Canadian Extruders: Lean, Mean and Ready to Invest

With the worst of the worst recession in living memory hopefully behind us, it’s as good a time as any to cast a backwards glance to assess the toll taken on Canada’s pipe and profile extruders. How did they hold up during this unprecedented challenge? As the economy coughs, sputters and begins to recover, which product markets are they relying on to take them into the immediate future? And is new equipment part of that future? These — and a lot more — are the queries the fourth annual Canadian Plastics Extrusion Benchmark Survey tried to answer. How did we do? Let’s let the answers answer that question.

JUST THE BASICS

When asked how many employees worked at their plant, we received answers ranging from five to 225, with the average shop employing 52 people. Last year, the survey respondents ranged from one worker to 200, with the average shop employing approximately 66 workers. In 2008, there was a 69-worker average.

Right off the bat, then, we have probable evidence of the downsizing that must certainly have occurred during the Great Recession. Of this year’s respondents, 75% are involved in profile extrusion, 41% in tubing extrusion, and 25% in pipe extrusion. In 2009, 56.3% were involved in profile extrusion, 37.5% were involved in pipe extrusion, and 25% in tubing extrusion. Additionally, 33.3% of this year’s respondents say they’re involved exclusively in proprietary extrusion, 33.3% exclusively in custom extrusion, 25% in custom extrusion with some proprietary work, and 8.3% in captive with some custom extrusion. Last year, 43.8% of respondents said that they were involved exclusively in proprietary extrusion, 12.5% were involved in exclusively custom extrusion, 18.8% were involved in captive with some custom extrusion, and 25% were involved in custom with some proprietary extrusion.

The majority of respondents this year — over 66% — reported that their shops were involved in the construction and building markets. This marks a notable decline from the 81% involved in these same markets in last year’s survey — no great surprise given the ongoing weakness of the U.S. housing market. Also, 33.3% of this year’s respondents are extruding consumer goods (compared with 50% in 2009), 33.3% are involved in packaging applications (down from 25% last year), and 25% are doing automotive work (up substantially from 12.5% in 2009 — a suggestion that the auto sector is beginning to recover?).

Over 67% of those surveyed this year said their plant already has either ISO or QS9000 certification, up from 55% last year. As in 2009, the majority of respondents this year (54.5%) are located in Ontario; of the rest, 27.3% are in Quebec and the remainder (18.2%) hail from Alberta.

MACHINERY & PURCHASING

When asked to tote up the number of extruders at their plant, 70% said they have 10 or fewer machines — a number virtually unchanged from the 73% with ten or less in 2009. At the high end this year, our largest respondent reported having 34 extruders. The vast majority this year (75%) use single screw extruders (compared with 81.3% in 2009), with 16.7% using counter-rotating twin screw designs, and 16.7% using co-rotating twin screw designs– a slight fluctuation from the 31.3% with counter-rotating machines and the 12.5% with co-rotating twin screw units in 2009.

Here’s something to make extruder suppliers sit up and take notice: on average, 49% of the machines in respondents’ shops this year are five or more years old — a huge tumble from the 80.5% that were five or more years old in 2009. Either this year’s respondents are really atypical, or a lot of new(ish) equipment has quietly been snapped up in the past 12 months. How many of those machines were bought brand spanking new from the OEM as opposed to picked up on auction is, alas, unknown.

If you’re getting the impression by now that extrusion shops are beginning to loosen their purse strings, you might be right: forty-five per cent of respondents this year say they have no plans to buy a new extruder within the next 12 months — which sound like a lot until you consider that a whopping 73% weren’t in a buying mood this time last year.

When asked if they were more likely to buy a complete line — including extruder, tooling and downstream equipment — or a unit extruder, 66.7% of respondents opted for a complete line (compared with 75% last year). And here’s another indicator of the peculiar lay of the post-recession land: eighty per cent of respondents this year said the equipment they planned on buying would replace old machinery rather than add capacity. In 2009, 50% was to replace old units and 50% for new capacity. Doing the math thusly, it seems our respondents in the brave new world of 2010 — supposedly the year of the recovery — remain skittish about the likelihood of adding capacity in the months ahead.

This fact notwithstanding, 55.6% of respondents this year plan to purchase new downstream extrusion equipment within the next 12 months, and (presumably the same) 55.6% will be shopping around for new auxiliary equipment.

Machine utilization rates have bounced around considerably during the four years of our extrusion survey, but in the end little seems to have changed. How little? The average machine utilization rate among respondents this year was 62% — exactly what it was in our first survey, in 2007. (To complete the picture, the average rate was 71% in 2009 and 73% in 2008.)

INVESTMENTS, WAGES

In 2009, extrusion firms allocated an average of 3.5% of their annual budget to employee training and 4.9% to product research and development. How do those numbers stack up against current expenditures? The figures have shifted, but not by much: almost 2.5% was allocated to employee training in 2010, while funds set aside for product R&D actually rose to an average of 5.5% — still, this last number pales in comparison to the 9% average spent on R&D in 2008.

For the guys on the shop floor, here’s probably the most important question on the survey: what’s the hourly average rate paid to machine operators, excluding benefits? According to this year’s survey, the average operator wage is $19.68 per hour — an impressive bump up from the comparatively Ebenezer Scrooge-like rates of $16.08 an hour paid out in 2009

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The 2010 Canadian Plastics Extrusion Benchmark Survey, consisting of 35 questions, was emailed to approximately 390 people at pipe, profile and tubing extrusion facilities throughout Canada, with one respondent being selected per manufacturing facility. We received 15 completed surveys.