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Manufacturing vs project margins
What it is
Companies that both manufacture equipment and execute projects earn very different margins on each. Manufacturing is a repeatable product sale with factory overhead absorption; project execution is a one-off engagement with site, subcontractor and schedule risk
The reported blended margin therefore depends on mix rather than on performance in either business
Impact on industries
- Manufacturing margins are structurally higher and more stable, so a rising product share improves both level and quality of earnings
- Owning the equipment inside a project win captures the manufacturing margin as well as the EPC margin on the same order
- Project revenue is lumpier and consumes working capital, so a project-heavy mix can grow revenue while destroying cash
- Blended reporting obscures which business is actually performing, so segment disclosure matters more here than in single-business peers