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Higher is the Key Word

U.S. plastics processors are raising the bar with higher productivity, higher profits and higher utilization. That's the word from the 2013 North American Plastics Industry Study from Plante & Moran’s Plastics Industry Team, comprised of Leader Jeff Mengel and Co-leader Ted Morgan, who surveyed 84 companies with 131 facilities and $3 billion in sales.

Labor productivity, as measured by value-add (sales less material and outside processing), divided by total full-time equivalents significantly jumped in 2012, as “companies were forced to figure out how to do more with less.” That seems to be a continuing trend post-recession, as “the industry as a whole is getting into a rhythm operationally with the continued sales growth.”

As for higher profits, the key is to control both resin and labor, two of the largest cost drivers for plastics processors. “Control these two items and profits are almost certain to come,” notes Mengel and Morgan. “Resin pricing over the past 12-18 months has seen only modest increases compared to recent years. In addition, a higher percentage of plastics processors are able to pass resin cost increases to customers.”

Press utilization increased for the third straight year, said the Plante & Moran study. That’s good news given that press utilization had been in the doldrums even before the recession hit. “The top quartile is in excess of 50 percent utilization for all presses based on a 24/7 basis,” said the study. “While press utilization does not correlate with profitability as many weak companies routinely low ball quotes to keep the presses running, the reduction of available capacity has brought pricing discipline to the industry.”It appears that the industry as a whole has returned to some semblance of normal – albeit a new normal to some extent – and the ship has steadied. Let’s hope the next three quarters of 2014 remain that way!

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