After the official launch of BMG Hydraulics, Motion Control caught up with BMG Group sales and marketing director, Ian King, and BMG Hydraulics MD, Greg Lester to get the inside track on this development.
MC: What was the rationale for BMG’s acquisition of Goldquest?
IK: When Charles Walters became CEO of BMG about two and a half years ago Bearing Man had already become much more than a bearing shop, but was still looking for synergistic growth areas. We surveyed our customer base and one of the outcomes was that customers wanted an expanded offering including hydraulics. Goldquest was a natural fit – many of the BMG people knew or knew of the Vickers product and Goldquest already had an excellent reputation with a culture that was aligned to the BMG culture.
GL: From a Goldquest perspective we had reached a decision point. Some shareholders had reached retirement age and we could easily have stagnated. I could still see the great opportunities in this industry and it was not a difficult decision to become part of a larger group that could help to fulfil those visions.
MC: How did the acquisition affect the Goldquest staff structure?
GL: There was hardly any impact – the only notable difference was that BMG brought in Andre Smith as commercial manager – a position that we had not explicitly defined in Goldquest.
MC: Has there been any change in the distribution chain?
IK: BMG Group has a broad distribution network and the majority of branches operate on a franchise model in which BMG owns the consignment stock and the franchisee is responsible for premises and staff infrastructure. However, BMG Hydraulics does not plan to utilise this infrastructure.
GL: Goldquest already had an effective distribution network in place comprising owned branches in Cape Town, Durban and Secunda and a number of independents in other areas. That is not to say that we are not looking at the BMG franchise model, which we may adopt in the future. Availability of product is a key success factor in hydraulics and the combination of an efficient distribution chain and availability of working capital puts BMG Hydraulics in a very competitive position.
MC: What does the market look like in terms of where the business comes from?
GL: About 30% of our turnover comes from mining, 45% from heavy industry and ferrometals. The remainder is made up of cement, marine, plastic injection and other. In terms of projects the heavy industry probably makes up 60% of BMG Hydraulics’ business.
MC: Is BMG Hydraulics achieving much turnover from export?
GL: We are exporting into India and Russia with new project business, but project work has slowed down with the global economic downturn. Currently exports make up around 10% of turnover.
MC: How would you be able to grow that export number?
IK: As a group, BMG has the strategic vision to expand aggressively into Africa, particularly Ghana, Nigeria, Angola, Tanzania and the DRC. Africa is still an untapped market, lacking in good distribution networks. BMG has two branches in Zambia, representatives in Botswana, Namibia, Swaziland and distributors in Zimbabwe and Ghana.
GL: BMG Hydraulics has appointed distributors in Kenya, Tanzania, DRC, and Zambia. We were already represented in Zimbabwe and Mozambique. Our goal is to see exports reach 25% of turnover.
MC: Presumably this growth is coming from doing business with the Chinese minerals activities?
IK: Interestingly the sales growth in Mozambique and the African west coast is coming from Australian and Brazilian miners and industrials rather than the Chinese. And project work is more likely to be with French, Italian and Indian involvement.
MC: So are you seeing competition from Chinese suppliers?
GL: BMG Hydraulics is very successful with its hydraulic power packs. The company has a long history of excellent reputation for product and support in this area – whereas the Chinese are tending to focus on the aftermarket – where they compete only on price. Remember that Hydraulics is a safety purchase, not a commodity purchase and the South African purchasers and specifiers are still discerning.
MC: What is BMG Group thinking on the state of the economy and signs of recovery?
IK: We do not expect to see any uptick until 2010 Q1 or Q2 but there are some European and Asian companies showing signs of improvement.
MC: There is an ongoing cry in the fluid power industry about the skills shortage. What is BMG Hydraulics doing to help rectify this?
IK: The BMG philosophy is one of adopting best practice. To achieve that staff training and development needs some structure. At group level we have the BMG Academy of Excellence whose goal is to provide accredited technical skills training for staff and customers. The academy has developed SETA approved desktop learning modules in conjunction with academic staff from the University of KwaZulu-Natal. At this stage this initiative is aimed at in-house employee development, but it is a work in progress. We plan to add a hydraulics module and to roll it out to our customer base later.
GL: This is another area where the existing Goldquest culture and that of BMG Group fit perfectly. We have always promoted a disciplined on-the-job training and development philosophy and have just completed our internal training facility. Here we run the highly regarded Vickers Hydraulic Training courses.
MC: BMG Hydraulics is a SAFPA member and there are plans to introduce a Hose Assembly Accreditation Scheme. What are your thoughts on this?
GL: I would be happy to see the adoption of First World standards for hose assembly. The fact that there are hose assemblers out there who do not perform 100% pressure testing on assemblies is a real concern. From our own perspective, there is not a piece of equipment that leaves BMG Hydraulics’ premises without testing. That is an essential element of our ISO 9001:2008 accreditation.
MC: Are there any new developments taking place in your testing facilities?
GL: We are busy designing software for our hydraulic pump and motor testing area, where we have five drives ranging from 130 kW down to 15 kW. In the brake cylinder testing area we perform fully automated test runs on our cylinders, with no manual involvement at all. We are getting to the same point on the hydraulics power packs. So within about two months their testing will also be fully automated.
Our record keeping and proof of ISO quality system compliance is greatly enhanced by adopting these fully automated test systems.
MC: Will the BMG acquisition have any impact on product and services mix?
GL: We will continue to seek high quality complementary product such as hose and fittings and are also looking to fill some gaps in our pump range. On the service front we provide a 24/7/365 service and will continue to improve our technical backup and service offerings. At the moment we have three mobile service units in operation in the greater Gauteng area and we plan to grow this number.
To view more images of BMG Hydraulics facilities visit www.motioncontrol.co.za/093Q72
BMG Hydraulics – A potted history
Late 1950s: West & Du Toit was founded.
1969: The company became a subsidiary of Vickers Corporation.
1989: Goldquest name established and new product lines added.
2008: BMG started negotiations to acquire 100% of Goldquest.
2009: The company remains incorporated as Goldquest but trades as BMG Hydraulics from 1 July 2009.
Key product lines of BMG Hydraulics include EPE, Schroeder, Eaton and Vickers.
For more information contact Andre Smith, BMG Hydraulics, +27 (0)11 614 2004, [email protected], www.bmghydraulics.net
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