Caltex, Fonterra named in Australia’s Top 10 manufacturers

CaltexFMCG giants Caltex, Fonterra and BP, as well as global packaging giant Amcor, have all made the top 10 on IBISWorld’s list of Australia’s Top 100 Manufacturers in 2019.

IBISWorld, in collaboration with the National Manufacturing Week, revealed that petrol giant Caltex took the lead, followed by Fonterra, with BP taking the 4th spot on the list.

Top performing industries from the FMCG sector include Milk and Cream as well as Meat Processing. IBISWorld said these industries are seen to grow annually and exceed 4.0 per cent over the five years through to 2018-19.

“It is certainly no surprise to see the Top 100 Manufacturers list for 2019 dominated by food production and non-metallic mineral production companies. Australia is renowned for its strong agricultural exports, and its mining, energy and resources sector,” said IBISWorld senior industry analyst, Liam Harrison.

Lion, Coca-Cola Amatil, Nufarm and Inghams all made the top 30, with Nestlé and Wrigley following.

According to IBISWorld, the manufacturing sector in Australia has declined over the past five years. Sector revenue is expected to decline at an annualised 0.4 percent over the five years through 2018-19. However, manufacturers that have been able to capitalise on growing export markets have seen greater success compared with their peers.

“Australia is a large exporter of commodities, with the nation benefiting from coal and iron ore prices remaining relatively high year-on-year. On the other hand, Australian food product manufacturers have recorded volatile performances over the past five years. However, demand from China and other export markets for products such as infant formula provides opportunities for Australian manufacturers that can capitalise on this demand and expand their international offering,” said Harrison.

“Despite the ongoing uncertainty of global trade partnerships and relations, manufacturers that can respond quickly and export their products to new markets will likely perform well if they open up to markets where tariffs on other nations’ products exist or are introduced.”

Manufacturers dealt with cost challenges over the past five years, according to the latest report of IBISWorld. Volatile commodity prices, fluctuations of the Australian dollar and natural disasters had significant impact to raw input prices. This has lead to instability in manufacturers’ purchase costs. LNG shortages affected the rising costs on the east coast. The research company reported these economic conditions made it difficult for some manufacturers to generate steady incomes in recent years.

Food companies declines in the list

Drought or flooding had a big impact on food manufacturers, particularly dairy giants in Australia, falling off this year’s top manufacturer’s list, with only Fonterra leading the pack.

“Despite being the leading group of manufacturers in this year’s Top 100, food product manufacturers also made up a strong proportion of the companies that fell the most or completely dropped off the list,” said Harrison.

“This correlates to food producers’ exposure to natural disasters such as drought or flooding, which have occurred over the past twelve to eighteen months. This problem is often compounded, as most food producers are unwilling or unable to pass these increased costs onto consumers due to their contractual agreements with the major supermarket chains.”

The companies dealt with the pressure to achieve greater productivity and reduce costs which led them to change business operation processes. But the global bigger players had less exposure to economic downturns, allowing them to have a steadier income.

“Vertical integration is a major factor for many of these leading manufacturers in generating revenue or reducing volatility in their manufacturing division. For example, companies such as Caltex Australia and BP Australia not only drill and refine petroleum, but also operate their own networks of retail fuel outlets,” explained Harrison.

According to IBISWorld, Australia’s manufacturing firms faced roadblocks including energy and wage costs and the threat of global competitors with well-resourced and integrated supply chains. As a result, some companies automated operational processes to improve productivity and efficiency which led to reduced wage costs.

Future of the manufacturing industry

IBISWorld said it projects the industry to decline as Australia continues becoming a more service-based economy. Automated manufacturing processes only contribute a smaller amount to GDP compared to labour-intensive processes. But food production manufacturers with strong domestic vertical integration are seen to grow over the next five years.

“While manufacturing certainly has a future in Australia, the sector will look different to what most people might expect,” concluded Harrison.

Top 10 Manufacturing Companies

Rank Company Revenue
1 Caltex $21.7 billion
2 Fonterra Co-op Group $18.9 billion
3 Perth Mint $18.8 billion
4 BP Australia $16.7 billion
5 Viva Energy $15.7 billion
6 Amcor $12.7 billion
7 BlueScope Steel $11.6 billion
8 CSL $10.7 billion
9 ExxonMobil $10.5 billion
10 Visy $6.7 billion

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