Funny Kinda Crush

Jun 08, 2023

Timely new agency agreement between Thailand's Leadway Heavy Machinery Company Limited and Finnish multinational Metso:Outotec should be just what the quarrymen ordered.

published : 5 Aug 2022 at 18:26

Literally one of the essential building blocks of life as we know it, yet all but ignored and even unloved, the materials sector, to give it its equally anonymous stock market handle, is nevertheless on a roll.

For evidence look no further than the recent announcement that one of the biggest players in the pan-continental heavy equipment manufacturing sector that physically propels all the mining and quarrying activity, Metso:Outec has found itself a new distribution partner in Thailand, a rising star in the commensurately indispensable new machinery distribution and maintenance dimension, Leadway Heavy Machinery Company Limited

Spearheading the subsequent synergies are Mr. Jimmy-Chakart Seanchan, Chief Executive Officer, Leadway Heavy Machinery Company Limited and Mr.Campbell Johnston, Distribution Manager Aggregates – Asia Pacific, Metso:Outotec.

Mr. Chakart started out in 2007 as a dealer in used heavy Machinery which he imported and then sold locally or exported to neighbouring countries. He began by representing a few Japanese brands and five years later added European names.

In 2012, he switched to exclusively dealing in new equipment, a move prompted by the difficulties and frustrations of handling used equipment where, as with second-hand cars, you never quite know what you’re getting. And these are pretty big tyres to kick. The spare parts aspect of the used machinery arena can be even trickier with floods of generic items of sometimes questionable quality grabbing market share at the expense of genuine but pricier items.

Moreover, while the second-hand heavy machinery sector is highly populated and hence somewhat cutthroat, you can count the specialists in new equipment in Thailand on the fingers of one hand.

"Our value proposition is that we select the best equipment manufacturers in their respective fields so we can offer customers final solutions, including financial packages, spare parts and maintenance, through our 14 branches around the country," explains Mr.Chakart in the offices of Leadway Heavy Machinery Company Limited's expansive depot well-stocked with big yellow machinery deep into Bangna-Trad.

"Our intention is to provide a one stop service offering customers the best benefits they can utilize on the plantation, road building, quarrying, and transportation sides. As our first move into aggregates machinery, Metso:Outotec fills a key missing piece in our portfolio so that we now cover 70%-80% of all the machinery quarry sites use."

With the new kid on the lot, that makes five brands in Leadway Heavy Machinery Company Limited's portfolio, including SUMITOMO of Japan's excavators and pavers, BOBCAT of the USA's compact excavators and skid steer loaders, SANY of China's concrete mixers and mining trucks, BOMAG of Germany's road machinery such as vibrating rollers, and JGM of the China's wheel loaders.

The tie-in with Metso:Outotec has been sparked by the merger of Metso:Outotec.

"Metso:Outotec is a very well-known name with a long history in the aggregate business," explains Mr.Campbell. Metso:Outotec, another mineral processing equipment and machinery company, and one of the top companies in aggregates metals and mining equipment supply, makes for a synergistic merger."

Metso:Outotec was a Finnish industrial machinery company focusing on providing technology and services for mining, aggregates, oil and gas, recycling, pulp and paper and other process industries. Metso:Outotec was Finnish listed technology company as well as project company, selling complex mining technology and plant projects that it designs and executes.

Headquartered in Helsinki, Metso:Outotec started out in Sweden in 1868. It got into the crushing business under Bruno Nordberg in the late 1800s and the name of Nordberg is still today synonymous with the heavy duty business of crushing, including 500-600 machines in Thailand which Metso:Outotec supports itself directly, representing a 20-25% market share.

Mr.Campbell first got involved with Nordberg in that mega materials empire known as Australia around 26 years ago.

"With the merger the management wanted to change things up with a target of being no. 1 in all areas of the aggregates business," explains Mr.Campbell.

In Thailand's case, that involved a market study and sales channel review with independent consultant Asian Insiders.

"We had them go out and quantify the market. Once that data was in hand, our management asked what the best sales channel would be for us. That sparked another process which came back with the recommendation that Leadway Heavy Company Limited has the best potential for us."

Under the agreement, Metso:Outotec looks to Leadway Company Limited's distribution and maintenance network to keep costs down and provide support to customers(Business) in what, despite the big ticket equipment prices (a decent cone crusher can set you back $300,000-$600,000), is a low-margin game.

At the same time Metso:Outotec has on-the-ground resources supporting Leadway Heavy Machinery Company Limited and its customers as well as working with operations in other parts of Southeast Asia.

The customers are almost exclusively private companies but some are contracted to public sector entities. The core companies are TPI, SCG and Siam City Cement along with a lot of smaller family-owned companies.

All sales go through a due diligence process and financing is key. Most sales in Thailand involve a rental phase. Leadway Heavy Machinery Company Limited sells the machine for Metso:Outotec but the agreement is between the buyer and a leasing company, primarily two Japanese firms, UFG Leasing Thailand, a subsidiary of Bank of Tokyo Mitsubishi, and Krung Thai Mizuho. The item in question becomes yours when you make the last payment, usually after three years.

Part of the deal on Leadway Heavy Machinery Company Limited side is not to try to sell at too high a price while providing very good support through specialist engineers and technicians stationed at its 14 branches nationwide.

After all, if anything breaks down it's a lot more than a little irritation.

"In this business, you need a lot of support and it must be immediate because they can't stop," explains Mr.Campbell. "They need to do so many thousand tons a day, so if a machine breaks down, whether its an excavator problem or an aggregate problem or a dumptruck problem, it's a big issue: the whole chain grinds to a halt."

Nevertheless, the sector doesn't get a lot of coverage. Or does it?

You don't see much about mining and quarrying in the news unless you search for it but without all that cement and aggregates there would be no new expressways, railways and other infrastructure let alone condos, hotels and malls.

It turns out there’re around 300 quarries throughout Thailand. The biggest demand for their outputs comes from greater Bangkok. The brightest mid-term prospect may be the Eastern Seaboard or Eastern Economic Corridor development. Extensions of Mab Ta Phut and Laem Chabang ports are also keeping heavy equipment dealers and operators busy. Then there's the infrastructure, the highways, the metropolitan train lines etc.

"Business is quite good and the outlook is better," says Mr.Campbell. "If there's more high speed railway development and the EEC steps up a gear that will be another layer of demand."

As for the longer-term, consider the ramifications of global warming. With sea levels rising, dykes and embankments are going to be in high demand along the seashore. That's a lot of rocks.

"Meso:Outotec is now part of Leadway Heavy Machinery Company Limited business," summarises Mr.Chakart. "The good thing is that when we visit the customer, we can sell a lot of things."

"Overall, we’re just excited about the opportunity to reestablish contact with a lot of customers," concludes Mr.Campbell. "The customer is everything to Meso:Outotec and with a partner like Leadway Heavy Machinery Company Limited we can grow the business together."

SIDEBAR

The unsung heroes of excavation are actually extraordinary feats of incredibly tough engineering

While the materials they gather have evolved at a glacial pace the evolution of the machinery is rather faster.

"Probably our most popular machine here, and one of our most longstanding, is our HP Cone Crusher," says Mr.Campbell Johnston, Distribution Manager Aggregates – Asia Pacific, Metso:Outotec.

"It comes from our original Simons Cone which was developed by Bruno Nordberg a hundred odd years ago. Big rocks go in the top and hit wearing surfaces that powerfully crush the material so that small rocks, or aggregate, come out the bottom. That goes to a screen that separates out different sizes."

It's important to get the sizes right.

"When you've got quite fine reinforcing bars, the quality and gradation of the aggregates determines how the cement flows around them. If it's not exactly right, you get voids and structural integrity problems. If you're a high rise building, that is not the end product you want."

Meso:Outotec spends millions of Euros every year on research and development and upgrading products.

"We continue to upgrade as technology allows us to do better engineering, to understand where the forces are in the machines and so on, so we can optimize the design life over the lifecycle of the machines.