Hard Goods

Key highlights

  • Portfolio optimisation and product rationalisation delivered cost savings and improved investment in working capital
  • Improved flexibility of workforce negotiated at production sites in order to meet current production volumes
  • Outsourced production and partnerships provide agility and ability to adapt to volume changes
  • Improved sales and marketing structure to better link customers and opportunities

Key challenges

  • Key customers such as distribution, mining, energy and fabrication sectors have deferred expansion plans and all non-essential maintenance, leading to a difficult trading environment
  • Competitive environment with lower volumes led to pressure on margins for a variety of products
  • Loss of some technical skills primarily due to attrition

Performance review

Key performance indicators

Overview

Hard Goods provides welding solutions and offers long-term partnerships to improve our customers’ cost base by being a complete product provider for all their welding needs. Through strategic partnerships with key original equipment manufacturers worldwide (typically leaders in their areas for partner productions), we are able to meet such needs timeously.

Due to the nature of Hard Goods products and their use, the performance of the segment is directly related to economic activity. The decline in the local economic performance led to a reduction in customer purchases – mainly from the distribution, mining, energy and fabrication sectors. This is reflected in the 9% reduction in volumes year-on-year for the gas equipment division and a 10% reduction in units sold in our self rescue division. Consumables volumes remained flat year-on-year.

Optimising the product range allowed us to focus on the key revenue products, while releasing working capital to focus on new products for targeted sectors. As part of our restructure programme, Hard Goods streamlined its business to focus on agile and specialised sectors with significant opportunities for growth and operational stability. The disposal of the GEF was completed in 2016, and we are addressing initial teething problems that occurred as a result of the supply of product as part of the disposal agreement. The closure, as a result of the disposal agreement, had an adverse effect on our sales of gas equipment in the short term, exacerbated by the low demand in the mining sector due to economic strain.

The rationalisation of the Hard Goods segment was another step taken in on our path towards getting stronger.

The right-sizing of the business has enhanced the agility and speed of this segment, bolstered by the support of our direct and indirect partners. A small element of transition still exists, but we are now fully aligned to our business strategy in terms of product delivery. New products and service offers in the pipeline for 2017 will ensure we address the needs of our evolving customer base. A new product example is a popular Afrox-patented general purpose welding electrode that is both efficient and cost‑effective.

We focused on selected countries to develop the Arcmate brand and offer base products to the market. Our dedicated sales team ensured we retained our key customer base during the restructure and regained others lost in the past.

Future focus areas

  • The focus for 2016 was on understanding the changed Hard Goods landscape and appointing strategic distributors, partners and agents in selected areas to maximise our footprint to gain new business. This will continue in 2017.
  • The new embedded sales and marketing structure has enabled the Hard Goods business to better interact and gain closer proximity to strategic segments with improved exposure to light industry segments, understanding their needs to provide value-adding solutions. We intend to defend and grow our customer base in key segments by providing solutions that improve their efficiencies. This will be achieved through customer engagement to create customised product service offerings and intelligent pricing initiatives.
  • Focused growth in light industry markets with tailored offers delivered through our partners, Gas & Gear outlets, and national resellers to gain additional market share.
  • Invest in resource development and upskilling of our sales and marketing team to enhance our growth opportunities and sell effective solutions knowledgeably.
  • Continue to position Afrox appropriately for infrastructure requirements in respect of green energy initiatives such as wind and concentrated solar power.

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