U.S. & Canadian Packaging Machinery Shipments Soar In

Arlington, VA, September 21, 2005 -- United States packaging machinery shipments reached $5.344 billion in 2004, a 9.3% increase from the $4.889 billion in equipment shipped in 2003, according to Packaging Machinery Manufacturers Institute's (PMMI) 11th Annual Shipments and Outlook Study.

All 17 of the machinery categories that PMMI tracks in its annual review experienced growth in 2004. Double digit growth was experienced in 7 out of the 17 categories including converting machinery +24.6%; skin and blister packaging machinery +23.8%; filling machinery, liquid products +22.8%; labeling machinery +22.0%; capping, overcapping, lidding, sealing machinery +13.8%; form/fill/seal machinery bag/pouch +11.1%; and palletizing, depalletizing, and pallet unitizing machinery +11.1%.

In addition, exports of U.S.-made packaging machinery increased by 12.5% to $1.071 billion over the $952 million shipped in 2003. This is the first time since the inception of the annual Shipments and Outlook Study in 1993 that U.S. packaging machinery exports have topped $1 billion. Furthermore, exports as a percentage of total U.S. packaging machinery shipments reached 20% for the first time since 1997, when exports were 21% of total U.S. shipments. Finally, U.S. domestic market demand, which includes domestic consumption including import figures, increased by 9.8% with $5.604 billion consumed in the U.S. market. Domestic shipments were up 8.5% to $4.273 billion and imports to the U.S. increased 14.2%, to $1.331 billion.

Canadian packaging machinery shipments grew 8.4% in 2004 to an estimated C$420.6 million (US$323.7 million). Several categories achieved significant growth including filling machinery -- dry products +113.5% to C$15.8 million; cartoning and multipacking machinery and leaflet/coupon placing machinery +22% to C$42 million; case and tray forming, packing, unpacking, closing, and sealing machinery +14% to C$56.9 million; and bottling line machinery +13.5% to C$16 million.

"With growth across the board, clearly 2004 was a year that consumer goods companies focused on capital equipment as a means to achieve operational efficiencies and increase productivity," notes Charles D. Yuska, president of PMMI. "In 11 years of tracking machinery shipments, PMMI has never seen such a strong pattern of growth across all segments and for both U.S. and Canadian markets. What is also different with the 2004 shipments was the balanced growth across domestic consumption, exports, and imports."

Factors contributing to the increased spending levels during 2004 in both the U.S. and Canadian markets included:

Sustained U.S. and Canadian Economic Growth and Renewed Customer Confidence -- In contrast to the customer uncertainty saturating the market in the past two years, more capital spending by end users took place in light of stronger economic fundamentals. This also benefited Canada due to the heavy dependence Canadian manufacturers place on U.S. domestic market demand.

Large Order Backlog on the Books at the End of 2003 -- Into the first quarter of 2004, there was a large backlog of orders booked and not yet shipped. This amounted to $1.313 billion, representing 24.6% of the final volume of shipments for 2004.

The U.S. Investment Tax Credit -- The stimulus of accelerated depreciation tax writeoffs for new equipment, which expired at the end of 2004, was a key factor behind the year's higher shipments.

Continued High Level of Machinery Replacement Activity -- As forecasted in PMMI's 2004 and 2005 Purchasing Plans reports, many customers are replacing older packaging machinery with newer, technologically advanced models.

Resurgence of Strength in the Food and Beverage Products Markets -- These markets typically represent two-thirds of the packaging machinery annual shipment volume. Sizable increases in these orders amounted to $3.31 billion.

The results of this year's Shipments and Outlook Study show promise for the future of the industry. U.S. shipments of packaging machinery are forecasted to grow at a cumulative annual rate of 3.8% over the next three years, from an estimated $5.244 billion in 2004 to $5.982 billion by 2007. By the same token, Canadian shipments of packaging machinery are forecasted to grow at an average annual rate of 3.9%, from C$421 million to C$472 million by 2007. According to the report, the primary reasons for this expected growth in both markets include:

Growing U.S. and Canadian Economies -- The U.S. Gross Domestic Product is expected to increase through 2007. Given that the largest proportion of Canadian exports is to the U.S. domestic market, Canada's GDP will reflect the U.S.'s strong growth.

Capital Spending on Machinery and Equipment Up -- The report predicts manufacturers will continue to increase spending for new machinery and equipment, mainly for productivity improvement, although this will be cyclical.

Capacity Utilization Will Continue to Rise -- In step with rising industrial production, capacity utilization reached 78.4% for total U.S. manufacturing at the end of June 2005. The food segment, a key indicator for the machinery market, has improved to 82.6% from 81%.