Manufacturers are poised for growth in 2014

PLANT’s 2014 Outlook survey shows execs are gearing up for better times.

Business prospects are looking up next year. Photo: Thinkstock

TORONTO —The entrepreneurial fire continues to burn brightly among Canadian manufacturers. Analysts have been predicting modest growth of 2.3% over the next five years, and manufacturers are poised to harvest it. The challenge will be to take growth to a higher level, and the results of this year’s PLANT Manufacturers’ Outlook Survey suggest that they are preparing to do so.

Most of the companies fall into the small to medium category (five to 499 employees) and 13% account for the rest (500 employees plus). Averaging their annual sales for 2013 shows an increase from last year’s sample of $68.6 million to $86.8 million with anticipated sales of $91.3 million in 2014.

Sixty-four per cent expect orders to increase as will the dollar value of sales for 62%, 44% are expecting higher profits and 32% anticipate higher pricing.

Biggest challenges for 61% continue to be increasing sales, controlling and reducing costs (58%) and improving productivity (47%), which is a top investment priority for 44%.

Jim Menzies, national leader of manufacturing and distribution with Grant Thornton LLP, sponsor of the survey, observes from the results an upward trend in manufacturers’ level of sophistication. They’re no longer in survival mode and operating in a very reactive way.

“Many more companies are now taking a longer-term approach to managing their businesses by setting formal strategies, assessing and managing their most significant business risks, putting in place comprehensive tax and succession planning structures, and other longer term initiatives. This shift will have a positive effect on their potential to grow moving forward.”

Here are the highlights:

• Companies are getting most of their revenue from Canada (62%) and the US (27%) but business is going up by nano steps in other areas such as Western Europe (2.6%) and China (almost 2%).

• Over the next three years 40% plan to pursue new markets in the US, 39% in Canada, 16% in Mexico, 13% in Brazil and 13% in other South American countries.

• Access to financing continues to be the biggest growth constraint, according to 49% of the executives, while 71% intend to finance using internally generated cash flow.

• Respondents identified areas where they are experiencing skills shortages and leading the list for 53% is production, followed by general labour (35%), management (29%), engineering (28%), R&D (20%) and production support (19%).

• More than two-thirds of the companies are looking internally to meet their skills needs, 37% are using agencies, 30% are hiring from other companies, 29% are making use of apprenticeship and other programs and 23% are networking.

• More companies anticipate hiring over the next three years (58% compared to 54% in 2013), add new lines of business (43% from 39%) and 33% intend to expand their plants.

• Priorities over the next three years are investments in machinery and equipment for 76%, which 62% are tying to improving productivity for growth, and the average investment for more than half of the respondents is just short of $1 million.

• On the innovation front, 32% of companies intend to spend 1% to 3% on R&D, but 27% aren’t sure what they will spend, and 47% plan to take advantage of the SR&ED tax credit.

The survey, conducted by Bramm Research for PLANT in partnership with Grant Thornton LLP, is based on 450 completed replies from senior manufacturing executives, and has a margin of error of +/- 4.5%, 18 times out of 20.

Click here for a pdf of the survey results and the executive roundtable report.