A Perth-based hydraulic technology company which has been operating for more than 30 years has collapsed, with debts exceeding $6 million, as a result of tough market conditions and fast growth.
Fluid Power Technology, trading as Pressure Dynamics, was placed in administration on June 7, 2013, and administrators Matthew James Donnelly and Dino Travaglini from Grant Thornton were appointed.
The business is a one-stop destination for engineering design, consultancy and manufacturing and service testing, repair, maintenance and installation.
It also stocks and manufactures a range of hydraulic equipment and provides services to predominantly oil and gas and mining businesses throughout Australia and internationally.
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Donnelly told SmartCompany total liabilities could be between $6 million and $8 million.
“The company’s failure is a story of a company which grew too fast without appropriately sourcing stable work flow and maintaining its own cost controls effectively. It has a cost structure which is too large compared to the revenue it can generate.
“There has also been a downturn in the mining and oil and gas sector, which has made the business hard to maintain. In Western Australia it’s a common theme at the moment, particularly if you’re a service provider in the mid-market,” he says.
The company’s major creditors are general trade suppliers and the Australian Taxation Office.
Donnelly says a “double step” administration is underway where he manages the administration, but receivers and managers from Grant Thornton are handling the daily operations and sale of the business’s assets.
“The receiver and manager is in charge of the day-to-day operations of the company and at the moment the business is trading in a limited fashion, while the receiver and manager tries to sell its assets,” he says.
PPB Advisory receiver and manger Simon Theobald told SmartCompany that the 50 staff remaining at the company are continuing to service existing clients and contracts.
“We are continuing to trade the business while we are assessing its profitability and cash flow and we’re looking at a sale process kicking off this week.
“We haven’t formally expressed the sale, but we will be doing so shortly and while it hasn’t begun officially we’ve received some local and international interest,” Theobald says.
Donnelly says it’s difficult to know which assets will be sold at this stage, but there have been “numerous” expressions of interest confirm the business is still valuable.
“It’s a relatively large business in its space and it has a good collection of talented employees, which would be valuable to someone who can pick it up and run with it,” he says.
Leading up to the administration, Donnelly says the business acknowledged it had a surplus of employees, with just over 90 workers.
“There were early redundancies leading up and immediately following my appointment as administrator. Ninety employees create quite a costly workforce,” he says.
The first creditors’ meeting will be held on June 19.
The collapse of Pressure Dynamics is the latest in a string of manufacturing company collapses, as many have been under increasing pressure as economists predict the end of the resources boom.
The administration comes as the latest Productivity Commission report reveals in 2011-2012 government assistance for manufacturing businesses exceeded $7 billion. Car and steel producers received the biggest benefits, with each sector given more than $1 billion in subsidies.