AMBA member survey: Winter business forecast shows improvement

The Winter 2010 Business Forecast of the American Mold Builders Assn. (AMBA) shows continued improvement, and moldmakers overall are expressing guarded optimism about any significant recovery to bring on large mold programs from their customers. The quarterly survey revealed that current business conditions improved slightly over the previous three months, with 6% of the respondents saying that business is “Excellent,” down just 1% from 7% in the Fall 2009 survey.

Current business conditions improved by 10% for those reporting “Good” conditions (33%) compared to 23% of the respondents in the fall survey. “Fair” business conditions exist for 44% of the respondents compared to 38% of the fall respondents. But business conditions have improved considerably for some, with only 15% reporting “Poor” conditions compared to 27% previously. “Bad” conditions exist for only 2% of respondents, another improvement from the fall’s 5%, and a continued improvement from the 12% reporting “Bad” conditions in the summer survey and 11% in the spring survey.

Projections for business over the next three months are fairly flat, with 8% reporting that they expect business to “Increase substantially,” the same as in the fall. And 40% of respondents expect business to “Increase moderately,” down slightly from 44% in the previous survey, but still up considerably from 28% in the past summer, when the climate was bleak.

There was a substantial increase in those expecting business to “Remain the same”—41%—compared to 25% in the fall survey. Respondents expecting business to “Decrease moderately” again dropped slightly to 9% compared to the fall’s 11%. Respondents expecting business to “Decrease substantially” remains at 2%, the same as in the fall.

When asked to compare their company’s current level of business with that of three months ago, responses show movement in a positive direction.

Compared to the fall survey, quoting activity is up for 40% (from 38%); is the same for 59% (from 42%); and down for only 21% (from 20%). Some mold manufacturers reporting an increase in quoting activity believe there are signs of new molds being cut loose in 2010 due to so little activity in 2009. “Business activity is improving and hopefully pricing and profitability will follow,” commented one respondent.

“We are seeing an uptick across the board in our quoting and are seeing some increase in orders,” said another.

Shipments are up for 33% (vs. 29% in fall), a continued upward trend from 25% in the summer survey. Shipments stayed about the same for 49% and were down for 18% vs. 28% in fall and a big drop from the 43% in the summer and 59% in spring, which could be an indication that shipments—and thus work—are holding steady.

Backlog is up for 38% of the respondents, another nice jump from the 31% in the fall, 24% in the summer, and 11.3% in the spring survey. This is one trend that moldmakers like to see on the increase, as most of them live and die by their backlog. “Seems like things are improving,” commented one respondent. “We are not swamped but looking at the industry improving.”

Backlog remained the same for 30% of the respondents, down from the 33% in the fall survey; and down for 32% of the respondents, an improvement from fall’s 38%, summer’s 52%, and spring’s 66.1%. This indicates that business is trending upward for a nice percentage of the AMBA shops, along with a healthy dose of cautious optimism. “We are extremely busy, but we’re always aware that a downturn could be just around the corner,” commented another respondent.

Profits in the winter survey ticked upward once again, with 17% reporting profits up, compared with 15% in the fall. Profits are the same for 49% of the respondents, again an uptick from 47% in the fall survey, 31.6% in summer, and 30.4% in spring. Profits are trending down for 34% of the respondents in the winter survey, but an improvement vs. 38% (fall), 58% (summer), and 63% spring).

This perhaps indicates that moldmakers are holding the line on price and terms, or that many Tier One suppliers, seeing the fallout in the supplier base, are becoming more cooperative. “We are noticing a real decrease in pricing, and have to quote at break-even prices to land jobs,” said a respondent. “We are seeing many projects continue to be so underpriced that we have to let them go.”

Employment seems to have leveled off, and is up for only 16% of the respondents, vs. 22% in the fall. Still, that’s better than the 12% of the summer survey respondents and 7.0% of the respondents to the spring survey. Employment is the same for 74%, which indicates most shops are hanging tight with the employees they have. Employment is down for only 10% of the respondents compared to 31% of the respondents in the fall survey.

The current average number of shop employees ticked up by one, to 22. The current average number of design and engineering employees also moved up by one in the winter survey, to six. Work-week hours for shop employees are up for the third consecutive quarter to an average of 45 hours for the winter survey, compared to the fall’s 42. For design and engineering employees the hours also increased for the third consecutive quarter to 45 hours, up 2 hours.

Responses were mixed to the question, “With recent economic changes, has your company altered its payment terms?” Many maintain the 1/3, 1/3, and 1/3 model. However many more seem to have upped the down payment. “With new tool builds, I am requiring 50% down with the PO, 25% prior to delivery, and the remaining 25% 30 days after delivery,” said one respondent.

Several said they alter their terms based on the customer. Generally, long-term good customers get better terms than new customers. “Depends on the company,” said another respondent. “Some pay well and no upfront money is required. With newer customers, upfront payment is required.”

Another respondent said, “We require a 50% downpayment and 40% prior to shipment on all new customers, with 10% net 30 days after mold approval. Most of the new customers have been fine with this. With our current/established customers we are still using the standard 1/3, 1/3, 1/3 terms.” Clare Goldsberry

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