Small and medium-sized manufacturers across New Zealand are feeling the strain as conflict in the Middle East continues to unsettle global markets. Many businesses are reporting falling revenue and shrinking profits, while stock levels have also dropped as supply chains and costs come under pressure.
The latest Manufacturing Health Index shows just how tough conditions have become for New Zealand’s small and medium-sized manufacturers. Average profit margins plunged 31.5% in the first quarter, falling to their lowest level since records began in 2018, when margins averaged 41.3%.
The latest figures compiled by software company Unleashed were drawn from data covering hundreds of New Zealand businesses across a wide range of manufacturing sectors, including food and beverage, clothing and fashion, and construction.
However, some sectors were proving more resilient than others and continued to perform better than the overall average.
Profit margins improved over the fourth quarter in several industries, including the beverage, electronics, food, energy, and industrial machinery sectors.
Despite stronger performances in some industries, overall sales across the sector remained sharply down. Average first-quarter sales fell 58% from a year earlier to $129,653 and were also 47% lower than the $245,758 recorded in the three months to December.
Stock-on-hand also fell sharply, dropping to an average of $123,626, the lowest level since 2018 and well below the long-term average of $261,000.
While stock levels were low, Unleashed head of product Jarrod Adam said manufacturers had learnt valuable lessons from the Covid period and were now managing inventory far more efficiently, with average restocking lead times reduced to just 13 days.
“It’s definitely lower than the 2025 averages,” he said.
“What that means is these businesses are able to take this deliberate approach to see what happens.”
“They’ve got confidence that they can reorder and restock when they need to to fulfil orders, and that also just allows them to preserve that cash flow and really be confident with navigating pretty tricky situations.”
Adam said many manufacturers were deliberately avoiding tying up too much cash in inventory, with the value of purchase orders falling across all sectors as businesses took a more cautious and cash-conscious approach.
“It’s been a really challenging five or six years of trading for these businesses, and the way that they’re navigating it and using the stock that they have and the ability to get this new stock in is really allowing them to hopefully navigate through in a healthy way.”
“The challenge for 2026 is uncertainty. Manufacturers must leverage technology to manage rising costs and mitigate the challenges which are out of their control,” Adam added.
“In such a volatile environment, those who invest in efficiency, data and adaptability will be best placed to protect margins and compete in an increasingly constrained market.”