Australian small and medium-sized enterprise (SME) manufacturers are experiencing a wave of optimism as new data reveals a 4.5 per cent rise in sales revenue across industries for the third quarter of 2024.
The findings come from the latest Unleashed Manufacturing Report, which assesses the performance and health of manufacturing businesses in Australia, New Zealand, and the United Kingdom.
The report, compiled by inventory management software provider Unleashed, analysed data from approximately 1,300 SME manufacturers.
It highlights strong sales as a key driver of increased stock levels and purchase orders, pointing to an anticipated surge in future sales.
The Manufacturers’ Health Index, a key component of the report, underscores a positive trajectory for the sector despite lingering challenges.
Unleashed Head of Product Jarrod Adam hailed the findings as a much-needed reprieve for manufacturers.
“To see sales revenue rise is a welcome relief for struggling SME manufacturers. The last few years have been tough, and businesses have worked hard to strengthen their sales pipelines, manage inventory, and enhance their overall health. Many are now well-positioned to capitalise on improved economic conditions,” Adam said.
Between 31 June and 31 September 2024, average sales revenue rose by 4.47 per cent across all industries, marking a significant 16.98 per cent increase compared to the same period three years ago.
According to Adam, this recovery in sales revenue reflects growing confidence among SME manufacturers, who are also bolstering their purchasing activities in anticipation of sustained growth.
The report found that purchase orders were up 8.6 per cent this quarter and 23.7 per cent from Q3 2021.
Despite the positive sales and purchasing metrics, profitability measured as Gross Margin Return on Inventory (GMROI) declined by 8.36 per cent in the quarter.
However, this dip is attributed to increased investment in inventory, which is expected to translate into higher profits in the coming quarters. Adam noted that while profitability reflects past performance, metrics like purchase orders signal future gains.
Excess stock levels have remained stable, increasing by only 0.6 per cent from the previous quarter but significantly up by 27.7 per cent compared to three years ago during the pandemic.
Adam emphasised that stockpiling indicates optimism among manufacturers. What we’re seeing now, coupled with an increase in purchase orders for future sales, is that local manufacturers are feeling confident about the future,” he said.
The positive trends extend across various manufacturing sub-sectors. In the beverage industry, sales revenue rose by 14.22 per cent over the previous quarter, with purchase orders up by 14.38 per cent.
Stomping Ground Brewery founder Guy Greenstone attributed this growth to improving consumer sentiment and a focus on supporting local businesses.
“As a business we have benefited from the continuing trend of consumers supporting local and supporting independent. We have really focused on our region of Victoria, and our market has responded by supporting us in turn. It has been a great moment for an SME brewer to build a real community around our product,” Greenstone said.
Chemical manufacturers also saw gains, with sales revenue up 9.18% for the quarter. Evan Smith, director of biochemical firm Enzyme Generation, noted that growing demand for environmentally sustainable products is driving the sector’s expansion.
However, he highlighted challenges such as complex supply chains and rising logistics costs, which manufacturers must navigate to sustain growth.
Meanwhile, the construction manufacturing sector reported a 9.45 per cent rise in purchase orders, suggesting a rebound in an industry often seen as a bellwether for broader economic trends.
Food manufacturers also recorded a 7.24 per cent rise in sales revenue, while purchase orders surged by 16.97 per cent, indicating strong future demand.
