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Equipment Purchasing Up; Capital Investment Down

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Equipment Purchasing Up; Capital Investment Down

March 08, 2013 - 06:43

The 2012 Exclusive Paperboard Packaging Census Report reveals that box makers are purchasing more equipment this year but making fewer capital investments.

Although box makers are purchasing more pieces of equipment this year, the data from the 2012 Exclusive Paperboard Packaging Census Report suggests that the amount of capital investment might be 20 percent less in 2012 than in 2011. Plants with a larger equipment-buying budget this year will upgrade and modernize.

“Our objective is to improve throughput,” says a U.S. box maker. “We are looking at load formers, scrap handling, load turners, and improved computerization.”

Many box makers say they are updating equipment, increasing capacity with their equipment purchases, and meeting the needs of new clients. A few converters say they are purchasing machinery to improve labor efficiency in order to combat the higher material costs. This is all done to hopefully balance the budget.

“We are moving forward with technology and making investments to ensure our company is sustainable with the future of packaging,” explains a U.K. manufacturer.

Other buying motivators include a better economy, good prices on equipment, productivity, capabilities, and efficiencies.

One in three corrugated plants will spend less on equipment in 2012 compared to a year ago. For most, they already made their big equipment purchase in 2011. For others, lower budgets, poor sales, and the continuation of an economic crisis will put the brakes on equipment purchasing this year.

Whatever the budget, actual equipment purchases will be higher this year compared to last. Overall, 53.6 percent of corrugated container converters will buy new equipment in 2012 (in 2011, 48.3 percent were buying). One in three will buy material handling equipment and 23.4 percent will order diecutters. One in five will get new adhesive/gluing equipment.

In 2012, the top motivator for corrugated container plants to choose a specific brand of equipment is the reputation of the supplier. Plants want new equipment that matches up with existing equipment. Quality is a purchasing driver for 30.9 percent of plants.

“Best in class – same equipment as currently own,” explains a corrugated box plant manager in the South.

Performance is mentioned by 23.6 percent and this includes productivity, speed, and technology. Price is a driver for 18.2 percent and 16.4 percent are pleased by services, particularly after-sales service and good technical support.

The data suggest that total capital expenditures in 2012 will be 23.6 percent lower than in 2011. This decrease is likely driven by fewer larger plants having multi-million dollar budgets. Last year, 27.8 percent of larger plants planned to spend more than $5 million — this year, only 9.6 percent.

Plants provided the last piece of equipment they purchased. These answers provide a snapshot of actual equipment purchasing activity. Comparing these data suggests that safety equipment, folder-gluers, and control systems will be hot items for 2012.

The top three most-recently purchased machines are flexo folder-gluers (15.9 percent), diecutters (12.8 percent), and material handling equipment (11.3 percent). The top three future purchases will be material handling (29.8 percent), diecutters (23.4 percent), and adhesive/gluing equipment (17 percent).

Overall, 52.9 percent of plants bought equipment as an addition. However, additions are more popular with small converters, those with less than $10 million in annual revenue, where 66 percent expanded and 34 percent replaced existing pieces. The percentage of larger converters, those with revenues over $50 million, buying additional increased to 49.1 percent, up from 35.1 percent a year ago.

Conversely, replacement buying is down to 52.6 percent compared to last year’s 64.9 percent.

This year, 19.5 percent recently purchased equipment to open up a new market and this is down from last year when 25.4 percent saw opportunity in something new. Four of five plants bought equipment for existing markets.

Folding Carton Converters

Most folding carton converters (59.8 percent) will purchase new equipment in 2012. This is up from last year when 51.4 percent were planning to buy. The most popular new machine this year is a printing press, to be purchased by 47.5 percent of box makers. One-fourth will buy diecutters and 22.5 percent will each purchase material handling equipment, gluers, and folder-gluers. Other purchases will include converting equipment, pre-feeders, inks, and sheeters.

Most box makers choose an equipment supplier based on their reputation and, many times, this can be because the new machine will match up with their existing piece. Reputation is also earned in the form of past experience and being a proven supplier.

“We already have their equipment in-house and are satisfied,” says one folding carton converter.

Also, 40.9 percent of plants will focus on quality, which is more important than performance and price for folding carton plants.

“Our new business requires this machinery, and there are good prices for equipment right now, so why not purchase?” asks one folding carton converter.

Folding carton plants were asked exactly when they would be purchasing new equipment in 2012. The data suggest that equipment buying will become entirely frantic in third quarter because 51.2 percent of plants will be buying at that time.

Capital expenditure on equipment in 2012 will be 19.3 percent less than it was in 2011. This is due to a smaller percentage of folding carton plants buying in the $1 to $5 million dollar range. Instead, there is higher activity in purchasing equipment that costs less than a million.

Folding carton plants were asked to identify the last piece of equipment they purchased. This provides a snapshot of actual equipment purchasing activity. Diecutters are at the top of the list with 18.2 percent. Folder-gluers are in second place being bought by 14.8 percent of box makers. Adhesive/gluing equipment was most recently purchased by 12.5 percent of folding carton plants.

The data show a statistically significant change this year in the amount of used equipment purchasing at folding carton plants. New machines represent 65.1 percent of all equipment purchases and this is much lower than the 76 percent buying new 12 months ago. Used equipment is at an all-time high with 34.9 percent of plants entering this market, which compares to only 24 percent buying used a year ago.

Plants purchased additional equipment 60.8 percent of the time. Replacement machines are 41.85 percent of purchases (plants could give two answers to this question, which is why they add up to more than 100 percent). Ninety-five percent of machines were purchased rather than leased.

Buying a machine for an existing market represents 85.5 percent of purchasing activity. Opening up a new market was the reason 18.1 percent of folding carton plants bought new equipment. PBP