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Business Observer Friday, Dec. 19, 2003 18 years ago

Bellwethers Buoyed

A late year recovery for the Gulf Coast manufacturing industry has companies looking forward to the new year.

Bellwethers Buoyed

A late year recovery for the Gulf Coast manufacturing industry has companies looking forward to the new year.

By Sean Roth

Real Estate Editor

When Dick Dobbyn is happy, he has plenty of company. Dobbyn, chief financial officer for the Sarasota hydraulic cartridge-valve and manifold manufacturer Sun Hydraulics Corp., has seen a gradual increase in new orders.

This spells good news for the economy and manufacturing market. When orders go up at Sun Hydraulics, it usually signals an increase in manufacturing as well. The company's primary customers are manufacturers, and so an increase typically means those manufacturers are buying new machines and/or increasing production. The surge in orders at Sun Hydraulics is just one of the bellwethers indicating a positive 2004 for the manufacturing industry.

"The most exciting thing for us is the pickup in demand," Dobbyn says. "We are expecting this (growth) to continue through 2004."

For year-to-date, as of Sept. 30, the company's sales were up 8% from the same period in 2002. (Sun Hydraulics had net sales of $64.5 million in 2002.)

The company, however, doesn't plan to hire more workers because it didn't lay off workers during the downturn, which started in late 2000.

"We made a conscious decision early on to maintain our workforce," Dobbyn says. "We are well prepared to take any increases in the volume. We have made a lot of productivity improvements - adding additional automation, employee cross training. We can produce and ship significantly more product."

But the employees will benefit. Dobbyn says that the salary freeze, in place since the downturn began, will be lifted Jan. 1.

The good news isn't limited to the manufacturing industry in the Sarasota-Manatee area. Pinellas County, now the second-largest home for Florida's manufacturing jobs, is expected to fare well in 2004.

"We are actually starting to feel some momentum," says Kim Green, executive director of the Bay Area Manufacturers Association in Clearwater. "The industries are starting to hire again, and new orders are up as companies try to replace their inventories."

A few months ago, conditions didn't seem so rosy.

In mid-July, the Pinellas County Economic Development Council completed its annual survey of manufacturing firms, which showed gradually declining morale. Sixty-eight percent of the 218 companies that responded rated their business performance as "excellent/good," but that was down from 76% in 2002. At that time, 59% of companies expected revenue in 2004 to be better than this year, a decline from 64% a year earlier. One of the few positive notes in the survey was that about two-thirds (66%) of the companies planned to expand their product line.

But it appears that the survey was done too soon to capture the recovery. "I would tend to agree that things have picked up toward the end of the year here," says Suzanne Christman, senior manager of business development for the Pinellas County Economic Development Council. "We are seeing substantially more businesses that are looking to relocate, and we are getting a lot of local manufacturers looking into expanding."

Aerosonic Corp., a Clearwater manufacturer of aircraft instruments, was one of the lucky companies during the three-year downturn; it had a sideline business supplying products for the defense industry. Still, business is now even better for Aerosonic. "We are pretty encouraged for the future," says Mark Perkins, executive vice president of sales and marketing. "General aviation has been in a downturn since Sept. 11. Now things are starting to pick back up. We have a steady backlog of work right now. We should stay at the same basic employment level (about 140) for the moment."

Hillsborough County experienced similar change. Glenn Fons, manager of Oleco Inc.'s Tampa production plant, says the manufacturer, which produces cable, harnesses and electro mechanical assemblies, has experienced a recent increase in demand. "It hasn't been a sharp spike," Fons says. "It has been a much slower growth. This is actually good, if it were to spike up, it could spike down just as much. This increase just started in October or November."

Fons says the plant doesn't yet need to hire additional workers, but existing employees are being asked to produce more. "Maybe in another month or two we might have to hire some additional people," he says. "Efficiency is kind of the game everyone is playing. It's great for the bottom line."

Several miles to the south, PGT Industries Inc., a Venice-based manufacturer of custom windows, doors and patio rooms, continues to post "help wanted" signs. Rod Hershberger, executive vice president and chief operating officer, says the company, whose sales have increased every year since 1984, expects to add about 52 employees to its Florida office and 98 to 123 employees to its Lexington, N.C., office in 2004. "We have been very busy," Hershberger says. "We have been having record years. We are growing at about 20% each year."

Due to that growth, PGT Industries, with about 1,583 Florida plant employees, tends to overstaff by about 10% to handle production, Hershberger says, adding, "We have extremely short lead times so we need that extra staff in order to train and get ready for the next wave of growth."

Even so, PGT Industries' productivity per employee has increased. "We have doubled our production capacity (sales per square foot of manufacturing space) in the past four years," he says, " and we believe we have the ability to double it again. We have been effecting about 12% to 15% productivity improvements per year."

Nancy Engel, executive director of the Manatee County's Economic Development Council, says that the area is recovering nicely. "I think we are doing better than the national standard," she says. "We are working with a number of manufacturing companies talking about expansion right now. We aren't taking huge size expansions, but we are talking buildings. We also have not had the major layoffs that have affected other areas of the country. Our area is much more stable."

Officials from Tropicana Products Inc. in Bradenton expect continued growth for the juice beverage manufacturer and distributor owned by Pepsico. "This year we gained two share points to 40% of the chilled case," says Meghan Stout, manager for communications. Next year, Tropicana plans to unveil two new juice drinks, along with a new Tropicana Pure Premium Essentials brand. "This has been a tough category the past few years. Over the past few years we have found creative ways to be more productive than ever. But we are seeing improvements (in the market). Now as category leader, we have to drive the category."

Kevin Connelly, president of Sarasota-based Apollo Sunguard Systems Inc., president of the Sarasota Manatee Association of Manufacturers and vice president of the Florida Manufacturers Association, is upbeat about Gulf Coast manufacturing in the short term, but he worries that overseas competition could unfairly harm the American market. "This year we already have sizable orders for next year," Connelly says. "We were in bad shape toward the end of the 2000 - so much so that we even got an emergency SBA loan to cover us. I am happy to say that 2003 was a strong rebound year. We are already 50% ahead of 2000 (in gross sales). We had minimal contracts in hand in 2002 for this year, so we are proud to start the year off (2004) with strong order base."

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