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McLanahan sizes-up the Asia Pacific from Australia

11 April, 2006

Skilled people, quality local manufacturers and strong transport links have produced strong Asia Pacific sales growth for McLanahan Corporation.

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US-based equipment manufacturer McLanahan Corporation found Australia ideal as a market for its crushing and sizing machines and as a base to serve China and the Asia Pacific.

McLanahan Corporation celebrated its inaugral sale in China just over a year after it opened its first Australian office in Newcastle and less than three months after giving the business unit responsibility for the entire Asia Pacific region.

Headquartered in Hollidaysburg, Pennsylvania and employing 200 staff, McLanahan Corporation is one of the 50 oldest family-owned companies in the United States with roots stretching back to 1835.

The company makes equipment that processes any raw material from the ground that requires crushing, screening, classifying, washing or separating. It provides aggregate, mineral, environmental processing and screening equipment to the waste treatment, agricultural and civil construction industries.

Familiar business conditions

Australia is the McLanahan Corporation's first permanent presence outside the United States. "We felt very comfortable coming to Australia." says Sean McLanahan, executive vice president and chief financial officer of McLanahan Corporation.

"The business conditions are similar to the United States and as a whole it was easy to establish our office in New South Wales. So far, the only big difference is the Australian accent.

"We were also pleasantly surprised with the quality of people we were able to hire," he says. "Our Australian staff are highly skilled and very committed to building our business. They're the reason we've been able to grow so rapidly in the region."

Launched in mid-2003, McLanahan Corporation's Australian subsidiary began with a solely domestic focus. The company has been selling equipment to Australia through agents since the 1960s, focusing on crushing equipment to the country's coal and coke markets.

Althoug persevering with a distribution arrangement through an agent had bought a number of crusher sales, it had not produced results for the company's sizing equipment range.

Ideal base to serve China and the Asia Pacific

"Opening an office in Australia gave us the opportunity to kill two birds with one stone," says McLanahan. "China is modernising at full swing and with its growing resource industries it could be as big a market for us in the future as the United States is today.

"Australia is a large market in its own right, so by using our office there to serve China and the Asia Pacific we could avoid the risks of establishing a stand alone facility."

In July 2004, McLanahan Corporation handed responsibility for the Asia Pacific to Australia, due to proximity and the ease with which staff in the country could monitor market movements in the region.

"Australians are very familiar doing business with the Chinese and have a long history of transactions with the country. Representative of Chinese companies seem to prefer doing business with Australian," says McLanahan.

McLanahan Corporation's Australian office appointed Brisbane-based John Finlay Engineering as sales agent for China. The company has 15 years experience of doing business in China and strong coal industry connections.

Immediate sales to China

Results were almost immediate, says Jon Bentley, general manager and chief operating officer of McLanahan Corporation Australia. "Pretty much from the day of the appointment was saw a huge increase in the number of enquiries, resulting in the first order which came through within two months," he says.

The order came from one of China's largest coal producers. Its value was in excess of US$1 million and included four DDC-Sizers and spare parts.

As well as McLanahan Corporation's long history of supplying the American coal mining industry, a key element in the win was the company's ability to use its local base in Australia to comply with a demanding delivery timetable.

The units were required for shipping to a coal mine in inner Mongolia within 12 weeks, six weeks faster than the typical manufacturing time for an order of that size.

Critical to McLanahan Corporation's ability to meet this fast-tracked schedule was its contract with the process engineering division of Roche Mining, a subsidiary of Australia's Downer EDI group. Roche Mining manufactueres all the equipment McLanahan Corporation sells in the Asia Pacific.

"One of the reasons we've been able to succeed so quickly is that we've been able to source a high-quality manufacturer in Australia. We've had a wonderful relationship with Roche Mining," says McLanahan.

The contract gives McLanahan Corporation access to Roche Mining fabrication facilities in Kalgoorlie, Western Australia, as well as three other Downer facilities in Geelong, Victoria; Gladstone, Queensland; and Singletary, NSW.

"There are also significant logistical advantages in building equipment for export to China in Australia," says McLanahan. "Australia is well served by transport infrastructure and that means our lead times from shipping there are significantly less than if we loaded equipment on the docks in the US."

Strong outlook

The outlook for McLanahan Corporation's Asia Pacific growth looks bright. The company is continuing to make inroads into China.

Australia's resource sector is burgeoning and local infrastructure spending is picking up. McLanahan Corporation has opened  second Australian office in Queensland and its total number of employees in Australia had grown to 20 staff by mid-2005 from three people in 2003.

"One of our battles here in Australia as an American-owned company is that we're viewed as the new kid on the block," says Bentley.

"We've now done the ground work and flown the flag to the point  where we are happy that we are being given an opportunity on every tender that comes up in the Australian black coal industry," he says.

The company sees further opportunities for local business. It has entered a joint venture with fellow US company Air Control Sciences to sell passive dust control systems to Australian mining operations.

"Our Australia-based operations are now the fastest growing part of our company. It's been a real success story for us," says McLanahan.

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