Plant hiring still firing
Wednesday, May 7, 2008/
The recent construction boom and strong activity in the infrastructure and mining sectors have helped the plant hire and leasing sector, but it is still a tough game. By ROBERT BRYANT
By Robert Bryant
The recent construction boom and strong activity in the infrastructure and mining sectors have helped the plant hire and leasing sector, but it is still a tough game.
It’s said that one of the best ways to judge the health of the economy is to count the number of cranes on the city skyline. That’s also a good way to judge the strength of the plant hire or leasing sector, which has enjoyed reasonable growth over the past five years thanks to a boom in construction and infrastructure projects.
IBISWorld estimates this industry grew by around 2% in the past 12 months to have revenue of just under $3 billion. But an increase in the number of smaller companies entering the industry over the last five years has had a detrimental impact on profit margins, with firms tending towards competitors based on price.
Listed companies Coates Hire and Emeco Holdings are the biggest players in the sector, with market shares of 14.5% and 7.4% respectively.
While the industry will take a hit from softer demand in the Sydney and Melbourne residential construction sectors in this financial year, stronger activity in the industrial, civil infrastructure and mining sectors are expected to contribute to an increase in revenue.
IBISWorld forecasts that this industry will grow at an average annual rate of 2.9% during the five year period to 2012-13. The weak growth rate expected over this period is primarily due to a predicted economic slowdown in 2009-10, which is anticipated to soften demand from all sectors.
Industry growth is estimated to expand only slightly in 2009-10, however the industry is anticipated to expand more strongly over the following three years as the Australian economy and total fixed capital expenditure strengthens.
Major operators linked to resource projects are expected to experience strong growth over the outlook period, thanks to the expansion of mining projects in most states. The public sector is expected to outsource its plant and hiring needs (in areas such as roads) and the privatisation of public assets in areas such as electricity, gas and water will also lead to increased demand for industry services.
Spread of establishments
Companies linked to the hiring of equipment for special events, and to the major existing coin-operated amusement centres, are estimated to perform relatively better than the industry average over the five years to 2012-13. As the downturn hits in 2009-10, this industry is likely to undergo some rationalisation and mergers.
Product and service segmentation
Key performance factors
Key success factors for operators in the industry include:
- Access to the latest available and most efficient technology and techniques. A computerised stock monitoring system, which also incorporates a maintenance of equipment program, will be essential.
- Highly trained workforce. Having adequately trained staff in all areas of activity and who are constantly kept informed of regulation changes in the equipment hire/rental area.
- Ability to quickly adopt new technology. Plant equipment and systems offered need to be updated periodically to reflect any changes in technology associated with the equipment.
- Having links with suppliers. The ability to source reliable equipment at competitive prices is important for profitability.
- Prompt delivery to market.
- Ability to control stock on hand. To have a stock of well maintained hire equipment on hand but not to be overstocked.
- Understanding government policies and their implications. To thoroughly understand all government regulations that affect this industry and ensuring that they keep constantly up to date in this area