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More production and profit for manufacturers

The strong Canadian dollar isn’t slowing down some manufacturers too much, particularly those making electrical equipment, fabricated metals products and machinery.


May 18, 2011
by PLANT STAFF

OTTAWA: The strong Canadian dollar isn’t slowing down some manufacturers too much, particularly those making electrical equipment, fabricated metals products and machinery.

The Spring 2011 edition of the Canadian Industrial Profile from the Conference Board of Canada, in association with the Business Development Bank of Canada, says these manufacturers can look forward to continued growth in production and profits this year.

Michael Burt, Conference Board’s associate director, industrial economic trends cites a rebound in construction demand and in broader manufacturing sectors, plus a revival in US, European and Asian export markets will drive their businesses. But on the downside, a strong dollar poses a threat to industries that depend on exports for growth.

“This is especially true in some of the manufacturing industries covered in the Spring 2011 outlook, which are largely composed of smaller firms that need to continually invest to compete,” he said.

Here are some manufacturing highlights from the report:

• Electrical equipment. Profits for products ranging from lighting equipment to electric motors and batteries are expected to more than quadruple to $223 million this year, but will be well below the pre-recession peak of $577 million in 2007. The surge in business is attributed to rising non-residential construction activity and strong telecom investments, which support demand for wiring.

• Fabricated metals. Improving prospects in the automotive industry and rising investment in the oil patch is driving double-digit growth in sales, but profits will experience a more modest 6.9% growth to $1.4 billion in 2011 because of surging metal prices.

• Machinery manufacturing. Recovering global demand will boost exports and benefit domestic sales of machinery and equipment. Higher commodity prices will increase demand for machinery in the resources sector and create incentives for customers to invest in fuel-efficient equipment. But the strong dollar will also affect the price of Canadian products in global markets, especially in an industry with fierce international competitors. Nevertheless, profits are forecast to rise almost 40% this year to $920 million, up from just $261 million three years ago.

• Textiles and apparel. After two years of losses, the textiles and apparel industry is expected to post a modest profit of $13 million in 2011. Production, which grew last year for the first time since 2000, will increase again in 2011. Canadian demand has been rising since 2009, and exports are to increase for the second consecutive year.

• Oil and gas support activity. Although weak gas prices are detracting from growth, high oil prices are encouraging new drilling activity. As well, the unconventional drilling techniques are more intensive users of industry services. The result is strong growth, and industry profits are to increase – from a low of $45 million in 2009 – to $225 million in 2011.

The Conference Board of Canada, an Ottawa-based think tank, provides outlooks for 23 industries each year, which are available at www.e-library.ca.