Plante Moran 2016 Plastics Industry Study Report

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  • North American

    plastics2016 SURVEY REPORT

    Industry Study

  • 2016 NORTH AMERICAN PLASTICS INDUSTRY STUDY2

  • PLANTE MORAN 1

    Table of Contents

    NOTICEPlante Moran has exercised professional care and diligence in preparing this report. However, because the data used in this report comes from third-party sources and Plante Moran has not independently verified, validated, or audited any such data, Plante Moran makes no representations or warranties with respect to the accuracy of the information contained in this report. Plante Moran shall not be liable to any client or any other person or entity for any inaccuracy or inauthenticity of the information contained in this report or for any errors or omissions in its content, regardless of the cause of such inaccuracy, inauthenticity, error, or omission. Furthermore, in no event shall Plante Moran be liable for consequential, incidental, or punitive damages to any person or entity in any manner relating to this report.

    INTRODUCTION 2

    EXECUTIVE SUMMARY 4

    Select 2015 Benchmarking Analytics 5

    Additional quartile benchmarking analytics available

    to those who participate in our study 6

    INSIGHTS 8

    Higher productivity and profits bolster overall industry health 8

    Featured analysis 10

    A second look at Successful Companies 14

    IN CLOSING 17

    ABOUT US 18

    Our plastics practice 18

    Our services 19

    PARTICIPATING IN OUR STUDY 20

    Partial list of information provided to survey participants in full report 20

  • 2016 NORTH AMERICAN PLASTICS INDUSTRY STUDY2

    We are pleased to present the 2016 North American Plastics Industry Survey Report. Since 1995, Plante Moran has led this study, which serves to gather and analyze the most empirical data collected in the plastics processing industry in North America.

    HOW THE STUDY IS COORDINATEDPlastics processors complete a survey template that is available on our website.Upon completion of the survey, we generate a customized report that is unique to each processor who completes our survey template. The survey results are held in strict confidence, and participating in the study is at no cost to the processors. We collect data from plastics processors on an ongoing basis throughout a given calendar year and release a summary report available to the public.

    TYPES OF DATA COLLECTEDStrategic, financial, operational, sales & marketing, and human resources data.We commonly receive over 250 unique data points from each participating company. Please see the last page of this report for a more detailed listing of data collected. The participants provided fiscal year data from December 31, 2013, through January 15, 2016. As a result, data are reported as 20132015 data.

    PARTICIPATION108 surveys comprising 160 facilities totaling $4.4 billion in sales.Most are U.S. based, however, we have participants from Canada and Mexico as well.

    PROCESSES OF PARTICIPATING COMPANIESInjection molders, blow molders, extruders, and thermoformers.

    introduction.

  • PLANTE MORAN 3

    INDUSTRIES OF PROCESSORS INCLUDEAutomotive, electronics/electrical, medical, building construction, packaging, consumer, and many others.

    WHATS INCLUDED IN THE CUSTOMIZED BENCHMARKING REPORT?Survey results, our commentary, and other discussion items.A 90-page detailed report is issued to each processor who participates in the study, which communicates the results of the study and offers our related commentary on many of the results. The report is board presentation ready and is divided into a few key sections to provide industry and benchmarking analytics and a report card that grades the participating company against its peers. Testimonials from our clients are available at our website at: plastics.plantemoran.com.

    WHATS INCLUDED IN THIS SUMMARY REPORT?This summary report contains some of the highlights from our survey results recently collected.It pales in comparison to the 90-page report received by the processors participating in our study; however, this report also provides our commentary on the general pulse of the plastics industry today, key issues being faced, and information about our practice.

  • 2016 NORTH AMERICAN PLASTICS INDUSTRY STUDY4

    executive summary.DESPITE RAMPANT UNCERTAINTY ELSEWHERE, THE PLASTICS INDUSTRY REMAINS STRONG Its an election year. Global oil supply is imbalanced. Geo-political issues around the world continue to force government intervention and drive fear in many. Analysts continue to hang on every word uttered by the Fed, looking for clarity into the health of the U.S. economy.

    As the above issues continue to dominate the headlines, we acknowledge that some of these issues could create headwinds for plastics processors in the future. In the meantime, we are pleased to report that the North American plastics processor industry appears to be staying focused on operating efficiently and continues to offer growth opportunities for many (not all) processors. This is driven by several key factors including:

    A 10-year high in productivity. More specifically, labor productivity. Plastics processors continue to carefully manage their labor costs. This is usually a processors second-highest expense (next to material), and it is an expense for which the average processor has more control as compared to material costs.

    Solid growth in transportation, building & construction, and consumer products markets fueled by favorable economic conditions including low employment and fuel prices, ample access to credit, and a strong housing market.

    Mexico continues to drive opportunities for plastics processors serving several end markets (we expand on this point in the feature section on pages 10 through 13.)

    Resin prices for high-volume resins such as high-density polyethylene (HDPE) and polypropylene (PP) went from long periods of reasonable stability to noteworthy declines heading into 2016.

    How long can it last?Were often asked, how long this industry will remain as healthy as it has been over the past few years? While we dont have a crystal ball, we dont see any metrics in our data that point to an eminent downturn. However, plastics processor serve cyclical industries that some could argue are due for compression and would be negatively impacted by the headline issues we mentioned above. Our recommendation is to understand your companys market position and to focus on your strengths to drive profitable growth. Being focused on the top and bottom line can provide your best insulation from known and unknown challenges that lie ahead.

  • PLANTE MORAN 5

    MEAN DATA BY SALES QUARTILE

    2013/2015 DATA $11.9M &

    $19.6M &

    < $42.3M >$42.3MSUCCESSFUL

    COMPANY1

    For comparison purposes, we aligned the (average) of the statement of operations and the (median) of select benchmarking analytics versus the successful company performance.

    Select 2015 benchmarking analytics

    SALES

    Production Sales 93.6% 98.5% 96.6% 97.8% 96.6%

    Tooling Sales 13.4% 6.9% 7.9% 4.0% 8.5%

    Less: Tooling COGS (7.8%) (5.5%) (5.4%) (2.9%) (6.0%)

    Other Operating Revenue 0.8% 0.1% 0.9% 1.1% 0.9%

    Total Sales 100.0% 100.0% 100.0% 100.0% 100.0%

    COST OF SALES

    Raw Materials 28.7% 37.0% 35.7% 36.7% 34.0%

    Purchased Components 6.1% 4.8% 7.5% 9.4% 5.6%

    Other Direct Costs 2.6% 2.8% 2.4% 3.1% 2.6%

    Direct Labor 13.0% 10.7% 9.4% 8.9% 9.2%

    Overhead Costs 28.2% 25.1% 25.0% 24.1% 23.3%

    Total Cost of Goods Sold 78.6% 80.4% 80.0% 82.2% 74.7%

    SELECT BENCHMARKING ANALYTICS

    Value Add Per Labor Dollar2 $2.15 $2.15 $2.26 $2.65 $2.31

    Complexity - Probable - Injection3 244,900 387,972 1,736,640 1,289,376 2,243,708

    Press Utilization - Injection 27% 37% 47% 50% 42%

    Two Year Sales Growth 2% 7% 8% 11% 12%

    1. A Successful Company exceeds 10% return on sales (before interest, taxes, and owners compensation), return on assets of 15%, and sales growth of greater than 5%

    2. Value add per Labor Dollar = (Sales Purchased Materials)/Total Labor

    3. Complexity equals frequently used resins x (active molds + inserts) x presses

    Gross Profit 21.4% 19.6% 20.0% 17.8% 25.3%

    Selling, General, and Administrative Costs 16.0% 12.7% 12.4% 8.7% 12.1%

    Operating Income 5.4% 7.0% 7.6% 9.0% 13.2%

  • 2016 NORTH AMERICAN PLASTICS INDUSTRY STUDY6

    Additional quartile benchmarking analytics available to those who participate in our study: Number of full-time employees

    Value add per press hour

    Employee turnover

    Number of recorded work injuries per year

    Customer PPM

    Internal PPM

    On-time delivery percentage

    Inventory turns

    Earnings before interest, taxes, depreciation, & amortization

    Return on net capital employed

    Return on assets

    Percentage of sales with gross margins less than 10 percent

    Two-year EBIT growth

    Two-year sales growth

    Current ratio

    Debt to equity

    Days in accounts receivables

  • PLANTE MORAN 7

  • 2016 NORTH AMERICAN PLASTICS INDUSTRY STUDY8

    insights.

    The following graph shows year-over-year adjustments to productivity as measured by value-add per employee, equipment utilization percentage, and gross profit margins for the last 10 years.

    Higher productivity and profits bolster overall industry health

    Cum. productivity change

    Cum. utilization change

    Cum. GP change-5

    2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

    0

    5

    10

    15