Canadian manufacturers kick-start 2012 with confidence and plans for capital investment

More than half of Canadian manufacturers surveyed in PwC’s fourth-quarter 2011 manufacturing barometer study feel optimistic about the prospects for the Canadian economy over the next 12 months. With a 25 percent jump in confidence from the previous quarter, 90 percent of respondents expect positive revenue growth for their own companies, with 10 percent forecasting double-digit growth.

“Industrial manufacturing CEOs are now focusing on the upside rather than the downside,” said Calum Semple, consulting partner, PwC. “Across the board we’re seeing Canadian manufacturers with positive projections associated with company growth, international sales and spending trends. One area of concentration is operational spending. Eighty percent of Canadian respondents are hoping to increase spending in this area over the next year.”

Leading areas of increased spending are information technology (47 percent), research and development (47 percent), and new product or service introductions (37 percent).

“Manufacturing CEOs plan to change their company’s research and development innovation capacity in the next year. CEOs are using innovation to make their products more sustainable,” explained Semple. “Also, with signs of global manufacturing activities on the rise and U.S. manufacturers showing signs of resilience, there is a need to upgrade existing systems, associated business intelligence and introduce mobility as a source of success for firms of all sizes.”

Manufacturing Barometer panelists expect international sales to contribute to 66 percent of their total revenue over the next 12 months. Corroborating the data from Canadian companies, PwC’s report titled Delivering results – Key findings in the industrial manufacturing industry shows that manufacturing peers around the world are thinking the same. Nearly three-fifths of industrial manufacturing CEOs said they would like to develop operations outside of their home markets. The four BRIC (Brazil, Russia, India and China) are cited as potential opportunities.

“Manufacturing companies looking to explore outside of Canada can experience a reduction in inventory, support local manufacturing and there may be foreign exchange advantages for the company,” said Semple. “Simultaneously, manufacturers must adhere to enterprise risk management protocols that meet quality and delivery standards, while staying aware of foreign corruption activities and social responsibility practices.”

At the same time, foreign market competition is cited by 43 percent of Canadian manufacturers surveyed as a barrier to growth. To reduce this barrier, initiatives such as new strategic alliances and joint ventures in markets abroad are on the minds of companies this year.

“An example of this is Canada’s Magna International Inc.’s application to produce 300,000 vehicles annually in Russia,” said Semple. “Its current Magna Steyr operation in Austria is the largest contract manufacturer in the world, assembling vehicles for Mercedes-Benz, PSA Peugeot, Minis for BMW AG, and others.”

Other barriers to business growth highlighted by manufacturing companies include concerns over oil and energy prices (53 percent) and monetary exchange rate (47 percent).

“Similar to last quarter, Canadian manufacturers are looking to hire, and the lack of qualified workers remains a concern,” said Semple. “Among the respondents planning to hire within the next year, the most sought-after employees will be production workers (30 percent), skilled labour (27 percent), and professionals and technicians (23 percent).”

One way the manufacturing industry is responding to the labour barrier is through workforce development. According to the report, Delivering results – Key findings in the industrial manufacturing industry, a majority of CEOs think business has a responsibility in this area, and many say they are already making investments to ensure a future supply of employees. As well, more than half of the respondents indicate skill development should be a key priority for the government.

For more information, visit www.pwc.com/ca/industrial-manufacturing.

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