Growing pains in metal treatments

Citation

(1999), "Growing pains in metal treatments", Anti-Corrosion Methods and Materials, Vol. 46 No. 3. https://doi.org/10.1108/acmm.1999.12846caa.001

Growing pains in metal treatments

Growing pains in metal treatments

Keywords Markets, Metal treatments

Plimsoll reports that sales growth in 1999 is going to be hard to find. In the best of times, the market average has only grown by a maximum of 10.9 per cent in 1995 and if the worst sales growth was 2.2 per cent in 1993, at what rate can the metal treatments industry grow when the forecasts are decidedly pessimistic for this year? If you hope to get growth this year, it's going to be at the expense of your competition.

Most disturbing was that almost half of companies in 1997 in the metal treatments industry did not grow at all. This compares to 45 per cent of companies with no growth in 1993.

Every year for the past six years, there has been, and still is, a band of companies which is beating this trend in terms of sales growth. Within the metal treatments industry, 80 companies achieved 20 per cent or higher annual sales growth in 1997.

The fact remains that if sales come under pressure, then profit margins start to be vital, as companies seek to maximize resources. As the latest Plimsoll Portfolio Analysis ­ Metal Treatments, 1st ed., 1999 can demonstrate, the growing trend in the industry has been surprising, as pre-tax profit margins were at an all time low of 2.7 per cent in 1993 and yet have risen to 5.4 per cent in 1997.

Interestingly, 20 per cent of the industry failed to make a profit at all in 1997. This compares to 32 per cent of the industry in 1993.

Overall, average pre-tax profit margins have gone up by 2.8 per cent since 1993, with an average of 5.4 per cent in 1997. Yet in the upper band of companies in the metal treatments industry, the average pre-tax profit margin in 1997 was 17.2 per cent. This is almost three times the industry average!

Gross profit margins for the majority of companies in the industry have remained relatively constant but costs seem to be going up, year on year. Directors' fees and average remuneration per employee, for example, have both increased consistently over the last five years.

It isn't the shareholders who are chipping away at pre-tax profit margin. Dividends as a percentage of sales have remained fairly constant year on year since 1993.

Because Plimsoll reports are based on individual companies, they can pick the average beaters; those companies moving the industry. As with any industry, there are those companies which manage to beat the averages. Plimsoll's report has found some terrific companies that year on year, over the last four years, have beaten the averages in the metal treatments industry:

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  34 companies have grown at 5 per cent or more in terms of sales;

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  37 companies have made over twice the average pre-tax profit margin; and

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  66 companies have increased salaries every year.

Conversely, Plimsoll has detected several companies which are pulling the averages down. Over the last four years in the metal treatments industry:

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  seven companies have shown no growth at all;

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  52 companies have shown a loss in pre-tax profit margins; and

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  three companies are showing a fall in average salary.

Either set of these companies could be your key competitors. What is vital here is a means of finding, amongst all these mixed messages, what your key competitors are doing. Every company is unique; therefore having a way to assess them individually is key in determining not only an industry overview, but also an individual company overview. The Plimsoll Portfolio Analysis ­ Metal Treatments, 1st ed., 1999, gives the non-accountant a simple means of assessing a company's last four years of audited accounts, as well as key ratios in determining a company's overall financial standing. The report analyses 1,302 individual companies in the metal treatments industry. For more information on this report, contact Jennifer Ovington. Tel: 01642 257800. The main report costs £305, the supplement report costs £205. Readers of this publication can obtain a 5 per cent discount if mentioning this article upon ordering.