent forecast sales gains, while 10.7 percent expected sales to remain constant, and 5.8 percent thought sales would drop.

Though industry challenges remain, 87.9 percent of all survey respondents say the United States and Canada are in a period of economic growth. Only 72.9 percent thought so heading into 2004.

In line with their 2005 sales projections, manufacturer respondents had a slightly rosier view of overall business conditions, according to the survey: 92.3 percent agreed that "we are currently in a period of economic growth." In comparison, 82.2 percent of distributors thought so.

"We're going to finish 2004 close to our plan—with a pretty sizable increase—and we expect a sales increase of 7 to 10 percent in 2005," said Philip Derrow, president of Ohio Transmission Corp., a distribution firm based in Columbus, Ohio. "Clearly, the economy has stabilized to some degree. The mass exodus of manufacturing to China has slowed."

Most distributors and manufacturers offered suggestions on how long the period of economic growth would last. Predictions varied widely, with 36 percent of distributors and 32 percent of manufacturers saying economic growth will continue until 2007 or later.

Though survey respondents have positive outlooks on sales and the overall economy, margin growth remains a battle. The challenge seems to be getting tougher for both distributors and manufacturers due to recent commodity price rises—most notably for steel—that affect finished PT/MC products.

Nearly half (48.9 percent) of distributors and 37 percent of manufacturers expect margins to remain flat in 2005. Among distributors, slightly more than one-third (35.6 percent) hope to improve profitability. Of this group, slightly less than one-third (31 percent) thinks margins can increase 5 percent or more. The largest single share (44 percent) sees margin gains of 2 percent or less.

Manufacturers are, again, more hopeful. Exactly half of the survey respondents predict margin improvement in 2005. Among these firms, roughly 30 percent peg margin growth at 5 percent or more, 30 percent forecast it at 2 percent to 4.9 percent, and 40 percent expect it to be less than 2 percent.

Among distributor respondents, 15.6 percent said margins will shrink in 2005, while 13 percent of manufacturers expect this to happen.

Member profitability expectations for 2005 are slightly better than those of 2004. For 2005, 42.6 percent of survey respondents expect improved margins, as compared to 34 percent for 2004. Flat margins have been predicted by 43.6 percent of all 2005 respondents, as opposed to 55 percent last year. Margin slippage is expected by 13.9 percent of all respondents, as opposed to 11 percent in 2004.