Originally Posted by
Snoopy
Check out the price of any bit of whiteware in 2003. Now look at an equivalent item today and I bet you can buy it for the same price or less. Falling margins on relatively static demand is the problem faced by whiteware makers worldwide.
Solution? Crank up the speed of the automated manufacturing lines that make the fridges / washing machines. But that puts more strain on the manufacturing equipment. And that means more troubleshooting is required by the likes of Scotts. As the manufacturing equipment becomes 'less reliable' whiteware making customers require larger 'performance delivery bonds'. Another cost to be faced by Scotts.
The truth is, supplying manufacturing equipment for whiteware makers is not as profitable as it once was. This was the driving force behind diversifying the business firstly by acquiring Rocklabs in 2008, and subsequently in a business acquisition drive that has been continuing ever since. And as we know business acquisition and changes of direction do not come without risk. So yes Winner, SCT was more profitable in 2003. But unfortunately going back to 2003 business conditions is not possible because the cosy business model of 2003 now has new cost pressures.
To pervert a Warren Buffett baseball analogy. If you keep swinging your bat at new balls, eventually you will hit a home run (at least that is what we SCT shareholders hope)!
SNOOPY