Mining supplier optimism up after year of collapses, with marketing high on agenda

Despite the collapse of many mining supply businesses in 2013, companies in the sector are largely optimistic about the March 2014 quarter, the latest Projectory Quarterly Survey of Business Expectations shows.

The survey of around 45 mining suppliers, mostly located in Western Australia, found that nearly 75% of respondents forecast a sales revenue increase for the period.

Over half, 56%, of respondents were very positive about their outlook for profits for the quarter, with greater investment in marketing a key intent for 50% of the businesses. Forty-two per cent of businesses intended to invest the same amount as the previous quarter.

Just over a quarter, 28%, of respondents indicated that they already had work lined up for the quarter.

The findings come after a series of mining supplier collapses in 2013, including the collapse of Queensland-based mining services company MEM in August, and Minecorp, which was sold to RMA Group, also in August.

Advertising was on the agenda for the suppliers, with an average of 5.3% of sales revenue to be spent on marketing, and 15% of this budget to be invested in advertising.

This would be spent mostly on the company website, followed by direct mail, online advertising/wp-content marketing, social media and SEO.

In some cases the budget would also stretch to trade shows, social media advertising, search engine marketing and editorials or white papers.

Respondents indicated that other areas of focus would be customer loyalty, lead generation and making clients aware of their products in the quarter. Trade shows and print advertising were indicated as ways to generate leads, while engaging public relations was a listed by a small number of respondents.

CFMEU Mining and Energy national research director Peter Colley told SmartCompany the optimism was “in accordance with union views”.

“The business troubles were exaggerated in the year regarding company collapses, they were a small portion of the overall mining activity,” he says.

Colley explains that while the mining “investment bubble” is at the end, production is increasing at new mines.

He says there will be demand on suppliers, particularly when it comes to consumables, rather than big ticket items.

However, Colley says suppliers will face mining companies that are watching their pennies. This is in contrast to their free-spending approach after the global financial crisis, when contracts were “easy” to come by.

“The work is there…but it is not easy money,” he says.

BIS Shrapnel senior manager of infrastructure and mining Andrew Hart agreed with Colley that mining suppliers, particularly in Western Australia, are set to benefit from a phase of production.

Hart explains that Western Australian mining suppliers can benefit from the boom in iron ore, while businesses on the East Coast of Australia may remain challenged as coal is not thriving at the same rate.

“With the Roy Hill project going forward, that has saved a lot of companies,” he says.

He warns that while companies such as BHP, Rio Tinto and Fortescue have ramped up investments, he doesn’t think the “boom conditions” are coming back any time soon.

Hart says iron ore mining is forecast to grow from 545 million tonnes last year to 739 million tonnes in 2016.

“That is about 10% per annum growth for three years,” he says.