Order trends in the pump industry

A year ago, when we published the first Pump Industry Briefing, the world's pump makers were enjoying almost universal success. Most had just posted record order books, record sales and profit margins as high as at any stage in the twenty years I've been writing about the pump industry.

Of course, there was already concern at that time about the prospects for 2009 as the rate of growth in orders was slowing for most companies at the same time as the scale of the crisis in the banking sector began to become apparent. There was, however, great uncertainty about the length and depth of the downturn and its impact on the industries in which pumps are used. It was far too soon to contemplate the timing and nature of any recovery.

With the publication of our second Pump Industry Briefing (2009 Edition), a year later, the picture has become much clearer. Every company profiled has had to adapt its strategies to cope with an altered marketplace and changing shareholder expectations. Manufacturing facilities have been closed, recruitment halted and staff laid off. The impact of the recession varies hugely from company to company, depending on each one's exposure to particular industrial and geographic sectors, but the pain has reached every corner of the pumping universe.

The most responsive market indicator is order input, since sales and earnings figures have been protected by the substantial order backlogs enjoyed by many pump makers at the end of 2008. To try and understand where we now stand, I have plotted the quarterly order intake of ten leading pump makers over the past two years, relative to the orders booked in the first quarter of that period (i.e the three months ending of September 2007).

Not surprisingly, the picture is complicated by seasonality in certain markets and the impact of large one-off orders. Nevertheless, we can identify a general upward trend, reaching a peak in the middle of 2008, followed by a decline late in 2008 and into 2009.

What does this chart tell us about what is likely to happen in the coming year?

The good news is that some manufacturers are seeing growth in orders in 2009. The bad news is that some are still seeing orders decline, for example Robbing & Myers' most recent quarterly order bookings for its pump operations were almost 45% down on the 2007 reference point. This variation reflects the dependencies of different companies on markets with different cycles. Robbins & Myers depends strongly on North American oil & gas demand, a notoriously short-cycle market and the rapid slowdown in that sector has had a dramatic impact on its suppliers.

There is no room for complacency amongst those who appear to be riding out the storm in industries with longer cycles. The short-cycle industries (like oil & gas and pulp & paper) are directly reflecting stagnation in overall industrial output. Without a return to higher levels of general industrial activity, the money will run out for the major infrastructure investments in water and power generation that are keeping many companies afloat.

The pump industry as a whole should be looking for an upturn in orders for Colfax, Sulzer, Robbins & Myers and Ebara by the end of the year, as an indication that the global economy is truly on the road to recovery.

© BZ Engineering Briefings 2009