2017 Q2 Pulse Tooling Update - oesa.org · PDF file85% 90% 95% 100% 2017 Q2 Capacity...
Transcript of 2017 Q2 Pulse Tooling Update - oesa.org · PDF file85% 90% 95% 100% 2017 Q2 Capacity...
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Survey Overview
Harbour Results’ 2017 Q2 survey covered a quick update on the tooling industry current state. It covered an additional dive into key components of shops’ financial statements.
Survey population includes a total of 61 respondents, split 72% mold and 28% die.
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Respondent Demographics
• Question: Please identify your Revenue for 2016• Question: Please identify your company’s geographic location
Location
32%
68%
4% of respondents from outside NA
21% 21%
26%
13%
18%
0%
5%
10%
15%
20%
25%
30%
<$5M $5-$10M $10-$20M $20-$40M >$40M
Revenue Range
28%
72%
Shop Type
Die Mold
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Shops’ Utilizations Leveling Out or Slowing in Q2
• Question: Current capacity utilization for design/machining/assembly
91%89%
87%
81%
85%88% 89%
83%
87%84%
77%79% 79%
76%
67%
76%77% 76%
81%83%
60%
65%
70%
75%
80%
85%
90%
95%
100%
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
Capacity Utilization By Shop Type
Die Mold
81%78%
80%
90%
95%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
2017 Q2 Capacity Utilization
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Overall Shops’ Capacities Around 80% UtilizedSubset of Mold Market Continues to Struggle to Stay Utilized
• Question: Current capacity utilization for design/machining/assembly
84% 83% 83%
50%
60%
70%
80%
90%
100%
110%
Design Machining Assembly
Mold Capacity Utilization
High/Low Quartile Average
86%83%
84%
50%
60%
70%
80%
90%
100%
110%
Design Machining Assembly
Die Capacity Utilization
High/Low Quartile Average
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US Shops Having Harder Time Staying Full
• Source: AMBA
75%
71%74%
82%
77%
50%
60%
70%
80%
90%
100%
<$2.5M $2.5M-$5M $5M-$10M $10M-$20M >$20M
US Mold Capacity Utilization
Lower Quartile Upper Quartile Average
25% of shops fall under the red markers in utilization
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Mold and Die Showing Very Similar P&L Statements
75% 78%
16%15%
9% 7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mold Die
Profit and Loss Summary
EBIT
SG&A
COGS
24% 26%
29% 29%
16% 16%
6%7%
75%78%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mold Die
Manufacturing Costs
Depreciation
Subcontracting
Direct Labor
Materials
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Future Booked Business Drops from First Quarter
• Question: What is your shop’s tooling revenue (2016); Quarterly Booked Business
28%
21%
7%
2%
19%
9%
4%4%
0%
5%
10%
15%
20%
25%
30%
2017 Q3 2017 Q4 2018 Q1 2018 Q2
Mold and Die Booked Business(as of Q2 2017)
Die Mold
Average Booked BusinessMold: 36%Die: 57%
22%
14%
5%3%
0%
5%
10%
15%
20%
25%
2017 Q3 2017 Q4 2018 Q1 2018 Q2
Quarterly Booked Business(as of Q2 2017)
The average shop has 44% of their revenue
booked, down over 20% from first quarter 2017.
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15.7%
11.9%
17.9%
12.2%
13.9%
9.3%
11.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2
Work On-Hold
Work On Hold Rises Back to Over 11%
The clearly cyclical nature of work on hold continues, as a significant number of shops (particularly on the mold side)
are experiencing delays
• Question: What percent of jobs that you have been awarded are currently on hold due to reasons outside of your control?
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12.8% 10.7%0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Die Mold
Work On Hold by Shop Type - 2017 Q1
D3 Driving Significant Delays in Suppliers
• Question: What percent of jobs that you have been awarded are currently on hold due to reasons outside of your control?
While a significant number of shops are
experiencing “standard” levels of delays, there are a subset of die and
mold shops experiencing
significant (+20%) delays due to several
key programs
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49%
51%56% 56%
62% 62% 62% 62% 62%68%
51%
44%
59% 59%
57% 57% 57%61% 61%
71%
25%
35%
45%
55%
65%
75%
85%
2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1
Progressive Payment Terms and AR Paid On Time
Percent Progressive Terms Percent of AR Paid On-Time
Payment Terms and Timing Peaked in First Quarter
• Question: Over the past three months, approximately what percent of your: new booked business includes progressive payment terms; accounts receivables were being paid within contract terms
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56%
72% 72%68% 68%
73%79%
79%85%
80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
General Business Outlook
Sentiment Positive Threshold
Sentiment Dips, Remains PositiveWith an increase in work on hold and decreases in
utilization, booked business and payment
terms, shops saw a slight decrease in optimism from
the first quarter.
• Question: Over the next three months, the general outlook for your business is:
While a small decrease occurred from the previous quarter, shops remain very optimistic.
Sentiment% of
Respondents
Pessimistic 0%
Somewhat pessimistic 3%
Neutral 14%
Somewhat Optimistic 44%
Very Optimistic 39%
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Primary Shops Have Less Trouble Staying Full
87% 86% 87% 86%
76%81%
87%91% 90%
95%
78%80% 80%
76%
70%
78% 78%
75%
81%78%
60%
65%
70%
75%
80%
85%
90%
95%
100%
2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2
Capacity Utilization By Primary and Secondary Shops
Primary Secondary
• Question: Current capacity utilization for design/machining/assembly
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Primary Shops More Vulnerable to Work On Hold
14%
22%
28%
20%
16%
11%
15%16%
10% 10%
16% 16%
11%
14% 14%
9%11%
0%
5%
10%
15%
20%
25%
30%
35%
2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2
Work On-Hold
Primary Work on Hold Secondary Work on Hold Level
• Question: What percent of jobs that you have been awarded are currently on hold due to reasons outside of your control?
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Primary Shops Less Frequently Provided Progressive Terms
• Question: Over the past three months, approximately what percent of your: new booked business includes progressive payment terms; accounts receivables were being paid within contract terms
35% 35%33%
45%
52% 52%55% 55% 55% 56% 56%
52%44% 44%
53% 52%57% 57%
63% 63% 63% 63% 63%
70%
20%
30%
40%
50%
60%
70%
80%
2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1
Progressive Payment Terms
Primary Secondary
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Primary shops have to approach sales
differently than other tool shops. They have
to intentionally oversell their capacity
and outsource whatever they cannot handle, since they are more susceptible to delays/work holds.
Primary Shops Have to Oversell CapacityUse Outsourcing To Flex to Accommodate Work Delays/Holds
• Question: Current capacity utilization for design/machining/assembly
76.2% 81.4% 87.4% 90.5% 89.9% 95.4%
14.3%14.3%
14.3% 14.3% 15.0%15.0%28.2% 20.3%
16.3% 16.3% 11.3%14.8%
0%
20%
40%
60%
80%
100%
120%
140%
2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2
Primary Shop Utilization, Outsourcing and Work On Hold
Work On Hold
Outsourcing
Capacity Utilization
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Primary Shops Leveraging SG&A For EBIT
76% 75%
7%17%
17%7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Primary Secondary
Profit and Loss Summary
COGS SG&A EBIT
24% 24%
28% 29%
19% 15%
4% 6%
76% 75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Primary Secondary
Manufacturing Costs
Depreciation
Subcontracting
Direct Labor
Materials
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What Are They (or Should They Be) Doing?Primary Shops Establishing strong tooling supply
base and supplier development to support them.
Focusing on becoming preferred suppliers for OEMs and large T1s and developing these relationships
Developing strategic sales plans to “feed the beast”
Capacity planning to avoid lulls
Driving efficiency in their shops and investing in capital
Secondary Shops Developing relationships with
primary shops as supply base shifts
Working to take advantage of advantageous stair steps of growth, working to drive bottom line
Pushing for advantageous payment terms
Sales planning to focus on filling walls with best-fit work with high margins
Developing niche
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2017 Still Looks to be a Very Heavy Year for Tool Sourcing
33
42
35 34
17
33
13
0
10
20
30
40
50
2016 2017 2018 2019 2020 2021 2022
Annual OEM Launches by Type (w/o Facelift) - Tool Sourcing
New Entry Redesign
While New Entry and Redesigns showing a decrease in future years, the next 18-24 months still show strong opportunity for tool shops.
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The Addition of Facelifts Level Out Work for Some Mold Shops
64 63 63 63
54
66
37
0
10
20
30
40
50
60
70
80
2016 2017 2018 2019 2020 2021 2022
Annual OEM Launches by Type - Tool Sourcing
New Entry Redesign Facelift
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Summary Despite small dips in key indicators, sentiment remains at one
of highest points in last two years.
There continues to be a division between shops who are very busy and shops struggling to bring work in.
Overall averages for profitability relatively healthy, but the underlying variance strengthens the growing division.
Shops need to capitalize on the “good times”, and make sure they are prepared for the possibility of a dip.