Grant Thornton has released its 2022 Manufacturing Benchmarking Report, which reports overall sales growth in 2022 following 2020’s decline in sales numbers due to the COVID-19 pandemic.
In 2022, the manufacturing industry experienced overall sales growth of 4.6 per cent, demonstrating that while the growth rate is trending upward, it continues to be impacted by global supply chain challenges.
In another good outcome for the industry, average debtor days were at 47 for 2022, significantly below their pre-COVID levels of 62 days for 2019.
The impact of the COVID-19 pandemic is also revealed in the report, with a sharp decline in sales growth from 7.6 per cent in 2019 to 1.79 per cent in 2020.
The report provides a unique view of the Australian manufacturing industry. Now in its seventh year, the Manufacturing Benchmarking Report helps mid-sized manufacturers track their performance against industry benchmarks across data points such as sales trends, gross margins, workforce costs, inventory lockup, and capex, and highlights potential avenues for improvement.
While sales growth for 2022 – 23 is expected to increase, the current economy’s high inflation will pose many challenges for the year ahead for all businesses, including the manufacturing sector. The anticipated inflation number for the December 2022 quarter is 7 per cent, but there are several actual cost increases businesses are also facing now that far exceed the cost of inflation.
Supply chain issues have also seen the cost of raw materials increase significantly, and both freight and energy costs have doubled or more for mid-size manufacturers over the last year.
Michael Climpson, partner and national head of manufacturing at Grant Thornton, said, “While the manufacturing sector has shown strength, it is not immune to major challenges – including skill and labour shortages, supply chain gaps and finding its place in a highly competitive global marketplace.
But there’s light at the end of the tunnel with major investment into the sector as a result of a strong push by government for manufacturers to scale up, establish Australia as a manufacturing nation, and position itself as a strategic partner in global supply chains. This includes the Modern Manufacturing Initiative, Patent Box, the R&D Tax incentive, multiple state-run initiatives, enterprises to modernise and improve Australia’s trade system and support Australian exporters.”
Climpson further explained that many of these initiatives are specifically targeted at mid-sized manufacturers and will play a key role in scaling up domestic capabilities to life.
The 2022 Manufacturing Benchmark Report also recorded staff costs as a percentage of sales, which are between 1 and 1.7 percentage powers lower in 2022 compared to the previous year across all market segments. In addition, many manufacturers have been hesitant to add to the cost base of their business due to prevailing uncertainty in the market.
The manufacturing sector has been critical to national resilience throughout the pandemic and recovery in Australia. Manufacturing contributes to the economy by encouraging commercialisation and research and development, creating efficiencies, generating export activity, and driving the production of crucial personal protective equipment and medical equipment throughout the pandemic.
The entire manufacturing report for 2022 can be found here.