How can I tell if a plastics manufacturer for sale is profitable?

A moulder’s or extruder’s profit statement can look healthy while the plant is quietly under strain. Resin timing, scrap, idle machines and an owner who does unpaid work can all hide what the business earns. This page lists where to look. It is a way to read the books, not a method to value the business, and your accountant should help you with the numbers.

Resin cost and the pass-through

Resin is the largest input for most plants. Ask how a change in resin cost reaches the customer: a formula in the contract, a quote that is revised, or nothing. Ask how long the lag is. A plant with no pass-through carries risk whenever resin moves, and a good year may simply reflect a favourable market. Look at several years, not just the latest.

Scrap, regrind and press use

Ask how scrap is measured by program and what happens to it. Regrind can be reused in some jobs and not in others. Then ask how many hours the presses run against hours available, and how long changeovers take. Ask how long changeovers take and what they cost. Track inventory levels alongside these records; the list of financial records to ask a seller for shows what else to request.

Margins by program

Ask for margins by program or customer, not only for the whole plant. Long-running programs and one-off jobs behave differently, and a single weak program can pull down a strong shop. Find out whether the cost records include setup time and mould maintenance, and whether pricing has kept pace with costs.

What the owner’s books may hide

• Maintenance on presses and moulds that was put off to show a better year
• Tooling and repair work the owner did personally and did not charge to the plant
• Personal expenses run through the business
• Equipment due for replacement soon

Ask your accountant to adjust for these and to explain each change. Verifying a seller’s financials covers how to test them.