Sales of injection moulding machines are holding up well despite the uncertainty on how trading agreements are likely to pan out following the UK referendum to leave the European Union (EU).
Barry Hill, managing director of Wittmann Battenfeld UK, tells PRW sales at his firm are still very strong and well ahead of budget. “Our one-stop-shop approach continues to help drive machinery sales; especially our strong showing in robotics and automation and in an increased activity for us in Ireland, not least in the med-tech sectors there,” he says.
Wittmann Group sales also continue to thrive. In 2015 group turnover increased 19.5% on 2014 to Ä359.4m (£323m) and sales expectation for 2016 is expected to rise to approximately Ä380m (£342m). Hill says global demand is especially strong for SmartPower and MacroPower injection moulding machines, for automation and for temperature controllers. “Expansion of our production facilities is taking place in most global locations.”
Colin Tirel, managing director of Arburg UK, paints a similar picture. He tells PRW: “The market has held up really well all the way through 2016 and we are very happy with the business to date. We will take a good backlog of machines into 2017.”
He believes that it is too early to say how the sales will perform once Brexit talks start, probably from next March. Tirel says: “I believe through many discussions with customers that it is simply to early to tell at this stage. It is clearly going to be a long, drawn out process and all we can do is hope that the whole process does not lead to any level of protracted uncertainty in the market.”
Meanwhile, Nigel Flowers, managing director of Sumitomo Demag, says the first six months started off strongly, “although clearly the Brexit result has started to have an impact”. He believes uncertainty on how the relationship the UK and the EU will unfold in the next couple of years has unsettled the market.
Although Flowers is anticipating that physical sales of machine are likely to fall, possibly by around 10% once Article 50 has been triggered, “the UK will continue to be one of the largest markets for plastics production in Europe”. He adds that with such a high volume of machines in circulation his firm is expecting customers to invest more in service, spares and support.
Terry O'Reilly, sales director of Plastics Machinery Sales, reveals his company has seen a more challenging market this year, with the uncertainty surrounding the European referendum prompting a number of companies to delay investment plans earlier in the year on “a wait and see” basis.
However, he says: “Obviously investment decisions cannot be put off indefinitely and we are certainly seeing an increasing level of business from most industrial sectors. Automotive is still buoyant, Jaguar LandRover especially, white goods, household, packaging, as well as building and construction amongst others.”
He adds that in addition to an increase in firm machine orders in recent months, the enquiry level has also risen and says this “points to what is likely to be an exceptionally good year next year”.
Peter Kirkham, managing director of Billion UK, says his firm has seen a flattening of new machine orders in the second half of 2016. He is quick to point that is due to comparison “with an exponentially high level of activity over the past couple of years”.
Kirkham adds investment decisions are now taking longer due to some uncertainty over how markets might develop over the next year or so, and of the higher cost of equipment due to exchange rates. “That said, our main customer base in packaging, medical and consumer product remains very active with companies fighting to meet demand.”
Currency fluctuations due to the Brexit vote are also posing challenges for other machinery distributors.
O'Reilly says the devaluation of sterling has been problematic in that machine costs have risen to a level that is not always easy to recover fully from the market and “as a consequence our profit margins have undoubtedly been compromised as a result”.
Tirel says his firm has “not yet” felt the impact of currency fluctuations on sales and profits. “This is a concern going forward. However we have been here before and managed it and will do so again.”
But Flowers believes the weak pound has had an impact on machine sales in the second half of the year. “This is true across the whole market, and not limited to Sumitomo Demag,” he says. “The main reason is the weak pound had added 15% to the machine price overall. While the larger companies or those with a European euro income stream have continued to invest, others have deferred or delayed their investment decisions.”
Flowers adds another impact of the weak sterling is that while exporters have seen an increase in competitiveness compared to European manufacturers and have experienced increased sales, raw material cost has also increased. He attributes this primarily to foreign exchange rates. “It has resulted in margins being squeezed for customers whose products comprise a significant amount of raw material.”
In contrast, Hill says Wittmann Battenfeld UK has seen no impact of currency fluctuations “in terms of machinery sales, and only a slight effect upon profit as most of our ancillary equipment is sold in sterling”.
Sectors that continue to show strong demand include automotive, medical, packaging and trade moulding. Hill says: “The automotive supply chain is still strong. Last month's expansion news from Nissan in Sunderland is a great boost to the supply chain. Our general trade moulding customers remain very healthy and competitive.” He adds advances in medical moulding were “also helping to increase market share in that sector which shows very healthy growth”.
Arburg's Tirel also reports a widespread of sectors are still investing in machinery. He says: “We have seen growth in machine sales within the trade moulding sector, continued levels in the electronics, automotive, medical and packaging to name a few. We have enjoyed good results from all areas with particular pleasing developments in the North.”
Flowers says that before Brexit, the automotive sector especially was performing strongly and there was confidence that the domestic automotive supply chain, especially injection moulders, would benefit. He tells PRW: “The drop in the value of sterling has meant exports to the continent are very competitively priced. Moulders exporting components globally may discover that in the short term the exchange rates work in their favour. Importers however may really start to struggle.”