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Survey Says Trump’s Policies Will Spur Growth in 2018-19

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Whatever his reputation is outside industrial America, Donald Trump continues to enjoy high approval ratings from the metals supply chain. That was just one of the obvious takeaways from 2018 Steel and Metals Growth Survey from Headwall Partners LLC, a corporate finance and strategic advisory firm to the metals industry.

Headwall’s survey poses a variety of questions on growth to executives from across the supply chain. Service center operators represent one-third of the respondents. 

On Trump, the responses were almost uniformly positive. 

Asked if the Trump Administration’s policies had been good for U.S. GDP growth, 65 percent believed they were positive and another 15 percent indicated they were strongly positive. Only 5 percent thought they had a negative impact on GDP. The responses were similar for the outlook for 2018-19, with 85 percent voting for positive or strongly positive. Just 10 percent anticipated negative effects.

Likewise, respondents believe Trump’s policies will also be good on the measures of profitability and volume growth. 

Specifically, respondents cited three primary areas of change that are most responsible for driving gains: corporate taxes, reduced regulation and general economic growth, in nearly equal measures. Tariffs and infrastructure spending had lesser levels of support as reasons for company gains. 

As for the negative, the only Trump policies seen as a drag on growth this year were tariffs, suggested by 35 percent of respondents and the renegotiation of international trade agreements, supported by one-fifth of the respondents. Forty percent said none of his policies would have a negative impact.

Overall, the respondents to the survey are anticipating strong levels of growth over the next year-plus. Three quarters of the executives believe the U.S. will see growth between 2 percent and 2.9 percent this year, and another 20 percent anticipate growth above 3 percent. Only 5 percent of respondents see growth levels below 2 percent. 

At the individual company level, the optimism is even greater. Almost half the respondents expect revenue growth to exceed 6 percent in the next two years. In contrast, only 5 percent of the survey takers believe their revenue growth will be less than 3 percent in 2018-19.

The respondents to Headwall’s survey have grown through a variety of means in the past, with market penetration representing the greatest source of revenue gains at 35 percent. Geographic expansion and product development were each cited by one-fifth of the respondents, while mergers and acquisitions and market development were lesser vehicles for expansion.

However, that mix is not likely to be repeated in the future, the respondents said. M&A was cited by 50 percent of the respondents as the greatest source of growth over the next three years, while market penetration was at 20 percent and the other avenues at 10 percent or less. 

Sixty percent of the respondents expect to be more active or significantly more active in industry deals over the next three years, while 35 percent anticipate similar levels. Only 5 percent indicated their company would be less active.

As for the types of business deals, 44 percent of the respondents believe their company will make several acquisitions of varying size, while 28 percent expect their company will make one small acquisition and another 28 percent anticipate one large acquisition. Only 6 percent expect their business to make a transformative deal, described as one that represents 30 percent or more of current revenue. 

At the other end of the spectrum, 11 percent anticipate their company will sell a facility, division or business unit. Another 11 percent expect to sell the company outright over the next three years.