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Study Shows North American Manufacturing Is Rebounding from a Challenging 2020

Harbour Results survey indicates 25% of plastic processors and moldmakers broke even or lost money in 2020 and returning optimism within the manufacturing community.

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A recently released survey, “Q1 2021 Harbour IQ Manufacturing Pulse Study,” conducted by Harbour Results Inc. (HRI, Southfield, Michigan), indicates that while 2020 was a challenging year, North American plastics manufacturers and moldmakers are optimistic for 2021.

According to the analysis, 25% of small- to medium-sized manufacturers indicate they would have broken even or lost money without government funds (Paycheck Protection Program (PPP) or Canada Emergency Wage Subsidy (CEWS)). Despite this, sentiment is slowly returning to 2019 levels of optimism, Harbour Results notes, with tool and die utilization rebounding to 80% in Q1 2021 from an all-time low of 63%, and production utilization growing from 39% in Q2 2020 to 60% in Q1 2021.

“The industry seems to be rebounding in 2021 after a difficult 2020—sentiment is up, capital spending is planned and utilization has increased, all pointing to a healthier industry,” says Laurie Harbour, HRI president and CEO. “Although this is positive news for manufacturers, there is a great deal of room for improvement as efficiency is declining, overall revenue fell, and profitability was achieved through PPP and CEWS.”

According to study respondents, access to labor remains the top concern for manufacturers, followed by raw material pricing and employee health. Additionally, for the tooling industry backlog has stabilized, work on hold is down and payment terms and on-time payments of accounts receivables have returned to pre-COVID-19 levels. Most manufacturers across all processes are planning for capital investment of 3% or more from 2021-2023.

The study focused on manufacturer’s financial performance, and last year profitability dropped an average of 6.8% in tooling and 4.2% for production. However, Harbour Results says, because of PPP and CEWS funding, the industry did not appropriately adjust headcount to better manage workload and optimize profits. Furthermore, study responses indicate that while COVID-19 hit many industries hard, declining profitability has been trending since 2016.

“Thanks to the economic growth of the last decade, owners in this industry have used their proceeds to pay down debt and invest in the business,” adds Harbour. “The average debt/equity for most of the respondents is 0.5 or less. There was a time in memorable history when the averages were over 1.”

Looking ahead, 2021 will continue to be challenging for the manufacturing industry. Numerous headwinds, including supply chain shortages; increased cost of business—corporate tax rate, minimum wage and raw material prices; uncertainty with tariffs; and talent shortages will create inconsistency for many shops.

“Now is the time to gather market intelligence, focus on efficiency and improve your sales processes to create a niche that customers will pay for to create a sustainable and profitable business,” adds Laurie.

The survey population was comprised of more than 300 facilities, including mold shops (23%), plastic processors (27%), stamping/metalformers (29%) and die builders (10%). Shops with revenue ranging from less than $5 million to more than $40 million were represented, with the largest percentage of shops (28%) coming from the $10-$20 million range.