Complications in Downstream Industries Have Shocked The Heavy Machinery Repair

Complications in downstream industries have shocked the Heavy Machinery Repair and Maintenance industry. Higher private capital expenditure on machinery and equipment will encourage increased spending on industry services. However, lower commodity prices will provide lower purchase costs to operators, which will lower prices and reverse some of the revenue growth. For these reasons, industry research firm IBISWorld has updated its report on the Heavy Machinery Repair and Maintenance in Australia. Complications in downstream industries have shocked the Heavy Machinery Repair and Maintenance industry. Consequently, industry revenue is estimated to grow at a sluggish annualised 0.7% over the five years through 2012-13 to reach $1.64 billion. Growth in private capital expenditure has increased the pool of heavy machinery and propelled the need for more repairs and maintenance. According to IBISWorld industry analyst Aries Nuguid, “strong demand for machinery repair and maintenance from the Mining division has also supported revenue over the past five years”. However, a collapsed construction market, particularly residential and commercial building construction, has dragged down industry revenue. The continued decline of the Manufacturing division due to strong import competition has also weighed on demand for the repair and maintenance of industrial machinery. Industry revenue is expected to grow at a similarly slow rate of 0.5% in 2012-13. Higher private capital expenditure on machinery and equipment will encourage increased spending on industry services. However, lower commodity prices will provide lower purchase costs to operators, which will lower prices and reverse some of the revenue growth. “Profitability in heavy machinery repair and maintenance has declined slightly due to weak demand from the Construction division,” adds Nuguid. However, strong demand from the mining market has softened the dip in profitability. The industry is expected to grow faster over the next five years. The faster pace will be due to higher private capital expenditure on machinery and equipment, a ramp-up in mining volumes and a recovery in construction markets. The residential and commercial construction markets are expected to make the strongest recoveries. Market share concentration in the Heavy Machinery Repair and Maintenance industry is estimated to be low. Market share concentration is low because industry players tend to specialise in particular machinery, markets and geographic locations. The specialised nature of many of the machines requiring repair and maintenance reduces the advantages of scale; hence, there are no dominant players. Nonetheless, market share concentration is estimated to have increased over the past five years as the market of smaller businesses was absorbed into the operations of larger players. The larger players have benefited from greater accessibility and marketing from online platforms, but not to a great extent. Source: SFGate