Austin Engineering Ltd has completed a previously announced strategic review of its global business, with the first two phases of this review funding a third that will fuel innovation and technology development.
Austin initiated the strategic review in May 2021 in parallel with the decision to relocate its headquarters from Brisbane to Perth, in Australia. This move was carried out to, Austin says, bring the company’s central management closer to Austin’s major mining customers and its largest APAC manufacturing centres in Perth and Indonesia.
The strategic review aimed to identify opportunities to improve business efficiency and to align with the future needs of Austin’s mining industry customers. Ultimately, the review identified what Austin needs to do and where it needs to invest to be at the forefront of the industry, to grow earnings and, thereby, unlock value for its shareholders, it said.
Austin’s loading and hauling products are designed to meet the specific needs of its mining industry customers around the world. Its products are designed to help mining companies increase operational efficiency, improve site safety and help meet their environmental and decarbonisation targets. This is crucial as the mining industry works towards dramatically reducing emissions in the coming years, Austin said.
The strategic review outcomes are structured in three phases, representing short-, medium- and longer-term measures to create company value across Austin’s operations in Australia, North America, Indonesia and South America.
As Phase 1, Austin has already rebased the indirect support structures throughout the business and enters the new 2022 financial year (to June 30, 2022) with a leaner structure. By the end of June, about 50% of the “people cost reductions” identified in the review were completed, with 85% due for completion by the end of August, it said.
In addition to the rapid closure of its previous head office in Brisbane, Queensland, Austin has consolidated its separate businesses located in Mackay, Queensland, into Austin’s wholly-owned subsidiary, AUSTBORE. The consolidation enables a stronger focus on new product delivery and support in Queensland and reduces the focus on general repair and maintenance services, which have not been delivering “adequate earnings”, Austin said.
Austin will continue to deliver its own product offerings to the east coast of Australia from its manufacturing facilities in Perth and Batam, while continuing to offer support directly in Mackay through its existing team, it said.
Phase 2 will see Austin develop its major manufacturing sites, commencing in Perth, Australia.
“Austin has identified significant manufacturing opportunities to reduce waste and improve production efficiency and product consistency through the adoption of flow production and automation,” Austin said. “This will provide significant benefits for Austin’s major product ranges, in particular truck bodies, while remaining agile in bespoke designs and delivering unique capabilities for its customers.”
It is likely that the production system will be adopted in Batam to build bodies faster, use less factory space and improve product quality, according to Austin.
Initial project investment for Perth is underway with a final investment decision by the Austin Board planned within the next quarter.
In the US, Austin is reviewing its delivery logistics to improve overall “cost competitiveness”, the company said.
It explained: “Large truck bodies are difficult and expensive to move around the disparate mining centres of Canada, USA and Central America. Further detail around the changes being considered for North America will be announced when sufficient certainty has been achieved in the current review. Under consideration is an increasing presence in western Canada to service the oil sands region more effectively.”
Phase 3 is looking at putting technology and innovation at the forefront of a significantly expanded Austin product range.
The company explained: “Out of the review, Austin has established a new customer-focused, innovation and technology group that reports directly to the CEO. The team will interface directly with Austin’s major customers and will use innovation- and technology-led solutions in an agile implementation environment to meet customers’ needs for product capability and performance. Austin has already reviewed its technology pipeline with some of its major customers, with new developments already underway. Further details on these developments will be made available at the appropriate time.”
In the longer term, Austin says it seeks to increase its product offering, through a mix of in-house design, partnering with aligned businesses and M&A activity.
Cost savings to the business generated in Phases 1 and 2 are expected to provide funding for innovation and technology development, as well as enhancing earnings, it said.
Austin CEO and Managing Director, David Singleton, said: “The strategic review process has provided a chance for Austin to make some big decisions about what we most need to focus on for organic and inorganic growth of the company. Through this process, we will cut significant costs from the business while increasing output through adopting more advanced manufacturing techniques. Importantly, we are firmly concentrating our efforts to meet the needs of our mining customers into the future. Austin’s products will support our clients as they target net zero emissions, improve productivity and ensure ever safer operations.”
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