Manufacturers Loosen Budgets To Make Tech Upgrades

The COVID-19 pandemic may have brought manufacturing to a halt, but that hasn’t stopped these same companies from investing in software upgrades and technology initiatives to stay competitive.

The Wall Street Journal reported companies such as Xylem Inc., the New York water technology company, SPX Flow Inc. a maker of engineered flow components in North Carolina and industrial automation provider Rockwell Automation Inc. of Wisconsin, said they’ve maintained or accelerated investments in tech and research.

Morgan Stanley reported a three-month average index of planned capital spending among U.S. manufacturers dropped in May to its lowest level since May 2009.

But the index made a comeback in June, suggesting the second half of 2020 might show more companies likely to make business investments, the Journal reported.

David Berge, a senior vice president at Moody’s, said large manufacturers typically spend 3 percent to 5 percent of annual revenue on capital expenditures. They don’t want to weaken their ability to meet customer demand and lose market share coming out of the economic downturn, he added.

Xylem, for example, did not spend on equipment, but invested in software to support its digital tools, Chief Financial Officer Mark Rajkowski told the Journal.

“You have to be ambidextrous,” he said.

Xylem expects to cut its annual capital budget by $40 million to roughly $200 million this year, he added. Typically, the company spends $226 million on cap expenditures, Rajkowski said.

Rockwell Automation said it will continue to invest in cloud-based software systems for managing employees, and other technology projects to support its software offerings.

Chief Financial Officer Patrick Goris said Rockwell will put off non-essential maintenance projects because lower volumes have given its equipment a longer life expectancy.

SPX Flow said it is crafting a digital portal where customers can see prices, inventory and customize the products they want to buy, its finance chief Jaime Easley told the Journal.

Easley added that SPX Flow’s capital spending for the year could potentially dip below the planned $40 million because some projects might be put off until 2021.

In April, PYMNTS reported corporations are likely to spend on technology as the country emerges from the coronavirus. The numbers show one key pocket of growth is spending on work from home infrastructure, where dollars funneled to those initiatives will grow by 30 percent annually, where once the growth rate was pegged at just 1 percent.