PTDA MEMBERS EXPRESS CAUTIOUS OPTIMISM IN FACE OF RECESSION
Chicago, Ill.—February 2, 2009 — Members of the
Power Transmission Distributors Association (PTDA) aren’t alone in
wishing for a crystal ball to predict the recovery of the world
economy. The mixed results of the most recent PTDA 2009 Member
Forecast Survey underscore the uncertainty in the economy, revealing a
healthy dose of optimism mixed in with a cautious outlook for the coming
year. While two-thirds of this year’s respondents confirm
that the economy is declining, nearly the same proportion project that
their sales will increase or remain flat in 2009.
Although the National Bureau of Economic Research announced that the
United States has been in a recession since December 2007, PTDA members
were aware of the state of the economy months in advance.
Administered from October 22 – November 14, 2008, the PTDA 2009
Member Forecast Survey shows that the survey’s 79 manufacturer
respondents are slightly more optimistic about 2009 sales than their 58
distributor counterparts. Nearly half of manufacturers project an
increase in sales, compared to 36.2 percent of distributors.
Overall 42.8 percent of all firms project their companies’
sales will increase in 2009, down roughly 15 percent from 2008.
Meanwhile, 28.3 percent of companies expect a sales decrease in the
coming year.
Aggressive Sales Strategies Key to Success in ‘09
Although both distributors and manufacturers have significantly
lowered their expectation for 2009 in comparison to 2008, PTDA member
firms aren’t putting all their focus on the risks. Across
the board, PTDA member companies are predominantly looking to broaden
and deepen their existing sales relationships, although many are hoping
to acquire new customers as well.
In follow-up interviews conducted with a sample of manufacturer and
distributer respondents in December 2008, Michael Kenney, vice president
of RBI Bearing, Inc., succinctly summed up the opinion of many members,
“The recession and downtimes are also opportunities.”
Kenney is one of 37 manufacturers projecting sales increases in
2009.
“I’m expecting to lose at least 10-15 percent of our
current business. In order to get the growth we need this year, I
need to grow our business by 15-20 percent,” said Kenney.
“Our strategy is to find those companies looking to increase their
profit margins.”
Kenney’s firm isn’t alone in pursuing an aggressive sales
strategy. Across the board, PTDA member companies are
predominantly looking to broaden and deepen their existing sales
relationships, although many are hoping to acquire new customers as
well.
Pressure on Margins Hampers Growth
Tempering the optimism of many firms are concerns about margin
erosion in 2009. For the third consecutive year, half of the
survey respondents expect gross margins to remain flat.
Manufacturing firms are slightly more optimistic than
distributors. Sixty-one percent expect gross margins will remain
constant and 20.8 percent predict increases, compared to the 50.0
percent of distributors projecting flat gross margins and 22.4 percent
expecting increases.
Pre-tax profit margins are similarly strained. Among
distributor respondents, projections of their companies’ profit
margins are evenly split between increasing, remaining constant and
decreasing. Half of manufacturers expect their pre-tax margins to
remain constant, while 27 percent project an increase.
Max Belski, support manager at Power Rubber Supply, is concerned
about the rising cost of doing business.
According to Belski, “The biggest challenge in 2009 is the cost
of goods, especially rubber and steel. [Commodity prices] have
come down, but our cost, just like everyone else’s, has gone
up.”
Belski said his distribution firm can come out ahead in 2009, despite
the pressure: “We work with a number of customers, and we offer
lines in PT, bearings, conveyor belts, etc. If we have an area
where there is a slowdown, we’re compensating in another
area. We’re diversified enough in our product lines, so we
can make it work in slower times.”
Staying the Course Throughout 2009
While there is no consensus on when the global downturn will end, one
thing is clear. PTDA members are focused on implementing strong
plans in 2009 and staying the course.
Nearly 40 percent of manufacturers expect the total number of
distributors that carry their line to increase, and 45.8 percent of
manufacturers expect the percentage of sales through distribution to
increase. Only eight manufacturer respondents expect the total
number of distributors will decrease, and 10 expect sales through
distribution to drop.
These numbers are born out by distributors. One-third of
distributor respondents expect authorized supplier lines to increase in
2009, half expect that lines will remain constant and only nine
respondents predict a decrease.
Justin Aschenbrenner, vice president of industrial business
development, PT division, for Gates Corporation, wishes for a crystal
ball into 2009.
“Since I took the survey, the news has gotten progressively
worse—not only on the U.S. economy but the world economy. If
there’s anybody out there that knows what’s going to happen
in the next year, I’d like to hear from them,” said
Aschenbrenner. “[Economist and Industry Summit Keynote
Speaker] Alan Beaulieu was pretty prophetic—he nailed what’s
going to happen with the economy. Mortgage crisis is going to stay
with us for a long, long time and going to press consumer demand for a
lot of products.”
While Beaulieu predicted a rough ride for PTDA members in 2009, he
cautioned against pessimism. Companies who work with economic
cycles—in this case by focusing on their competitive advantages
rather than trying to fix perceived weaknesses—will come out ahead
when the economy inevitably rebounds.
Aschenbrenner is heeding Beaulieu’s advice. Even as he
prepares Gates Corporation for the worst, he is honing in the
company’s strengths.
“We have not changed our strategy, other than to prepare for
the worst in 2009…Strategically, we just want to leverage our
value proposition a bit more aggressively than we have in the past. We
think we have a good one, and it’s relevant to the times
we’re in.”
To access the full results of the PTDA 2009 Member Forecast Survey,
visit www.ptda.org/ForecastSurvey.
Founded in 1960, the Power Transmission Distributors Association
(PTDA) is the leading association for the industrial power
transmission/motion control (PT/MC) distribution channel. A
U.S.-based trade association, PTDA represents 204 power
transmission/motion control distribution firms that generate more than
$10 billion in sales and span 3,500 locations in North America and 12
other countries. PTDA members also include 198 manufacturers that
supply the PT/MC industry.
PTDA is dedicated to providing exceptional networking, targeted
education, relevant information and leading-edge business tools to help
distributors and manufacturers meet marketplace demands competitively
and profitably. For more information, visit www.ptda.org.
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