Australian forklift industry holds steady through 2008 and beyond

News Story
- 8 Jan 2009 ( #392 ) - Australia
21 min read
EMC will be looking to 2009 to consolidate its double-digit growth over the past five years, as well as focus on providing better service.
EMC will be looking to 2009 to consolidate its double-digit growth over the past five years, as well as focus on providing better service.
By Karen Harverson

The past 12 months have seen unprecedented events unfold around the world, with few people at the beginning of the year able to predict the degree of financial carnage that began in the US and quickly spread to other economies.

As Reserve Bank governor Glenn Stevens said at the Australian Business Economists Annual Dinner in December: "I do not know anyone who predicted this course of events. This should give us cause to reflect on how hard a job it is to make genuinely useful forecasts. What we have seen is truly a 'tail' outcome - the kind of outcome that the routine forecasting process never predicts. But it has occurred, it has implications, and so we must reflect on it."

The Australian forklift industry appears to have got through 2008 relatively unscathed. Some change was inevitable, with a few businesses sinking into insolvency, some parting ways with distributors and a growing trend for customers to lease rather than buy equipment.

Still, many new deals were concluded and the year was good for those companies able to adapt to tighter conditions.

Looking back at some of the stories we reported on in 2008, it was perhaps an early omen of bad times to come when, in January, we reported on the demise of Independent Forklift Services (IFS), which was placed in liquidation following a decision by creditors who'd met the month before.

On a brighter note, Toyota Material Handling Australia (TMHA) once again announced they'd claimed the number one position in the Australian counterbalance forklift market for 2007, an achievement held for the 21st consecutive year.

The company, combining its Toyota Industrial Equipment, BT Lift Trucks and Raymond Forklift brands, sold 4,885 machines in Australia in 2007 for a 28% market share.

TMHA says there will be  a softening of the Australian forklift market in 2009, particularly in the area of purchases of material handling equipment of the AUD100,000 or less mark.
TMHA says there will be a softening of the Australian forklift market in 2009, particularly in the area of purchases of material handling equipment of the AUD100,000 or less mark.
In February, we reported on the sale of embattled forklift company Smeaton Forklifts, trading as Budget Forklifts (NSW), which was sold to Statewide Forklifts (NSW).

In March, Ports of Auckland took delivery of the biggest reach-stacker in New Zealand, supplied by Hyster agent Gough's Forklifts. In the same week, 10 new straddles became fully operational at the port, having been assembled on-site for the previous two months. Supplied by Noell in Wurzburg, Germany, the straddle-carriers cost an estimated NZ$15.8 million.

Still in March, a parting of ways occurred when Australia's importer and distributor of Nissan forklifts, Powerlift (Nissan), cancelled its previous distribution arrangement with United Equipment (the former Nissan dealer for East Melbourne), while the latter added Caterpillar forklifts to its range of products.

Another split was announced the following month, when News reported on the demise of Red Australia's 19-year relationship with Jungheinrich. The German forklift manufacturer appointed NTP Forklifts as its new distributor in Australia.

TMHA celebrated its 40th anniversary in the Australian market; and Red Australia announced it would introduce the new range of Komatsu AE50/AM50 counterbalance electrics following an agreement with Komatsu Utility - Japan. Also in April, a new forklift tyre supplier, Solid Plus, launched its services across Australia.

In May, Haulotte Group Australia added a new telehandler range to its suite of access equipment which, thanks to its high ground clearance, can traverse the roughest terrain.

And in New Zealand, materials handling equipment supplier Eurolift NZ was awarded a five-year, "multi-million dollar" contract from dairy giant Fonterra Co-operative Group to supply and service the group's New Zealand forklifts.

Still in New Zealand, materials handling supplier AB Equipment of Manikau City, Auckland was awarded a contract worth over NZD6 million from meat exporter PPCS to supply, service and manage its forklift truck fleet over a three-year period.

Most still optimistic in May

Good times were still being felt by most companies with a May survey of small to medium enterprises (SMEs) in Australia by global logistics giant UPS revealing that almost two-thirds believed their companies' overall prospects for 2008 were better than 2007.

Meanwhile, the third edition of PricewaterhouseCoopers (PWC) Private Business Barometer indicated that private businesses remained optimistic about a return to more favourable economic conditions in 2009.

PWC partner Gregory Will said, "The consensus is that the medium- to long-term future looks bright with some unsettled conditions in the short term."

According to the barometer, funding was the biggest challenge facing private businesses, which were planning fewer investments over the next 12 months.

In June, amid widespread reports of a slowing economy, falling business and consumer confidence and the global credit crunch, Australasia's forklift industry appeared amazingly upbeat about business prospects.

According to Allen Powell, director (marketing/sales) of Adapt-A-Lift Forklift Rentals and Sales, the company had not experienced any slowdown in business. "If anything, our rental (activity), both contract and casual, has increased significantly, with May one of our biggest contract rental months for the past year."

He added that casual hire had also continued to grow consistently every month for the preceding 11-month period.

"On a national and state level, our quote and participation rate is still strong with no signs of abatement."

Chris Burns, national accounts manager for Powerlift Nissan, told News that the company had not seen a slowing in either order intake or enquiry levels, even though interest rates had gone up significantly over the previous 12 months.

"Indeed, if anything, order intake of new trucks has increased whilst sales of used trucks has remained fairly constant," said Burns.

He added that enquiries from major fleet clients had increased dramatically, commenting that perhaps the wise buyers were getting in and locking in interest rates before further increases.

AB Equipment's Steve Antunovich told News that the company was certainly not seeing a slowdown in business at that stage.

However, he reported seeing a change in what major customers expected from the company. "For example, more fleet management and KPI reporting; much more communication on their fleet costs; a real proactive input from us as materials handling experts on optimising fleet size and composition, and in minimising risk."

He added that if the expected tightening in the market developed into a recession, past history indicated that some customers would keep their forklifts longer, "meaning more parts and service and short-term rental back-up from us".

Shaun O'Brien, national sales and marketing manager of Red Australia, said the company had not experienced a decline in sales during the fiscal year and its current forecast would remain constant over the short- to mid-term.

Around July, Hoppecke Germany appointed Euro Power Australia Pty Ltd as the new sole distributor for the Oceania region of the full range of Hoppecke motive power batteries, chargers and accessories.

And another economic report, this time by ANZ, pointed out that growth was slowing across the world, inflation was on the rise, asset prices were falling and the reality that addressing climate change would be costly is hitting home.

However, despite the gloom, it said the outlook for Australia was still bright largely due to the rise in commodity prices. Although the country's economic growth rate would slow quite sharply in 2008/9, it would not be due to global influences but rather the deliberate slowdown engineered by the Reserve Bank to cool inflationary pressures.

It concluded that while there were considerable challenges, it was still a great time to be Australian.

Deals aplenty

In August, we reported on Australia's largest single supplier of irrigation, garden and turf care products, Toro Australia, which selected TMHA to provide its counterbalance forklift and reach truck requirements.

The following month, Linde Australia announced that it would launch a new forklift fleet management system that would set it apart from its competitors in terms of the service, pertinent advice and savings it could provide to customers.

And Red Australia announced to the market it would launch the latest internal combustion forklift from Komatsu, the CX50 series.

In October, or "Shocktober" as it became known, following ever more turmoil on the financial fronts, a number of forklift contracts in the wine industry were reported in News.

NTP Forklifts supplied Barossa Valley winery Langmeil with a top quality TCM 7-tonne diesel forklift, while TMHA continued to supply Casella Wines through a lease agreement; and Powerlift Nissan supplied seven forklifts to First Creek Wines of Hunter Valley as part of a rental deal for the winery.

We also covered a major forklift deal secured by Linde, which signed a contract in September to supply materials handling equipment to cold storage and logistics specialist VersaCold Logistics.

The contract involved supplying more than 400 forklifts to the company's warehouses in Queensland, New South Wales, Victoria and Western Australia.

Still in October, the arrival of the world's largest passenger jet in Australia, the Airbus A380, resulted in Qantas choosing Manitou Australia to provide a Manitou MRT 2540 Telescopic Handler fitted with a 3m wide, 800kg work basket.

Currency woes or opportunity?

In November, News reported on the impact the falling Australian dollar was having on the local forklift market.

Christine Nolland, national marketing co-ordinator of Linde Material Handling, said prices were being reviewed based on the Australian dollar and material cost factors.

She told News that a tightening of the retail/small business sector was anticipated together with a more cautious approach in the larger business area.

"Determining factors, as we see it, will be the Australian dollar and what develops in the Asian market and local mining sector."

Wayne Franklin, director of Calmat, said the company was being conservative on stock purchases at that time due to the weak currency and the general economic conditions.

"We are fortunate that we have short lead times from our suppliers, so we are able to quote ex-factory at the current exchange rate with a currency variation clause.

"I feel confident that the Australian dollar will bounce back shortly, so any stock purchased now will be very expensive, if and when we get a recovery."

General manager of NYK Forklifts, Phil Singleton, said "the fact that we purchase our equipment in American dollars from Japanese sources has resulted in our purchasing power being vastly eroded".

"Therefore, to maintain our small margins, we have no choice but to increase our selling prices on new stock."

He told News that it looked like Australia might enter a recession in the first quarter of 2009 due to a possible second quarter of negative growth.

However, on an optimistic note, Singleton felt the market would start to recover "mid to end of the second quarter of 2009".

John Cowpe, Exide Australasia general manager, said the effect of the weakened Australian dollar forced companies to daily review inventory levels, debtors and pricing.

He added that he envisaged the current market conditions to continue into early 2009. "Our business will continue to monitor market conditions whilst offering a high level of customer service to our customers."

But some companies took the currency battering in their stride. John Watts, business development manager of Barrier Security Products, told News that the company was trying to increase the range of its products made in Australia to avoid any dollar fluctuation woes.

"Our sales have continued to increase over the past five years at an average of 33% and the month of October 2008 was up 13% on our previous best."

Still in November, NTP Forklifts Australia, local distributor for battery-electric TCM Corporation forklifts, announced the launch of its new 8-series reach truck.

In December, Adapt-A-Lift was appointed as forklift and materials handling supplier to AWB company, Landmark. The forklift fleet management agreement will see Landmark replace its current materials handling equipment with a fleet of new equipment at over 250 sites across Australia.

Forecasts for 2009

So what does 2009 hold for the Australian forklift industry? Given the speed at which economies across the world have unravelled over the past 12 months, leaving professional 'forecasters' and analysts gobsmacked, only some players were willing to go on the record.

EMC, manufacturer and distributor of forklift attachments, fork-arms and spare parts, will be looking to 2009 to consolidate its double-digit growth over the past five years, as well as focus on providing better service.

Managing director Stefan Marschner tells News that the company's acquisition of forklift manufacturer Sattach and gaining exclusive distributorship of CWS/IMAC tyre manipulators were the main highlights of 2008.

He believes the forklift industry may flatten somewhat in 2009 with a shift in focus to more 'repair and maintenance' to supplement lost income from decreased forklift sales, although he believes the larger end users will continue to supply their operations with new equipment.

Marschner says government could help ease the burden on companies by cutting taxes, particularly with regard to payroll tax which currently does not encourage businesses to hire or even retain staff in tough economic conditions.

NTP Forklifts Australia, whose most significant development in 2008 was becoming the official distributor for Jungheinrich forklifts, says this distributorship has allowed the company to break into the warehousing segment of the market. "We will continue to focus on that area of the market going into 2009 as we see significant growth opportunities," says NTP marketing manager Tom Naffine.

NTP Forklifts Australia says its Jungheinrich distributorship has allowed it to break into the warehousing segment of the market.
NTP Forklifts Australia says its Jungheinrich distributorship has allowed it to break into the warehousing segment of the market.
Orbit Communications, which supplies proximity alert systems to the forklift industry, anticipates its new BodyGuard vehicle and personnel system will be offered at point of sale of the forklift across the country in 2009.

Managing director David Huisman says while there are challenges ahead economically, it makes sense for companies to continue to improve their safety processes and controls because the cost of downtime in particular will be higher as some companies attempt to operate with less staff.

Despite the general slowdown, Huisman says his company has, in fact, grown over the period.

Another positive forecaster for 2009 is technology innovator Peacock Bros. which recently developed a first-of-its-kind forklift-mounted RFID pallet solution combined with a real-time indoor vehicle positioning solution and integration to a warehouse management system.

The solution has already won multiple awards this year for innovation and productivity improvement.

Craig McKenzie, strategic marketing co-ordinator, tells News that 2009 will see an increased interest in technology enhancements within the forklift or forklift user industry. "The forklift industry rarely had a technology representation where this now has become a significant aspect."

"The days of a simple low-tech forklift are numbered. Businesses today need more from their capital investment including both forklift and driver. Solutions such as ours dramatically increase the performance and capabilities of a warehouse operation and at a time where every dollar counts, this will be part of required criteria when businesses seek to utilise or purchase forklifts."

He says forklift manufacturers are already considering offering this type of technology as an option with any new forklift purchase in 2009.

Peacock Bros. believes 2009 will see an increased interest in technology enhancements within the forklift industry.
Peacock Bros. believes 2009 will see an increased interest in technology enhancements within the forklift industry.
McKenzie says governments need to provide more financial and incentive support for companies that are developing application enhancing systems onto forklifts. "To research and develop these new technologies, the costs in both manpower and dollars are enormous and yet it is only through increasing the productivity of forklifts that many operations will remain profitable in these hard economic times."

"What we have developed is only the tip of the iceberg, we are already exploring more aspects of other technology advances, involving a huge commitment on our part to pursue and bring to market. Australian businesses need more advanced solutions to make them more competitive and viable, and government needs to commit larger resources to what has become a critical issue."

McKenzie says any slowdown experienced by the company has only occurred within sales that involve standard solutions. "Peacock Bros. has committed to provide innovative next-step solutions, which will help our customers get through any slow down they experience and these solutions are very sellable in this type of business climate."

On 2009, TMHA general manager sales and marketing Steve Takacs comments that there will be a softening of the Australian forklift market, particularly in the area of purchases of material handling equipment of the AUD100,000 or less mark.

"However, large corporate customers ... will continue on an equipment replacement programme as their needs dictate."

Takacs tells News that the recent moves by government in terms of additional Australian infrastructure development will help keep economic activity on track.

"The lowering of interest rates will also assist, and the government should look to see what it can do to improve Australia's manufacturing industry, which seems to be going through a rough trot.

"However, it is important that we stay positive about our economic circumstances, as, compared to some other countries, Australia seems somewhat better placed to ride out this global economic uncertainty.

"For TMHA it is business as usual. We are structuring our operations to cater for all our customers, and are particularly focusing on big business customers at the present time. Our fully owned branch network will allow us to adapt to any market softening accordingly. We can shift resources across our branches as required so as to ensure efficiencies are maintained in the event of any slowdown.

"We also believe that in these (uncertain economic) times, smaller material handling players will fall by the wayside, with the larger players left to aggressively pursue all sales opportunities.

"TMHA is also working a lot more closely with the other Toyota Group Companies - Toyota automotive, Hino trucks and Toyota Finance - and establishing cooperative relationships in order to maximise all sales opportunities.

"We are very fortunate that the Toyota family is built upon a platform of high quality, reliable products, and synergistic teamwork between all Toyota Group companies (which) will help maintain our sales objectives during any slow down."

Ben Rainsford, CEO of Task Australia, says a big development for the company in 2008 was the release of its Pedestrian counterbalance truck with power steering - the SUMI COBRA - which has had an excellent takeup in the market.

"We have also seen real penetration into the US market which was traditionally difficult to access but due to the Australian currency weakening, we now have a great advantage with our equipment being made in Australia, which has proved positive against a tightening local market.

"We have achieved our predicted growth in our hire-fleet contracts as customers shy away from asset purchases when the credit market is more difficult."

He adds that the market has shown an increased awareness of the walkie product. "Walkies are environmentally friendly and don't require a full- time operator and these factors have pushed the numbers up during the year."

Task Australia says the recent currency devaluation has provided opportunity in the US and Asian markets.
Task Australia says the recent currency devaluation has provided opportunity in the US and Asian markets.
For 2009, Rainsford expects the market to slow compared to the previous three years, "although we're still achieving our sales targets based on value". In times like this, says Rainsford, customers typically take longer to make decisions with regards to capital equipment and are demanding more value "so we see our hire-fleet business increasing as well as an increase in our service contracts as customers look to get an extra few years out of existing equipment rather than replace it".

On dealing with any slowdown, Rainsford says: "Task Australia is now in its 27th year and we've seen similar cycles like this occurring. We find that focusing on our hire fleet business and servicing usually sees us through any downturn and, of course, the fact that we have no competition in Australia for products like our SUMI BOA legless stacker, means we have a point of difference to our customers.

"We are placing extra effort into our USA and Asian business as the recent currency devaluation has given us a real opportunity in these areas."

Heli Forklifts NZ director Steve Mackay says 2008 saw the establishment of Heli's new green series in New Zealand, and the establishment of AC technology in both three- and four-wheel counterbalance trucks.

Heli Forklifts NZ director Steve Mackay says when there are fewer deals to win, everybody works extra hard to secure the business.
Heli Forklifts NZ director Steve Mackay says when there are fewer deals to win, everybody works extra hard to secure the business.
He notes an "increased acceptance of Chinese product by both users and dealers (who) now recognise the value for money compared to other brands".

Mackay says the impact of the change in exchange rates has not really impacted on buyers yet because dealers are still selling old stock. "The combination of higher prices (driven by exchange rates) with a weaker economy will make our Heli product very attractive compared with Japanese equivalents during 2009."

He believes the government should be doing more to stimulate manufacturing in New Zealand. "We have seen a big decline in the percentage of manufacturers who buy our products."

But he remains confident despite the slowdown. "We believe that our company gets stronger during a slower economy. During tough times we focus on quality and efficiencies. When there are fewer deals to win, everybody works extra hard to secure the business."

Nichiyu Forklifts substantially improved its distribution network and national coverage with the establishment of the Nichiyu Premium Dealer network during 2008.

The network now numbers 15 dealers Australia-wide with further dealers to be appointed during 2009.

"Our expanded presence in the marketplace has paid off, with Nichiyu achieving almost double the sales volume in 2008 compared to 2007," says Nichiyu Forklifts sales manager Craig Coles.

Nichiyu Forklifts substantially improved its distribution network and national coverage during 2008.
Nichiyu Forklifts substantially improved its distribution network and national coverage during 2008.
"Given that the global economic crisis has yet to really bite, it is inevitable that capital equipment purchases will fall during 2009, but to what extent is anyone's guess."

Coles tells News that the Australian forklift market dropped by around 25% in October when the severity of the economic slowdown became apparent, but bounced back again in November to be just 8% down on the same time last year.

"Australia's economy has always shown great resilience during other tough economic times. My own feeling is that while the overall market may contract 15 to 20%, it will bounce back strongly once the current economic situation settles down."

Coles believes the best thing the government can do for business is to support the value of the Australian dollar. "Since the Aussie dollar has fallen from 98 US cents to the low 60s, importers are now paying up to 30% more for purchases in US dollars. The situation is even worse for importers purchasing stock in Japanese Yen, which has dropped more than 40% from a high of 105 to a low of 55 in recent weeks."

He says the Australian forklift market is one of the most competitive in the world, and already operating on slim margins, so importers will have little choice but to pass on the increased costs to customers.

"We are hopeful the government's economic initiatives will help stabilise the Australian economy and return the Australian dollar to a realistic and sustainable value of around 75-85 US cents. This would allow pricing to return to pre-crisis levels."

Coles believes the market for battery-electric forklifts will improve in 2009 even though the rest of the market may not.

"The overall market for battery-electric materials handling equipment increased by about 10% in 2008. With the recent surge in fuel prices, we certainly found more gas truck users contemplating the switch to battery-electric forklifts.

"The average forklift burns through over AUD5,000 a year in LPG, and much more for petrol and diesel models. A battery-electric is normally more expensive than a gas truck, but the price basically includes the cost of the first five years' fuel!

"With gas trucks incurring operating costs of more than AUD5,000 a year, it doesn't take long for the battery-electric solution to come out on top, even with fuel prices returning to more sensible levels. Environmental and OH&S concerns are also driving the switch to battery-electric materials handling solutions for many users."

Online auctioneer GraysOnline has seen consolidation in the forklift industry in 2008, with over 500 forklifts sold online.

"We expect 2009 will be a fairly difficult year for the forklift industry," PR manager Blanche Wilke tells News. "We anticipate that there will be an even larger amount of excess forklifts not being sold or hired out."

Grays expects more stock to be offered for sale on its website in the year ahead.

In order to sell increased numbers of forklifts in 2009, the company will be looking to attract more buyers. "We have and will continue to invest significant amounts of money in developing our database of forklift buyers. We do this with a combination of online advertising such as search and banner ads and the more traditional forms of advertising such as print magazines."

Quietly confident

The implications of the past year's events are still unfolding, and their full impact on Australia has not yet been measured. According to Reserve Bank governor Glenn Stevens, we are now in a period when the essential nature of events is not so much a crisis in the financial system. "It is a crisis of confidence on the part of households and businesses, and it is global in nature."

With government moving swiftly to strengthen the economy, 2009 may not be as bleak as once thought.

In December, the Australian government announced a AUD4.7 billion nation-building package in the form of investment in road, rail and education infrastructure, as well as vital tax changes to help local businesses during a global recession.

As Stevens notes, Australia has a pretty good record overall of responding to the need for change, especially in times of adversity, and there is no reason we should not maintain that record. "We do have reasonable grounds for some quiet confidence about the future, however bad the storm at present may be."

So while the data confirms that there is an international downturn taking place, and that it shows every sign of being a deeper one than 2001, the forklift industry remains quietly confident.
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