Product and Service
Companies included in food service equipment sector in food service industry primarily design, manufacture, market, distribute, and service food service equipment and food processing equipment.
Demand for Product and Service
As our sales data indicates, growth in demand for food service equipment varied as changes in commercial food restaurants, especially in chain restaurants as indicated by fluctuation in the past several years. However, for long run, we think companies in this industry will have an opportunity to continue to grow.
The Sector
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Generally this is a pretty matured industry as seen by the stead margins of companies in this sector.
- There is a quite uncertainty in US industry of foodservice equipment. Our data indicate that demand slowed down in 2017 after strong growth for previous two years.
- There is a signal indicating that the demand may be coming back in remaining 2018.
- The future performance of this industry has been directly related to performance of food service industry and, particularly, its performance in US market seems to have been driven by and be currently related to quick service and fast-casual restaurant chain of US.
- As economy develops globally, international market is playing an increasing important role for manufacturers in this sector to continue their growth.
Causes behind the trend
As industry that are directly facing consumers foodservice equipment manufacturers usually have a buffer between them and terminal consumers and benefit not only from general improved consumption but from re-structure or development of new restaurant concept.
Economic globalization and the resulted increasing income of people and their desire to improve quality of living in developing countries are the fundamental drivers behind opportunities of US style restaurants to expand internationally.
Industry Future
Companies in this sector who are flexible to changes in this restaurant industry of US and developing countries will be able to benefit from fundamental improvement of global economy in the next several years and development of new concept in quick service food industry.
Numbers
General Financial Performance of Companies In the Sector
It seems that companies in this sector have benefited from the strong demand from restaurants for cooking and warming equipment as indicated by continuing increase in revenue of foodservice equipment of companies (5-6% annually) between 2015 and 2016. Relatively, our data indicates that the demand for food processing equipment is weak and unstable and the demand for premium residential kitchen equipment has gone down. After sluggish growth (-2% ) in demand from food service for equipment in 2017 and the first quarter of 2018, it seems that the demand may be coming back driven positive changes in food service industry in the second quarter of 2018.
Our data indicate, from a typical company, that company’ gross margin is about 40% in 2017 presenting slight positive changes in the past several years. The typical SG&A as percentage of sales of average is 19% and the typical operating margin is about 20%. After the recent acquisitions, its gross margin down to about 38% and operating to 18% in 2018.
According to our analysis, the current companies’ enterprise price/EBI ratio is 31 with an interest/EBITDA ratio of 6%.
