Plastics Products Makers Posting Sales, Margin Gains

U.S. plastics product manufacturers, key suppliers to auto and aerospace industries, construction and retailing, recently wrapped up their fifth year in a row of increased sales,  according to new data from Sageworks, a financial information company.

Profitability has also strengthened as the industry benefits from a growing economy, increasing automation and “reshoring” trends.

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Preliminary estimates from Sageworks’ analysis of statements filed in 2014 show that privately held companies in the industry, on average, increased sales by about 4 percent, on top of roughly 8 percent growth in each of the previous two years. Plastics product manufacturers in 2011 and 2012 had experienced double-digit growth as manufacturing, in general, led the U.S. economy out of the recession.

“A lot of things have plastic in them, so it’s an important industry,” said Sageworks analyst Kevin Abbas.

Abbas said data on plastics manufacturers’ results in 2014 continue to flow into Sageworks’ database, so it’s too early to determine whether any slowdown in plastics product manufacturing sales was material. However, he noted growth rates for 2014 appear to be lower than rates for manufacturing in general, and he said that many industries with consecutive years of strong revenue growth have a tough time sustaining those elevated growth rates.

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“The U.S. exports a lot of plastic,” said Abbas. “While the U.S. economy is strong, concerns about the general global economy might provide insight into why our initial estimates indicate a slower rate of growth for plastic manufacturers,” Abbas said.

The impact stemming from the labor disputes that caused huge bottlenecks at West Coast ports is something to watch for 2015, he added. “Although the disputes were tentatively settled in late February, the impact of the delays caused by the disputes will likely have an impact on many industries, including plastics. If you’re a plastics manufacturer, maybe you are reliant on molds that are manufactured in Asia and shipped to the U.S., if they are held up in the port – you can’t get the goods you need to continue manufacturing your product, which will ultimately impact growth and earnings. It’s unclear whether we saw some of the impacts in the fourth quarter 2014 numbers, however, it is very likely to have an impact when we look at results from first quarter 2015.”

Michael J. Devereux II, partner, and director of accounting firm Mueller Prost’s Plastics Industry Services, said many of the firm’s middle-market, privately held clients are seeing stronger growth than shown in Sageworks’ numbers. Plastics manufacturing companies are benefiting from automotive industry demand and from customers’ desire to have shorter lead times. “That has driven both the plastics processing and the mold-building back from China to the U.S.,” Devereux said. “Customers don’t want their molds sitting on a boat for four weeks.”

“Reshoring is real,” he said.

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Devereux credits increased automation with boosting not only sales for plastics products manufacturers but also their profitability. Manufacturers producing highly engineered products are especially benefiting, he said.

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