Energy conservation to govern US plant spend in 2009: report
Industrial Info Resources predicts a scale back on equipment spending and facility expansion plans in 2009 due to the fact that US food and beverage manufacturers are tentative about the economic situation and consumer confidence has taken a huge hit.
According to Randy Godet, vice president of food and beverage research for Industrial Info Resources, high commodity costs continue to impact on food and beverage companies and this is placing downward pressure on their profit margins.
He claims that tight supplies and higher prices for grain, coupled with a weak dollar, will eventually lead to reduced capital expenditure.
Automation, energy conservation and efficiency improvement schemes, costing in the region of $1m (€781,815.65m) to $10 (€7,81m) and involving the recycling of waste by-products to fuel plant boilers, the purchase of new pumps or electric drives, will dominate capital outlay next year and will result in a reduction in manpower, said Godet.
He added that companies have indicated that projects already in the pipeline, and set to cost $20m (€15.6m) to $30m (€23,4), will have to be closely scrutinized to ensure that the expenditure involved is justified.
However, Godet forecasts that tight credit lending practices will make it difficult for companies to get favourable financing terms for facility expansion projects costing in the region of $100m (€78.1) to $200m (€156m), and that these will be delayed until the credit crisis eases.
He claims that as many US food and beverage companies have seen their asset value decline in recent months, it is now an opportune time for the better positioned companies to acquire competitors.
“Expansion next year will probably take the form of acquisition rather than new build, construction or installation of new equipment and that is a direct result of the current economic crisis,” said Godet.