Manufacturing 2010: Looking towards a brighter future

Having weathered the storm of 2009, many manufacturers are looking towards 2010 with increased optimism, expecting the economy to improve over the next year. And they have every reason for optimism, with some key industry surveys adding weight to claims that conditions will improve. Eurozone manufacturing production, for instance, increased for the fifth consecutive month in December, with the rate of expansion the fastest since September 2007, according to Markit’s Eurozone Flash Service Purchasing Managers Index. The flash manufacturing index rose to 51.6 in December 2009 from 51.2 in November 2009, while the manufacturing output index rose to a 27-month high of 55.2 from 54.8. Outstanding business rose at manufacturers for the second month running and at the fastest pace since August 2007.

“The Eurozone economy is ending 2009 on a positive note, with business activity and new orders both growing at the fastest rates for over two years in December,” Chris Williamson, Chief Economist at Markit, says.

Our own field check of Manufacturing Digital readers has shown that leaders are increasingly optimistic too; some, naturally, more so than others.

“There is a demand for new generation and renewable energy is an area of significant investment and importance for future generations,” says Terry Skee, Business Development Executive at Cleaner Air Solutions UK Limited, a leading North-East based renewables company, who recently spoke with one of our reporters. “Significantly, as we prove, the technology to harness energy from wind, solar, water, and other renewable resources, I think, is there. The hard and fast facts are that Britain is an island that is dependent on importing our energy. Because of that, and because of commercial bias, we will not be able to resist the increases in the cost of purchasing energy in the future and will, at some point, also face a shortfall. Therefore, we must take hold of the renewable resources that we have got. Wind farms alone will not provide all the energy we need, nor will solar. What we need is a mix. In terms of solar, the UK has somewhere in the order of 28-29 million domestic properties, of which something like nine million are suitable, with south, southeast, southwest facing roofs, to allow solar PV/solar thermal to be installed on those properties.”

Given the opportunity in the renewables market, it isn’t surprising that Cleaner Air Solutions UK Limited has increased its workforce by 78 percent in just 12 months, despite the recession. It is looking forward to 2010, given that business will ramp up as the government outlines its future energy proposals.

It’s not just newer industries, such as solar, that are looking to 2010 with optimism though. “We’re looking forward to 2010,” says Chemiphos’ Managing Director, Dean Mulqueeny, who told Manufacturing Digital how it made good business sense to make his company safer and greener in 2009.

Chemiphos has made a name for itself providing polyphosphoric and orthophosphoric acids. Its plant in Johannesburg produces 7,500 tonnes of phos-acid products a year, which it sells to Europe and the UK, while also servicing more than 90 percent of the local market in South Africa, as well as serving some of the big multinationals, such as Coca-Cola.

“We’ve just completed a R1.5 million investment into a waste gas scrubber to reduce our P2O5 emissions,” explains Mulqueeny, adding that for Chemiphos, protecting the environment isn’t just part of its social responsibility, it’s also good business. “It’s a positive step for us, because now we can recover some of the previously exhausted material, improving our overall yields. So the company gains and the environmental protection is much better.

“We’re in the process of running trials where we burn the waste internally and catch the gas in our scrubber, pushing our plant to a state of almost zero waste production. That will reduce our sludge dumping annually so that there will be around 50 tonnes less waste going into a city landfill.”

Mulqueeny’s optimism for a brighter year is shared by Rasheed Hargey, CEO of Tellumat, a large privately owned diversified electronics, manufacturing, telecommunications, defence and services group. “We have identified a number of opportunities,” he explains. “Telecoms is the natural one because the industry across Africa is being deregulated as we speak.”

Tellumat, which already exports to numerous African countries, is also keen to do more business in key economies in Asia, the Middle East, Eastern Europe and South America. “That is true,” says Hargey. “We look forward to a future of continued innovation and commercial success.”

Tellumat is a significant player in South Africa’s telecommunications, particularly in CPE (customer premises equipment), and has a long history of manufacturing and supplying products to Telkom, Neotel and other key industry players. Its best known product is the Telkom Diana PBX and the company offers a wide range of locally developed and imported PBX and wireless solutions. Tellumat still works closely with Telkom, but its relationship has expanded to include the supply of consumerfocused products, like handsets.

“We plan to expand that business in Africa in the next few years as the industry becomes deregulated, beginning with a focus on the Southern Africa region,” says Hargey, who went onto explain that the Wireless Solutions division is focused on “supplying high-end broadband communications equipment, such as microwave and Wimax” to telecom operators, which are increasingly demanding a “complete solution from suppliers, including services”, such as network design, RF planning, installation, commissioning and maintenance.

WINNERS AND LOSERS

Our experience shows that, while there were many losers in 2009, manufacturing leaders are excited by what 2010 will bring. Yes, we’ve all had to make adjustments - particularly where cost is concerned - and the lack of available funds is still causing companies to look into reducing fixed costs and increasing productivity with the same or smaller staffs.

For this reason, many leaders are urging banks and funders to support manufacturers out of recession, believing cash will be king for manufacturers that are looking to make the most of economic recovery.

“Recent surveys by the EEF and CBI predict an upturn in manufacturing over the next six months and whilst we should all welcome this news, we have to be mindful of history telling us that a lot of firms fall victim to the growth that follows a recession,” explains Simon Griffiths, Chief Executive of the Manufacturing Advisory Service-West Midlands, a leading figure in the UK manufacturing industry. He is urging banks and other lenders to help the sector bounce back from the downturn by increasing access to finance and, importantly, at reasonable rates. “That is why it is so important that banks and other lending institutions treat manufacturers fairly and ensure they have the same access to finance and loans as other sectors so they can continue to trade, win new business and move a sector that employs 330,000 people locally back into positive territory.

"We have lots of anecdotal information about credit insurers refusing to guarantee new orders and funding only being offered at unreasonable rates,” he continues. “This, I feel, is beginning to change in recent months and can only be helped by the government’s desire to force banks to lend to SME s. We’re not asking for favours or hand-outs, just a level playing field so that our well run and often world-class businesses have the best possible chance to lead the area out of recession.”

Money is much needed if the UK and other economic hubs are to build on the global optimism of people like Hargey and increase turnover, safeguard, as well as create, jobs and achieve success in 2010.

Edited by Ian Armitage

Manufacturing Digital Magazine