Ireland Industry Outlook – 2019

Protel tracks capex project activity across the main process sectors to help suppliers win new business. In this article we aim to present a quick and easy to digest run-down of the main trends and developments in the main process manufacturing sectors in one of our covered regions – Ireland industry outlook. For more information on the areas we cover, click here.

In our previous Irish industry outlook, we reported that the political turmoil in the neighbouring UK had impacted the project pipeline in a significant way in the main process sectors in Ireland.

With a backdrop of strong economic growth, major concerns over the future relationship between Ireland and the UK have resulted in a major impact, particularly in the food and beverage sectors in Ireland. Pharma and biotech in general remains strong, with minor issues surrounding the number of capex projects moving through due to a number of factors.

Pharma & Biotech

We previously reported in 2018 that the quantity of projects coming on stream had remained relatively consistent across biotech and medical device production in Ireland. We were seeing a large amount of activity both at the planning and implementation stages.

Since then, the outlook for 2019 remains a little less positive, but there is still a significant amount of investment taking place overall. This is mainly concentrated across larger (€15m+) projects for major players.

Biotech is still booming in Ireland, with this expected to continue across to 2019-2020. Large projects by MSD, WuXi Biologics, Pfizer, Janssen and Regeneron are some examples of major biotech players with capex plans in Ireland.

Some of this activity is outside of the usual Dublin & Cork biopharma clusters WuXi mentioned above are in Dundalk and Almac are in Wasdell.
A problem with resource and engineering capacity being maxed out has persisted from last year. We are seeing pharma/biotech companies shaping the timing and scope of capex plans around the resource availability. Many engineering houses are outsourcing concept & design work to other global locations while they focus on the detailed design stages in Ireland.

A large degree of Brexit planning has taken place, with some engineering organisations choosing to consolidate pharmaceutical project delivery into Ireland from the UK.

Where we are seeing smaller projects coming on stream, these tend to be tied to larger term service agreements but represent a great way for suppliers to begin to win work with some of the larger pharmaceutical and biotech companies in Ireland.

Food & Drink

We previously wrote about the large impact on the Irish food and beverage sectors resulting from the Brexit uncertainty in the UK. Unfortunately one year on this has not changed, although there have been some positive trends emerging as producers are forced to adapt and have put contingency plans in place to ensure continued product demand.

The changes in investment around cheese production are particularly illustrative in this case of the wider Ireland industry outlook in food and beverage. Producers were faced with a large drop in demand due to Irish cheddar potentially becoming uncompetitive if trade barriers with the UK were enacted. In 2019 and 2020 we are seeing the response to this emerge, with many dairy processors undertaking capex to produce other types of globally desirable cheeses, such as Mozzarella and Gouda.

However, in general there does remain a delaying effect on some investment decisions. Innovative pilot plants and smaller scale investment seems to have been particularly badly impacted, with many schemes being shelved or investors taking a ‘wait and see’ approach while they wait for more certainty on the future relationship with the UK.

Larger players, such as PepsiCola, are adopting a much less cautious approach, with Brexit seemingly not impacting on some larger scale food and drink sector capex.

Trends

In pharmaceutical and biotech, significant investment is still being seen in this sector for branded drugs. The near term outlook continues to look quite positive, with significant capex investment by companies such as Pfizer and MSD across a number of Irish sites. There is a major trend toward contract manufacturing with production line expansions around generics production proving to be a major source of investment in the year to come and beyond.

As a result, the trend may move to more focused generic drug production for other pharmaceutical players like WuXi, Teva and Hovione. In the medical technology, (Medtech), sector, we are continuing to see investment with capex among both new start ups like Renew Health and Meissner Filtration as well as existing facility expansions for Abbott Diagnostics and Johnson & Johnson Visioncare.

The global growth in Irish whiskey is resulting in activity in both small and larger scale distilleries. This activity is expected to reach construction over the next three to five years.

Coca-Cola are rumoured to be exploring the possibility of manufacturing a milk based range of drinks called, “Fairlife”, in an as yet to be constructed purpose built facility in Co.Cork. This is in response to falling demand in Europe for sugar based soft drinks.

In general, there is a theme of consolidation in the Irish process sectors after 5 years of major fast-paced capex activity. Suppliers must therefore ensure they are aware of the more ‘below the radar’ investment schemes to ensure continuity of the project pipeline (find out how we can help here).

Our Coverage

Pharmaceutical, Biotech & Laboratories

At Protel, we are currently tracking 121 active pharmaceutical & process related laboratories investment projects with a combined potential investment value of just over €7.1bn in Ireland.

Food & Beverage

At Protel, we are currently tracking 43 active food & beverage investment projects with a combined potential investment value of just over €1.5bn in Ireland.

Summary

The overall outlook remains positive for the year ahead. Industry is still growing, with the IDA predicting some 5% growth over the medium-term. The pharmaceutical industry in Ireland is buoyant in terms of capex, albeit with new schemes being concentrated more toward generics and contract manufacturing facilities. Resource capacity problems persist and are often impacting investment decisions as companies are forced to wait for capacity to open up. However, there is ample opportunity for suppliers of capital equipment and services.

In food and beverage, the ‘Brexit effect’ is much more pronounced, though we are seeing capex beginning to move through the pipeline as producers are forced to confront and adapt to an uncertain future.

For more information on any of the organisations, projects or trends covered, including key information required to target specific projects, please contact us.