Around nine in 10 (89 per cent) of manufacturers and distributors headquartered in regional Australia are confident about future conditions, according to the CommBank's Regional Manufacturers and Distributors in Focus report released today. CommBank's report reveals the majority are also expecting an uplift in revenue (68 per cent) and profit (67 per cent) in the year ahead, more bullish than their metropolitan peers.
As a result, two in three regional manufacturers and distributors are seeking to increase output levels amid demand for local producers. A positive outlook is also supporting stronger overall technology investment among regional manufacturers and distributors. In the next 12 months, 83 per cent plan to increase technology investment, with 52 per cent forecasting a moderate increase and 31 per cent forecasting a significant budget uplift.
Regional manufacturers are also setting the pace for sustainable manufacturing practices, with 60 per cent having implemented multiple sustainability practices such as using renewable energy. On average, regional manufacturers and distributors are sourcing 41 per cent of their total energy supply from renewable sources, ahead of metropolitan businesses at an average of 30 per cent.
Positive sentiment is buoyed by healthy capacity utilisation rates (CUR) - the percentage of an organisation's potential output that is being achieved. The majority (90 per cent) of regional manufacturers report CUR at more than 75 per cent, which includes close to 60 per cent of regional manufacturers report running above 85 per cent.
Despite positive performance metrics, regional manufacturers acknowledge that higher interest rates and energy costs are impacting the industry in 2024. Most expect fixed costs to keep rising, and labour and skills shortages are seen as the top drag on productivity.
To navigate headwinds and meet higher production targets, many regional manufacturers are directing capital expenditure towards boosting productivity in supply chain enhancements (60 per cent), technology, software and operating systems (each 42 per cent). Of all activities supporting productivity, reskilling is seen as the most crucial.
CommBank Executive General Manager Regional and Agribusiness Banking Paul Fowler said regional manufacturers have continued investing through the economic cycle to help build capacity and much-needed skills.
"Regional businesses have been busy adapting to changing customer expectations, including demand for higher quality products and a preference for local suppliers. To lift output while managing persistent talent shortages, many manufacturers and distributors are searching for new ways to drive productivity and efficiency gains," Mr Fowler said.
"According to our research, regional manufacturers are demonstrating stronger productivity and higher intentions to invest in supply chain efficiencies, technology and labour when compared to their metropolitan peers."
Regional New South Wales-based Tyree Transformers in Mittagong is one manufacturer expanding production. Originally established in 1946 by Sir William Tyree, the Tyree brand has become synonymous with transformer and cable manufacturing throughout Australasia and beyond. Tyree Transformers is now Australia's second-largest transformer manufacturer and is meeting growing demand for quality product amid the transition to renewable energy.
Tyree Transformers Group Chief Financial Officer David Ward explains the challenge is in managing workflows to meet demand peaks and short lead-time requirements. "We're expanding our capacity by investing in people and state-of-the-art machinery because that's where the growth is," Mr Ward says.
"We are also rapidly expanding the available space in our factory floor plan at our Braemar operations and opening a new modern manufacturing site in Auckland to support both our New Zealand and Australian customers."
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