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Banks and other financial institutions may be easing restrictions and starting to lend more often, and that could be good news for this year’s investment outlook, according to Baking & Snack’s exclusive 20th Annual Capital Spending Survey.
The survey asked companies to list all of the ways they plan to cover capital purchases in 2013. Most companies — 70% of survey respondents — noted they expect to use existing cash to pay for investments. However, 39% indicated they plan to borrow from outside sources. That’s up significantly from 25% who said they planned to borrow money in the previous survey and suggests there is more liquidity in the market.
And most bakers and snack producers are spending a greater amount on equipment. In fact, 83% of respondents earmarked funds for new processing equipment while 69% also plan to buy new packaging equipment. Those percentages are up substantially from last year’s report.
Additionally, 61% expect to upgrade existing facilities, 60% allocated funding for maintenance and replacement parts and 56% plan to invest on systems improvement. Only 31% budgeted funds for new buildings.
To drill down further, the survey asked how much they plan to spend in each area. Executives responded that 33% of their total budgets will go toward new processing equipment, or more than double the 16% they plan to spend on new packaging equipment. Only 11% of overall spending targets new buildings, but even that’s up from 6% the previous year.
New products continue to prime the pump for spending. In fact, 45% of respondents list product innovation as the single most important factor influencing capital spending plans in 2013. That percentage is similar to survey results for the past two years.
However, 23% list “reducing changeover/driving efficiencies” as their top priority, indicating that controlling costs and eliminating waste play major roles in factoring return on investment.
Find out more about the outlook for capital spending in the upcoming February issue of Baking & Snack magazine.
