Pipeline to the Facts
Wondering what shape Canada's extrusion shops are in as the Great Recession becomes history? Looking for info on buying intentions, markets served, machine utilization rates, and more? It's all here. Our sixth annual Extrusion Benchmark Survey gives you a snapshot of an industry segment that you won't find anywhere else.
November 1, 2012 by Canadian Plastics
This time last year, we opened our fifth Extrusion Benchmark Survey by noting that the worst of the worst recession in living memory was behind us. Twelve months later, we’re fairly certain it’s true. But what do some of Canada’s extrusion shops hope…and what do they think? Has business bounced back? If so, what product markets are they relying on to keep the bounce going? And is new equipment part of their plans? These — and a lot more — are the questions our latest extrusion survey installment tries to answer.
When asked how many employees worked at their plant, we received answers ranging from five to 200, with the average shop employing 68 people. Last year, the survey respondents ranged from shops with five workers to 225, with the average employing a comparatively low 43 workers. In 2010, there was a 52-worker average. It seems, then, that the streamlining that must certainly have occurred during the Great Recession might be over.
Of this year’s respondents, 81% are involved in profile extrusion, 33.7% in tubing extrusion, and 28.6% in pipe extrusion. In 2011, 63.3% were involved in profile extrusion, 31.8% were involved in pipe extrusion, and 27.3% in tubing extrusion. Additionally, 40.9% of this year’s respondents say they’re involved exclusively in proprietary extrusion, 18.2% exclusively in custom extrusion, 13.6% in custom extrusion with some proprietary work, and 27.3% in captive with some custom extrusion. Last year, 26.1% of respondents said that they were involved exclusively in proprietary extrusion — down almost 14% from this year — 26.1% were involved in exclusively custom extrusion, 34.8% were involved in captive with some custom extrusion, and 13% were involved in custom with some proprietary extrusion.
Last year, the majority of respondents — almost 74% — reported that their shops were involved in the construction and building market. This year, 45.5% said the same, which is no big surprise given the ongoing weakness of the U.S. housing market. Also, 40.9% of this year’s respondents are extruding for packaging applications (up from 26.1% in 2011), 27.3% are involved in automotive work (compared to 26.1% last year), and 27.3% are doing consumer goods work (up slightly from 21.7% in 2011).
No surprise here: as with every other year, the vast majority of respondents (72.7%) are located in Ontario, with 22.7% in Quebec, and one lonely shop this year in Prince Edward Island.
TO BUY OR NOT TO BUY
When we asked our respondents to tote up the number of extruders at their plant, 33% said they have 15 or more machines, the same ratio as last year. At the high end this year, our largest respondent reported having 62 extruders, compared with a high water mark of 70 last year. As with last year, the vast majority this year (77.3%) use single screw extruders (compared with 69.6% in 2011), with 22.7% using co-rotating twin screw designs, and 13.6% using counter-rotating twin screw designs — an inversion of the 13% using co-rotating machines and the 34.8% using counter-rotating twin screw units in 2011.
Attention extruder suppliers: on average, 70% of the machines in respondents’ shops this year are five or more years old (50% don’t have any machines less than five years old) — this is a big leap from the 49% that were five or more years old in 2011. Either this year’s respondents are atypical, or there’s a lot of older equipment rattling around out there, just possibly due to be replaced.
But are the respondents in buying moods? Not really. Thirty-six per cent of respondents this year say they plan to buy a new extruder within the next 12 months — which sounds bad until we compare it to the whopping 90% who weren’t planning on buying last year.
And here’s another indicator of the peculiar lay of the post-recession land: exactly 50% of respondents this year said the equipment they planned on buying would replace old machinery rather than add capacity. In 2011, 80% was to replace old units and 20% for new capacity. Doing the math thusly, it seems our respondents in the brave new world of 2012 — well past the supposed “recovery year” of 2010 — remain skittish about the likelihood of adding capacity in the months ahead.
The tight-fistedness loosens slightly when we look downstream. Sixty per cent of respondents this year are planning to purchase new downstream extrusion equipment within the next 12 months, compared to only 30% who said the same last year. But it gets a little worse again with auxiliary stuff, as only 50% of respondents this year plan on purchasing new auxiliary equipment within the next 12 months.
Machine utilization rates have held incredibly steady since last year. The average machine utilization rate among respondents this year was 68%, exactly the same as in 2011 — right down to the one very hard working shop that reported a 100% utilization rate this year and last year.
THE PRICES OF DOING BUSINESS
In 2011, extrusion firms allocated an average of 2.6% of their annual budget to employee training, and 6.3% to product research and development. How do those numbers stack up against current expenditures? The figures shifted, but not by much: on average, almost 2.8% was allocated to employee training in 2012, while money earmarked for product R&D rose to an average of 6.9% — still, this last number pales in comparison to the 9% average spent on R&D in 2008, our all-time survey best.
And how are the men and women on the shop floor faring? According to this year’s survey, the average hourly operator wage, excluding benefits, is $18.98, an improvement on last year’s relatively parsimonious $17.10 per hour. But it’s still a fall-off from the comparatively generous average of $19.68 per hour paid out in 2010 — at the height of the Great Recession, no less.
GOING GLOBAL (OR NOT)
In this brave new globalized world, how are Canadian extruders faring when it comes to doing business, or establishing a presence, on foreign soil? Approximately 50% of survey respondents this year said their facilities ship 50% or more of finished products outside of Canada, a doubling of the 25% that reported doing so last year.
As far as setting up shop beyond our fair shores, 57.9% of respondents have a presence in the U.S. (down slightly from 64.3% in 2011), 15.8% are in Mexico (up from zero last year), 10.5% have a presence in India (down from 7.1% in 2011), and no one has a presence in China (down from 14.3% in 2011).
Digging a little deeper, 80% of the respondents whose shops have a foreign presence are maintaining at least a sales office, 50% have a manufacturing facility, and 25% are warehousing. In case you’re wondering, 20% reported having a joint venture with a local firm last year, compared with no one reporting a JV this year.
Of the extrusion shops without a foreign presence, 54.5% are quite happy to keep it that way, and have no plans to plant the company flag on foreign soil in the next 12 months. Sounds like a lot, until you compare it to last year, when 80% said they had no plans to enter these markets inside of the next 12 months.
The 2012 Canadian Plastics Extrusion Benchmark Survey, consisting of 35 questions, was emailed to approximately 340 people at pipe, profile, and tubing extrusion facilities throughout Canada, with one respondent being selected per manufacturing facility. We received 36 completed surveys.