Regional manufacturers and distributors reveal ‘bullish’ economic outlook: CBA
Regional manufacturers and distributers have expressed confidence in future economic conditions and will increase output levels in the next 12 months, according to a new CommBank report.
Around 89 per cent of manufactures and distributors in regional Australia have reflected optimistic feelings and perspectives towards future economic conditions, as found in the Regional Manufacturers and Distributors in Focus report.
The report operated by the Commonwealth bank of Australia (CBA) highlighted 68 per cent are also expecting an uplift in revenue and 67 per cent are expecting a lift in profits during the year ahead.
CBA said as a result of the positive outlook, two in three regional manufacturers and distributors are seeking to increase output levels amid demand for local producers.
“A positive outlook is also supporting stronger overall technology investment among regional manufacturers and distributors,” CBA said.
“In the next 12 months, 83 per cent plan to increase technology investment, with 52 per cent forecasting a moderate increase and 31 per cent forecasting a significant budget uplift.”
Based on the report, it was also found 60 per cent of regional manufacturers have implemented multiple sustainability practices such as using renewable energy.
CBA said regional manufacturers and distributors are sourcing 41 per cent of their total energy supply from renewable sources, whereas metropolitan businesses only average at 30 per cent of renewable energy.
CBA executive general manager for regional and agribusiness banking, Paul Fowler, said regional manufacturers have continued to be strong and invest through the difficult economic climate to build capacity and skills.
“Regional businesses have been busy adapting to changing customer expectations, including demand for high quality products and a preference for local suppliers,” he said.
“To lift output while managing persistent talent shortages, many manufacturers and distributors are searching for new way to drive productivity and efficiency gains.”
The report highlighted the positive outlook is being supported by healthy capacity utilisation rates (CUR), which refer to the percentage of an organisation’s potential output that is being achieved.
Ninety per cent of regional manufacturers report CUR at more than 75 per cent, which includes 60 per cent reporting CUR above 85 per cent.
CBA said regional manufacturers have acknowledged challenges despite being positive about the future such as higher interest rates and energy costs.
“Most expect fixed costs to keep rising and labour and skills shortages are seen as the trop drag on productivity,” CBA said.
“To navigate headwinds and meet high production targets, many regional manufacturers ae directing capital expenditure towards boosting productivity in supply chain enhancements, technology, software and operating systems.”
Fowler said regional manufacturers value reskilling as being the most crucial activity in supporting productivity.
“According to our research, regional manufacturers are demonstrating stronger productivity and higher intentions to invest in supply chain efficiencies, technology and labour when compared to their metropolitan peers,” Fowler said.
Regional NSW company Tyree Transformers is a manufacturer expanding production in the next 12 months, according to CBA.
Tyree Transformers Group CFO David Ward said the biggest challenge with increasing production is in managing workflows to meet demand peaks and short lead-time requirements.
“We’re expanding our capacity by investing in people and state-of-the-art machinery because that’s where the growth is,” he said.
The CBA report demonstrated regional manufacturers and distributers are more bullish than their metropolitan peers.
