Australia 2016: Consolidation is Key

Published 24/6, 2016 at 11:20

A New Year is traditionally a time to reflect on the old and make predictions for the next. Tyrolit head of sales and marketing in Australia and a member of Concrete Sawing and Drilling Association Australia’s Executive, Phil Rowden invited Chris Webb to share his thoughts on where the concrete cutting industry may head over the next 12 months.

Like most industries that rely on infrastructure investment for their well-being, concrete cutters are feeling the chill of tumbling oil prices that have wiped billions of dollars off shares. But a healthy 2015 has buoyed the sector sufficiently, perhaps, to weather the storm of a China-led global economic slowdown, which continues to haunt investors.

Australia is a country whose domestic manufacturing of diamond tools and associated equipment has been savaged by an Asian invasion over the last three decades. “The industry is a different place,” said Rowden. “Some 90% of diamond tools are imported”. No wonder, then, that those players still present, among them Tyrolit, which has bases in Melbourne, Sydney, Brisbane, Perth and Adelaide, feel confident enough to look forward with new optimism.

“Of course everyone knows it depends on what the foreign exchange is doing and bank rates are key,” said Rowden. And, it is a patchy picture , with the East coast performing relatively well, rail investment looking strikingly robust, and the major cities of Sydney, Brisbane and Melbourne playing host to a hundred or more tower cranes, always a good indicator of prosperity and investment.

“In 2015, Australia was a good year for our industry,” said Rowden. “We saw a 17% growth overall over the previous year. Sawing and drilling, and the floor preparation companies did well through hire and reseller activities. Tyrolit benefitted from good wall saw, wire saw and other sales. But 2016 may see the industry reaching a plateau. We’re looking for a little growth, but it won’t be a spike, more of a consolidation.”

Australia is no stranger to competition. An aggressive pricing onslaught from South East Asia has taken its toll on domestic manufacturing and marketing, leaving only the very strong to survive, but the former price freefall appears to have bottomed out.

The Asian invasion, as Rowden calls it, started late 1980s. “Original products were made by Australian companies, like Keith Fisher, ADT, Dembicon and Boart Longyear here in Australia, then the Japanese companies started appearing like Sankyo and Riken,” said Rowden. “Ten years later the Koreans entered the market, which closed down most Australian manufacturing plants. In the last 10 years Australia has become flooded with imports from China, Korea and Thailand. There is very little manufacturing in Australia now. But this in not just the diamond tools industry, this has spread over most markets.

“The last couple of years have seen the price erosion flatten out, this is mainly due to the exchange rate fluctuation and the rising cost of manufacturing. Over the last 20 years the professional diamond tools sales price has decreased by at least two-thirds. For example, back in 1988 a 400mm handsaw blade sold for A$750 (€490). Today it sells for about A$200 (€130). In 1988 a 20-inch road saw blade sold for A$1100 (€714); in today’s market it will sell for about A$400 (€260)”.

Despite an era of relative austerity, Rowden points out that the industry has matured and gained its professional credentials. It has striven to attract good people, and the CSDAA continues to make strides in training and accreditation aimed at raising its profile in the career market.

“I think it will make the industry a better structured business, the current issue is untrained operators earning a very good income, in the building industry, but with no official training,” said Rowden. “As there are no regulations, anyone can do concrete cutting and drilling, so building companies do their own cutting and drilling, giving no security to the CSDAA industry. That’s about to change”.

So, how is marketing set to change as the industry grapples with the digital era?  It has been suggested that most sales within about five years, will be online. How this will affect the culture of the business? Don’t buyers want a hands-on feel for what they’re buying?

“That’s possibly correct for basic tooling,” said Rowden. “But I feel top-end purchases and professional use will still require application knowledge, which will still give diamond tools companies progress in the industry; cheap-end tooling with no guarantee will be sold on the internet in just the same way as today.”

How does Rowden think the industry will develop over the next year or more? “The industry needs and will be more regulated; it will end up being a mix between European and American standards,” said Rowden. “All machinery and tooling will need to meet compliance, which will eradicate a lot of the cheap-end products, and non-structured companies. This will bring up standards, and pricing. Pricing will increase, but to a moderate level so that a lot of large businesses will be on the same level. There will always be the one-man, small trading businesses picking up the low end.

“I believe the diamond tool and concrete cutting industries will see larger organizations thrive once the regulations are put in place, as they will be registered to do major works. Overall, innovation will keep the industry strong, with lighter weight, higher powered, longer lasting, better quality products entering the market.

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