If one could categorize the 2010 Capital Expenditures Report (published in The National Provisioner, December 2009 issue) as an excellent sign of a positive future for protein processors, then one also could categorize the results from the 2011 version as a sign that the industry is easing its foot off the gas pedal a bit, preferring to spend similar amounts on capital improvements, rather than increase their spending in 2011.

In the 2010 Capital Expenditures Report, respondents predicted stabilization in capital spending heading into 2010 and 2011. Last year, the study reported a bounce-back for the industry, and the 2011 report confirms processors’ sentiment that the industry can support those 2010 levels.

Indeed, the jump from 2009 to 2010 showed that the worst of the recession likely is behind us, but a cloudy economic future has led processors to slow the growth of their spending in 2011, despite a rosy overall outlook for the future.

The 2011 Capital Expenditures Report shows that the industry is reinforcing its 2010 plans by continuing to develop new projects for 2011, so spending habits of processors are not shutting down in the face of uncertainty. At worst, spending habits are leveling off.

Among processors surveyed, 82 percent feel positive overall about the future of their company and the industry as a whole (see Figure 1). This is up 1 percentage point from the 2010 report.

Adding to the positive sentiment, an encouraging 59 percent of those surveyed (Figure 2) said their company has new projects on the docket, and an additional 10 percent have carried over project from 2010. Only 15 percent have reduced plans for 2011.

Overall, the industry appears poised to hold the line in 2011 where capital expenditures are concerned. When compared to capital-expenditure plans in 2009 and 2010, it becomes clear that 2011 is perceived as a stabilization period, with a whopping 55 percent of respondents stating that they will spend about the same as they did in 2010. On the bright side of things, the number of respondents stating that they’d spend less on projects dropped for the second straight year.

The key drivers for capital investment in 2011 have not changed much over the last two years, with improved efficiency, increased capacity and maintenance of existing operations heading up the list. Despite this lack of shuffling at the very top of the list, one notable driver of capital investment is making waves in our survey in 2011, “Reduce waste water energy expenditures.” This reason alone has gained 22 percentage points between 2009 and 2011, as a combination of awareness, regulations and costs have often pressured the industry to make changes in this arena.

Where only 15 percent of respondents in 2009 cited this as a driver of investment, 37 percent tabbed it as a primary driver of capital expenditures in 2011.

Finally, for the third straight year, more processors plan to repair, rebuild or maintain current assets than create a new asset, and the percentage of processors planning on the former also increased from 2010. Nonetheless, more than 40 percent of processors continue to create new assets in their facilities, keeping the manufacturing engine well-fed and motoring along.

Heading into 2011, it truly does appear that the industry believes the worst of the recession is well behind us. However, the uncertain future of the global economy overall appears to be giving many processors a reason to pause in terms of increased investment in new facilities, lines and equipment. Many appear to be taking a wait-and-see approach to capital spending, preferring to hold the line rather than spend more in the coming year.

More about the 2011 Capital Expenditures Survey

This article is a snapshot of an annual study examining capital-investment plans across the protein-processing industry. The conclusions are based on the opinions and behaviors of decision-makers who agreed to participate in the survey. This survey was conducted and findings compiled by BNP Media's Market Research Division in conjunction with The National Provisioner. A total of 40 individuals actively involved in capital-expenditure planning and decision-making participated in the study, which was conducted in late October 2010. This research study provides up-to-date information on the key drivers in capital-expenditure plans specific to the protein-processing industry.

For more information on the 2011 Capital Expenditure Study, contact editor-in-chief Andy Hanacek at hanaceka@bnpmedia.com.