Large companies in the measurement, control and automation industry are prospering after the 2008-2009 economic downturn, according to the 2015 Operating Benchmarks Report by the Measurement, Control & Automation Association.
The report contains data from 59 member companies that manufacture and distribute instrumentation, systems and software used in industrial process control and factory automation around the world. The data is reported for manufacturers in four size categories according to sales—over $100 million (Group 1); $30 million to $100 million (Group 2); $10 million-$30 million (Group 3); and under $10 million (Group 4).
The data shows the strength of the recovery of the larger companies following the economic downturn. While there was very little revenue growth (less than 1 percent) on the net sales from these public companies between 2013 and 2014, they had substantial operating profit (11 percent) and 14.6 percent Operating Income as a percent of revenue.
According to Edward Curry, a principal in the consulting firm of Curry & Hurd and a former chairman of MCAA, during the economic downturn in 2008-2009, these companies cleaned out some of the “operational cobwebs” in order to prosper and now those improvements can be seen in the bottom line.
In looking at their individual performance, there is a cluster of pubic firms showing 5-10 percent of Revenue Growth with Operating Income (as a percent of sales) at 14-20 percent. A couple of companies have been consistently above those marks—Ametek and Danaher— are perfecting the art of blending in new companies that they acquire and improve their profitability, according to Curry.
Looking at the Income from Operations, the leverage of the larger companies is evident as there is a clear and sustained upward trend (incremental as it may be) for the larger companies, while smaller companies bounce up and down depending on economic pressures.
The report shows that the larger companies turn inventory at a pace (7.5 times per year) twice that of the smaller companies because they have the tools, including JIT manufacturing, to do so. Smaller companies, turning inventory at a rate of three to four times per year have much larger inventory to carry and have to bear the costs of that inventory—a cost that might justify some of the expenses of developing the tools that make the larger companies more agile.
The report says smaller companies have increased R&D spending, while R&D for larger companies remains at a fairly low level as a percent of sales. However, the report notes that larger companies are more likely to acquire technology through M&A activities.