ISSUE 3 – JULY 2012
The big event this month was the arrival of the long awaited Carbon Tax. The tax which is regarded by many as highly divisive is also linked to a household compensation package and a revision of personal tax thresholds. Whatever your personal views on the need and level of this tax, it is clear that it does not come at the best time for the Australian manufacturing industry as it faces further contraction. With the Coalition vowing to repeal the tax immediate upon taking power at the next election; this can only add further uncertainty to many sectors of the economy, which may also be further threatened by economic slowdowns in our largest export trading partner – China.
Trawling the news this month produced two Australian manufacturing success stories (see below) and an interesting article on the visit of NZ Prime Minister John Key. Key’s was in Australia to take local manufacturing back home to NZ says the AFR 6/7. Fresh from winding back the carbon tax, cutting the top rate of income tax to 33% and kicking off partial privatisations he said Government is a practical business; making a series of sensible decisions which build on each other. During questions he was asked from the audience; “Prime Minister, I’m not sure what you are doing next week but the question is; Australian business would like you to run the country”!
On July 1 the government’s long awaited Carbon Tax finally came into being. The tax will tax all companies that emit more than 25,000 tonnes of CO2 equivalent a year. It will apply to about 60% of the country’s emissions with carbon units at a initial price of $23 rising in the next two years. Companies can lower their tax bill by claiming carbon credits for emissions from a number of activities including transport and domestic aviation. In addition, a clean energy finance corporation has been set up with an investment of $10 billion over 5 years to lend money and invest in clean energy companies.
Australia’s manufacturing sector contracted for its fourth straight month in June, a private sector survey shows. The Australian Industry Group/Price Waterhouse Coopers Australian Performance of Manufacturing Index (PMI) remained below the key level of 50 points in June, indicating the sector continued to contract. However, the index rose 4.8 points to 47.2 points, indicating the sector contracted at a slower pace compared to the previous month. The index, released on Monday, showed eight of the 12 manufacturing sub-sectors – including wood products and furniture, food and beverages textiles and chemicals – recorded decreases in June.
(By AAP 02/07/2012 – www.thebull.com.au)
Manufacturing activity in China hit a seven-month low in June; a private survey has shown, due to a slide in exports and weak domestic demand. HSBC’s preliminary purchasing managers’ index (PMI), which gauges the manufacturing sector, fell to 48.1 in June from 48.4 in May marking the 8th consecutive month of contraction..
Analysts said the results suggest China will move again to boost its slowing economy, after cutting interest rates earlier this month for the first time in three years and encouraging more government investment. A spokesman said China is facing weak demand in key export markets such as the US and Europe. The government has reduced its economic growth target for this year to 7.5 per cent, down from growth of 9.2 per cent last year and 10.4 per cent in 2010. (ABC news.net.au)
National kitchen designer and manufacturer Australian Kitchen Industries has gone into voluntary administration, a victim of tough economic conditions for manufacturers and last year’s floods in Queensland. The company has 20 stores across the nation, which operates under the brands Kitchen Connection, Wallspan Kitchen Connections and Impala Kitchen Connection, and it employs around 200 staff. There are stores in Melbourne, Sydney, Adelaide and Brisbane, although Impala Kitchens in states other than Victoria is not part of the AKI group and is not affected by the administration. (www.smartcompany.com.au)
The Horsham foundry of failed car parts maker CMI Industrial will be closed next month after receivers failed to find a buyer for the business. The company is a major parts supplier to Ford but it went into liquidation earlier this year. Twenty-nine employees will be made redundant and the factory is expected close by July 6 after the receivers who initially believed the foundry could stay open for another 6 months admitted they could not find a buyer for the foundry business. (www.abcnews.net.au)
And now a couple of success stories:
Bartco a traffic management business, started an off shoot manufacturing their own road signs has grown to become a multi-million dollar operation and has just secured a $2 million contract to deliver traffic management signs for the London Olympics. So we decided to build them ourselves, basically. We put the specifications together, contracted out the manufacturing, and then started building up things with LED technology. We put them on the road, and to cut a long story short, people started noticing them and wanted to buy them off us. Using new technology, solar powered and LEDs and subcontracting manufacture they started building a technology company, investing substantially in R&D to keep ahead of the competition. The contract for the Olympics came out of a new type of sign using new colour LED’s and solving power consumption by use of solar.
Barry Thomas’s Brisbane-based company, Cook Medical, is at the forefront of manufacture in the medical device field. Cook Medical Australia reported $164 million in revenue in 2011. This included $76 million in export sales of product manufactured locally in Australia, $8 million in sales of locally manufactured product into the Australian market and $78 million in sales of imported product from other Cook companies outside of APAC.
Thomas, who received a 2012 Australian Export Heroes award from the Australian Institute of Export, has some simple advice. Watch your input costs, keep management structures flat, make sure you are either making money out of the dollar or hedging yourself and, most importantly, look after your employees. It’s about making sure the people you have on board are the right fit, and then taking care of them so that they stay. “It’s about having a workforce that’s working with you to maintain manufacturing,’’ Thomas says. Cook Medical now employs about 600 people in Australia. It has a low turnover of staff because it works almost as a family company.
That doesn’t mean the company can’t cut staff when it has to. But it needs to be strategic in the way it goes about it, he says.