CANADIAN EXTRUDERS IN PROFILE

By all accounts, 2008 has been a tough year for plastics processors. The high dollar, fluctuations in energy markets and declines in the U. S. export market continued to batter manufacturers in Canada.

And many pipe and profile extruders are dealing with downturns in their key markets. For example, the battered construction market continued to be the biggest market served by this year’s respondents, with 71% serving the sector.

How did Canada’s extruders fare in 2008? This was the second annual extrusion survey conducted by Canadian Plastics, and comparisons to last year’s results paint a telling picture.

THE BASICS

Before delving into the actual results, it is important to understand the size and scope of this year’s respondents.

When asked how many employees worked at their plant, answers ranged from 20 to 200 people. It should be noted that last year’s respondents reported as many as 800 employees and as few as three employees at their facilities.

Twenty-three per cent said they had 100 or more employees at their plants, and another 38% had between 50 and 75 employees. On average, the survey’s respondents had 69 workers at their facility, compared to a 134-worker average in the 2007 survey.

Of this year’s respondents, 38.5% were involved with pipe extrusion, 53.8% perform profile extrusion, and 46.2% use the tubing extrusion process at their plant. Additionally, a small majority (38.5%) categorized their shop as performing custom with some proprietary extrusion. The remaining respondents were evenly split between exclusive custom extrusion (30.8%) and captive with some custom extrusion (30.8%). No extruders who perform exclusively proprietary extrusion answered this year’s survey.

Over 60% of those surveyed said their plant has ISO or QS9000 certification. The vast majority of this year’s respondents were working in Ontario (64%) and Quebec (21%), and some respondents worked in facilities in Alberta (7%) and Manitoba (7%).

In addition to the construction and building market, which was served by 71.4% of the respondents, Canada’s extruders also serve the automotive (42.9%), consumer goods (21.4%), electronics (21.4%) and packaging (42.9%) markets. One respondent’s facility serves the appliance and agricultural markets, while another sells products into the plumbing market.

MACHINERY & PURCHASING

When asked about the number of extrusion machines they have at their plant, 15% said they have between 1 and 5 machines; 54% had 6-10 machines; 23% had 11-25 machines; and only 8% had more than 26 machines at their plant. The vast majority were working on single screw extruders (92.9%), but several respondents also had counter-rotating twin screw extruders (14%) and co-rotating twin screw extruders (7%) at their plants.

On average, 70% of the machines owned by those surveyed are five or more years old. Over one-third of the respondents said that all of their machines were more than five years old.

Surprisingly, despite the anticipated slowdowns in 2008, this year’s respondents reported a higher machinery utilization rate than last year’s participants. This year, extruders had an average machinery utilization rate of 73%, compared to 62% in 2007.

As part of the 2007 survey, respondents were asked if they planned on purchasing any new extruders within the year. At the time, nearly three-quarters of those who answered said they would not purchase any new extruders over the next year.

Looking at this year’s survey results, that number holds true: over three-fourths of the respondents did not purchase a new extruder in the past year. All of the companies that did purchase extruders used the machines to add capacity rather than to replace old machinery, and all of the new purchased extruders were smooth bore single screw extruders.

Looking ahead at 2009, the picture looks slightly rosier for extrusion machinery manufacturers. Over 40% said they had plans to buy new extruders in the next year, and two-thirds said they were looking to replace their old extrusion machines.

When asked if they were more likely to buy unit extruders or a complete line (including an extruder, tooling and downstream system), respondents were split right down the middle. Respondents were also equally likely to invest in smooth bore single screw extruders, grooved feed single screw extruders, or twin screw extruders.

Additionally, extruders noted that they are slightly more likely to invest in downstream extrusion and auxiliary equipment. Over 53% said they planned to purchase downstream extrusion equipment like pullers and saws in the upcoming fiscal year, while only about 40% purchased new downstream equipment in the past year. And 53% said they plan to purchase new auxiliary equipment in the next year, compared to 46% who made actual auxiliary purchases in 2008.

FINDINGS ON FINANCES

In 2008, extrusion firms allocated nearly 3.5% of their budget to employee training, and an average of 6.2% of their budget to product R&D. These allocations are slightly smaller than 2007: last year’s survey respondents allocated an average of 4% to employee training and 9% to product R&D.

Based on survey results, a greater number of extrusion facilities are investing in safety and training programs. All of the respondents had a safety program in place compared to 87% in 2007, and all of the respondents had instituted training policies and programs compared to 68% last year.

More manufacturers are also investing in programs related to preventative/ predictive medicine and environmental goals. About 26% more manufacturers have brought in preventative/predictive maintenance programs, and the number of manufacturers with recycling, waste management and environmental programs has increased by 37%.

Harder economic times may have put a pinch on manufacturers, but our survey shows that extruders are actually paying their machine operators a slightly higher hourly wage than they were last year. The average operator is paid $16.67 an hour, excluding benefits, in 2008, compared to $16.12 an hour in 2007.

And the recent surge in energy prices seems to have had very little impact on the amount of resin purchased by Canadian extruders. Although a few individual extruders reported that they purchased less resin in 2008 than they did in 2007, the respondents generally trended higher. On average, Canadian extrusion facilities purchased 14.6 million lbs of resin in 2007 and 15.2 million lbs of resin in 2008, a year-over-year increase of 4 per cent.

Overall, looking at plant revenues, the average extrusion facility brought in $8.4 million in 2008, compared to $8 million last year. It should be noted, however, that the Canadian Plastics survey didn’t ask respondents about increases or decreases in spending and expenses, so it is impossible to determine if higher revenues yielded greater profits.

LOOKING ABROAD

When polling our readers about their presence outside of Canada, the Extrusion Benchmark Survey was modified slightly to be more inclusive.

Our survey found that over 40% of extrusion companies have no presence outside of Canada. However, 40% have some presence in the U. S., 16.7% in India and 8.3% in China. Some respondents also indicated that they had a presence in Europe and Mexico.

Canadian extruders were reaching these markets through a variety of ways. Nearly 60% said they had a manufacturing facility outside of Canada, and 29% had formed a joint venture with a local firm. An additional 43% of respondents reached those markets through a sales office or distribution centre.

In 2007, all of the respondents who didn’t have any presence outside of Canada said that they had no plans to enter those markets. In 2008, 86% said they had no intention of entering other markets, but 14% said they plan to enter foreign markets in 1-2 years.

Interestingly, a smaller percentage of th
e product at Canada’s extrusion facilities is shipped outside of Canada. Only 31% of what’s produced is being exported, compared to 42% in 2007.

CPL

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The 2008 Extrusion Benchmark Survey, consisting of 35 questions, was emailed to 440 people at pipe, profile, and tubing extrusion facilities throughout Canada. We received 25 completed surveys. This year, Canadian Plastics refined its research methodology by limiting its survey sample to one respondent per manufacturing facility. As a result, this year’s survey has a smaller sample that is more representative of the industry.

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BY THE NUMBERS

$16.67

Average hourly operator wage, excluding benefits

69

Average number of workers at Canadian extrusion facilities

$8,400,000

Average total revenue in 2008

15,200,000

Average resin consumed in 2008 (lbs.)