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Manufacturing firms holding up well here
Tuesday, December 09, 2008

Robroy Industries is wrapping up the best year in its history, marking the seventh year in a row that the Verona company has beaten its previous revenue record.

The company's results are far from an anomaly. A recent survey of Western Pennsylvania-based manufacturing firms showed that local manufacturing this year remained strong, apparently bucking downward trends elsewhere in the country.

There is a bit of a timing issue on the survey, which was completed in September before the market meltdown, said Lawrence Barger, director of manufacturing services for the local office of accounting firm Alpern Rosenthal, which conducted the survey with the University of Pittsburgh's Institute for Entrepreneurial Excellence.

"The regional manufacturers have experienced pretty strong operating results. Their attitudes were pretty optimistic," Mr. Barger said. "Most of my clients are reporting into the third quarter of 2008 pretty strong years."

About 100 firms responded to the survey, which found that over the past three years 78 percent had increased their numbers of employees. Ninety-four percent expected to hire even more people in the next three years, up from 81 percent in 2007.

The results offer a sharp contrast to the picture painted nationally by the Manufacturers Alliance/MAPI Quarterly Industrial Outlook for the third quarter, which showed an annualized manufacturing decline of 7.8 percent for the quarter. The Virginia-based organization researches economic activity and its impact on manufacturers.

"There was a sudden and acute acceleration of the decline in the industrial sector in September and October," said Daniel J. Meckstroth, an economist for the manufacturer's group. "The vicious circle of financial crisis, decline in wealth, consumer spending cuts and job loss continues to spiral into a severe recession -- certainly the worst since the early 1980s."

On the national scene, the alliance reported the largest manufacturing decline was in housing, which had a 32 percent decline in housing starts from the same quarter last year. Industrial machinery saw a 19 percent decline.

While Mr. Barger is expecting more caution from his clients after the market downturn in October and November, he is not yet hearing the sort of agony that has affected other parts of the country. "When you look at this on the surface, there seems to be a disconnect between the survey and what we're seeing."

One strength of Pittsburgh firms is that many are privately held, he said. That allows them to look toward longer-term results, rather than focusing on quarterly profits.

He said there could be a couple of other reasons Pittsburgh's companies have not seen dramatic declines. First, the local credit markets have not dried up. "Some banks may be taking a little harder look at credit risks," he said, but overall the lenders are still moving money when businesses need it.

"It's also possible that, like in other times, the Pittsburgh area may come to the party a little later than other areas," he said. That would mean slowdowns are still on the way.

Robroy Industries, which manufactures electrical conduits and piping for oil fields, is not expecting to repeat the banner year it had in 2008.

Mike Deane, chief financial officer, said the Verona company is projecting 2008 revenues will come in at $125 million, an increase of $14 million over last year. But it is projecting a 7 percent decline in revenues for 2009.

"We're on a string of seven consecutive record years. We just don't think we can duplicate that," Mr. Deane said.

Some factors in his projection include the fact that there are no major revenue-producing projects on the horizon and a major competitor, which had manufacturing problems this year, is back up and running.

Besides, it is dangerous to project a great year.

"It's always good to be pleasantly surprised," he said.

Ann Belser can be reached at abelser@post-gazette.com or 412-263-1699.
First published on December 9, 2008 at 12:00 am