Like many executives, United Plastics Group Inc.'s Shannon White hopes the worst is behind him.
The chief executive officer of the Westmont, Ill.-based injection molder said the company was losing $1 million a week when he joined a little more than two years ago.
The firm's strategy of buying other molders was not well-timed, and integration of the disparate units had been poor, he said.
So the company closed several plants, eliminated jobs and tried to steer a better course.
Within seven months, the firm had become profitable, and now is focused on growth in automotive, medical and consumer goods, shifting away from what had been its core electronics business, he said.
White believes the company has turned the corner, even if it's not yet where it wants to be: The firm is preparing to add a third plant in China next year, and is introducing lean manufacturing and Six Sigma quality practices throughout the organization, he said.
White spoke at the 2003 Injection Molding Financial Symposium, held Sept. 17-19 in Chicago, and addressed topics on the minds of many - managing through a tough economy, identifying key markets and dealing with pressures to be a global molder.
The event, organized by PennTar Consulting Inc. of Port Washington, N.Y., also included PennTar's annual financial bench- marking review of the industry. Results across the industry seemed generally to mirror UPG - things were better in 2002, but not where people would like them to be.
The survey, which included responses from 45 companies, indicated sales increases across the board and somewhat better profit margins in 2002.
Large companies reported 2 percent sales growth last year, compared with a 4 percent decrease in 2001, while midsize firms saw 3.5 percent growth, which actually was not as good as 2001's 4 percent jump. Small companies fared best, reporting 9.5 percent growth in 2002, a sharp swing positive from 2001's 2.8 percent decline.
That translated into better profitability among all types of injection molders that responded to the survey.
Profit margins, measured as earnings before interest, bonus, taxes, depreciation and amortization, were 10.1 percent, compared with 9.6 percent in 2001.
Large molders had the best margins, 11.8 percent, with small companies reporting 10.9 percent and midsize firms faring worst, at 10 percent.
Estimates for 2003 were mixed: Profit margins were up somewhat, to 11.2 percent overall, with small molders projecting the most growth, and midsize and large firms holding steady. But PennTar President Brian Tartell cautioned against reading too much into the figures. He noted that molders can be optimistic with projections, and small molders in particular may estimate higher than what actually happens.
The report identified some factors among the 10 most-profitable companies: Four of them do proprietary molding, and half of them get at least 50 percent of their sales from automotive or medical/pharmaceutical work.
But the industry continued its love/hate relationship with the automotive sector, Tartell said.
While automotive was good for many, it also made up more than 50 percent of the work for a sizable chunk of the least-profitable companies. The market's price squeezes can be very tough on smaller molders doing less-complicated work, Tartell said.
The medical sector far and away was considered the most profitable, which was the case in previous years also.
Government and defense spending also was identified as another key market, probably lifted by significant increases in military spending.
Computers and telecommunications equipment were considered poor markets, while the appliance sector was mixed - similar to automotive, a sizable group put it among the best markets, while an equally large group considered it a very tough place to be competing.
Tartell also noted that the layoff picture improved last year.
Large companies reported laying off 4.5 percent of their workforces, while midsize firms cut 1.4 percent and smaller firms generally reported no layoffs, although one cut 34 percent of its workers.
While the economic picture improved, the survey indicated that excess capacity remains a major problem, with all three sectors of the industry reporting 56-65 percent capacity utilization.
The survey size is small, but that's in line with estimates of 30-40 percent overcapacity in the U.S. injection molding industry, he said.
And many of the responding firms reported that much of their work goes to one customer, a somewhat alarming statistic, Tartell said. No matter the size of the company, 30-35 percent of all business came from each firm's biggest customer.
Bankers generally don't like to see more than 10 percent of sales tied to one customer, which may explain why financial institutions can be leery of the plastics molding industry, Tartell said.
The report also showed that not as much tooling business is going overseas as some people think.
About 60 percent of the respondents said they use North American toolmakers for the majority of their mold making. About 15 percent mainly use overseas toolmakers, mostly in China, Taiwan and Portugal.
But a full one-third of the firms said they planned to boost the amount of tooling they source from overseas, with most to come from China, the survey said.
Tartell said that of the 45 firms that responded to the survey, 12 were large, with annual sales of more than $75 million, while 13 were small, with less than $10 million in sales. Twenty companies were considered midsize, with sales between $10 million and $75 million.