Canadian manufacturers expect low growth

Almost half of Canadian manufacturers are more optimistic than their international counterparts about the global economy in the next two years. But they also believe the sector has some obstacles to overcome to remain competitive, finds a KPMG survey.

As such, 46% anticipate the global economy will experience low growth (between 0.1% and 1.9%) compared to 20% for their international counterparts. Sales growth also remains the overwhelming priority for 74% of Canadian manufacturers, who are smaller- to medium-sized niche market businesses, while reducing the cost structure comes in second at 56%.

Read: Canadian manufacturing expanding: RBC PMI Overall, Canadian manufacturers are focused on controlling costs and maintaining competitiveness which means they are actively reviewing all aspects of their cost structures including supply chains, distribution, profitability by market, products and clients.

They also face two big challenges in the next two years: increased competition and pricing pressures (60%) and ensuring the business model remains competitive (36%). Less diversified sources of financing make it more difficult for national manufacturers to fund growth but they also need to invest in innovation to remain competitive.

Read: Manufacturing business conditions deteriorate

Two-thirds of respondents are focusing on enhancing existing product lines and services, as opposed to investing in breakthrough technology (15%). Manufacturers are spending on smaller innovations or tweaking products and processes that do not require large spending investments.

“The tough economic climate during the past four years forced many manufacturers, including the smaller, niche players in Canada, to reassess their plans, focus on the bottom line and control costs,” says Laurent Giguère, national industry leader, Industrial Markets, KPMG in Canada. “Shifting to a long-term and innovative focus will ensure the Canadian manufacturing sector remains competitive and productive and a vital part of the national economy.”

Read: Manufacturing business conditions pick up: RBC Other findings include:

• Canadian companies recognize increasing opportunities outside of the United States and Canada: 31% expect to increase sourcing from China and 12% from India;
• 53% reduce labour force/costs and 40% exit unprofitable product lines in order to control costs;
• Canadian manufacturing is seeing a shortage of skilled workers in the trades, which is becoming an issue within the industry; and
• Risk management ranks low on the list for Canadian companies, yet if they were to increase their operations, they must develop strategies and plans to address supply chain interruptions or quality issues.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.