Executive Hire News › Archives › November 2009 › Market Report : Challenging times
Market Report : Challenging times
Kicking off this month's Market Report, Alan Guthrie gauges suppliers' opinions on both the current state of the compact plant market and future trends.
In last year’s Compact Plant Market Report, we described the decline in machine sales that had begun following the economic downturn. Not surprisingly, the downward trend in order for mini excavators, dumpers and related equipment has continued sharply, chiefly because of the decreased levels of house building and large-scale construction activity.
“Figures suggest that, in 2008, the number of mini excavators sold in the UK weighing up to 9 tonne was just below 11,000. We would estimate that figure will fall this year to approximately 6,000,” says David Munns, Director Compact Equipment for Volvo Construction Equipment. “We believe the market will then remain flat, perhaps not picking up significantly until 2011.” It will therefore be some time before total sales approach anything like the record 16,000 mini sales figure in 2007.
“Hire companies and owner-operators are obviously keeping machines in their fleets for longer,” continues David Munns, “and pressure on hire rates means many are extending the intervals between replacement. We obviously maintain close contact with our customers, offering as much support as we can with advice, spares and service backup. During challenging times, strong relationships with suppliers become even more important.
High proportion of smaller minis
“Of the units that are being sold, we estimate that minis of up to 1.5 tonne represent 36% of sales, with 2-4 tonne machines accounting for 29% and the balance comprising larger machines. This high proportion of smaller minis suggests that small builders and landscapers are still undertaking work. And there are very good independent hirers out there, with relatively small fleets, who have loyal customers and can charge sensible rates for their reliable service. So it is not all doom and gloom.”Keith Hoskins, JCB Sales Director for Key Accounts, agrees with an approximate 6,000 mini excavator sales forecast for 2009. “There has not been a significant recovery in the market yet, but it possibly reached the bottom in around June or July. Financial institutions seem reluctant to lend to businesses they associate with construction, including hire, and perhaps the government could do more to help. Many sites have been mothballed, but if public funding was put towards stimulating construction, they could proceed again quickly.
“The number of enquiries for equipment has been rising since the summer, but many people are still reluctant to commit. It is a question of confidence and hopefully this will grow, especially as there are now more positive reports coming from the national media. Most interest is in machines of 1.5 tonne and below. Also popular is our HD5 compact tracked dumper, which is ideal for use alongside such minis. Users want to reduce manual handling for reasons of Health & Safety and efficiency.”
Richard Harrison, Sales & Marketing Manager for Kubota (UK) - Construction Equipment, agrees that lack of confidence is a major factor. “Some contractors who are currently busy are doubtful whether they will remain so, especially with the likelihood of decreased pubic spending following next year’s election.” However, he believes hirers should resist pressure to cut rates, as the longer return on investment makes it more difficult to keep fleets fresh.
Attachments help win business
Ed White, General Manager of Digga Ltd, believes that if hirers offer a wider range of attachments for minis in their fleets, as well as for skid steers and tracked loaders, they can win more business. “The machines are effectively hydraulic power packs on tracks, and by adding implements like trenchers, breakers, augers and rotavators, they can be kept in use all-year-round. Demand is increasing for these attachments, which we will promote on our stand at the Executive Hire Show in February. It’s all about offering the customer added value.”
Robert Brown, MD of Ammann Equipment Ltd, also reports increased sales of attachments, such as breakers, compactors and crushers. “Their relatively low cost means they can pay for themselves in as little as ten weeks, and hirers can achieve sensible rates because they increase on-site efficiency. Generally, we continue to emphasise that hirers must keep their fleets refreshed. If they do not, many will be left with older machines when the upturn gathers pace, enabling customers to be choosy about equipment they hire. Most of the local independents whose newly purchased, and liveried, machines we showed at SED have since ordered additional units. Demand for our Cormidi compact tracked dumpers has also remained steady, and we plan to launch new models early next year.”
Not surprisingly, wheeled dumper sales have been similarly affected by the downturn. Ian Brown, Sales Director of Thwaites, says, “UK and export markets are extremely challenging. Although we believe we are close to the bottom of the demand curve, any real increase in activity is looking somewhat distant. Many customers have reduced their fleet size in response to a slowdown in demand. They are being careful how they spend their budgets, and, therefore, running costs and residuals are key, in addition to a competitive price.”
Positive signs
“There just has not been the volume of contracts to drive normal levels of business in construction,” says Adrian Hyde, Global Product Manager, Site Dumpers, Compaction Rollers and Light Equipment, with Terex Compact Equipment. “Nevertheless, there are some positive signs now, with construction sites re-opening and more ‘sold’ boards outside houses. Of the dumpers that are being sold, smaller models below 3 tonne represent the largest proportion, being typically used for home extension projects and landscaping. A lot of people will just want to get through the dark days of winter and then start with renewed optimism in spring at the start of the new financial year. The government could do more, such as reducing stamp duty on house purchases to get the cycle going again more quickly.”
Because County Armagh-based NC Engineering’s main market is agricultural machinery, it has been less affected by the construction downturn. “We launched our 1 tonne dumper at the Executive Hire Show in February and the response has been very good,” says Dumper Specialist, Lee Morris. “We have had the machine on trial with a significant independent hirer, following an initial contact at the Show. With equipment generally being kept for longer, there should, eventually, be a surge in replacement sales. We remain positive and we will be launching new 3 and 4 tonne dumpers before the end of this year.”
Also positive is Paul Rolfe, MD of Versatile Equipment, the Kent-based dealer and hirer of Bobcat skid steer and tracked loaders, serving London and the Home Counties. “Business has been challenging, but the last couple of months have almost been as busy as it was 12-18 months ago. While construction and demolition activity may have decreased, our machines appeal to many other markets, from grounds care and agriculture, to highway maintenance and waste recycling.”
Versatile recently added Bobcat’s new 2.3 tonne T110 tracked loader to its fleet and the machine has quickly won business. “We hired it to Dean & Dyball Civil Engineering, a division of Balfour Beatty Regional Civil Engineering, for landscaping a new South East Water reservoir in Cranbrook. Its low ground pressure made it ideal for work involved in grassing over the roof of the structure, which is partially below ground level. We have also just replenished our fleet of Avant Tecno articulated loaders, which includes the 528, 635 and 750 Series models. Demand remains steady because they can be used with so many attachments.”
Although the sales market is flat, hirers are evidently still winning business if they can offer appropriate equipment. Also encouraging is that many of the manufacturers EHN spoke to have new products in the pipeline, having maintained investment in R & D. Hirers and suppliers alike will hope that a steady economic recovery, which some commentators are suggesting evidence of, takes firm hold soon. • |
