MHEDA Dealer Forecast: Modest Growth Anticipated for 2017

January 1, 2017

Each year in the 1st Quarter issue of The MHEDA Journal, we survey the industry to try to paint a complete picture of what can be expected from the economy in the coming year. To do this, we solicit forecasts from our partner associations like MHI, ITA and CEMA. We also speak to MHEDA members from both the distributor and supplier sides of the industry. This year, we had the added benefit of being able to interview well-respected economist and presenter at this year’s MHEDA Convention, Alan Beaulieu. Taken together, these forecasts should provide some insight into where the industry is heading in 2017 and beyond.

As has been the case for the past six years, many MHEDA dealers across all industry segments and representing all portions of the country enjoyed record-setting years in 2016. And, like last year, many expect to replicate those highs in 2017. However, the rapid expansion that many members enjoyed from 2011-2014 has given way in the past few years to more tempered growth. Replicating record highs is an impressive feat and many expect to even build on those highs. But rather than 10-percent growth, many members have settled into the 5-6% range.

Another thing that could have some impact on growth in 2017 is the newly-unified government. Not since 2010 has one party controlled both houses of Congress and the Presidency. Since 2012, there has been constant gridlock in Washington. Will the GOP-controlled government lead to a more business-friendly environment? Time will tell but many respondents are hopeful.

The following are responses from MHEDA dealers across North America about what they expect to see in 2017. Respondents are grouped by region, but to see anticipated growth by segment of the industry, see the graph on page 52.

Northeast
For the third consecutive year, the Northeast represents the least optimistic region of the country. Last year, the Northeast predicted 5.4% cumulative growth and this year there is less optimism, as respondents anticipate 3.86% growth.

A heavy emphasis on marketing leads Conveyco CEO Ray Cocozza to believe that the company will outpace the Federal Reserve’s conservative estimate of 2% growth. Cocozza believes that extensive marketing and new clients will result in growth of 10% or more in 2017. The company is an active participant in social media, which has resulted in higher inbound traffic to the website. To keep up with that anticipated growth, Conveyco will add positions in engineering and project management in the first quarter. Though he is cautiously optimistic about the direction of the industry as a whole, he cautions that political pressure and taxation could hinder growth.

Like Conveyco, Hurricane Industrial Equipment, Inc. also expects 10% growth in 2017. COO Jamie Thomson expects growth in rentals, service and parts to be the main drivers of that growth. In 2016, Hurricane secured a new shipbuilding contract and the resulting business is part of reason for Thomson’s optimism going into 2017. The company plans to add service technicians to the team and expects those techs to be in place and ready to hit the ground running by January 1. Hurricane anticipates adding new lines in the second quarter of 2017.

For PennWest Toyota Lift a combination of lower gas prices, the trend to class I, II and III and lower parts consumption in 2016 lead President Mark Gaier to predict a decrease of 10% for 2017. Gaier also anticipates the industry as a whole to decrease 5-7% next year. He attributes this industry slowdown to the economy in the United States as well as higher interest rates and continued slowdown in the world economy. For PennWest, the most important investment the company plans on making in 2017 is an updated business management software.

AJ Jersey President David Rizzo is very wary of the continued divisiveness surrounding Washington DC, saying that turmoil and a divided country will be reasons for a slowdown in the economy. We have seen only growth the last three years. Insane growth. I worry that the new President can bring that to a sudden halt.” Rizzo predicts a decrease in sales of 5-7% next year and predicts the industry as a whole to be flat. AJ Jersey is active on social media and finds it to be a good marketing tool. The company’s biggest investment in 2017 will be centered on technology.

New product offerings and focused marketing efforts lead Wecon Systems VP of Operations Will Egerton to forecast 10% growth for 2017. New lines added in 2016 buoy that optimism and Wecon expects to add staff in engineering and project management in the first quarter of 2017 to help handle that new business. As in the United States, warehouse automation is very popular in Canada, which benefits Wecon. Egerton says that e-commerce and goods-to-person are strong markets that the company continues to focus on.

Alliance Material Handling, Inc. Director of Finance Mike Martinec predicts that systems growth and larger market share for new equipment will help propel the company to 10% growth in 2017. The expansion of the Baltimore port is another reason for optimism within the company. Alliance expects to add a Director of Human Resources in addition to technicians to the company during the first quarter of the new year. Martinec expects steady 3-5% growth for the industry next year. He too sees more demand for automated systems, which has led the company to bring engineers in-house in recent years. With multiple generations it the workforce at the same time, Martinec believes that a strong online presence is more important than ever and has invested time in building the company’s social media following, which Martinec says has helped website views and online inquiries spike.

The ongoing industry trend toward consolidation has helped create new opportunities for M&G Materials Handling Company says President Ken Mac Donald. Mac Donald anticipates 4-5% growth in 2017 with increased market share in all operating departments. He says, “I think that increased spending in infrastructure will generate more business. However, it will increase debt which is foreboding for the following years to come.” Like many companies, M&G has an aging workforce, so adding staff and developing a replacement workforce is ongoing and will continue for some time. Overall, Mac Donald says of the conservative growth estimate by the Federal Reserve, “This may be the new norm. There is still overcapacity in many industries. It will continue market pressures for growth, profitability and consolidation.”

Southeast
While not quite as bullish as last year’s anticipated 8.9% growth, the Southeast was once again among the most optimistic regions of the country heading into 2017. Overall, respondents anticipated 6.81% growth for next year, narrowly trailing the Midwest (6.89%) as the highest projected growth in the country. Unsurprisingly, the two most optimistic regions are also the only two regions where not a single respondent expected sales to decrease in 2017.

Jake Bruning, Sales Manager at IPW Lift Techs, foresees 10% growth for the company next year based on new territory. To handle this growth, IPW plans to add staff in the form of mechanics, sales staff and administrative support throughout the first and second quarters. Bruning expects the industry to stay flat in 2017, as the contentious atmosphere in Washington has caused customers to be slower in their purchasing decisions.

LiftOne President Bill Ryan anticipates a growth of 4% in 2017 compared to 2016. However, he says that the 4% is due more to normal increase and not due to actual growth. He anticipates the industry to remain flat or decrease slightly next year, saying, “Manufacturing and retail are both flat or declining slightly.” Ryan expects modest correction in the 7-8% range in late 2018 and early 2019. Ryan expects industry to consolidation to, “continue for a whole and then a number of smaller niche players will emerge. It always goes in cycles like that.”

Three new branches and a maturation of its sales force will propel Jefferds Corporation to 10% sales growth in 2017, according to President Richard Sinclair. Though West Virginia has been hit hard in recent years due to struggles with energy-related issues, Sinclair says that natural gas production may rise in 2017, which would benefit the company. Sinclair has seen a shift in the industry in recent years that Jefferds has been well-positioned to capitalize on, saying, “More and more customers are turning over the maintenance of their equipment to us. Our positioning of being a full line material handling house has paid multiple dividends.”

“More leases will term in 2017 a compared to 2016. Also, automotive manufacturing and their suppliers continue to expand in our region,” says Springer Equipment Co. President Ted Springer. Springer anticipates 3% growth for the company in 2017, saying, “We will need to add technicians as this is, and will continue to be, our strategy for growth.” Springer hopes to have these new technicians on board by March. If the Trump administration succeeds in passing a more affordable health care alternative to the ACA, Springer would be one of many companies who benefit. “One of our biggest challenges comes from the Affordable Care Act and what it costs our employees and our company. It is the single biggest challenge we face today and it appears the problem will continue until the ACA is repealed.”

Pent up demand in the market leads ConveyorMan President John Williams to forecast 20% growth for 2017. ConveyorMan will add sales, installation and order processing personnel to go along with a planned new product debut in the first quarter. Williams anticipates a robust market for the industry as a whole, as well, but cautions that government regulations could put a damper on that optimism.

Tony Sessa, President of CFE Equipment Corporation in Norfolk, VA, predicts flat to 2% growth for the company in 2017. Like every forklift company, CFE is always on the look for good technicians. Any increase in military spending would be a boon to CFE, as Sessa says, “We have a strong military presence. That will be impacted by federal budget activity, good or bad.” Sessa expects the trend toward consolidation to continue and hopes to take advantage of it by growing through acquisition. He summed up the general feeling of the industry well by saying, “Each year is a new one. We focus on growth and improvement.”

Carolina Material Handling President Mid Middleton brought up a great point about business in the Southeast when he said, “I’m thankful to be in a state where companies are moving TO.” Expansion in North Carolina, the election finally being behind us and lower transportation costs are just three reasons why Middleton is projecting a 5% growth in 2017. Carolina Material Handling increased its pallet rack stock and sales in 2016, which has encouraged Middleton going into next year. The company is looking to add two outside salespeople as soon as possible. CMH has been on both sides of the consolidation trend, as Middleton says, “Big catalog house consolidation has hurt us and the fork truck consolidation has helped us. They are still sorting out their internal workings and we have been able to take advantage of the chaos.”

Atlantic Lift Systems, Inc. President Allan Haynsworth expects sale to be level in 2017 with 2016. This will be in line with Haynsworth’s projection of flat industry growth next year. In recent years, the company has seen a trend of customers moving more toward rental equipment. Like CFE, Atlantic Lift Systems is heavily involved with the military. “We are heavily geared to military and it is always a concern because of budget constraints and the polarizing atmosphere between democrats and conservatives.”

Hal Ingram, Group VP at Gregory Poole Equipment Company, anticipates 5% growth in 2017 driven primarily by market penetration and parts and service growth. Like many others noted, Ingram has also seen the continued growth in rental and leasing vs. buying. He has also noticed an increase in the amount of customers looking for fleet management. The company will look to add revenue-generating employees in addition to technicians in the first half of the year. Gregory Poole’s most significant investment in 2017 will come in the form of rental fleet assets.

Green Energy Concepts Inc. (GECI) is poised to see 10-15% growth in 2017 according to Vice President William Clayton. Clayton has seen an increase in quoting which, combined with new accounts, lead to the optimism for GECI. The company will be adding new lines in the first quarter of 2017. Inventory will be GECI’s most important investment in the new year. Clayton sums it up by saying, “From the request of local dealers, it looks to be a great year.”

As the Florida market continues to grow, Jamco Inc. Vice President Tim Jamal expects Jamco to increase sales by 6% in 2017. “At the local and state level in Florida, there are still programs to stimulate small to medium businesses as well as a noticeable trend of a shrinking qualified workforce, which leads me to believe those that want to work are finding placements rapidly. Shortage in labor equates to growth by companies,” says Jamal. If 2017 shapes up to be as strong as 2016 was, Jamal anticipates having to add staff in 2017, namely road technicians and administrative support staff. In addition to a strong economy, all of the OEM’s that Jamco represents have released new products.

McGee Storage & Handling CEO/CFO Janelle Anderson anticipates slight growth, less than 5%, for the company in 2017. Anderson sees the uncertainty of the election being behind us as a factor in that growth, as well as the fact that McGee had large project opportunities that were pushed from 2016 into 2017. The company has had success utilizing Google Adwords to generate leads. “We invest $2,000-$2,500 monthly in GoogleAdwords. This pays for itself in one quarter of new business sales.” Anderson adds, “It will be interesting to see what the new legislation will do to impact trade (imports). If the Chinese are held at bay, that could be a plus for our American manufacturers.”

Dyna-Lift, Inc. will see sales increase by 6-8% according to Corporate Operations Manager Wolf van der Geest. The primary driver of that growth is increased aftermarket business, both through a push in CSR efforts and an increase in ITA. Says van der Geest, “There was a significant increase in truck sales in 2016, which will lead to more aftermarket business in the years to come.” Dyna-Lift invested in growth throughout 2016 and is prepared to add a possible 5% increase in staff in 2017. The most important investment the company will make next year will be training and safety as, according to van der Geest, “Asset investment will slow down after 2016.”

Midwest
For the third consecutive year, the Midwest ranks as the most optimistic region in the country, according to this survey. While expectation dropped slightly compared to 2016 (6.89% this year vs. 7.11% last year), the Midwest still outpaces the rest of the country in anticipated growth. As was the case in 2016, not one respondent in this region anticipated sales to fall in 2017, though a couple of respondents did expect sales to remain flat.

YMH Torrance President Steve Gallagher expects sales in 2017 to be in line with 2016, due in part to a decline farm equipment manufacturing. Gallagher expects the industry as a whole to suffer a 15% loss in 2017, primarily because of a lack of demand. Like many respondents, Gallagher has seen an increase in customer interest in the areas of robotic equipment and AGVs. If the Trump administration can follow through on its planned infrastructure spending, the results would be positive for YMH Torrance.

Economic expansion and strong market activity in telematics leads Stoffel Equipment Co. President Bob Stoffel, Jr. to predict 10% growth for 2017. The company intends to add staff in sales, service technicians, parts, and administration. Stoffel has some concerns about a possible recession in late 2017 and warns that the global economy could be impacted by the Brexit. However, he still anticipates growth not only for Stoffel Equipment but for the economy as a whole.

President Scott Hennie of Elite Supply Chain Solutions forecasts 10-15% growth next year resulting from expansion into new markets. For “same market” sales, Hennie expects to be flat next year, in line with his prediction of flat to moderate growth for the industry. Elite’s most important investment in 2017 will be in adding staff, as Hennie intends to hire employees in sales, engineering and project management throughout the year. Unlike some others, Hennie doesn’t believe that Washington has a strong impact on business one way or the other. “I am believing more and more that Washington is in its own little bubble and that their legislation has minimal impact on our day-to-day business. We adapt to the impacts of the laws that are passed, whether positive or negative.”

Conveyor Solutions, Inc. will also be up 10-15% in 2017, according to President Scott Lee. Both Elite and Conveyor Solutions follow the industry consensus that the Engineered Systems segment will be much stronger than the rest of the industry (cumulative growth of 12.5%, compared to 3.34% for IT, 5% for SH and 7.12% for Diverse). Organic growth and small acquisitions will account for the majority of Conveyor Solutions’ growth next year. Says Lee, “Everything I hear points to an economic slowdown. However, our industry will be in a position to avoid any major downturn given the demand for our products and services.” For the industry as a whole, Lee expects a decrease of 3-7%.

CSI Materials Handling President Mike Wall expects 2017 to be level with 2016. “We’ve having a good year in 2016 and it would be difficult to top it,” Wall says. “We feel we’ll maintain this pace.” The company intends to add salespeople in the first and second quarters of 2017. Wall expects continued slow growth for the industry but cautions that, “Healthcare costs are starting to rise rapidly. This could hinder overall hiring and therefore overall growth.” In a prescient prediction before the playoffs were even over, when asked “Is there anything that wasn’t mentioned that could impact your sales in 2017?” Wall answered, “A Cubs World Series win wouldn’t hurt.”

Continuing the trend of Engineered Systems companies predicting double-digit growth, AHS, LLC President Chuck Frank anticipates 10% growth in 2017, stemming primarily from new business. Says Frank, “We are in the process of adding team members to support sustainable growth.” Frank sees a strong market for the industry, saying “The key is to get out and find the opportunities and get involved early.” AHS has had success meeting the demands of multi-generational buyers and new purchasing trends by spending more time in front of clients getting AHS’s next generation of leaders involved earlier in the sales process.

Miami Industrial Trucks President/CEO Mark Jones forecasts 3.2% growth for the company in 2017. An increased share of market gain across six key revenue streams will be the driver behind that growth. “Share of market gains in 2016 lead us to forecast increased sales in 2017,” says Jones. The outcome of the election could prove positive for Miami Industrial Trucks, as Jones said before the election, “If taxes go down, it will help our industry. If they go up, it will hurt. Regulations, Obamacare, uncertain global markets, strength of the dollar will hurt the growth in our industry.” The biggest investment the company will make in 2017 is in technology.

Southwest
While not as robust as the Southeast or Midwest, the Southwest nevertheless forecasts strong growth for 2017, with a cumulative projection of 5.86% growth. This is essentially in line with the region’s 2016 projection of 6% growth.

Nelson Equipment Company President Mark Nelson forecasts a whopping 50% increase in revenues for 2017 over 2016. However, it comes with a caveat. “We are having a down year but this forecast would be only 7% over 2015.” Nelson attributes this expected growth for next year to an improved economic climate for the region. “We are seeing an upward movement in business activity as we enter the 4th quarter of 2016,” Nelson says. “We have added a new product line that shows signs of improving over the next year as well.” The company is well-positioned to handle the anticipated growth without adding staff, but if staff were to be added, it would be in sales. Nelson is active in social media and Mark Nelson says, “Our monthly newsletter is probably our most productive asset.”

Gas prices stabilizing will be one of the factors behind an anticipated 5-10% growth for Toyota Lift of South Texas, according to Senior VP and GM Ken Townsend. “ITA is up over last year by 7% and we expect it to increase by at least 5%,” Townsend says. The company will need to add staff to keep up with the increased sales. Townsend anticipates adding one salesperson, 2-3 technicians and 1-2 tire technicians. The company will also take on a new Trailer Spotter Line in 2017. The most important investment Toyota Lift of South Texas will make is bar coding in the parts department and going paperless in the service departments.

James Graham, VP of Sales and Marketing for Burke Handling Systems anticipates a 7% fall in sales in 2017 compared to 2016. Graham indicates that this part of the normal business cycle in the market. One thing that Burke Handling Systems has noticed is that customers are shifting away from in-house maintenance on trucks to a greater dependence on maintenance performed by dealerships. The most important investment Burke will make in 2017 will be in training.

“We expect sales to increase by at least 10% and are forecasting for better than that,” says Cisco-Eagle Director of Marketing Scott Stone. “We’re bullish on 2017 growth because our customer base continues to express their needs to us. We’re already working on known projects for 2017 that help us understand that demand is going to continue to be strong.” Stone mentions that some of Cisco-Eagle’s key sectors, such as oil producers and aerospace, will be flat, while others, like food and general distribution, continue to demonstrate strength. “We have also invested in safety products, which tend to grow aside from capital investment,” says Stone. He continues, “The general believe is that 2017 will look very similar in market conditions to 2016. If distributors have positioned themselves well, they should continue to capitalize on a steady manufacturing, warehousing and distribution market.”

Sunbelt Industrial Trucks President Matt Maddock projects a 5% growth for 2017 based on 3PL expansion and oil and gas rebounding. This is in-line with his projection that the industry will be up slightly compared to 2016. One thing that he cautions may hinder growth is banks not being able to loan at the current rates long-term.

WW Cannon Inc. will be building on the new markets it began penetrating two years ago, which will lead, in part, to a projected 10% growth in 2017. President Greg Brown sees the industry decreasing next year due to a slight recession brought on by low growth, high taxes and increased regulation. The most important investment WW Cannon will make, according to Brown, is, “Holding onto our excellent people during a downturn.” The company suffered a ransomware attack in 2016 and they, like many other MHEDA members, are putting an increased emphasis on increasing data security.

DuraServ (formerly Southern Acquisitions) can expect a growth in the 7-10% range, according to CFO David Iliff. The company has a strong backlog of work already in house and Iliff sees end-users feeling more confident and making large purchases that they have held off on for a number of years. Texas continues to be a strong market, which gives DuraServ a geographic advantage. He says, “2017 should be an up year. We believe the trends that played out in 2016 for our business will continue in 2017. We believe we continue to see a trend of large end-users preferring to work with large and established players. We will continue to use our large regional coverage to grow across markets.” Of the election, Iliff says, “A Trump tax plan that revises the tax rate paid by S-Corps and C-Corps could be beneficial for closely held family businesses, due to more cash flow to reinvest in the business.”

West
The Western region of the country anticipates 3.9% growth in 2017, narrowly edging out the Northeast. This is a marked decline from 2016’s anticipated growth of 6.75%.

Watts Equipment Company CEO Shirley Perreira projects an increase in sales in 2017 compared to 2016. The primary driver of that growth will come from growing the company’s customer base. Says Perreira, “We have solid goals for our sales staff and we are measuring them monthly. They are doing all the work.” In 2016, Watts moved its staff to a CRM Program, which has made a measurable difference in time management. As other respondents have noted, geography may be playing a part in the company’s growth. “Some of our large customers have closed down and moved out of California into a more corporate friendly environment,” says Perreira. The company will continue to add staff in 2017, primarily senior road technicians. Says Perreira, “Customers are tightening their budgets, even though they seem to need to grow.”

Reduced demand leads Washington Liftruck VP of Operations Jeff Darling to forecast a 7% reduction for 2017. The company had large, significant orders in 2016, which contributed to the belief that 2017 would be down slightly. He sees a reduction in store for the entire industry as high interest rates and decreased demand for equipment will affect everybody. The company plans to acquire a new facility in 2017. Additionally, the company is very active on social media and has seen a big boost from these efforts. Says Darling, “We have seen 3+ leads per day coming from our web/media presence.”

Storage Equipment Systems, Inc. President Jim Radzik projects a 15% increase in sales in 2017. This is based on new product lines that the company added in 2016. Though they project double-digit sales growth, the company is prepared to handle the new business in-house without the need to add new staff. Says Radzik, “We have a multigenerational staff. We continue to educate each other on new and old purchasing trends.”

FMH Material Handling Solutions President John Faulkner anticipates 2.6% growth in 2017 due to required replacement of older units among the company’s customer base. This is in-line with the projection for the industry of slight growth but relatively flat compared to 2016. Faulkner anticipates the Rocky Mountain Region to outpace the national average and beat the conservative estimates of the federal reserve. On the topic of succession, Faulkner learned first-hand the importance of having a plan. “I was injured two years back and we put a plan into place. All dealers MUST have a succession plan and be ready to act in the event events require it.”