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Revealing the profit challenges and opportunities in the power transmission/motion control industry, the 2009 PT Distributor Performance Report released by the Power Transmission Distributors Association indicates that the typical PT/MC distributor experienced an increase in gross margins but slower sales growth than anticipated at the beginning of the year.
When asked in October 2007 to forecast sales for 2008, just over 50% of distribution firms anticipated growth in sales of between 5% and 14.9%. The actual sales growth rate for the median PTDA distributor, was lower than anticipated at 1.7%. As for gross margins, 80% forecasted growth in gross margins in the range of 0 to 1.9%. According to the data collected for the PT Distributor Performance Report, gross margins as a % of net sales beat expectations with an increase of 3%.
The results suggest the most successful firms continue to exhibit critical profit variables well above those of the typical firm:
- With respect to the bottom line, the typical PTDA distributor member generated pre-tax profit of 4.1% on annual sales of $30.1 million, compared to high-profit firms that produced an average profit of 6.8% on sales of $44.6 million.
- While the typical firm experienced an increase of 1.7% in sales in 2008, high-profit distributors reported a 3.7% gain in sales growth over the same period.
High-profit firms reported a pre-tax return on assets (ROA) of 20.4%, while the typical PT/MC distributor reported ROA of only 11.9%.
The PT Distributor Performance Report, conducted annually for PTDA by Profit Planning Group of Boulder, CO, is a compilation of operational statistics from 49 PTDA members throughout North America. The report is designed for distributors seeking information to benchmark their company's performance against that of the industry as well as manufacturers looking to obtain insight into the operational and business needs of their distributors.