PRESS ROOM: IN THE NEWS


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Mike McDonald, Prime Advantage
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Press Release:
Small and Midsized Manufacturers Continue Growth and Expansion

CFOs anticipate increase in revenues and new orders, and plan capital investments and hiring

CHICAGO, March 25, 2012 - Prime Advantage, the leading buying consortium for midsized manufacturers, announced the findings of its fourth annual Group CFO Survey, revealing financial projections and top concerns of its Member companies’ CFOs in 2012. CFOs continue to see solid signs of the economic recovery in U.S. manufacturing. While Member companies are planning more hiring, wage increases, and capital expenditures, the availability of skilled workers is a growing challenge.

Summary of Findings

Mixed Feelings on Financial Prospects and the U.S. Economy
CFOs are more optimistic about the financial prospects for their own companies now than in the last two years (the level of optimism is 79/100 in 2012, compared to 63/100 in 2011). Only 2% of respondents are less optimistic about 2012. This number is higher for Prime Advantage Members than the recent similar surveys, conducted by Duke/CFO Magazine (67/100) and Bank of America (50/100). The majority of CFOs report increases in their own new order pipelines, with 57% citing more new orders now than at this time in 2011. Manufacturing CFOs are also optimistic about the business prospects of their key customers this year, with 55% expecting to see their customers’ businesses grow moderately in 2012.

Respondents are slightly less optimistic about the overall U.S. economy, with 67% more optimistic and 12% less optimistic (compared to 74% and 3% respectively in 2011). However, nearly all manufacturing CFOs (98%) believe manufacturing will stay the same or continue to expand in 2012. These mixed sentiments are consistent with a recent GE Survey in which respondents were optimistic about their own companies and industries, and slightly less optimistic about the U.S. economy.

When asked to cite the top potential threats to U.S. economic growth, 90% of the CFOs were most concerned with the European fiscal situation (90%), followed by the U.S. budget deficit (69%) and the cost of healthcare reform (68%).

Top Priorities
CFOs will focus this year on cutting operational costs, developing new products and long-term strategic planning. The number of respondents citing long-term strategic planning increased strongly, increasing by 13 percentage points since 2011 and 26 percentage points since 2010. Last year’s top priority, the ability to quickly respond to market conditions, fell 24 percentage points. These results indicate that companies are employing proactive growth strategies rather than reactive strategies that reflected the prevailing uncertainty during and post-recession.

Employment
Manufacturing companies continue to struggle to fill open positions. Fifty-seven percent of respondents have unfilled positions (more than double last year’s result of 23%). The inability to find skilled workers locally is the main reason for this problem (as reported by 65% of respondents with open positions). Competition for talent and labor force immobility were cited as other top causes. As a short-term solution, companies have recognized that they cannot rely on the market to provide skilled workers and they are investing in retraining existing employees and providing training for existing employees. As a long-term solution, respondents emphasized promoting manufacturing as a strong career choice in local educational institutions. Respondents are also going to junior college or vocational schools and co-developing welding or electronic programs to help deliver skilled workers to the local marketplace.

Top Concerns: ability to maintain margins, customer demand, commodity prices
The ability to maintain margins, which was a top internal concern back in 2010, tops the list with 71% indicating it as the top internal concern. Attracting skilled workers (40%) and forecasting accurate results (38%) round out the top internal concerns. The cost of healthcare, which was the top concern last year tied for 3rd (38%) in 2012.

External concerns remained the same as prior years: customer demand (67%), price pressure from competitors (64%) and the cost of non-fuel commodities (40%). However, these concerns are not as concentrated as in past years. The cost of non-fuel commodities is down 33 percentage points and uncertainty about customer demand is down to 67% in 2012 from 82% in 2011.

“For the third straight year, our Member companies are optimistic and expecting strong growth and financial performance for their companies,” said Louise O’Sullivan, founder, president and CEO of Prime Advantage. “Our Members, and manufacturers in general, have performed well and the majority are back to pre-recession levels, which speaks to the health of their organizations. Our goal remains the same, which is to deliver cost reduction opportunities for these companies, reduce risk within their supply chains and position them with best-in-class supply partners that align with their growth strategies.”

The Prime Advantage Group CFO Survey was conducted in January and February using an online survey platform. Prime Advantage surveyed a cross section of finance executives from its Member companies consisting of industrial manufacturing firms from various sectors with annual revenues ranging between $10 million and $10 billion, of which the majority ranges between $20 million and $500 million.

Methodology: In February 2012, Prime Advantage surveyed financial executives from its Member companies whom represent US-based manufacturers in more than 25 different industries, including commercial foodservice, packaging, truck and trailer, material handling, food processing and construction. These small and mid-market companies range in annual revenues between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million. The survey received a 21 percent response rate from 200 surveyed.

In the past ten years, Prime Advantage has paid more than $113 million in rebates and discounts to its manufacturing industry Members. To request a copy of the Prime Advantage 2012 CFO Outlook Survey
visit: www.primeadvantage.com/cfooutlook/

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About Prime Advantage
Founded in 1997, Prime Advantage is a buying consortium for manufacturers with more than 750 Members and more than 125 Endorsed Suppliers. For more information on Prime Advantage, visit the website at www.primeadvantage.com

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