ANZ sig­nals strong eco­nomic out­look

Australian Transport News - - CONTENTS -

A con­tin­u­ing spike in truck sales, along with over­all in­creased mar­gins and rev­enue are seen as the ma­jor themes for 2018 in truck­ing

A con­tin­u­ing spike in truck sales, along with over­all in­creased mar­gins and rev­enue, are the ma­jor themes for 2018 in truck­ing, ac­cord­ing to ANZ as­so­ciate di­rec­tor of client so­lu­tions Ti­mothy Suffield.

Suffield is due to release ANZ’s an­nual eco­nomic re­port into trends in the road trans­port in­dus­try soon, and has hinted the key signs are good.

“The de­mand for truck­ing has con­tin­ued and our fig­ures show we have top-line growth for the first time in a while. It means that the ac­tual rev­enue the sec­tor is gen­er­at­ing in to­tal has in­creased, which is a real pos­i­tive,” he says.

A con­se­quence of that is that mar­gins have picked up for truck­ing busi­nesses, some­thing that wasn’t hap­pen­ing 12 months ago.

“We’ve seen a no­tice­able in­crease across the board with mar­gins im­prov­ing, and that’s a direct re­sult of a grow­ing top-line,” Suffield says.

“The fact that busi­nesses have been able to in­crease their rev­enue base while keep­ing their ex­penses rel­a­tively flat has led to them be­ing able to gen­er­ate bet­ter mar­gins.”

Suffield says it’s good news across the board, due to the in­crease in the capex for busi­nesses.

“It means buy­ing new equip­ment, in­vest­ing in new tech­nol­ogy, in­vest­ing back into the busi­ness, now that there’s more cash avail­able to do so. We see it as a re­ally pos­i­tive story for the in­dus­try as a whole,” he says.

The growth in truck sales, such a fea­ture of the last cou­ple of years, is set to con­tinue. Suffield puts this largely down to the fact Aus­tralia has an ag­ing fleet.

“The av­er­age age of a truck here is around 14 years, com­pared to the UK, which is eight years, and France and the US, which is around 6.5. So Aus­tralian fleets are, on av­er­age, twice as old by in­ter­na­tional stan­dards,” he says.

It can only lead to one thing, and that’s op­er­a­tors buy­ing new trucks, some­thing Suffield sees a pos­i­tive for the in­dus­try: “Small and medium op­er­a­tors get to the point where their run­ning, main­te­nance and re­pair costs are ba­si­cally equiv­a­lent to the fi­nanc­ing costs of pur­chas­ing a new ve­hi­cle, mean­ing they’re bet­ter off buy­ing a new ve­hi­cle.”

It’s some­thing many op­er­a­tors seem to agree with, es­pe­cially con­sid­er­ing the sav­ings of fuel based on more ef­fi­cient ve­hi­cles, as well as the ben­e­fits of new tech­nol­ogy that’s be­come such a fea­ture of mod­ern trucks. Suffield does ac­knowl­edge buy­ing a new fleet, or even a sin­gle new truck, is eas­ier for larger busi­nesses.

“A larger busi­ness can spread the capex over a pe­riod of time, whereas if you only own a cou­ple of trucks buy­ing a new one is a con­sid­er­able in­vest­ment,” he says.

Smaller op­er­a­tors face other chal­lenges. The trend is to­wards con­sol­i­da­tion, with larger busi­nesses tak­ing over smaller ones, mean­ing that even though the in­dus­try grows over­all, the num­ber of op­er­a­tors shrinks.

“Smaller op­er­a­tors who can’t pro­vide ser­vice on the scale larger ones pro­vide will even­tu­ally be folded into some form of a larger busi­ness,” Suffield says. “It doesn’t mean jobs are dis­ap­pear­ing, it just means you won’t have as many small op­er­a­tors run­ning their own busi­nesses.”

An­other fac­tor small op­er­a­tors need to aware of is con­cen­tra­tion of risk.

Suffield warns against re­ly­ing on one or two big cus­tomers, which leaves the bar­gain­ing power with those cus­tomers and will in­evitably mean get­ting squeezed on mar­gins. The fi­nal point he wants to stress to busi­nesses look­ing to re­main com­pet­i­tive is to get com­pli­ant, and fast.

“When you ten­der, you now have to fo­cus on safety stan­dards and com­pli­ance, some­thing that was never the case in the past. Hav­ing a pre­mium of­fer­ing in com­pli­ance is so im­por­tant when it comes to win­ning con­tracts. If you have a com­pli­ance breach, which re­sults in you los­ing a con­tract, that’s likely to have a knock- on ef­fect. Lose one and you could lose them all.”

But the signs are good, go­ing for­ward, and Suffield says smart op­er­a­tors have ev­ery rea­son to feel buoy­ant about the fu­ture: “The need for road trans­port ser­vices isn’t go­ing away. And even though debt is in­creas­ing the in­dus­try is about to ser­vice that due to the in­crease in prof­itabil­ity. So for busi­nesses look­ing to in­vest and grow it’s a good time right now.”

Ti­mothy Suffield

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