June 2, 2011
The FAB 40 listing for 2011 indicates that metal fabricators are gearing up to cope with an expanding manufacturing economy.
The FABRICATOR's FAB 40 suggests the rumors of manufacturing's death have been greatly exaggerated.
Anecdotal information suggests that metal fabricators are a busy bunch. Capacity utilization numbers from the Federal Reserve reinforce those reports; as of March 2011, manufacturers in the fabricated metal products sector (332 of the North American Industry Classification System) were operating at 75.5 percent of capacity, which is just below the 1972-2010 average of 77.2 percent, but way ahead of the low of 60.5 percent from 2008-2009.
Feedback from the FAB 40 list of leading metal fabricators supports both the positive reports from the field and the manufacturing data from the government. It may not be 2007 again, but thankfully, it's not 2009.
Before diving into further details, it may be helpful to share the purpose of the FAB 40. This listing is The FABRICATOR's attempt to provide a snapshot of metal fabricating in the U.S. By collecting this information, we hope to give metal fabricators an idea of how some of the leading shops performed financially last year and what they are forecasting for the current year. Also, this list is intended to reinforce the point that metal fabricating is a vital sector of the U.S. manufacturing community. For more information on how this list was compiled, please see the "Constructing the FAB 40" sidebar.
So how do metal fabricators view their situation in the manufacturing world? Improving. The FAB 40 reported $744.6 million in revenues in 2010 and project to collect $847.5 million in 2011—a healthy 13.8 percent increase. A look back at last year's FAB 40 list reveals that metal fabricators expected only a 3 percent increase when projecting 2010 revenue over actual 2009 revenue.
Last year was still difficult for some metal fabricators, with 15 of the FAB 40 expecting revenues would be down or flat from the previous year. In 2011 only six companies share a pessimistic forecast, predicting their revenues to be off or flat for this year. That some of those metal fabricators are closely connected to commercial steel construction—which is roughly a third of what it was during parts of 2007 and is very slowly recovering—somewhat distorts a very healthy outlook for the manufacturing sector.
Eighteen companies that made the FAB 40 last year are in it again this year. Those companies actually share a common bond: success with steady growth. For example, in the inaugural 2010 FAB 40, those 18 companies reported 2009 revenue of $297.2 million and 2010 projected revenue of $312.5 million—a 5.1 percent increase. The reported 2010 revenue culled from this year's responses reveals that those 18 companies did a pretty good job of forecasting; they reported actual total 2010 revenues of $315.8 million, a wee bit more than last year's forecasts. They also projected revenue of $341.4 million for 2011—an 8.4 percent increase over 2010.
Jobs are at the top of many people's minds. According to the Bureau of Labor Statistics, the U.S. unemployment rate stood at 8.8 percent as of late April—down from the beginning of 2010, but much higher than many would like.
The metal fabricating sector appears to be hiring more workers. The FAB 40 reports that 5,748 employees are on the payrolls, a significant increase over the 3,325 reported in the 2010 list. However, considering the number of much larger companies making the list this year, that's to be expected.
If you look at the employment figures for the 18 repeat companies, you find hiring actions that might suggest reasons for optimism. Those 2010 FAB 40 companies reported having 1,770 employees, but a year later the number expanded to 2,010—a 13.6 percent increase.
"We have improved our processes, revamped our maintenance department, and put together an all-star maintenance team. We hired top talent from various areas, and we opened an office in another city. We have supported our staff and partnered with a local tech college to help them," said one structural steel manufacturer, reflecting on how his company spent the last year in preparation for increased business this year.
That optimism is not limited to one company. Many others note that they will be looking to add more workers as they expand their businesses.
More than likely, as those companies expand their customer base, they also expand their service offerings. The array of services that metal fabricators are offering their customers is quite amazing. For instance, 24 of the FAB 40 offer machining services, and 21 provide finishing/painting/powder coating capabilities. Lynx Enterprises, Tracy, Calif., even offers woodworking for those customers looking for a wood accent with their metal fabrications.
Bringing so many manufacturing activities under one roof makes sense for those metal fabricators that want to maintain total control of supply chain relationships with their manufacturing customers. The less those metal fabricators have to outsource, the less they have to rely on subcontractors and their ability to hit delivery deadlines.
In the end, many of these customers prefer dealing with as few suppliers as possible. "This allows our customers to receive one invoice for a complete part rather than handling multiple transactions and vendors," a Midwestern job shop noted in its submission.
One other noteworthy item is the observation from a couple of FAB 40 companies that metal fabricating jobs that had been outsourced to Chinese companies are now being brought back to U.S. shores. In both instances, that newfound work is providing a nice bump in the metal fabricators' improving production volume.
It's natural to speak about 2011 in somewhat conservative tones in light of how the recession rocked the manufacturing world, the nation's heated political rhetoric, and the rising costs of raw materials and energy. Some metal fabricators, however, are more concerned with staying on top of expanding businesses. And while some companies merely survived the past couple of years, they pushed forward aggressively.
Read these amazing comments from FAB 40 companies:
"Our business levels should remain very strong through 2011 based upon booked sales and customer forecasts. All of our key customers are having strong years, and we have made strides as a company to be able to handle our customers' growth. Our revenues in 2010 were the second-highest in company history, and 2011 is projecting to be a 25 percent growth year."
"We are optimistic about 2011. We expect to return to levels similar to before the recession."
"While 2009 and 2010 were two of the most profitable and largest sales volume years in the 30-year history of the company, we feel 2011 will continue to allow the company to have both record sales and profits."
Any publication that puts together a collection of some of the best and brightest in its field should expect some overachievers to be part of the list. The FABRICATOR's FAB 40 isn't any different.
9 metal fabricators expect revenue growth of more than 20 percent in 2011.
14 companies plan to purchase or upgrade equipment in 2011.
7 companies made equipment investments during the recession.
11 fabricators were actively involved in continuous improvement programs.
24 offer machining services in addition to core fabricating services.
The FABRICATOR® is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971. Print subscriptions are free to qualified persons in North America involved in metal forming and fabricating.