In about 2007, mineral processing equipment group Multotec, which had been growing at 15% a year for an extended period, found itself at a crossroads. To maintain such growth it had to become a more internationally focused group. Africa is key to these plans.
Multotec CEO Thomas Holtz tells Mining Review Africa that the company had a choice. It could take its key product lines and become a niche supplier across a variety of industry sectors or could take the path it is now on. This path is to concentrate exclusively on a single sector, that of extractive metallurgy, and focus all its efforts in establishing a global brand in this field.
Over the past few years, the company, once known mostly for screening media, has expanded its range extensively to cover process equipment, screening and flotation, solids and liquids separation, rubber wear solutions, conveyor belt fastenings, and wear resistant ceramic linings.
Multotec focuses on the mineral processing solutions it can provide in commodities such as gold, coal, platinum, base metals, iron ore, and mineral sands. These are sectors from which its technical people come from and in which they have experience and knowhow. Multotec, a privately owned group which has been in business for 37 years, embarked on its internationalisation process because it has limited opportunities for further growth in South Africa where it holds a dominant position. “Of course we must ensure we continue to support and sustain our base in South Africa at the same time,” Holtz says.
He says that the internationalisation process, which entails aggressively targeting international business and which began in 2007, continues to be a work in progress. “There are no shortcuts and there is no text book; one has to learn through making mistakes. One of the key lessons is to listen more to local businesspeople when they talk about the culture in that particular part of the world and the local obstacles to business.”
Africa, which is the primary growth target for the company, is no exception and it is a market where the mineral sector is showing signs of strong growth. “In spite of the well known challenges, such as a lack of infrastructure and skills and the perception of having high risk, it is a region where our products are known and liked. Many of the companies we deal with in Africa are blue chip groups, and from our experience we have encountered more bad debts from our dealings elsewhere,” Holtz says.
It does not mean the challenges in Multotec’s internationalisation plans are trivial. While Holtz feels the company has been able to attract the necessary skills, it is based in Gauteng, far from the ports, and far from major shipping lanes. There is also the volatility of the South African rand to take into account. “A key issue to get right is the supply chain logistics,” Holtz notes. “We are looking at alternative supply lines and possibly at sourcing out of India and China, as we have lost a few opportunities due to pricing. However, we don’t aim to be the lowest cost supplier. We sell on the basis that we have got an appropriate product and technical know-how to provide back up for it, and this comes at a premium.
“Multotec can provide a customised product, and when things go wrong, as periodically happens at a mining operation, we have a fast and effective product and service offering where we can get a representative onto site quickly.”
The company also offers its Hawkeye product, which is an internet enabled software system that assists it with service and maintenance contracts. This tool assists Multotec to offer efficient field service and maintenance. “We can also aggregate field service teams across a number of clients and keep shared stocks in specific equipment.”
Multotec also has begun to operate parts of a plant that it has supplied. “In fact, a positive outcome – to our consumable equipment sales – of our operational and maintenance service is that we tend to extract more life and value out of the equipment than the client may be able to,” Holtz says. Multotec does have cost per tonne parameters built into certain contracts. “The model we use varies; we tend to start out conservatively and as a relationship evolves we evolve what we offer to the client. Our philosophy is to under promise and over deliver.”
The company does use formulas based on well known indices to hedge the prices of its own raw materials and those prices are passed onto the client.
At this stage about 40% of Multotec’s turnover comes as a result of business outside South Africa, with the rest of Africa contributing the largest portion. This is followed in sequence of significance by Australia, North America and South America. “We have exported to 54 countries, but in some cases that may only have been a single order.” At the moment the company does not spend too much focus on countries such as China and India, where it is represented by agents, and to the CIS, as it does not want to spread itself too thinly.
Multotec has established offices in Zimbabwe, Zambia and Ghana. It serves Tanzania and the DRC from its office in Zambia and serves Mozambique from South Africa. It has separate arms in West Africa based in Ghana to service French and English speaking countries. “However, there is flexibility as we have specialists in screening, milling and cyclones, who provide a consulting type of service and that we do from South Africa. The regional offices act more as sales and service centres.”
The company does have an applied research element which involves designing application specific solutions for customers. “We have got ex-mining people and metallurgists who can look at an application and find a solution appropriate to that site.”
Multotec has what it calls its capital business where it supplies new projects, and here its client base is the engineering companies and the mining company head offices. It is to ensure it gets business from the numerous Australian based project companies that Multotec set up an office in Australia. “Companies in Australia tend to go with the suppliers they are familiar with and it is important for us to be there, and also it is important for us to benchmark ourselves according to our competitors there,” Holtz says.
The company also has what it terms as its consumable business. This is not necessarily consumables as they are viewed by the mining companies, but consumables in that they are products that have a fairly short replacement cycle, such as three years or less. This accounts for some 70% of Multotec’s business. “For this business we deal with the end users, and we offer service on site and maintenance contracts. In every mining community where we are active, we have got a regular presence on site and as we get more business in an area this can mean having people on site on a daily basis.”
The company has some 150 to 200 service personnel out of its 1,400 total staff complement. Multotec’s manufacturing base remains in Gauteng, but it does manufacture in Australia and South America and it has some Asian suppliers.
Holtz’s experience is that engineers do have their favourite equipment types and brands, and Multotec offers a range of products and solutions from which customers like to pick and choose. However, Multotec is aiming at putting bundles together and offering incentives to customers to buy these. “Considering the levels of competition it is probably an insurmountable challenge for any group to offer leading edge products in all areas, and our choice was either to narrow our focus or expand it. At the same time, as mentioned, we don’t compete on price, but focus on the service offered and the quality of what we provide and do. We provide customers with peace of mind, for which they are willing to pay.”
Multotec’s policy has clearly paid off in the marketplace, since after the bumper year of 2008 it only saw a decline in income of 15% in 2009. “Our capital work continued as we went in with a big order book, but that has been whittled away. We take capital equipment work where we find it, and we are cautiously optimistic about the future.
Our consumable business did not see a lag in the impact of the downturn, but while commodity demand continues and plants keep running there is business out there.”
Holtz says, “Downturns provide opportunity to target growth in market share. We did that in the past in South Africa and are now doing this in Africa.”