Industry enters ’11 with [cautious] optimism

February 04, 2011

By all accounts, the second half of 2010 saw a strong, sustained surge in activity within the plastics sector, pushing business to levels not seen in years. In January, MPW spoke with several suppliers to the market, trying to gauge their sentiments for the new year and whether the recovery will continue.

As welcome as double-digit growth can be, the difficulty comes in tempering expectations that it can be sustainable. For auxiliary equipment supplier Conair (Cranberry Township, PA), 2010 revenues were up 20-25% over 2009 levels, according to VP global sales and marketing, Larry Doyle. So what does 2011 hold?

"For 2011, we've taken a very conservative approach. We've said, 'Look, the market's going to be relatively flat. We don't anticipate any huge growth.' I think it's playing it very conservatively." Doyle said, before adding with a laugh. "I hope I'm as wrong about 2011 as I was about 2010."

At automation and injection machine supplier Engel North America (York, PA), President Mark Sankovitch faces a similar dilemma. "Anytime you budget, you do the typical thing and try to be as conservative as possible, because you never want to be on the high end," Sankovitch said. "We had a great year [in 2010]. For us in North America, we had one of the better years from a revenue standpoint than we've had in four or five years. The hard thing to predict when you grow it that much is, incrementally, I can't go into next year and say I'm going to grow at 20%; that's just not reasonable."

Specialty compounder and distributor A. Schulman is being equally cautious moving into 2011, according to CEO Joseph Gingo, with his company aiming for incremental growth through new products, continuous improvement, smart pricing, and savings. "I'm not counting on heavy growth," Gingo said. "I'm counting on slow and steady right now. We're not going to have a horseshoe here where the economy goes back to 2008 tomorrow because all the evidence I have is it doesn't."

Synching expansion with expectations

Both Engel and Conair have added staff and boosted manufacturing capacity to meet the increased demand and recoup lost production and workers from the recession, but they have made these investments cautiously. "Do we have enough capacity right now for the demands of the market," Sankovitch asks. "Now the goal is not to over shoot, because everyone had a tendency to be gun shy. We don't want to overshoot our capacity, because the last thing anyone wants to do is have excess capacity."

"I don't think we're going overboard," Doyle said of his company's recent hires and expanded capacity in India. "I think everyone would certainly like more people, but we're doing it cautiously and based upon specific growth initiatives."

These companies, and the converters they supply, must balance smart growth with the ability to maintain acceptable lead times for their customers. "The problem is this surge hat we got in the fourth quarter, it's hard to predict where that's going to be in 2011, because the incremental capacity increases just aren't getting us there," Sankovitch said. "The new stress of 2011 is, can you take your delivery time and shorten it. Those are the challenges in this calendar year, get our lead times down and find ways to get machines out to market."

Growth in '11, regardless the number
Whatever the final number, many in the plastics industry are entering the new year with a degree of optimism, if cautious, that had been absent. "[Business] definitely will grow; I don't see it going down from what we saw," Sankovitch said, "but it's clearly not another 20% growth, and I think if my competitors were all in this same room, we'd probably all saying the same thing."

At A. Schulman there has been a consensus reached as well on 2011. "What we're seeing now, and I've talked to a lot of economists about it, is people are forecasting that we won't get back to the 2008 growth levels until 2014-2014," Gingo said. "They're looking at slow and steady growth until we get to that point. So we're not counting on big growth, but if it happens, it's not going to hurt us." —Tony Deligio


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