Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
April 4, 2006

Regulatory Report:
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No Stickers For Palm Beach
Florida Updates Restaurant Inspection Web Site
California To Make Buildings Greener
Oakland Says Pick It Up Or Pay

Industry Report:
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Server Products

Singer,Thoreson Presented Anoff Award At FEDA Convention
NSC To Distribute XDX Refrigeration Valve
RFID Makers Take Temp Of Market
Starbucks' Caffeine Buzz Fuels Record Expansion
Hail Caesar! "Pizza, Pizza" Chain Plans Expansion
Church's Chicken Says Sky Definitely Is Not Falling

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In This Section:
E&S Manufacturer Sales Go Negative In Fourth Quarter
Many Public E&S Companies Had A Very Good 2005, But Flat Fourth Quarter
New Fed Chief's Rate Action? More Of The Same

This issue's Regulatory ReportSponsor: HOSFAIR GUANGZHOU & HOSFAIR XI'AN 2006 Industry ReportSponsor: Server Products

Economic Report FER Economic Forecast Meetings

E&S Manufacturer Sales Go Negative In Fourth Quarter
The fallout from last year's hurricanes was not good for the foodservice equipment and supplies business. Manufacturer sales of equipment and supplies dipped precipitously in the fourth quarter, according to trended sales data compiled by the North American Association of Food Equipment Manufacturers.

On the other hand, the year overall was strong. North American sales for 2005 rose a respectable 4.5%, driven by strong gains in the first two quarters. Export sales surged 16.2% for the year. The numbers are from NAFEM's quarterly Industry Index program, which compiles data from participating member companies.

Fourth-quarter sales in North America fell 2% versus the year-earlier period and a whopping 12.4% compared with the third quarter of '05. The decline versus the previous year ended a seven-quarter record of consecutive sales gains.

These numbers, both for the quarter and the year, are consistent with quarterly reports for the fourth quarter from many public E&S companies (see story below).

In contrast, however, the quarterly Business Barometer from Manufacturers' Agents Association for the Foodservice Industry had overall fourth-quarter sales from the U.S. and Canada rising a robust 3.8%.

This Industry Index report will be the last from NAFEM, as the association has chosen to concentrate its research efforts on its every-two-year "Size & Shape of the Industry" report.


Section sponsored by FER E&S Market Forecast Meetings

Many Public E&S Companies Had A Very Good 2005, But Flat Fourth Quarter
Much in line with the preceding story, many publicly held foodservice equipment and supplies manufacturers have reported strong overall sales for 2005, but on the equipment side, at least, a flat fourth quarter.

Combined sales for 10 public companies, seven primarily equipment, three primarily supplies, rose 9% in '05, according to John Muldowney, president of Clarity Marketing, who compiles the data each quarter.

But averages are just averages, and equipment and supplies sectors fared quite differently. Sales at the seven public equipment companies rose 14.2% for the year. The three supplies companies managed annual growth of only 1%. This number is almost certainly affected by restructuring changes at two of the three companies.

For the fourth quarter, on the other hand, sales were flat at the equipment companies on a combined basis, but rose 5% for the three supplies-oriented companies. Combined sales from all 10 companies rose 1% in the quarter. Part of the volatility in the numbers appears tied to several equipment companies reporting big chain rollouts that waned through the course of the year and a downward restatement of sales from one manufacturer following a divestiture. The fallout from the August and September hurricanes also was a factor.

The question becomes whether manufacturer performance will mirror the general economy with a strong rebound in the first quarter of '06, especially as the re-equipping of restaurants, hotels and institutions affected by the hurricanes begins to take hold. With the quarter nearly in the books, we'll know soon.

Section sponsored by FER E&S Market Forecast Meetings

New Fed Chief's Rate Action? More Of The Same
Wall Street investors and the companies that depend upon them for capital discovered March 28 that the new chairman of the Federal Reserve, Ben Bernanke, was not inclined to toss them a bone.

As widely expected, the Fed's Open Market Committee raised the benchmark federal funds rate another quarter point to 4.75%. It was the 15th consecutive increase since June 2004.

Many were hoping the Fed would signal the end of such increases, presumably boosting stocks in the process. But no such luck. Instead, the committee indicated it still detects some slight inflationary pressure in the U.S. economy and may raise rates again, possibly more than once or twice.

The Fed governors cited the continuing impact of upward pressure on gasoline and other commodity prices as well as a robust jobs market, though the group did mention the productivity gains are mitigating pressure for wage increases. The group said it does expect growth of the U.S. economy to moderate after the first quarter.

Many economists believe the Fed will stop raising interest rates by summer and may actually ease rates if growth slows too quickly later in the year.

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