MHEDA dealers across the country expect growth, though Storage and Handling anticipates a slow down
Each year in the 1st Quarter issue of The MHEDA Journal, we survey the industry to try to determine what can be expected from the economy in the coming year. To do this, we solicit forecasts from our partner associations like MHI (page 65), ITA (page 68) and CEMA (page 73) We also speak to MHEDA members from both the distributor and supplier sides of the industry. This year, we had the added benefit of being able to interview well-respected economist and presenter at this year’s MHEDA Convention, Brian Beaulieu. Taken together, these forecasts should provide some insight into where the industry is heading in 2018 and beyond.
For the first time in the last seven years, there was not a unanimous expectation of growth across all industry segments. While the Industrial Truck, Engineered System and Diverse Product Mix segments all expect strong growth in 2018, Storage and Handling companies expect to take a step back this year. However, all geographic regions expect growth in 2018, with the Northeast surprisingly the most bullish going into the year after being the most tepid going into 2017.
Last year, the forecast took place around the election, which resulted in a unified Republican government. This year, we survey the industry amid uncertainty about tax and healthcare legislation. Many respondents qualified their answers with caveats about the tax bill falling through. The GOP has been touted as the “party of business” for many years and respondents seem to be operating under the impression that the unified government will create a pro-business atmosphere.
The following are responses from MHEDA dealers across North America about what they expect to see in 2018. Respondents are grouped by region, but to see anticipated growth by segment of the industry, see the graph on page 46.
In 2015, ’16 and ’17, the Northeast was the least optimistic region in the country. Last year, the Northeast predicted a meager 3.86% growth. This year, however, the Northeast is the most optimistic region we surveyed, with an anticipated 8.5% growth.
Aftermarket services will be the driving force behind an anticipated 1-2% growth for Mid Atlantic Industrial Equipment, according to CFO/Principal David Lang. That follows closely with a predicted flat market for the industry as a whole. Mid Atlantic will introduce a new line of equipment in the first quarter of the year and also hopes to add technicians to its staff. An increased emphasis on marketing will allow Mid Atlantic to outpace Federal Reserve expectations in the coming years.
AJ Jersey, Inc. President David Rizzo expects sales to be level to up 2%. A strong local economy combined with the rising imports to New Jersey through the state’s three ports will help contribute to that growth. “There are many industrial sites being started this quarter, and they will be filled with new businesses or expanding ones,” says Rizzo. “Also, warehouse space is at a premium in New Jersey with nearly 100 percent occupied for the first time in a decade.” While Rizzo predicts another robust year for the industry, he cautions that the implementation of robotic labor is a looming issue for the industry.
Liftech Equipment CFO Michael Vaughan expects 10 percent growth in 2018 on the back of accretive impact of acquisitions. Vaughan expects equipment sales revenue to be flat, which follows Vaughan’s expectation for the industry at large. The company will add additional staff to handle the administrative burden of large fleet accounts, as well as a Digital Marketing Specialist. “Customers are looking for distributors to handle more and more of the administrative burden of fleet management,” he says. “They are also stretching payment terms.” Vaughan expects the consolidation trend to continue and says that if it extends to manufacturers, it could force distributors to choose between existing product lines.
James Thomson, COO of Hurricane Industrial Equipment, Inc., also expects 10% growth in 2018. The driving factors behind that growth are parts and service combined with new opportunities with major account equipment sales. The 4th Quarter of 2017 trended higher than anticipated, which also contributed to the 10% expectation in 2018. Hurricane is looking to add service technicians as quickly as possible to help accommodate that growth. As a Canadian company, the exchange rate is something that could damper that growth in 2018.
Alliance Material Handling, Inc. is forecasted to increase sales by 15%, according to President and CEO Thomas Albero. Consistent with industry expectations, Albero expects Alliance’s systems to see the largest increase, with new, used and aftermarket sales also contributing. Albero expects the second half of the year to be stronger than the first, with tax reform contributing, if it comes to pass. The most important investment that Alliance will be making in 2018 is a new ERP System. As with many MHEDA members, consolidation has had an impact on Alliance as well. “The local dealer has become huge, causing bigger market share pressure as they have more funds to do crazy deals,” says Albero.
Hooper Handling expects growth between 10 and 15 percent next year, according to President Doug Ward. New opportunities that emerged in 2017 are expected to continue to pay dividends in 2018. The dealer will add service technicians in the first quarter to handle the robust growth expectations. Hooper will outpace the Industrial Truck market as a whole, according to predictions. With multiple generations in the workforce in buying roles, Ward has noticed a shift to more emails and less direct contact.
As in previous years, the Southeast had the most respondents to this year’s survey. However, unlike last year, when the Southeast was one of the most optimistic regions, this year’s responses were a bit more tempered. Overall, the region expects a cumulative growth of 5.7% in 2018, still very strong but not quite up to its 2017 (6.81%) or 2016 (8.9%) projections.
Professional Industrial Tire Co., Inc. Executive Vice President Ken Cooper predicts a 15% growth in 2018, after a tremendous 2017 that stemmed from an expansion of new product lines. That growth will continue into next year, as Professional Industrial Tire will add another service in the 2nd Quarter. The company is an active social media user and has seen tangible results from those efforts. The trend toward consolidation has been positive for the dealership.
Tim Jamal, Vice President of Jamco, Inc., projects a 2% growth in 2018. “We have seen a steady slow continued growth in Central Florida,” he says. “It’s getting a bit difficult to find good talent, which tells me those that want to work have jobs. Local job agencies are telling me their pool of talent is shrinking as well.” Jamco will add forklift technicians in March 2018, which will be one of the company’s most important investments. The company also intends to increase its marketing budget to improve brand recognition of both Doosan and Skyjack in Central Florida. Doosan’s decision to become the official sponsor of Major League Baseball has created a marketing opportunity for the company to increase brand recognition as well.
Jefferds Corporation President Richard Sinclair expects 7-8% improvement in 2018, due in part to the $1.6 billion road bond that West Virginia passed. The continued growth of the company’s three new Virginia branches will also lead to significant growth for Jefferds. One trend that Sinclair has seen is the need to better maximize warehouse space. “We are selling more turret trucks as the need to use existing space more efficiently comes to the forefront,” says Sinclair.
Advanced Equipment Company expects a growth of 5% next year, according to President Daryle Ogburn. “We were up in 2016 and down some in 2017, so we expect to be up in 2018,” he says. “Most of our business comes from manufacturing and there has been good activity across all sectors of manufacturing this year.” The company expects to get orders for a new type of conveyor, which should also contribute to growth expectations. AEC also brought on two new sales people in 2017 and should start seeing positive returns from that in 2018. Overall, as AEC continues its management transition, the company is well-positioned for a strong 2018.
CMH Services anticipates a flat 2018, says Owner/CEO Buddy Smith. “I believe the industry is about to take a dip, based on so many consecutive quarters of growth,” says Smith. 2017 was another strong year, with a very strong rental market as well as growth in racking projects and service. This year, CMH will continue to invest in its people, to position the company to continue its run of success. Consolidation will continue, according to Smith as, “Baby Boomers are retiring and favorable tax rates will accelerate DISTRIBUTORS consolidation, leading to bigger dealers and more manufacturers owning dealerships.”
John Williams, president of Conveyorman Inc., predicts 10% growth in 2018 based on less regulation and increased consumer confidence. “The industry is generally willing to take more risk due to the general business climate,” Williams notes. The company plans to add personnel in order processing, sales and engineering and will also be expanding its conveyor models in the first quarter. Williams does caution, however, that if Congress fails to enact tax cuts, it would hinder industry growth.
Green Energy Concepts Inc. (GECI) Vice President William Clayton also predicts 10% growth next year based on a strong economy and added jobs. 2017 saw an increase in electric truck sales that bodes well for 2018. The company intends to add two positions by the middle of 2018. GECI is involved with social media but Clayton expects that the degree of involvement will need to increase in the coming years. He expects the trend toward consolidation to continue and is concerned that it will eventually lead to increased prices and slower delivery.
Atlantic Coast Toyotalift President Jay Williford expects level growth in 2018, directly in line with level industry growth. ACT will look to add personnel in both marketing and technicians, with Williford singling out the need to increase technicians as the most important investment the dealership will make next year. Consolidation has opened up some doors for the company, according to Williford. “There are opportunities with accessory products that were previously unavailable,” he says. In 2018, the company intends to diversify outside of the material handling marketplace.
Hal Ingram, Group Vice President for Gregory Poole Equipment Company, anticipates 5% growth next year, based on price increases and new customer acquisition. “The 2017 local market being flat compared to an up national market leads me to believe our market opportunity will be slightly down next year,” he says. This tracks with the trend the Southeast has seen in recent forecast articles. Ingram predicts a slowing industrial economy in late 2018, leading to a national market that will end the year level to down 5%.
Springer Equipment Company President Ted Springer predicts 2-3% growth in 2018, primarily due to continued expansions and additions of manufacturing plants in the southeast along with some version of tax reform. “The aluminum industry continues to expand as the automotive sector replaces steel with lighter aluminum for increased fuel economy,” Springer says. The company will continue to add technicians, both in the shop and the field, beginning in 2018. “Wage inflation is an issue that drives costs for all dealers along with the impending exit of many experienced industry veterans who will be retiring,” says Springer, noting the need to invest in training to bring new employees up to speed as seasoned personnel prepare to retire.
For the past three years, the Midwest ranked as the most optimistic region in the country. This year, however, the region actually came out as the least optimistic region we surveyed, expecting a cumulative growth of 5.13% compared to 6.89% last year and 7.11% the year before. What has stayed the same, though, is that no respondents expected a decrease in sales next year, though a couple of respondents expected a flat environment.
Shelving + Rack Systems, Inc. was one of those companies expecting a level 2018. President Mike Burskey’s most important investment in 2018 will be in hiring employees, as the company is currently looking for an outside sales employee. With Cyber Security being of such paramount importance for business owners, Shelving + Rack just improved its security system. Part and parcel with the rise of the Internet has become an expectation of instantaneous response by clients, according to Burskey.
Riekes Equipment and Bublitz Material Handling President Duncan Murphy projects 8% growth in 2018. This stems primarily from a positive business climate, outsourcing by customers and delayed project implementation. “We are looking at methods and tools to improve productivity, including a new ERP system and other technology to handle increased revenue with the same staff,” says Murphy. “Our focus in 2018 will be on supplying our current offerings deeper within current customers and expanding our customer base.” On consolidation, Murphy notes that “the low hanging fruit is gone” and that consolidation has weakened traditional relationships between companies. He expects it to continue but at a slower pace.
Conveyor & Caster – Equipment For Industry Vice President Rick Andrews expects an uptick in the economy to account for anticipated growth. Like many respondents, Andrews couched his enthusiasm with a caveat about Congress not following through on its agenda, which would hinder growth. According to Andrews, the overall material handling market will experience a slight increase next year.
Jerry Weidmann, President of Wolter Group expects to see growth next year driven by 2% inflation and organic growth as well as possible acquisitions. The Group, including Wisconsin Lift Truck and Illinois Material Handling, expects to add technicians, fleet analysts and account managers in the first half of 2018. The dealerships will also introduce new products in all four quarters of the year. Following the overall trend from this year’s survey, Weidmann predicts modest growth in the IT market and double digit growth in the Engineered Systems segment (6.7% and 11.2% respectively, according to the graph on page 46).
“2017 has been an excellent year. I predict level growth because this year will be difficult to beat,” says Container Systems, Inc. President Michael Wall. He notes that state and local permitting requirements continue to become more cumbersome and expensive, which has complicated project timelines. CSI has an active social media presence and even found and hired its most recent salesperson via a social media platform. The company plans to upgrade its technology in 2018 and data security will be center stage during the upgrades.
SJF Chief Operating Officer Frank Sterner expects 3% growth in 2018, with the strong economy being the chief driving force of that growth. Sterner notes that economic confidence remains strong and if Congress enacts its tax proposals, it will remain that way. The company’s most important investment next year will be ERP enhancements and employee training.
Lift Parts Service LLC COO Kyle Free anticipates 10% growth in 2018. “2017 was a down year, but things are starting to break loose again,” he says. “A lot of end users have put off their lease renewals and just gone month-tomonth. They will be looking to replace their aging fleet next year.” The need to add technicians was a near universal agreement among Industrial Truck distributors and Lift Parts Service was no different. Free notes that, “Automation is a big topic, with higher demand for equipment to run longer shifts. We’ve added new technologies to assist with these concerns.”
Todd Maxwell, COO of RMH Systems, also anticipates in 10% growth next year, on the back of larger systems projects. Growth in smart carts, automation and robotics in 2017 allow the company to predict growth next year. The labor shortage that the industry has faced has actually produced a growth vehicle for many companies, including RMH, as it has forced companies to adopt automation that reduces labor requirements.
The Southwest region forecasts strong growth of 7.36% in 2018, an increase from its 2017 projection of 5.86% and 2016 projection of 6%.
Gerardo Padilla, CEO of Seil Rentals, anticipates 9.8% growth in 2018. The company has introduced a new product line, increased its sales staff and implemented a new sales strategy, all of which will contribute to that growth projection. As a Mexican company, Padilla does have some concerns about the effect of NAFTA in the regional economy. If NAFTA remains in place, Padilla predicts 6% growth for the industry, but if it does not he expects the industry to suffer. Aside from NAFTA, the 2018 Mexican Presidential Election is an outside influence that could alter sales projections.
Corporacion Raymond de Mexico Director General Carlos Merlo sees 6% growth next year, as the company gains additional market share. The company is prepared to handle that growth in house. Like Padilla, Merlo also sees NAFTA negotiations as an outside influence that could have a large impact on growth. The most important investment the company will make in 2018 is an increase in parts inventory and technician training.
Cisco-Eagle, Inc. President Darein Gandall expects 10-12% growth in 2018, driven by automated systems. To deal with the increased demand, Cisco-Eagle will add applications engineers in the second quarter of the year. “We have streamlined our proposal and order processes to reduce the time our customers have to wait,” says Gandall. He also expects the consolidation trend to continue. “The larger companies have already been in play and now equity groups are looking more closely at the mid level groups.”
Conveyor Solutions West expects to see 20% improvement over 2017, according to VP/Owner Kevin Thomson. New hires, new technology and new applications will all contribute to that growth. The company will be adding staff in sales and engineering and will be releasing new products in the first and third quarters of 2018. Though Thomson expects consolidation to continue, he expects minimal impact to Conveyor Solutions.
Nelson Equipment Company expects sales to decrease by 10% in 2018, but that number is a bit misleading. “We had growth of 80% year over year in 2017,” says President Mark Nelson. “We project being able to come close to that significant growth in 2018 but our conservative estimates get us to within 10%.” Says Nelson, “Growth will continue with existing customer capital investment in 2018. This growth will be propped up by the tax reduction measures hopefully approved by Congress.”
Much like the Northeast, the Western Region of the U.S. anticipates a big turnaround from projections in 2017. Whereas last year, the region predicted a cumulative growth of 3.9%, the second lowest projection from last year, this year the region anticipates growth of 8.13%, the second highest.
FMH Material Handling Solutions, Inc. President John Faulkner anticipates 5-6% growth in 2018, based primarily on an expanding economy in the Rockies. Faulkner echoed the prevailing sentiment that tax breaks would aid in this growth and a failure to pass them would hinder that growth. “With tax breaks we see strong growth of 5-6%,” says Faulkner. “Without, we see 2% growth.” FMH plans on adding sales, marketing and service technician employees in 2018. The company will also open new buildings in two locations next year.
Washington Liftruck VP of Operations Jeff Darling sees a 5-7% increase next year, as the company adds the JCB product line. “Political instability is reducing optimism about the future,” Darling says. “Local tax increases continue to negatively impact businesses. The use of third party fleet providers is increasing while making our business more complex and costly.” Darling anticipates the industry at large to see a slight decline, beginning in the latter half of the year.
Jim Radzik, president of Storage Equipment Systems, Inc., expects 15% growth in 2018. A strong economy is one of the reasons for this projection. Storage Equipment Systems will add engineering sales and administrative staff next year, as employees will be the most important investment the company makes in 2018. However, like many people have noted, the political climate is one that could negatively impact those growth projections.
Watts Equipment Company President/CEO Shirley Perreira sees 5-7% growth in store for 2018, based on new business opportunities. “We have seen a steady climb in business and growth in staff to accommodate the growth,” she says. The company brought on a scissor lift line that will be released in the first quarter that will also contribute to that anticipated growth.