3/30/2021 11:00:00 PM

Why factory automation could be 2021’s success story


Demand for better factory automation is providing global investment opportunities for Pie. Guy Thornewill, Pie's Head of Research UK & Europe and Senior Investment Analyst, explains.

Global factory automation companies are thriving, as demand for innovation and efficiency soars. Pie is invested in companies in this sector to take advantage of the growth. What are the benefits of improving factory automation, and why are companies keen to modernise their production facilities?

It’s more cost effective
The US-China trade disputes have accelerated a trend of near-shoring, i.e. bringing back some production from countries like China, to the markets where the products will be sold – Europe or the US. China is automating big time because its labour costs are not as cheap as they once were, and many factories are behind in terms of upgrades. Now, a good Chinese employee is actually not that much cheaper than someone in Germany these days. Near-shoring helps reduce product shipping costs and can allow better control of inventory.

It’s more efficient
Speed to market and flexibility is increasingly important for producers, and automation helps with this. Production is streamlined by using machines that can create a product faster and better.

Production’s closer to home
The impact and potential complications of having your US company’s manufacturing completed in China was highlighted during the global pandemic, when global links virtually shut down. Long supply chains to Asia aren’t great when things go wrong – we are still seeing supply shortages for many different goods.

It gets the green tick
A lot of modern automation saves significant amounts of energy. Plus, shorter supply chains with less air freight is better for the environment. Using labour in the west is also viewed by many as more ethical than large Chinese factories, especially with the stigma and controversy of  some garment factories in the east. 

Where is Pie invested?
Pie is invested in ATS Automation, a Canadian manufacturer of automated tooling solutions. This includes machines that automate food processing and the packaging of pharmaceuticals and vaccines. The company is doing well right now as it is seeing a pickup in order intake as economies re-open, the trend to automation in general is very strong (be that in factories making tools or parts for industry or life sciences, or simply processing food better), and the company announced the acquisition of CFT which looks like a good deal. 

We are also invested in Tomra, a global leader in recycling equipment and reverse vending machines (where you drop used plastic bottles and cans and get a voucher in return). Its equipment helps automate recycling facilities, popular with UK and European municipalities (councils) as government regulation around reducing plastic waste becomes strict. Tomra is well placed to benefit.

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Information is current as at 31 March 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.

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