Inflation has caused a 17 per cent YoY profit margin plunge for small Australian manufacturers, according to a new report by inventory management software provider Unleashed.
Small manufacturers made an average return of $2.84 on each dollar invested in inventory between July 1 2023 and June 31 2024. The year before, they made $3.42 per dollar invested; a dizzying drop of 17.01 per cent.
“Inflation can really be a silent killer,” said Unleashed Head of Product, Jarrod Adam. “Businesses are working hard to build strong sales pipelines, but if you feel you’re unable to pass your higher costs on to your customers for fear of hurting sales, the effect on your business health can be corrosive.”
For some industries, profitability is looking up. Small manufacturers in the Personal Care industry, for instance, reported a return of $5.29. Others, such as the Beverage industry, saw a significant YoY drop in profitability, from $3.47 in the 2022-23 period to $2.09 in the 2023-24 period.
Cautious optimism as sales revenues rise
Despite the drop in profit margins, overall sales revenue was up almost 8 per cent. Earlier this year, small manufacturers enjoyed their best quarter in five years. One small brewery owner described the figures as “sunlight on the horizon”.
“There’s so much doom and gloom out there,” said Guy Greenstone, the co-founder of Stomping Ground brewery. “But you can’t throw your hands up in the air and go ‘woe is me’ – you’ve got to go ‘how do we go about operating in this new environment?’ You’ve got to rely on your assets – great brand, great products, great people. You’ve got to keep being as upbeat and as efficient as you can to ride it out.”
