When it comes to a lot of things about the economy, I’m a glass half-empty kind of guy. Will the government shut down soon because of the mess inside the beltway? Yeah, probably. The jobless rates are down this week! Yeah, we’ll see how long that lasts. Five years after the financial crisis and worst downturn in a generation, Fannie and Freddie still operate much like they always have, quantitative easing continues unabated, and nothing much has changed. That figures.
But when it comes to metal fabricators and manufacturing in general, I tend to be a little more optimistic. I started covering this business in the roaring 1990s. Since then, manufacturing has endured global competition and a roller coaster ride of booms and busts. The best fabricators keep on keeping on.
And even after all this, this isn’t a bad business, judging by the money being made. Honest.
Every year the Fabricators & Manufacturers Association International conducts its Financial Ratios & Operational Benchmarking Survey, an in-depth study that delves into the books, uncovers the vital metrics. This year’s survey covered 2012 financials. Average EBITDA (earnings before interest, taxes, depreciation and amortization) margins among respondents was just over 10 percent. Average direct labor costs are at 13.90 percent of sales, indirect labor at 8.65 percent, and average sales per employee are at $159,000.
“The numbers aren’t terrible,” said consultant Dick Kallage of Barrington, I’ll-based KDC & Associates. Kallage, who is a member of FMA’s Management Advisory Council, hosted a webinar on the study a few weeks ago. “They’re decent. They’re just on the low side of decent.”
So why am I optimistic? It’s because of what some of the top performing respondents reported. Some had EBITDA margins of more than 20 percent. A few had sales per employee as high as $335,000. And most respondents were job shops—businesses centered not around proprietary products, but on providing a service. True, profit levels can depend on the market sector. But smart use of technology and people changes everything. Being in contract fabrication without a proprietary product line isn’t a bad thing. After all, hot products come and go. Continuous improvement is forever.
The Lynx FL offers easy entry into fiber laser cutting. Cut ferrous and non-ferrous materials reliably with excellent cut quality and at three times the speed of a CO2 laser. Enjoy high uptime with a virtually maintenance-free laser source, high wall plug efficiency, and very low operating costs. All for a modest investment.
What do you think of your boss? Is he or she a good motivator? Do you feel valued? Does your relationship with your boss affect your job performance and satisfaction? Some “Fabricating Update” readers took the time to share their thoughts about bosses they’ve known and what makes a good boss.
Practical Welding Today was created to fill a void in the industry for hands-on information, real-world applications, and down-to-earth advice for welders. No other welding magazine fills the need for this kind of practical information.