Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
March 27, 2007

Regulatory Report:
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North Carolina Turns Back Code Change
Yes, Still More Health Departments Put Reports Online
FDA Catches Flak For Voluntary Produce Guidelines
Japanese Restaurants Soon Subject To Visits From 'Sushi Police'

Industry Report:
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New Group Pushes For Energy-Efficient Lighting
Denny's Dumps Trans Fat; O.C. Eateries Do Too As Ban Looms
MAFSI Schedules Online Seminar Series
FER's MUFES Meeting Wins Folio: Award

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In This Section:
Preliminary Fourth Quarter Numbers Look Good For Most Public E&S Companies
Manufacturers Suggest Alternatives As Nickel, Stainless Prices Just Get Stupider And Stupider
Economists Pull 2007 Forecast Back A Bit, While Long-Term Looks Bright, If You Like 3% GDP Growth

This issue's Regulatory ReportSponsor: Enodis Industry ReportSponsor: FHV2007
Economic Report The NAFEM Show 2007

Preliminary Fourth Quarter Numbers Look Good For Most Public E&S Companies
The general U.S. economy may have struggled in the fourth quarter of 2006 (see story below), but most public companies making foodservice equipment and supplies were humming. Seven publics tracked by John Muldowney, principal at Clarity Marketing, report blended revenue gains of 11.6% for the quarter and 6.9% for the year ending Dec. 31. Two companies Muldowney follows have yet to report.

Of the five equipment-oriented companies tracked, two registered hefty double-digit fourth quarter gains, while increases for the remaining three were more moderate, though still positive. The five equipment companies saw fourth quarter blended sales rise 11.7%. Sales for the year rose 4.9%

The two supplies companies in the group saw very strong gains, with blended sales up 11.4% for the quarter and 10.9% for the year. The supplies sample has shrunk from three companies to two since Oneida went private in late '06.

Increases for all companies have been driven in part by aggressive price hikes as manufacturers try to keep pace with the rapid run-up in materials costs, particularly for stainless steel.


Section sponsored by The NAFEM Show 2007

Manufacturers Suggest Alternatives As Nickel, Stainless Prices Just Get Stupider And Stupider
We've spent a good part of March with manufacturers on the firing line of increasing stainless steel costs. And we're sorry to report things just get increasingly desperate. Spiraling costs for nickel, which comprises 8% of the material in 300 series stainless, but well over half the total cost, show no signs of abating. According to Stainless Steel News and Nickel News, a daily newsletter sent to us by Dennis Park at Vollrath, through March 16 nickel had closed at new highs eight of 11 business days in the month. On March 16 it stood at close to $22 a pound. And the newsletter said things were likely to get worse, as investors drive up nickel prices on speculation of continuing supply shortfalls.

There really was no other major topic of discussion at both the Foodservice Equipment Manufacturers Association annual meeting and the North American Association of Food Equipment Manufacturers annual meeting in early March. FEMA members, mostly fabricators, have been especially hard hit. Talk at the meeting centered on customer willingness to try alternatives to 300 series products, such as 200 and 400 series steels, at least in some components. The consensus was that gradually, major operator customers are realizing they may have no choice over the long haul but to try alternatives.

Many of the members said convincing consultants has been more challenging, perhaps because many spec kitchens are designed to last for decades. Other possible explanations: Consulting specifiers might be working with more flexible budgets, and because 300 series products have proven themselves so thoroughly over time.

One thing operators and consultants alike can count on is continuing run-ups in prices for equipment and supplies so long as the price of nickel continues to increase.

Section sponsored by The NAFEM Show 2007

Economists Pull 2007 Forecast Back A Bit, While Long-Term Looks Bright, If You Like 3% GDP Growth
The more than 50 economists polled monthly by Blue Chip Economic Indicators pulled back their consensus forecast of U.S. gross domestic product in 2007 after the federal government dramatically cut its estimate of GDP growth in fourth quarter '06. The economists now believe annual growth will slow to 2.5%, down from 3.3% in '06.

Their consensus for year-on-year growth had risen to 2.7% for February as the Federal government whipsawed its fourth quarter GDP estimates. Originally pegged at 1.1% growth, the estimate jumped to 3.5% before settling back to 2.2% in the final appraisal. The fourth-quarter-over-fourth-quarter Blue Chip forecast held steady at 2.7%. The group continues to believe inflation will remain moderate, and growth will move toward 3% in the second half of '07.

As for the long-term, the newsletter released consensus forecasts and those of the Bush Administration and the Congressional Budget Office. Expect growth of 2.9% to 3% '09-'13 and average growth of 2.9% for '14-'18, according to the consensus. The Bush figures are more optimistic—average 3.3% for '09-'13, while the CBO is less so at 2.6% average for the same period.

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