Manufacturers are less confident in Q2: PwC

Bets on foreign markets and energy investments as holding the key to growth.

August 27, 2012   by PLANT STAFF

TORONTO — Canadian manufacturers were not so optimistic about the economy in the second quarter, although they expect revenue to be strong, according to a PwC Canada Barometer survey.

The quarterly report resulting from the survey of 43 Canadian panellists at large manufacturing companies shows a 22 point drop from 76% in Q1, thanks to uncertainty in export markets such as Asia, the US and Europe.

Barriers to growth are concerns over energy prices (54%), lack of demand (42%), the monetary exchange rate (37% which is down 7% from Q1) and a lack of qualified workers (30%).

Despite their lower confidence, PwC says 93% of the senior executives expect positive revenue growth, with 7% forecasting double-digit advances.

Gross margins are expected to increase overall, as will costs on a much narrower margin, while prices will stay the same.

“Sustained interest in international markets is a contributing factor to the confidence manufacturers have with their revenue forecast for next year,” says Calum Semple, PwC’s industrial manufacturing leader.

Companies that intend to hire over the next 12 months dropped to 23% from 34% in Q1. Only 7% intend to cut jobs while 70% are maintaining current workforce levels.

Manufacturers who plan to expand to new markets abroad and establish new strategic alliances and joint ventures increased. More than half of the respondents selling abroad anticipate international sales to contribute to their total revenue over the next 12 months.

There is acknowledgment among 63% of the panellists of a need to increase investment in their operations and they are most interested in information technology (IT). That said, spending is only 3% of revenue compared to an industry average of 3.6%.

“To stay afloat in the sea of an unstable global economy, organizations must view technology as an essential part of their entire business plan and not just part an IT department consigned to mundane functions such as keeping servers running and email flowing,” says Richard Jhang, PwC’s technology advisory leader.

Click here for a copy of the survey, which compares responses to US executives.

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