By Glenn Baker.
It’s the stuff of export legends. Integrated Hydraulics Limited (IHL), a Christchurch company with a current annual turnover of $8.5 million, began life in 1989 with just two employees in a blueberry packing shed.
David Lawry, the founder of IHL had previously sold his engineering business and retired in order to grow blueberries. But there was some unfinished business. Manifold technology was very new and Lawry had been experimenting with it prior to the sale of the business. People continued to ask him for help in building manifolds, so he began manufacturing a few in the blueberry shed, then a few more. He employed a person to help, and then purchased a CNC machine in 1990, followed by another, and today IHL has around 20 machines to keep up with demand for its custom-made hydraulic manifolds – plus 30 staff. Needless to say, the company moved out of the blueberry shed a long time ago.
Then came IHL’s biggest milestone – a distribution agreement with Rexroth Hydraulics Australia, signed in the early 90s – which would catapult the company into export markets. “We did some work for the local branch of Rexroth and that led to an introduction to the Australian head office and a distribution agreement that has lasted 20 years, and is still going strong,” says Richard Craig, general manager of IHL. “What started out as a gentleman’s handshake between the two managing directors has strengthened over time, and is now stronger than ever. Both MDs have now stepped aside, but the strong relationship still exists with the new management teams on both sides of the Tasman.”
Today 60 percent of IHL’s revenue is derived from product exported directly to Australia, Singapore, Malaysia and Indonesia. The company celebrated its 25th anniversary in August and is looking to expand its presence in Australia, as well as diversifying beyond its core product line. Twenty percent growth year-on-year is the goal for 2014. The company’s core business is designing and manufacturing custom-made hydraulic manifolds for the transport, marine, forestry and mining industries. More than 30,000 manifolds and machined parts are manufactured at its modern factory each year.
Craig says the factory was relatively unaffected by the Christchurch earthquakes. “But we were a little worried in the first week after the quake when our offshore clients ‘left us alone to deal with it’ and we had to quickly get on the phone and make some sales trips to ensure them that it was business as usual.”
Hydraulic manifolds are key components in everything from giant electricity generators to the common digger, Craig explains. For systems that rely on hydraulic pressure to manage and control processes, they are the heart and brains. He sees growth going forward coming from projects in renewable energy and retrofitting safety systems to existing equipment. “We are spreading our offer into adjacent products.”
On time, on spec
Of course, with growth come challenges. “Our distance from markets and recruiting qualified people with the right skill-set are the biggest challenges,” says Craig. “Going to a company in Australia or Asia and explaining that we can deliver a custom designed product on time and on spec when their local manufacturers can’t, and then living up to that promise – that’s a big challenge too.”
So what does he put the company’s continued success down to? It’s about quality and quantity – IHL are specialists at delivering low quantity, high quality product that is ready to use. “The New Zealand dollar helped us get into Asia, now quality and delivery are keeping us there,” says Craig. As for the high Kiwi exchange rate, he says the solution has simply been to think smarter about how they manufacture their products, in order to retain a reasonable level of profit.
Craig’s advice for others in the export game is to use a closely targeted approach to markets. “Do not attempt to be everything to everyone, everywhere. Know exactly who you are and what you’re about.”
It’s worth noting that while 60 percent of IHL’s revenue is from direct exports, a further 30 percent of its production ends up being exported indirectly – as components within products assembled and then exported by IHL’s New Zealand-based customers. That makes IHL a significant contributor to New Zealand’s export earnings
Glenn Baker is editor of Exporter.