Cap Ex Survey: Focusing on new equipment
Despite an uncertain future, baking and snack food companies invested big time in 2011. But what is the outlook for 2012 when it comes to capital spending?
“If there is a theme for 2012, it’s steady as she goes,” noted Marjorie Troxel Hellmer, president of Kansas City, MO-based Cypress Research Associates, which completed Baking & Snack’s 19th annual capital spending survey.
In fact, 37% of those executives responding to the survey indicated that their companies doled out more than they initially budgeted for 2011, 45% invested as budgeted and only 18% spent less than what they scheduled for capital expenditures. In 2012, 38% plan to increase spending and 28% plan to remain the same and 29% will lower their investments, while 5% remained unsure when the survey was fielded in November and December.
According to Mr. Troxel Hellmer, 2011 saw a huge rebound in capital expenditures after the industry cut back on investing during the peak of the recession. While the outlook for 2012 capital spending remains more or less on track with last year, she noted there might be significant differences in where bakers and snack manufacturers invest this year.
“There isn’t as much activity with bricks and mortar and with new buildings,” she noted. “A lot of companies made those big investments already. In 2012, there is not going to be that much activity on this front, according to the survey.”
Rather, the investment strategy for 2012 will be more strategic with a greater emphasis on new equipment for producing new products as well as for improving productivity and controlling costs by enhancing operational efficiencies.
Where are bakers and snack producers investing in 2012? Specifically, 74% of those surveyed indicated they’re investing in new processing equipment followed by maintenance and replacement parts (64%), new packaging equipment (63%), system integration and automation (51%), upgrading existing facilities (51%), warehousing/distribution (36%) and new buildings (21%). The percentages are greater than 100% because most respondents are investing in multiple areas.
How much are they targeting in each area? According to the survey, 30% of budgeted dollars will be spent on new processing equipment, followed by maintenance and replacement parts (19%), new packaging equipment (14%), upgrading existing facilities (14%), warehousing/distribution (6%) and new buildings (6%).
Check out the upcoming February issue of Baking & Snack magazine for more exclusive information on our survey.