While the industrial sector is large and diverse, across industry verticals some common themes exist. Industrial companies have experienced significant revenue and profitability growth in recent years, driven by a buoyant global economy, increased global trade, and significant investments in infrastructure, commercial and residential property and manufacturing capacity. Despite years of steady growth, most industrial sectors are inherently cyclical.
As concerns about the global economy grow, industrial companies are faced with the challenge of attempting to maintain profitability despite reduced demand. Companies are also under growing pressure due to increased protectionism. Trade barriers not only reduced demand for products and services, but also exposed the difficulties of maintaining global supply chains. Current conditions have only exacerbated these issues, and serious questions about the future of globalization are being asked.
In any scenario western industrial companies will face growing competition from companies in developing economies, who are rapidly improving the quality of goods and services they provide at price points well below what many companies can profitably provide. Transportation and logistics companies will be especially impacted, and asset utilization and pricing are already coming under pressure.
Trends in markets that industrial companies sell to are rapidly changing. The energy sector is facing rapid upheaval with low commodity prices impacting activity levels, renewable generation is increasing in importance. Infrastructure spending continues to lag well behind levels needed to renew ageing infrastructure and accommodate changing population patterns. The outlook for both commercial and residential construction is increasingly uncertain.
Across the industrials sector we are in the early stages of a digital transformation which promises to enable companies to make smarter decisions and enable greater profits. However, most companies have struggled to successfully implement these solutions. After years of consistent growth, chemical demand is faltering. Companies across the industrial sector face growing uncertainty and need to focus on maintaining profitability in a rapidly changing world.