Plastics Industry Expectations Improving but Profitability Muted

The plastics industry continues on the road to recovery with 66% of firms predicting increase in turnover but high costs and raw material availability are still stifling the industry’s growth, according to the results of the British Plastics Federation’s (BPF) Business Conditions Survey June 2011 which is available to download today at www.bpf.co.uk/bcs.aspx .

The BPF has a longstanding tradition of monitoring levels of business confidence in the UK plastics industry. With the sector’s contribution to an extensive range of customer industries it is a bellwether to the fortunes of manufacturing as a whole.

The Business Conditions Survey was conducted in June with responses from 100 member firms, representing an estimated 25% of the UK’s turnover and 43,000 employees. Respondents to the survey were supplying products to the Construction, Automotive, Packaging, Electrical and Electronic, General Mechanical Goods and Healthcare sectors.

The results of the survey indicate a continuing healthy outlook for industry with a positive 66% of respondents predicting an increase in sales turnover in the next 12 months –up from the January 2011Business Conditions survey where 64% forecast an increase in turnover.

BPF Director-General, Peter Davis said, “With two thirds of plastics companies predicting an increase in UK turnover that’s good news for UK Manufacturing generally.  We are a key strategic industry supplying into all parts of the economy.  However the building and construction sector remains flat and raw material and energy costs increases means turnover doesn’t reflect volume sales.”

Another positive growth indicator is the expansion of the workforce highlighted by several member firms. 34% of respondents signalled a commitment to increase staff in the next 12 months - an increase over January’s figure of 23% - with 13% of firms intending to increase their full time staff by 6-10 %.

The shortage of raw materials remains a major issue with 55% of companies highlighting difficulties in obtaining supplies of polymers such as PET, HDPE, LDPE, PC, Acrylics, Elastomers and Additives including Pigments such as Titanium Dioxide. As a result of the scarcity of these materials, prices have shot up with all, 100%, of respondents indicating that they have experienced raw material price increases.
 
“It’s little wonder most plastic companies expect no increase in profitability despite rising turnover, when they have all, without exception, had to grapple with huge raw materials price increases. As a result 25% of respondents do not forecast growth in turnover in the next 12 months,” said Davis.

According to the survey 35% of respondents exporting to Western Europe predict an increase in turnover with 25% positive about export business in Eastern Europe.

Davis said, “Plastics companies were positive about growth in European markets which is a large but mature market. However, further Eurozone turmoil may threaten exports. Companies must look for opportunities in China and India.”