Machinery survey 2021: Room for improvement

How did machinery-makers fare last year, the second to be affected by the coronavirus pandemic? Simon Robinson looks at the numbers, and interviews some key players to get their take on the current state of the market

The past couple of years have been unusual, to say the least. There was a feeling that the machinery business had prospered in 2020 because of the momentum of orders placed in 2019, and the strong demand for more comfortable furniture by populations forced to lockdown at home. The question for 2021 was, would that continue?

It is certain that 2021 was a complicated year. It was characterised by the sputtering restart of business activity: the global economy tried to work its way through dislocated supply chains, bottlenecks, the Suez Canal blockage, raw material and computer chip shortages, and intermittent problems with raw material supply in the PU sector. As we will see later, these themes are continuing into the first part of 2022.

Looking at the results of the annual machinery survey, it seems that that the furniture and bedding sector came off the boil slightly in 2021. The 16 companies that responded to this year’s survey said sales in the sector were strong, but not as strong as in 2020. Nor were they quite as high as the five-year average.

Although our survey pointed to a slowdown in the flexible foam market in 2021, the greatest deceleration seems to have been in sales to general industry. Responses to the survey showed a significant fall between 2020 and 2021. In fact, the calculation showed that the index fell by 68% between the two years.

We calculate the numbers generated by the survey and the other relative numbers by counting the votes for each category, and dividing by the total number of responses to the question in each year. This gives a relative measure of responses, and helps to iron out the effects of different numbers of companies answering our survey in different years.

There was also a small drop in the index of companies suggesting that automotive was a the fastest growing sector in 2021, as that industry continued to labour under a shortage of computer chips. Several respondents were more downbeat about the automotive sector in the interviews that follow these numbers.

Respondents suggested that 2020 and 2021 were about the same for new business in the refrigerated appliance sector. However, the stand-out area for real growth was in building and construction. Here, the index of companies saying this was a fast-growing sector increased from 2020 to 2021, and headed towards the five-year average.

Looking regionally, Central and Eastern Europe returned to the top spot in 2021 as the standout region for sales growth. According to respondents, the index of fastest-growing sales in the region was 2.3x the five-year average, and 2.5x higher than in 2020. The index for 2021 was higher for Central/Eastern Europe than at any time since 2011.

North America also recorded its highest growth index since 2011, and was comfortably ahead of its 2020 result and five-year average. This is also reflected in the interviews. There was strong performance in Middle East purchases in 2021.

Western European numbers were down slightly on the average in 2021, and more markedly compared to 2020. Far fewer companies said growth was strong in China in 2021, as the country dealt with coronavirus through a programme of vaccination and regional lockdowns. This reduced the demand for polyurethane products and the need to invest in new machinery to make it.

Sales were down in every region in 2021. The country where the respondents’ perception that the fall was greatest was China, where it was down to 25% of its level the year before. This was followed by south-east Asia, South America and Central/Eastern Europe.

How are the machinery companies facing the difficult market situation?

According to the survey, while they may be very concerned about their ability to complete machinery at the moment, they are quite upbeat. Among the respondents, more companies than the five-year average said they were considering business acquisitions. In contrast, the survey suggested the number of companies looking to expand in 2021 was down from both 2020 and the rolling five-year average.

Overall, however, global polyurethane machinery-makers’ confidence crept upwards in 2021 to above the long-term average. In 2021, the UTMcIndex was 4.75, up from 4.70 in 2020, but down from the all-time high of 6.19 in 2019. The average annual figure since 2012, when we started calculating the index, is 4.68. Over the past five years, the industry has been becoming slightly more optimistic, returning an average value of 5.0

Urethanes Technology International/UTECH-polyurethane.com generated this year’s Index after surveying machinery companies across the world in February and early March 2021. Companies were asked if they wanted to expand their business, upgrade facilities, consolidate, build new plants, buy competitors, or sell part or all of the company. We then normalised the respondents’ results in each category by the number of respondents, and an index is calculated. This accounts for how positive the actions are.

Two companies were notably positive going into 2022. One, Saip, recently announced plans to expand into the US with a facility in Columbus, Ohio. Also in Ohio, Linden Industries, based in Cuyahoga Falls near Akron, has been investing in plant. A third company, Edge-Sweets (ESCO) has also been looking at its product line and changing its focus.

Walter Pozzi, Saip’s CEO, said moving some people and opening a facility in Columbus was a natural development. ‘We have been active in the US for many years,’ he said. ‘This growth was entirely because of customers asked to be there. We believe that the US market will be more important for us. Besides rigid and flexible panel insulation lines where Saip has been performing positively, growth sectors for Saip in the US include cold chain, from refrigerators to vending, and automotive. We want also to reinforce flexible foam applications, such as in mattresses and pillows, and we have experimented with success in this market.’

Columbus is located in a strategic position to serve markets in the north-east and north of the US plus the Midwest states, and also Canada, Pozzi said. Logistics from the site are very good. There will be an initial staff of three: two technical support and one technical sales. ‘They will offer aftersales support and spare parts that customers will be able to buy directly and receive quickly thanks to our warehouse,’ he said.

As well as a warehouse, the site will have a fully equipped lab with high pressure machinery for customer trial and validations, he added. The second phase of Saip’s development will include the establishment of a commercial section led by Luca Ceresa, SAIP commercial director. There could be also production at the site in the future.

Linden Industries is situated about 130 miles (210km) to the north-east of Columbus, in Cuyahoga Falls. Its CEO, Jon Cocco, used 2021 to invest in processes and equipment at his factory there and in nearby Akron. Cocco bought Linden in 2019, and said he has been growing this business in North America. ‘We have three strategic partnerships currently, and are looking to expand through joint ventures and acquisition,’ he said. The company invested $500,000 in a new CNC machine shop in the fourth quarter of 2021 and first quarter of 2022. It was also spending $350,000 on a new polyurethane test lab for customers, which was due to be complete in the first quarter of 2022.

The CNC machine is used to manufacture high-performance mix-heads. ‘While our investment in new CNC machinery equipment was important, we did not stop there. We also improved our ability to translate 3D models directly into CNC G-codes for accurate set-ups and improved manufacturing. We run simulations on each mix head before manufacturing. This reduces errors, and allows us to improve machining time. A part that historically took us to 16 hours, but now can be machined in less than 4 hours.’

Up-front investment That investment has a large up-front capital investment, but the value gained by the reduced lead time, better tolerance and more rapid prototyping will be long-lived, he believes. He said the inspiration for the investment came from working with a large aerospace company about 18 months ago. ‘This customer liked our laboratory space because we had the ability to bring in large airplane sections into our building for foaming,’ Cocco said.

The test lab also allows them to talk with a wider range of people at their clients. ‘We are engaging the R&D engineers at our customers at an earlier stage in their product lifecycle, and are a part of the design of experiments,’ he said. ‘These customers like to use the facility to understand the chemistry and how it interacts with Linden’s machinery. We have completed six or seven development tests for our customers over the past couple of years.’

Further north, this time in Michigan, Edge-Sweets’ Rick Hungerford is also changing his company’s direction. ‘In the past several years, we have stopped making many types of machine because the opportunities come from CNC produced parts and cutting lines,’ he said. ‘It is better to build four or five lines, and buy in bulk for orders that I am 90% confident will come through in the next six or so months.’

He added that the company is not turning its back on machines made in the past, but wants to move towards more standardised parts. ‘On the workshop floor, people don’t need to be artisans,’ he said. ‘The business is moving away from steel fabrication. We are in the middle of a project to change the way we build machines.’

This change in direction is in response to a changing competitive landscape. ‘Other companies are trying to build themselves machinery, it is the reverse of business consolidation. It is more disruption. Big furniture manufacturers want to make their own machinery,’ he said. The move to CNC machinery is leading to large time savings.

These investments and changes in strategy came about in 2021 because of the strength of business in 2020. After the initial lockdown shocks, contracts signed in 2019 were honoured, and machinery sales continued. In 2021, the economies in Europe and the Americas were less constrained by coronavirus and the struggle back to some sort of normality started.

Rolf Trippler, chief sales officer at Hennecke, confirmed the strength of the North American market. ‘In North America in particular, we had an excellent order intake in 2021 in the area of sandwich panel lines from Hennecke-OMS,’ he said.

While the global automotive business has not been performing particularly well, Trippler is sure that it will come back in big steps. ‘In slabstock foam applications, we have seen increased demand in Asia, as the US market is already saturated,’ he said. ‘Nevertheless, US producers are continuing to invest in plant technology from the world market leader here, too, because some production lines that we originally intended to supply to Asia were diverted to North America because of the tariffs, and ultimately sold there.’

Import tariffs Baumer’s Christoph Hauck also reports strong business in the US in 2021. ‘We generated about a third of our revenue there,’ he said. ‘The growth started in 2020 when the US import tariffs on Asian goods came into force. Many of our key customers in the US ordered Baumer machines. Currently we are planning to expand and start a new location in the US.’

Francis Pinckers, vice-president at Fecken-Kirfel, echoed Hauck’s point about US tariffs on Chinese imports. Started by Trump and continued by Biden, they have stopped a lot of imports from China. ‘This has given us a big opportunity to sell our machines in the US because they could not import from China any more,’ he said. ‘We have delivered machines to one Chinese “transplant” company [in the US]. We also heard of another which uses Chinese machines, and has issues because they get little support. The relationship between China and the US prevents Chinese technicians entering the US to repair or maintain equipment.’

As a result, some companies are moving to western suppliers to extend their production lines and cutting equipment. ‘The US market needs parts made with good quality machinery,’ he said.

Bruno Savarino, global head of marketing at Covestro Elastomers, which makes CASE machinery in addition to materials, said business was much better in 2021 than in 2020. ‘It was a surprise,’ he said. ‘We expected to be more impacted by the pandemic. During coronavirus, we made machines for stock in our Alpha range of industrial machines. These have a common basis that can be modified for customer needs.’

As an example, the offshore windfarm industry is booming in Asia and Europe, and the company makes machines tailored to this sector. ‘Mining is also strong and requires machines,’ he said. The company also delivered automatic production lines to make castors and wheels for forklifts in automated warehouses.

Savarino added that demand for his company’s Omega range of more complex machines was consistent in 2021. ‘This could be because during the coronavirus crisis, companies using standard machines can probably still take on new work with only a minor change to their machine,’ he said.

‘If you have a project that needs something specific, that may not be possible with the existing equipment, and you need to invest. This helped us to achieve good results in 2021. The share of these complicated projects increased significantly compared to earlier years.’

Linden’s Cocco said revenue at his company increased by a little more than 200% in 2021 compared to the 2020 figure, albeit 2020 being a slow sales year. ‘It was a strong year for bookings in 2021,’ he said. ‘So we felt good about the industry and what customers were doing with capital. It feels like it’s going to continue through 2022, and we are forecasting our sales to grow by another 150% over 2021. We like where the market is going and, even more so, we like our position in the North American market.’

Linden is also benefiting from the growth in the construction and insulated panel market. ‘Also, the military, recreational vehicle and refrigerant segments continue to be resilient,’ he said. ‘While automotive is a significant part of our business portfolio, it continues to be challenging because of the cyclical nature and the pricing pressure.’

Cocco highlighted the fact that his company’s machinery has the capability for high-throughput shots. ‘We have just commissioned a project with 100lbs/min (7.6kg/s) throughput, which we have experience of in the past with our military partners,’ he said. ‘This technology, developed with the military, helped us improve the production of commercial boats. The result is a more productive process for our customers so they can increase their build volumes.’

North American polyurethane panel fixtures maker Con-Tek had a good 2021, according to Ross Willoughby, the company’s soon-to-retire managing director; he will be replaced by Nathan Monroe. ‘It was a transition year because of the ownership change at the start of the year,’ he said. ‘It was a good year, and 2022 is shaping up to be twice as good. Panel fixtures drove the business forward, with construction and insulation products demand driving the business. There were a lot of orders for panel products for construction and HVAC.’

The company is in the process of adding a number of further employees in engineering and manufacturing, including welders and machine assemblers. ‘We have a detailed roadmap for growth are more than pleased with the results thus far,’ said CEO Zac Simma. ‘We are a strong and recognised brand, and we have our sights set on becoming the premier brand in our space.’

Business was good in 2021 for UK-based AutoRim, according to CEO Philip Hindson. ‘The balance of our activity changed, and we did more business supporting machines in production,’ he said. ‘In uncertain times, our customers were happy to invest to keep their machinery running and in good condition, with several customers upgrading technology with retrofit packages.’

The coronavirus lockdowns gave them time to reflect on the business, and incorporate customer feedback into its operations. ‘We now operate with two individual technical support business groups, one focused on high pressure mixing equipment and sandwich panel press technology, and one focused on our own AutoRIM low pressure mixing equipment and the support of other brands of low pressure metering machinery,’ he said. ‘We would have struggled to achieve this step-change in normal circumstances.’

Hindson has also found a Brexit dividend appears to be at play ‘Our customers are telling us they have a strong preference to buy from a single source in the UK that can provide technology transfer or integrate a package of equipment for insulation projects.’

Important refitting Covestro’s Savarino echoed Hindson’s point about refitting and repairing existing machines. ‘We have a very large number of machines in the field,’ he said. ‘These need to be serviced, maintained, and upgraded. This is a safe business. Customers could reduce their investment, but will still need to maintain their machines. This part of our business is growing as a percentage because the number of machines is growing, the machine lifetime is 20–30 years, and they need modernising and maintaining during that time. If you are a customer you try to protect your existing business, even if you cannot grow it.’

Baumer’s Hauck has a slightly different point of view. ‘There was very little retrofitting in 2021,’ he said. ‘Coronavirus meant that we could not travel. Instead, many customers bought new machines because of consumer demand for mattresses and furniture during their lockdowns.’

Now, as service staff can travel again, they can concentrate on the retrofit business at customer sites. ‘We specifically targeted those customers and machines with outdated and discontinued components, mainly electrical controls,’ he said. ‘The actual result was plenty of contracts, for upgrading more than 80 drive systems on older equipment. Fortunately, the late delivery of sub-suppliers is not hitting us as badly as it is on new machinery. Usually, the machines are still running, and we can upgrade the machines when the parts are available.’

The big issues facing machinery-makers as they look towards the rest of 2022 are the high prices, shortages, and unreliable delivery times of the components they need. ‘The after-effects of coronavirus are not over, especially in the supply chain,’ said Saip’s Walter Pozzi. ‘Many companies are struggling to source products. From computer chips to carbon steel, everything is short, and prices are rocketing.’

Hennecke’s Trippler said that in 2021, the company’s order intake was above budget. ‘The first half was critical in terms of order intake because of the impact of coronavirus,’ he said. ‘But the second half compensated for this, and allowed us to finish the financial year ahead of our budget. Looking to 2022, we want to do better than 2021, and take the momentum into the first quarter, which is very positive in terms of order intake. But to keep that momentum, with all the worldwide issues of the supply chain, the coronavirus outbreak in China and the Russia-Ukraine situation, it will be difficult. My concern is that we will see a hit later in the year because of these influences.’

In terms of business at Fecken-Kirfel, Pinckers said that 2022 is shaping up to be the same as, if not better than, 2021. ‘As a machine manufacturer, we had delivery times of 4–6 months on average,’ he said. ‘Nowadays, we have 10–14 month delivery time. It is really difficult for our customers to see so far into the future. What is needed today could have changed in 12 months. But our customers agree with the timeframe. If people want cutting machines of quality, they have to go with us or a competitor, who have similar delivery times.’

He said that some of the biggest supply problems are around parts which machine builders view as commodities like motors. ‘We have shipped a machine recently without a motor; we had to ship the motor afterwards,’ he said. ‘We had one motor here to test and commission the machine internally. We shipped the machine without it, and the motor afterwards. We kept the second motor to commission new machinery.’

Hennecke’s Trippler echoed this experience. ‘We test machines, but may have to send them to the customer incomplete, with other parts following by airfreight because they are not available when the machine is delivered,’ he said. ‘Proper planning is impossible. Even if the supplier tells you that the part will be delayed four weeks, they cannot ensure that they will be able to keep their schedule. There were delays in the past but not so many, and if they gave you a new delivery time, they kept to it. Now, they call you a few days before delivery is due and say, “We can’t make it, it will be another four weeks.” This is the reality today.’

Baumer’s Hauck agrees with him. ‘The situation is crazy right now,’ he said. ‘We have little clarity on delivery dates from our sub-suppliers. For example, we have delays of HMI, drive systems or I/O cards. You name it, tomorrow it will be yet another late delivery item. Getting valid delivery dates and forecasting is like gambling. It could be years before we get back to normal conditions.’

For Covestro, the year has started strong and quickly, with a number of complicated machines on order. But Savarino said the current supply situation is adding to business pressure.

‘Our purchasing department is doing a lot of work to bring security to our supply chain,’ he said. ‘We put a lot of effort into finding new suppliers to fill the gaps. For almost all the machines we have in the order-book, we can maintain delivery times. There are one or two cases with a one or two week delay. This is very reasonable at the moment, but the rest, we have fulfilled. I don’t have a crystal ball, so I can’t say if there will be delays for our machines in the future, but I can say supply is a priority for us.’

Con-Tek’s CEO Simma is optimistic his company can cope. ‘There are supply chain issues,’ he said. ‘But in the world of custom equipment, generally speaking, our lead times are adequate enough to absorb shocks.’

Hennecke’s Trippler is optimistic for the future of the sector, too. ‘Supply chain and costs are impacts, and world crises with coronavirus in China and the Russia-Ukraine situation will hit the machinery business in the next quarters,’ he said. ‘I think that, despite these current negative influences, polyurethane is a product that continues to generate demand. It is therefore worthwhile continuing to be active in this industry.’

And, he said, the industry still has many tasks ahead of it. ‘One example is the issue of sustainability,’ he said. ‘But at the same time, we are talking about a raw material that, despite the PU-specific debate about circular economy, has many positive aspects in the area of resource conservation. Just think of the topics of insulation and lightweight construction. PU has so many positive aspects that, overall, I have a positive outlook.’