The results of a September national survey of 600 manufacturing chief financial officers released earlier this month reported optimistic prospects for the new year, but an informal survey of some CFOs in the region was less sanguine.
About 73 percent of the CFOs – 74 percent in the Northeast – expect their companies’ revenue to increase and 46 percent predict increased profit margins, according to the report, issued by Bank of America Business Capital in
Connecticut.
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John Grady, executive director of the Rhode Island Manufacturers Association, however, said he “doesn’t see [Rhode Island manufacturers] talking about revenue increases” for 2006.
*William McCourt, CFO at Soluol in West Warwick, said there is about a “50-50 chance” the company will increase its revenue. It has been a difficult year for the company, despite initial projections of growth, he said.
*Paul J. Kelly, CFO at Quaker Fabric Corp. in Fall River, said the company must find new markets for growth to increase annual revenue, a prospect not made easier by volatile consumer confidence levels due to, among other things, higher energy prices.
*Duane Schmidt, CFO of Wardwell Braiding Machine Company in Central Falls, does expect an increase in revenue in 2006 based on the higher number of backlog orders that the company has now compared with last year.
And while revenue increased from 2004 to 2005, it has yet to reach the high point of 2000 and 2001, said Schmidt.
*Kevin Mahoney, CFO at A.T. Cross in Lincoln, said the company expects earnings to increase in 2006. The company is in the midst of one of its busier times of the year with holiday sales, but he said he could not indicate if 2005 sales would exceed 2004.
Despite optimistic individual projections nationally, the study reported that only 33 percent of respondents – 25 percent in the Northeast – predicted the manufacturing sector would expand. This is down from 44 percent last year – the fourth consecutive year with a declining outlook, according to the report.
It is difficult to grow in Rhode Island because of higher taxes compared with other states, including neighboring Massachusetts, said Schmidt. For example, in order to receive a federal tax refund when it records a net operating loss, a company must forgo its state refund, or vice versa.
“There are a lot of incredibly ingenious, inventive and hardworking manufacturers [in Rhode Island] that the state does not do enough to support,” said McCourt.
The survey reported a slight increase in the average manufacturing sector rating of 59 – up one point from last year – on a scale of 0 (weak) to 100 (strong).
Ten years ago, the manufacturing rate in the state would have been at about a 70, said Grady, noting that Rhode Island is currently about on par with the national
averages.
About 58 percent of the CFOs (57 percent in the Northeast) expect the national economy to expand next year. This is the lowest average score in four years and down from 77 percent last year, according to the study.
The “best-case scenario” for the economy would be to remain steady, said McCourt. But a dip in the economy based on the uncertainty of energy prices and interest rates is possible, said Mahoney.
