Report: Revenue dips among Aussie manufacturers, budget brings hope

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Australian manufacturers have experienced a decline in sales revenue this quarter following their best performance in five years, according to the latest figures from inventory management software brand Unleashed.

The Unleashed Manufacturing Health Index revealed a 12 per cent drop in average sales performance since the end of 2023. Despite this dip, the sector remains 11% ahead year-on-year, reflecting an overall upward trend.

Unleashed’s report, which examines businesses across 12 manufacturing sub-sectors in Australia, New Zealand, and the UK, provides a comprehensive view of the industry’s health.

“As supercharged inflation starts to cool, it’s laid bare how these high interest rates are cutting into the amount of spare change Australians have, which hits at the heart of our local manufacturers,” said Unleashed Head of Product Jarrod Adam.

Only two of the 12 subsectors—Beverages and Building & Construction—saw revenue increases over the quarterly period. However, Adam noted that last week’s Future Made in Australia budget could bring positive changes for some sectors.

“For local manufacturers like those in food who are producing more costly, higher quality goods, they’ll be particularly sensitive to tightening consumer spending,” Adam explained. “But on the flipside, last week’s budget allocation is a massive boost for other parts of our manufacturing sector, giving them long-term confidence for reinvestment.”

Enhanced stock control boosts industry performance

A bright spot for the industry has been the improvement in lead times as supply chain conditions stabilize. Lead times have more than halved, reducing by 55 per cent since late last year to just 14 days on average, marking a five-year low for the industry.

These improvements are attributed to both normalizing global supply chains and the intense focus on logistics by Australian businesses over the past three years.

Notably, Australian producers of medical supplies, who were heavily impacted by supply chain issues, have seen their lead times drop from a mid-pandemic peak of 61 days to an average of 14.

Beverage sector thrives amid challenges

Among the 12 manufacturing subsectors, Beverages (24 per cent increase) and Construction & Building (6 per cent increase) were the only ones to report revenue growth since the previous quarter.

The Beverages sector, in particular, has shown impressive revenue growth, up 43 per cent year-on-year, the highest of any subsector.

Conversely, the food sector has struggled, with a 13 per cent drop in sales revenue in the last quarter and a 16 per cent decline year-on-year.

The Beverages sector also reported improved lead times, now averaging 10 days, a 36 per cent reduction from the previous quarter and the fastest among the 12 Australian manufacturing subsectors.

Construction industry sees positive growth

Sales revenue for manufacturers in this sector jumped 6 per cent since last quarter and 13 per cent year-on-year. Additionally, the industry saw a significant 26-day reduction in average lead times since late last year.

Alex Boury, general manager of Construction at construction software business COINS, highlighted the importance of productivity in the sector. “The construction industry traditionally operates on single-digit profit margins, and right now there is demand in the sector to boost productivity. We are seeing the value investing in technology can bring to construction, not only in transforming business and project management but in areas such as offsite manufacturing which can improve efficiencies on-site drastically,” said Boury.

eCommerce gains traction in manufacturing

While most manufacturers in the report are B2B firms using traditional sales channels, Australian manufacturers are increasingly diversifying their sales models. Currently, 48 per cent of Australian and New Zealand firms are using or have used eCommerce tools, up from just 4 per cent in 2021.

“While it’s disappointing to see sales revenue drop in Q1 2024, there have been standout performances in some categories, notably Beverages,” said Unleashed’s Jarrod Adam.

“Year-on-year growth is heading in the right direction, and it’s promising to see just how much emphasis these SMBs are putting on productivity gainers like better stock control and diversified sales channels,” he concluded.