Australian SMB manufacturers grew Q3 sales 9% whilst cutting inventory by 33%, according to Unleashed’s latest report.
What’s happening: Australian small and micro manufacturers grew Q3 sales by 9% to $625,400 whilst expanding profit margins by 3.2%, according to Unleashed’s latest quarterly report.
Why this matters: The shift represents a fundamental change in how small manufacturers manage working capital and respond to economic headwinds. Food producers led growth with 42% sales increases, whilst construction manufacturers achieved 17.6% quarterly growth.
Australian small and micro manufacturers have executed a sharp strategic pivot in the third quarter, slashing inventory levels by a third whilst simultaneously growing sales and expanding profit margins.
The average Australian small manufacturer grew sales by 9% to $625,400 in the quarter ending 30 September, according to the latest report from inventory management software provider Unleashed. Profit margins expanded by 3.2% as firms decisively moved away from pandemic-era stockpiling strategies.
The report draws on data from more than 1,000 Australian firms using the Unleashed platform, spanning manufacturing categories including food and beverage, clothing and fashion, and construction.
Jarrod Adam, Head of Production & Distribution at Unleashed, said the figures reveal a fundamental shift in operational thinking.
“In spite of cautious consumer spending, spiking energy prices and high labour costs, Australian small and micro manufacturers have been adapting and thriving,” Adam said.
“Manufacturers have found pockets of demand and capitalised on them. The real story is operational awareness, firms have focused on growing revenue and expanding profitability without tying up capital in excess stock. That’s a fundamental shift in mindset from the pandemic era of buffer building.”
Food sector surges
Food manufacturers emerged as the clear growth leader, posting 42.1% sales growth quarter on quarter to $733,254 whilst simultaneously improving margins and reducing inventory.
The sector achieved margin expansion of 4.89 percentage points to reach 30.87%, demonstrating strategic pricing and cost efficiency despite input price volatility. Stock holdings contracted sharply by 25.6% as food manufacturers ran down Q2 inventory levels.
“Even with household budgets under pressure, the food sector is capturing strong consumer demand. The 42 percent sales jump shows Australians are still buying quality food products. The margin expansion to near 31 percent proves manufacturers are passing through input costs while optimising their product mix,” Adam said.
Marianna Amato, CEO of Visit Brands, which supplies souvenirs and promotional products to businesses across Australia, said purchasing patterns have shifted significantly.
“Typically we would see the final quarter the busiest with last-minute purchasing ahead of the end of year, but we’re now seeing businesses get smarter about their purchasing and ordering much earlier. People are more aware of lead times now, and they want to make sure stock is ready to go for seasonal demand, so Q3 ended up outperforming previous years,” Amato said.
“Consumers are getting more quality conscious and aware of the ethics of their products, too. This has benefited us as people search for socially compliant suppliers, and it’s going to benefit the wider Australian manufacturing sector.”
Construction maintains momentum
Building and construction manufacturers delivered the strongest sustained performance across all measured sectors, achieving 17.6% sales growth quarter on quarter and 16.9% growth compared to the same quarter of the previous year to reach $739,841.
The sector expanded margins by 2.39 percentage points to 37.31% whilst dramatically reducing stock holdings by 42.1% quarter on quarter and 52% compared to the same quarter of the previous year.
With $242 billion worth of major projects set for the next five years according to Infrastructure Australia, local manufacturers have been core beneficiaries of construction sector demand.
Strategic inventory drawdown
Average stock on hand across all industries fell to $311,200 per business in Q3, down from $462,735 in Q2. Australian producers pulled back purchasing of raw materials by 34.9% quarter on quarter to $339,371.
The dramatic reduction in ordering, combined with the inventory drawdown, signals manufacturers are abandoning buffer building in favour of lean operations that free up working capital whilst protecting profitability.
Lead times across all Australian manufacturers contracted sharply through Q3, falling 36% quarter on quarter to reach 16 days, matching the same quarter of the previous year. The improvement confirms supply chain normalisation is complete, enabling the sector’s strategic pivot to just-in-time operations.
“The sheer velocity of the Q3 pivot is remarkable,” Adam said. “Lead times down 36 percent, stock down 33 percent, purchasing down 35 percent, yet margins up nearly 4 percentage points. This is what disciplined inventory management looks like when manufacturers have real-time data and the confidence to act on it.”
Despite revenue remaining 3.7% below the same quarter of the previous year, the quarterly improvement reflects resilience and strategic positioning in the face of broader economic headwinds.
Beverages face headwinds
The beverages sector experienced significant revenue contraction, falling 28.2% quarter on quarter and 38.4% compared to the same quarter of the previous year to $437,502.
Despite substantial headwinds, beverage manufacturers maintained margin stability with modest improvements, lifting profitability from 31.44% to 31.95% quarter on quarter. Stock holdings declined 20.6% quarter on quarter as firms recalibrated inventory to match current demand levels.
The report, which also assesses manufacturing health in the UK and New Zealand, reveals Australian manufacturers leading the charge on operational efficiency across all measured markets.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
