When holding company Press-Gold Group LLC bought Scope Molding LLC in 2000, its first step was to jump-start a weary business.
``For the past four to five years, the company had reached a plateau in its sales level,'' said Press-Gold Chief Executive Officer Jeffrey Goldenberg. ``The business had gotten a bit tired. We saw a lot of opportunities for growth.''
Yet, the new owners of the injection molding company - started in a woodshed in Amery, Wis., in 1992 - faced a market that soon took a turn for the worse. Their plan to move the company to a new location, secure more financing and boost sales during the downturn became a tougher assignment.
Welcome to the up-and-down world of injection molding in the new decade. At the 2002 Injection Molding Financial Symposium, held May 16-17 in Chicago, the struggle to keep sales up in a sagging market was on the minds of several speakers.
At the conference, PennTar Consulting Inc. of Port Washington, N.Y., presented its annual financial benchmarking review of injection molding companies. The company delivered results that reflect the state of the economy.
``Last year, many companies were teetering on the edge,'' said PennTar President Brian Tartell. ``The destruction of the World Trade Center, in light of an already-fragile economy, and the loss of a lot of business in this country really served to take a toll on all sectors of injection molding.
``But we expect growth to pick up a bit in 2002. Survey participants seem more optimistic about 2002 than in 2001.''
After surveying 42 North American injection molding companies, PennTar divided the results into those for large companies (those with annual sales above $75 million), middle-market companies (with sales between $10 million and $75 million) and small companies (with sales under $10 million).
All those groups showed a sales decline in 2001. Small companies were hit the worst, with a median drop-off of 10 percent. Median sales for midsize companies declined 7.7 percent, while sales for large companies dropped 0.6 percent.
For all those sectors, PennTar forecasts a rise in 2002 sales and a bigger increase in 2003. In 2002, sales for small companies are expected to jump 16.4 percent, the largest rise among the three segments.
To a certain extent, molders always tend to be overly optimistic in their forecasts, Tartell said. ``But we hope the data signals that the worst is over,'' he added.
Profit margins also declined for both small and middle-market companies in 2001. The survey measured earnings margins before interest, bonus, taxes, depreciation and amortization.
For midsize companies, the median profit margin was only 7.9 percent last year, compared with 10.1 percent in 2000, while margins for small molders dipped to 8.3 percent, from 9.3 percent in 2000.
But for large companies, margins actually rose last year to 8.2 percent, from 7.9 percent in 2000.
Some companies showed signs of good health. In the survey, the 10 most-profitable firms had profit margins of 12-25.1 percent, Tartell said. Forty percent of those companies offered proprietary products that accounted for at least half of their sales, he said.
The automotive market continues to have a split personality for many companies. Three of the 10 most-profitable companies surveyed work extensively in that sector, Tartell said. Yet, half of the most-unprofitable companies also do automotive work.
The medical/pharmaceutical sector has been an extremely hot sector for growth, Tartell said. About 35 percent of the most-profitable companies perform medical work, while only 10 percent of the least-profitable companies have medical business, according to the survey.
The most-profitable companies seem to be staying away from both computer and telecommunications work, according to the survey. In past surveys, PennTar had said those were hot molding markets.
The number of layoffs in 2001, another symptom of a dull economy, also came as no surprise, Tartell said. Large companies laid off a median 3.8 percent of their work forces in 2001, while midsize companies let go of 6.6 percent.
However, the percent of voluntary turnover, some through attrition, was less than in 2000, Tartell said. Those results were an improvement from prior years. Employees are not so quick to leave their jobs in a slower economy, Tartell said.
For toolmakers, there was good news and bad news. First, the good news: Not all work is moving to foreign shores, Tartell said. Only 10 percent of the responding molders said they sent more than half their work overseas, with Taiwan and China the primary recipients.
Now the bad: 35 percent of molders surveyed indicated they will send more tooling overseas in the future, Tartell said. Cost is the primary driver, he added.
``Obviously, there's still going to be a tooling industry here,'' Tartell said. ``The quality of work in Michigan, for instance, is significantly better than that in China. But some molders under more intense pricing pressures will look into overseas toolmaking.''
The new owners of Scope Molding faced the problems chronicled by PennTar firsthand.
In 2000, during Press-Gold's first 100 days of ownership, the company added three injection presses and a second shift, said Press-Gold President Carl Pressman.
And in the first half of 2001, Scope moved to a 25,000-square-foot plant in Almena, Wis., and added five more presses.
Company sales then went into a short dry spell, after growing in sales by 120 percent in 2000, Pressman said. But Scope kept moving forward, opening a higher line of credit and securing a $1 million loan package from the U.S. Small Business Administration, Goldenberg said.
With about 15 new customers and a large marketing push, sales are growing again by about 75 percent annually, Goldenberg said.
But navigating a company during a downturn has not been an easy task.
``Costs can be a primary advantage [for a small-sized molder],'' he said. ``But in a down market, you can't give away the store,'' Goldenberg said.
