Manufacturers Passing Through Costs, Increasing Gross Margins

July 28, 2006
Even as costs -- particularly energy costs -- rise for large U.S.-based manufacturers, passing through those costs is providing companies with a chance to test their pricing power and to maintain gross margins. A recent PricewaterhouseCoopers' (PwC) ...

Even as costs -- particularly energy costs -- rise for large U.S.-based manufacturers, passing through those costs is providing companies with a chance to test their pricing power and to maintain gross margins.

A recent PricewaterhouseCoopers' (PwC) study of 62 senior manufacturing company executives reveals that while costs have increased for 53% of their companies, nearly as many companies --45% -- have boosted their prices. And 40% of the surveyed companies have increased their gross margins.

These strong margins are enabling the majority of manufacturers -- 60% -- to make major new capital investments during the next year, notes PwC. Fifty-seven percent of those planning to make major new capital investments expect to add to their investment in new products and services, 49% expect to add to their IT investments and 47% anticipate adding to R&D investment.

Overall, the manufacturing executives anticipate an average revenue increase for their companies of 8.1% during the next twelve months, up from the 7.8% average increase executives projected three months ago. Thirteen percent see decreasing profitability as a potential barrier to growth; however, that figure is down from 22% three months ago.

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