2014 CapEx Study
Processors report an improving landscape for capital expenditures in the meat and poultry industry in 2014.
In conjunction with The National Provisioner’s 2014 Economic Outlook, we thought it wise to get a read on processor’s capital-expenditures trends this year and spending plans for the coming year as a leading indicator on the industry’s health, and to offer a benchmark for your company’s plans.
The goal of our 2014 CapEx Study was to identify changes in spending levels annually from 2012 through 2014, leading business factors fueling capital expenditures, areas of processing and production that are receiving investment, and the level of reinvestment CapEx projects are commanding as a percent of annual revenue.
Concerns processors may have had about the health of the economy and the recession are in their rear-view mirror, as an overwhelming number of processors who participated in this study expressed a “very positive” to “somewhat positive” outlook on the economy and its effect on business and their operations.
That sentiment was supported in the change in CapEx spending reported among survey participants; 39% indicated their company’s CapEx investments increased this year over 2012, with an average increase of 19% in their spend levels. Meanwhile, only 18% reported a decrease, and 43% indicated CapEx spending was level to last year.
Equipment upgrades and replacement projects were cited most often among processors for CapEx projects this year, followed by maintenance/upkeep of existing facilities, expansions and renovation of existing facilities, new equipment purchases, and new production facilities. A whopping two-thirds of CapEx spending in 2013 was paid in cash, with various forms of financing (loan, lease, credit) each accounting for less than one-third of reported spending.
Repair, rebuild and maintenance captured the majority of respondents’
CapEx spending this year, with increasing capacity for existing and new
products a close second in terms of share of overall investments made in 2013.
One of the best signs of the meat and poultry industry’s health can be seen atop the reasons reported for processors’ 2013 CapEx spending, with “increased capacity” ranking as the leading driver over equipment replacement and reducing processing costs.
Important, but maybe not a surprise, to note: More than half of the study respondents reported that increasing food safety factored into their 2013 investments.
Beyond food safety/quality control, processors’ CapEx projects included a vast array of processing equipment, process automation and control, and packaging systems. To note, the lead items on processors’ shopping lists this year were:
- Packaging Machinery/Systems (66%)
- Refrigeration/freezing/cooling equipment (63%)
- Inspection/Detection equipment (60%)
- Worker Safety Systems/Modifications (60%)
- Conveyor/Belting Upgrades (55%)
- Computer/Data Tracking Systems (51%)
2014 CapEx outlook
Participating processors where asked to predict changes expected in their CapEx budgets in the coming year, and responses suggest that their processing operations will continue to expand in order to support higher volumes of production.
Nearly half (42%) of processors reported that they expect an increase in CapEx spending in the coming year — more than reported increases in CapEx spending for this year. On the flip side of the coin, 13% believe their company would spend less than this year and 46% expect CapEx spending to remain unchanged from levels this year.
On average, processors reported their company CapEx spending was on average 15% of annual revenues, while many spent less than 10% of annual revenues and more than a quarter spent between 20% and 49% of their company’s revenues. More than three-quarters of processors surveyed reported an anticipated ROI on capital projects of two to three years.
Looking ahead into next year, more processors (76%) expect to increase the capacity of their company’s operation, which is nearly double the rate of expected re-engineering of existing facilities and equipment (46%) that was also mentioned.
For more information on this study, or to see the complete version of The National Provisioner’s 2014 CapEx Study, which includes additional data not included in this article, contact Scott Seltz at email@example.com or (779) 221-9431.