Real reasons to be cheerful?
20 April 2009
I had a long chat with Ron Jakeman, Managing Director of Electrolube (HK Wentworth) recently, and he claimed that his recent optimism was based on real orders - not just wishful thinking.
Ron Jakeman is in a fairly good position to judge the current state of the market. As a manufacturer and supplier of consumables (including conformal coating, thermal pastes and resins), supply and demand reflects pretty much what the industry is doing, particularly after a few months of cutting costs by de-stocking. The company also has manufacturing facilities in China and Brazil and market penetration in every geography, including a direct operation launched last year in the USA. The reason I mention this is not to blow Electrolube’s trumpet, as it were, but to justify my belief that this company’s experience is reasonably representative of what is going on in the market.
Jakeman commented: “I think we are in a much better position this month than we were at the back end of last year. We have obviously seen reductions in sales like most people, particularly automotive, but quite a lot of it has started to come back quite strongly in February and March and we have now got the best order book we have had for several months, which is good news. We actually started to notice the first effects of the downturn back in March and April of last year. We saw it first in France and Germany where it had a big effect and in Brazil where we have got quite a lot of automotive business.”
A year ago most people were in the early stages of denial. A gradual turning of the economic cycle was more likely than global financial meltdown, or so we all thought. But if we all start to look back at our varied businesses, given that many obligations and long-lead time projects have a beneficial smoothing effect on the whole industry, maybe we were in crisis without really knowing it!
So if we went into recession before we were really aware of it, does that mean that we might be coming out of it early as well? Jakeman believes that problems in the automotive industry then moved on to the catalogue distributors and at the end of last year had rippled through to everybody. “But the good thing,” continued Jakeman: “Is that after the period of de-stocking which we think happened in November, December, January, and into February, our catalogue distributors are coming back very strongly. We now have the best order book that we have had for many months and that is across the board - with the exception of automotive!”
Even the de-stocking process, while obviously making a big hit on sales, had an upside. Jakeman said: “De-stocking was particularly noticeable with the catalogue distributors. But I think that has been true of everyone, including us. We are all trying to take stock out of the system and that means reducing stock and keeping it down to more appropriate levels than we would keep during the good times. It is very easy in the good times to cover up any inefficiencies by holding more stock. As we have overhauled our system and taken the stock out we have seen the holes left behind that we needed to fill and it has left us a lot stronger at the end of the day.”
So is this strengthening of the books over the last month genuine progress or a false dawn? Jakeman commented: “I think in terms of automotive it is going to take a long time to recover, but in many other areas of the business there has been a lot of talking the industry down – all the stories about collapse of the manufacturing industry and no-one wanting to buy anything – it is just not true. There are opportunities out there, lots of opportunities, and we are finding more and more each day. So I think to a large extent it is the media that has done quite a bit of damage in terms of people’s views and attitudes to what is going on. However, we would need a few consecutive months of sales at last year’s levels before people had the confidence to plan forwards. When you are on these reduced levels of turnover it is very difficult to plan business and know what you should be doing. But I am much more optimistic this month than I was last month. I think we may have turned!”
For a full transcript of this interview click here.
Contact Details and Archive...
Most Viewed Articles...