Manufacturing
The slump in retail sales has had a strong knock-on effect to the manufacturing sector, which reported below-average sales.
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Despite this, the sector markedly increased its profits, though it is unclear whether this was a result of improved productivity or cost-cutting measures undertaken after the global financial crisis. |  |
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Business growthSlow growth but profits surge in some statesSales growth was down across the manufacturing sector, which reported an average three per cent increase in sales over the past 12 months. This figure was below the national average and also three percentage points lower than the growth reported in the last PwC Private Business Barometer. One-third (33 per cent) of manufacturers surveyed experienced a decrease in sales. Manufacturers in New South Wales and Western Australia reported average growth in sales and profits, but the results in other states and territories were wildly divergent. Victorian manufacturers’ sales plateaued but profits grew 15 per cent – quite possibly a result of post-globalfinancial-crisis cost cutting. The experience was similar in South Australia, with a five per cent jump in sales and a 30 per cent surge in profits. | |
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Manufacturers expect the market to reboundBusinesses in those states that performed well said they expected their good fortune to continue, with positive growth forecasts for the short and medium term. Western Australian manufacturers set the highest targets – 19 per cent sales growth and a 27 per cent increase in profits for the next 12 months. Even those in the poorly performing states said they expected to turn around their fortunes quickly. | |
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New products are the way forwardThe exceptional profits achieved in some states may well be reinvested into product development: more manufacturers in New South Wales, South Australia and Victoria said they expected to grow by introducing new products than through organic growth, geographic expansion or acquisition. More businesses in Western Australia said organic growth was their favoured strategy for the short and medium terms. | ||
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PeopleLooking for staff as the economy improvesThe optimistic outlook of manufacturing business owners and managers is also demonstrated by their strong intentions to recruit staff. More than half (56 per cent) of respondents said they would likely hire new staff within six months. This figure was highest in Western Australia, where nearly two-thirds (65 per cent) of businesses said they would take on new staff. | |
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Uncertain demand affects hiring decisionsManufacturers across the country said high wages and skills shortages stood in the way of hiring new staff. However, this sector reported a relatively low overall level of concern about people issues. Compared to other industries, the manufacturing sector is highly concerned with the lack of business demand and general economic uncertainty, both of which affect decisions about future production and capacity. | |
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Business operationsLow margins the dominant concernFunding is always a major concern for businesses in the capitalintensive manufacturing industry and 73 per cent of businesses in this sector reported one or more funding issues as their biggest challenge. The greatest single challenge for manufacturers was low margins and competitive pricing, which affected 42 per cent of respondents. The availability of skilled staff was a greater concern for businesses in Western Australia. Privately owned manufacturers in South Australia said business operations were their key challenge, and approximately 60 per cent of businesses in all other states also reported difficulties in this area. | |
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FundingInvestments are likely, particularly in Western AustraliaMore than one-third (37 per cent) of manufacturers said they were planning a major investment in the next year. In Western Australia, this figure was close to half (43 per cent). Bank funding is the most popular choice for financing new investments – 23 per cent of manufacturers nominated banks as the likely source of funds. A smaller proportion (13 per cent) said they would generate the funds internally. | ||
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