https://www.engineeringnews.co.za

Manufacturing sector sentiment tumbles in Q1

Manufacturing sector sentiment tumbles in Q1

Nascence Research and Advisory chief economist Xhanti Payi discusses the results of the first quarter 2016 Manufacturing Survey and the difficulties leading to the deteriorated sentiments of the manufacturing sector. Video and editing: Darlene Creamer 25.05.2016

Photo by Duane Daws

25th May 2016

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

Font size: - +

Falling sales, rising unsold inventory levels and increased costs marred the sentiment of the manufacturing sector during the first quarter of the year.

The Manufacturing Circle’s 2016 first quarter manufacturing survey, released on Wednesday, showed a deterioration in sentiment over the past three months, with 57 manufacturing enterprises highlighting the pressures faced with stocks piling up, a decline in sales and rising debt amid escalating costs.

Presenting the findings of the report in Sandton, Nascence Research and Advisory chief economist Xhanti Payi said the “general sense” from the survey was that operating conditions during the period had “tightened” and the South African manufacturing sector was “taking a lot of strain”.

“In the last three months, we have seen negative growth,” he noted.

Sentiment had followed that downward trend, with more than half of those surveyed saying they had seen conditions in the sector deteriorating in the first quarter. One-third indicated that conditions were stable, while only 10% saw improvement during the first quarter of the year.

There was a marginal improvement in sentiment about expected conditions in the next quarter and the rest of the year, with some 40% of the respondents expecting stable conditions and 12% expecting the environment to improve.

Just under half of those surveyed reported a contraction in domestic sales volumes, 16% reported no sales movement and 13% saw sales volumes increase above 10%.

The manufacturing companies that exported saw better conditions, with only 20% posting a contraction in sales during the period. The remainder indicated that sales had remained unchanged or increased.

However, the tightening conditions in which the manufacturing sector found itself in were noticeable in the levels of unsold stock reported during the period under review, Payi pointed out.

On average, 10% of manufactured inventory went unsold in the first three months of the year, holding up cash.

Some 58% of those surveyed said that less than 5% of their stock was unsold during the first quarter, while a third of the respondents were left with 5% to 25% of stock and more than 10% said that a quarter of their stock remained unsold in the first three months of the year.

In terms of first-quarter debt levels, over half of those surveyed indicated that their debt levels had increased, with 90% of the respondents accessing finance at higher rates.

Overall costs during the first quarter were said to have increased an average of 12.2%, while imported costs were seen to rise by an average of 10.6%.

Some 60% of the respondents said their total costs rose over 6%, while nearly 70% said imported costs rose more that 6%.

Materials, utilities and labour were major cost drivers during the first quarter.

Meanwhile, the respondents reduced their workforce, increased the use of technology and implemented a range of efficiency measures to stay competitive and mitigate the unfavourable environment.

Around 25% of the companies surveyed said that, during the first quarter of the year, they had reduced their workforces; however, 10% said they increased it by more than 10%.

Further, 17% of the respondents were expected to reduce their headcounts over the next quarter, while three-quarters of the respondents believed the same levels of employment would be maintained during the next quarter.

Ten per cent expected to increase their staff complement.

To maintain or increase competitiveness, 83% of the companies were still pursuing new methods with efficiency imbedded as a large focus. Just under 45% worked to improve the use of resources or work more efficiently with inputs and 20% said they had implemented new products or become more innovative.

Seventeen per cent said they had mechanised their operations or introduced advanced manufacturing methods.

Edited by Creamer Media Reporter

Comments

Showroom

Booyco Electronics
Booyco Electronics

Booyco Electronics, South African pioneer of Proximity Detection Systems, offers safety solutions for underground and surface mining, quarrying,...

VISIT SHOWROOM 
Booyco Electronics
Booyco Electronics

Booyco Electronics, South African pioneer of Proximity Detection Systems, offers safety solutions for underground and surface mining, quarrying,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (15/03/2024)
15th March 2024 By: Martin Creamer
Magazine round up | 15 March 2024
Magazine round up | 15 March 2024
15th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.072 0.13s - 157pq - 2rq
Subscribe Now