The global machinery & equipment sector has a market value of around USD280bn and relies heavily on the APAC and North America regions, where revenues represent 34% and 30%, respectively, of the total market. The rest is split between EMEA (18%), South America (11%) and the rest of the world (11%).
As one of the most cyclical sectors, machinery and equipment is often hit hard and fast during slowdowns and recessions. This was the case during the 2020 pandemic-linked downturn, when revenues fell on average by -10% y/y. However, the post-pandemic recovery was noticeable as various end-market customers resumed operations and increased new orders, making revenues jump by around +16% in 2021 and +13% in 2022.
Through 2022, revenue and profit margins were positively boosted by still-high new orders that pushed backlogs to never-before-seen levels, ensuring production and revenues throughout 2023 as well. Despite waning demand in Europe and China (the main M&E exporter in the world), India and the US have witnessed business activity with huge government investments in infrastructure bolstering demand for heavy equipment.
Overall, two sub-sectors have seen the best performance in 2023: farming machinery and mining machinery, helped by elevated food demand and prices that have boosted income for agri-food companies and mining companies' increased capex to meet high demand for lithium and rare earth minerals, respectively. Nevertheless, as fears of a global recession remain, demand is expected to decline in the short term, which together with still-high production costs will threaten companies’ margins in 2024. In fact, equipment makers may face excess inventory in early 2024 as new orders from farmers and construction companies may cool in the next quarters. However, in the long term, we see a lot of growth potential, especially in the most tech-oriented subsectors such as robotics machinery, given that the automation of processes is gradually becoming a priority for sectors such as automotive and electronics, which are dependent on innovation to keep growing their businesses. The farming machinery sub-sector will also see rising demand to ensure food security for an increasing global population.
