Stronger global demand boosts profits
As a group, the 26 publicly traded Massachusetts manufacturing companies posted solid results last year. Helped by stronger global demand, especially for technology products, Bay State manufacturers increased revenue by nearly 13 percent and boosted profit by a whopping 842.6 percent, to $328.1 million.
But that hasn't helped keep jobs here. Since mid-2000, Massachusetts has lost nearly one-quarter of the 410,400 manufacturing jobs it counted then.
In several cases, a key to local manufacturing companies' success has been opening factories abroad that are closer to their best customers, and likely to be much less expensive to operate than plants in high-cost Massachusetts.
Boston's Cabot Corp., by far the state's biggest manufacturer ranked by revenue, reported a 55 percent jump in profit last year to $124 million. One signature Cabot product is carbon black, a chemical compound use in producing tires. In opening new production facilities in recent years, Cabot has carefully followed tire makers as they've migrated to lower-cost countries such as Brazil and China.
Meanwhile, Evergreen Solar Inc., a Marlborough developer of solar electric power cells and related equipment, more than doubled revenue last year, to $23.5 million from $9.3 million. Evergreen conducts its key research and development activities, as well as initial manufacturing, at its plant near Interstate 495.
However, to ramp up production, Evergreen is building a $79 million factory in Germany with local partner Q-Cells AG. One big reason: The partners are getting $35 million in government subsidies from Germany. But also, noted Evergreen chief executive Richard M. Feldt, ''Seventy percent of our business comes from Europe," where green-minded national governments have heavily promoted solar, wind, and other renewable energy sources.
Evergreen has also ''changed our business model from being a soup-to-nuts company," Feldt said. ''In our industry, no company can be good in all aspects of making a product. We had to ask ourselves, 'What are we really good at?' Where we excel is creating wafers for solar panels. So our strategy is to partner with companies that are good at other pieces of the value chain."
Another example of the benefits of global expansion is Watts Water Technologies Inc. of North Andover, which makes valves and devices that purify and conserve water. Twenty years ago, almost all of Watts's operations were in New England and its sales came mostly in the United States, said chief financial officer William McCartney. Now Watts makes 40 percent of its revenue overseas. It has recently opened facilities in China and Bulgaria. Last year, facing rising costs for raw materials, Watts was able to shift some overseas manufacturing operations to lower cost countries to cut costs. The company's profits jumped 40 percent last year.
Long-term planning is essential to strong performance, McCartney said. In the late 1990s, Watts decided to make water purification and plumbing products for the do-it-yourself consumer market. That's now one of the fast growing segments of the company's business, with nearly 10 percent of 2004 sales coming from Home Depot. ''You always have to be looking at trends that will affect you five years from now," McCartney said.
As a trend, building plants abroad to serve big customers is hardly a one-way street. The US subsidiary of Germany's Interprint GmbH & Co. Inc., which designs and prints decor paper used in laminate surfaces for countertops, flooring, and furniture, is building a $24 million replacement of an existing facility in Pittsfield.
And when Institut Straumann AG, a Swiss medical device firm, broke ground last year for a new plant in Andover, chief executive Gilbert Achermann offered a familiar explanation: ''We are investing in people and infrastructure to get closer to our US customers."
Chris Reidy can be reached at reidy@globe.com.
