First Quarter Report for 2019

Highlights 

  • Slattery Asset Advisory was engaged by the Administrators of RCR Group. Inspecting over 30 sites and 3,700 assets.
  • The Road Transport sector has been deflated in both the new and used sectors after hitting a new sales record for the year in 2018. Only specific trucking and trailer assets are performing well. 
  • In the Mining Sector, Caterpillar sales for equipment into the resources industry increased a massive 52% on last year. The used market continues to power with demand outstripping supply. 
  • New Vehicle sales are receding in Australia with budget-conscious buyers looking toward the lower end of the market and the used market. The quarterly year-to-date deficit ended at 7.8%.
  • Agri sales  in drought-affected New South Wales and Queensland remains pretty grim with New South Wales down 23% on last year and Queensland 34% behind in March, now 13% behind last year

Slattery Asset Advisory

Key Point Summary

The Slattery Asset Advisory brand has very active year to date and appears to be getting busier.  We have noticed an enormous increase in insolvency-related matters. Slattery Asset Advisory were engaged by the Administrators of RCR Group – at the end of November 2019 to value the PPE relating to the Group.  The RCR Group was a AUD$2B turnover company employing in excess of 3,500 people throughout Australia and NZ.

Given the scope of the project and the time of the year, the team were under immense pressure to attend the 25 major sites across Australia in the weeks leading up to Christmas.  The sites we attended operated plant ranged from specialised laser cutters, through to heavy steel manufacturing and mobile equipment.  The size of the sites included numerous 5-acre properties with heavy engineering equipment through to a range of high precision manufacturing facilities. 

Through thorough project planning, clear communication and a strong work ethic the entire team were able to deliver our valuation report to the Administrators prior to Christmas.  The only way we were able to achieve this exceptional result was through employing a range of technical valuers of the highest regard, exemplary team-work and culture from the whole team.

The report was critical in assisting the Administrators in securing going concern sales of various business divisions prior to the Christmas shut down.  This resulting in a very positive return to employees and creditors at a very sensitive time of the year. We then inspected over 30 sites and 3,700 assets in the January period to assist in closing out the valuation project.

Our team were able to absorb this additional workload while still maintaining our best in industry turnaround times for ongoing valuation work at a busy time of the year.  

In Victoria our valuations team have seen an increase in requests from both major banks and private clients to complete valuations for finance lending, this has been completed on a full range of assets from prime movers, trailers and varying sizes of rigid trucks 

There has been an increase in insolvency-related activity for our valuers across the country with a notable increase in Qld and WA. 

Following the success of last year’s Valuations Conference, the 2019 conference dates have now been locked in for 17th & 18th of October 2019. Early bird registrations are already being received so lock the dates in your diary and register early. You can register here 

 

Road Transport

New Heavy Truck Market

The heavy-duty truck market for new sales has seen a slight decline for the first quarter of 2019, with a total decrease of 3.4% for the year so far and a 13% decrease in April. This decline, however, needs to be read in the context that the 2018 year was a record year for new truck sales surpassing the previous record set back in 2007.  The correction in sales volumes for the first quarter could have been expected and is the first real sign that the market is beginning to slow as forecasted.

Kenworth continues to lead the Heavy Duty market, achieving 19% of new heavy truck sales for the first quarter, followed by Volvo with 16.1% and Isuzu reaching 12% of the total unit sold. From a group perspective Volvo Group (Volvo, UD, Mack and Renualt) leads the market with 27.4% market share with Paccar (Kenworth and DAF) at 22.1% of the market.

Across Australia, we have only seen Tasmania and Victoria record any growth in the market throughout the first quarter, with Tasmania achieving a 40% increase in sales whereas Victoria saw a slight increase of 5%. The biggest losses in the heavy-duty truck market has been experienced in South Australia with a decline of 21%. This is followed by an 8% decrease in Queensland and a 5% decrease in New South Wales.

 

New Medium and Light Truck Market

The first three months of 2019 saw new medium and light-duty truck sales fall from the record levels recorded for the same period in 2018.

The medium-duty segment posted solid sales in 2018, but the segment is losing more ground than any other this year. To the end of the first quarter a total of 1651 medium-duty trucks have been delivered, down by 6.6 % (or 117 trucks) over the 2018 tally. Outside the quarter the downward trend continues with a market drop of 12% in April which now brings the year to date loss to 8% on the same period last year.

Light-duty trucks also saw record sales in 2018, but results this year have not been as strong. For the quarter, light-duty truck sales lag those of the same period last year by 6.6% (or 169 trucks). Similar to the medium segment the April figures are not looking good with a drop of 9.5% in April and now a total market fall of 7.3% YTD April 2019

Used Heavy Truck Market

There is no doubt that both the new and used truck markets in Australia are deflated. Whilst the change in trend can be partly explained by a correction on the record sales of last year, there was a massive slump in sales in December of 2018 that has carried over into this year that can only be explained by a loss of confidence. Many believe the lead into the election and the tightening of finance to have contributed to this fall in sales. If this confidence returns in the current quarter then it will vindicate those putting the loss of confidence down to the recently decided election.

Notwithstanding the overall deflated market, good quality, late model and well-serviced trucks have continued to sell for good prices during the first quarter. Used truck dealers have reported that enquires and sales are consistent up to the value of $100,000. Whereas the price continues to soften for aged and high kilometre prime movers across the country, this is the consequence of 2018’s record new truck sales and the tightening of finance.

Queensland has seen continuous demand for good quality and low kilometre tippers throughout the first quarter, with a 2016 Gippsland Body Builder A &B Side Tipper Set selling for $100,000 at auction, reaching 95% of retail value and a 2011 Volvo FM 450 Euro 5 Tipper achieving a result of $120,000 at auction, reaching 90% of retail value.

Our Queensland office has also reported an increase in insolvency-related activity in the road transport sector and has been engaged to assist in a number of matters in the state.

Used Medium and Light Market

In continuation from previous quarters, the secondary medium and light market sales have slightly declined. However, we still see consumers willing to pay premium prices for Japanese brands at auction. This was shown in the auction results from our Sydney office, with a 2004 Hino Ranger FC Tipper achieving a result of $17,750 and a retail value of 120%. We have seen similar results at our Dandenong office with 3 x 2016 UD Condor 4×2 Tilt selling at auction for $95,000.

Trailer Market

In the Queensland market there has been a significant softening for trailer sales in the secondary market. The exception being good quality low loaders that contnue to be in demand. The auction results reflect this with a 2013 Haulmark 3ST37 Tri-Axle Skel Trailer achieving $19,000 and a 2013 Moore Tri-Axle Drop Deck Trailer reaching an auction price of $60,000, both of these only achieved 85 % of retail value.

In Western Australia, flat top and drop deck trailers specifically have been in high demand, this correlates to the strong agriculture season in the state with many aged flat top trailers being converted by farmers to carry liquid fertilisers. This has been reflected in the auction results, with a 2014 CIMCAU Drop Deck Trailer with ramps sold for $50,000 and reaching a retail value of 98 %.

AssetsKms/HoursPrice
Achieved
% of
retail
State
1998 Kenworth T401 Prime Mover13,822 Km$43,000103%WA
2015 Western Star 4800 FXB Prime Mover301,617 Km$160,000100%QLD
2014 Hino 500SR Curtainsider262,293 Km$90,000100%QLD
2007 Isuzu FVZ 1400 Long Tray Back Crane Truck180,296 Km$58,000100%VIC
2006 Peki 47FT Tandem Axle Pantech Trailer367,737 Km$19,000100%VIC
2014 CIMCAU Drop Deck with Ramps5,947 Hub$50,00098%WA
2014 Vawdrey VBS3 Tri-Axle Drop Deck Tautliner$47,50096%VIC
2016 Gippsland Body Builders A & B Side Tipper Set495,782 Hub$100,00095%QLD
2012 Maxitrans Tri-Axle Single Deck Stock Crate$70,00095%QLD
2016 UD Condor MK11 280 4x2 Tilt Slide Tray287,969$95,00093%VIC

Mining and Earthmoving

New Earthmoving Market

Caterpillar Inc. announced first-quarter 2019 sales and revenues of $13.5 billion, compared with $12.9 billion in the first quarter of 2018, which is a 5% increase. The increase was primarily due to higher sales volume driven by improved demand for both equipment and services, with the most significant increase in Resource Industries. Sales volume also increased in Construction Industries globally, however, the Asia Pacific region fell by 4%, while Energy & Transportation remained flat.

Construction Industries’ total sales were $5.873 billion in the first quarter of 2019, compared with $5.677 billion in the first quarter of 2018.  This was the only increase globally that the Asia Pacific region didn’t follow with a drop of 4%. The increase was mostly due to the North American market increasing by 13% with higher end-user demand for construction equipment, partially offset by a smaller increase in dealer stock compared with the first quarter of 2018.

Every other category in the Asia/Pacific region increased compared to the first quarter in 2018. Resource Industries sales grew by a massive 52% on last year. The increase was primarily due to higher equipment demand, favourable price realization and services. Mining production levels and commodity market fundamentals remained positive, which supported higher sales. Higher demand levels for non-residential construction activities and quarry and aggregate operations also drove higher sales.

Used Earthmoving Market

Across the country, there has been a shift through the civil equipment market. In Western Australia specifically the decrease is due to infrastructure contracts not being awarded until late in the financial year and mining contracts not being awarded until the new financial year begins. This has impacted small to medium civil contractors with a number of contractors having external administrators appointed. Auction results for good quality machines in the state are still performing well however as evidenced by a 2007 CAT 345C Excavator with 9,194 hours selling for $112,500 achieving 112% of retail value.

Queensland are still seeing late model, 5 tonne to 30 tonne excavators with low hours sell well, although the market has softened on previous results.  Older units with 8,000 plus hours are struggling to sell at anywhere near 2018 prices.  Grader, Skid Steer Loaders and Crawler Tractor prices have also softened due to the same drivers.  Second hand dealers locally have also reported a slowdown in demand and weaker prices as compared to 2018. 

In contrast to the other states NSW has seen a slight decrease or flattening of the market for used heavy earthmoving gear. However, NSW dealers have seen an increase in smaller earthmoving gear particularly skid steers. Small to medium wheel loaders and dump trucks are also in high demand. Caterpillar D6 dozers and graders are also very sought after. The demand is being driven by heavy inland rail upgrades to accommodate more freight. Comprising of 13 individual projects and spanning more than 1,700 km, Inland Rail is the largest freight rail infrastructure project in Australia.

In Victoria, while there has been a decline in demand for earthmoving equipment, we are still seeing interest from buyers for good quality civil equipment.

AssetsKms/HoursPrice
Achieved
% of
retail
State
2007 CAT 345C Excavator9,194 Hours$112,500112%WA
2014 Isuzu FYH Water Cart118,417 Km$141,000110%WA
2017 Gayk HRE 6000 Piling Rig4,931 Hours$73,00085%QLD
2016 Manitou132 Hours$92,50084%WA
2009 Toyota Husk 5 Skid Steer Loader & Trailer180 Hours$22,00083%VIC
2018 Gayk HRE 4000 Piling Rig870 Hours$55,00080%QLD
2017 Kobelco SK35SR-6 3.5T Rubber Tracked Zero Swing Excavator396 Hours$36,00080%VIC

Motor Vehicles

New Motor Vehicle Market

Vehicle sales are receding in Australia with budget conscious buyers looking toward the lower end of the market and the used market. A slight increase in vehicle sales in March failed to save a downward trend that has seen exactly 23,000 fewer sales during the 1st quarter of the year compared to the same period in 2018.

VFACTs figures show March 2019 recorded 99,442 vehicle sales, up from 87,102 in February, but was still 7.1% down on March last year, taking the quarterly year-to-date deficit to 7.8%. The slowing economy has impacted most manufacturers with even Toyota sales down 2,847 compared to the first three months of 2018.

It was worse for Holden, which had another poor month and slid to 10th position overall. Holden sold just 11,825 vehicles in the first three months of the year – down from 15,524 last year – to see its market share drop from 5.3 to 4.4 %, putting it behind Kia, Nissan, Volkswagen and Honda. This actually meant that the Toyota Hilux dual-cab outsold the entire Holden range in the month of March with the Ford Ranger threatening to do the same.

It was a very different story for Mitsubishi, which experienced its best ever March sales figures to outsell Mazda as Australia’s second-biggest selling brand with 10,135 sales over the month; 15% up from its performance in March 2018.  The hero in their range is their SUV’s. In this first quarter Mitsubishi sold more SUV’s than any other brand, with ASX again being the biggest-selling small SUV.

Used Motor Vehicle Market

With the new vehicle sales decreasing and a returning focus to the second market, so does the available stock for the used motor vehicle dealers. This has the effect of dealers and wholesalers having to source more motor vehicles externally including purchasing at auction increasing competition. In Queensland, our clearance rates for motor vehicles has hit around 95% every auction offering a fast turnaround with good returns for our vendors.

Notable sales for the quarter included a 2013 HSV Clubsport R* that sold for $41,850 achieving 100% of retail and a 2015 Toyota Landcruiser GLX that sold for $60,00 achieving 100% of retail

Older European vehicles are continuing to prove challenging to sell however any late model low kilometre stock tends to be bought readily by new car dealers selling the same make of vehicle.

Good quality light commercial vehicles are selling very well with consistent demand for dual cab utes and vans.

Finance repossessions have been steady with a mixed bag of late model cars and light commercial’s coming through which have been selling well.  This is in stark contrast to Western Australia with a significant decline in finance repossessions, however, the quality of vehicle when repossessed is improving.

AssetsKms/HoursPrice
Achieved
% of
retail
State
2011 Mercedes-Benz Coupe61,951 Km$66,000127%WA
2013 HSV Clubsport R8 Tourer66,862 Km$41,850100%QLD
2015 Toyota Landcruiser GXL Dual Cab Chassis73,575 Km$60,000100%QLD
Toyota Hilux SR564,492 Km$33,000100%NSW
2017 Ford Ranger Wildtrak 3.2 (4x4) Dual Cab13,786 Km$49,00095%VIC
2017 Volkswagen Amarok14,170 Km$43,50094%VIC
2016 Mazda CX-9 AZAMI (AWD)34,847 Km$40,00094%VIC
2016 Mazda BT-50 XTR (4x4)60,549 Km$34,00093%VIC
2015 HSV Senator Signature76,605 Km$46,25092.5%NSW
2014 Toyota Landcruiser32,474 Km$67,25092%WA

Agriculture

New Agriculture Market

Sales of Agricultural tractors have begun to show signs of steadying at the end of quarter one across the nation and whilst down on last year, dealers continue to report a reasonably healthy level of activity.  January and February saw a sharp drop in sales of Agricultural Equipment across the nation as the drought in the Eastern States continue to impact industry confidence.

Reported sales from the TMA (Tractor and Machinery Association of Australia) are down 13% on the first quarter in 2018. As a result, a forecast sales level of around 10,500 tractors is anticipated this year, down from the 12,500-unit levels of the past few years. Victoria staged something of a recovery with sales up 12% in the month, driven largely by the under 40 horsepower segment, though sales remain 7% behind last year.

The picture in drought-affected New South Wales and Queensland remains pretty grim with New South Wales down 23% on last year and Queensland 34% behind in March, now 13% behind last year. Elsewhere it is a mixed bag, South Australia continues to struggle, 25% behind last year, Tasmanian sales are 10% up and sales to the Northern territory are 50% ahead of last year.

Used Agriculture Market

The fall in sales for new machinery has also been seen in the second-hand market. The drought in the eastern states, as with the market for new assets, is the main cause of this. Regional Queensland has reported reduced levels of demand and sales prices for agricultural equipment in general. In Western Australia, it is a different story with the agriculture machinery sales this quarter being the strongest sector due to the largest crop yield in 2 years. Grain prices are high and farmers investing heavily in this area.

Very few assets have been put to the market in Victoria and the Slattery Melbourne office has reported a softening in prices towards the end of Q4 2018. Our Victorian March T&M, however, did see a large audience of buyers participate in the liquidation of assets from a Major Civil Construction business, which included a large range of tractors, cable laying jinkers and site ATV’s.  Buyers throughout Victoria, New South Wales and Queensland battled hard in their efforts to secure several low houred late model machines.  A 2014 John Deere 8360RT Tractor and 20t cable jinker saw two end users bidding furiously with the tractor reaching 92% of the retail value. Post auction, the buyers of the jinkers noted there is a 12 month wait on a jinker of this capacity causing them to bid aggressively.

The second hand market for good quality units, particularly small John Deere tractors is generally quite strong, with solid results achieved for a number of tractors sold over the past quarter, particularly out of the Slattery Brisbane site.

Sale of combine harvesters continues to struggle with advice from many dealers that the forward ordering of new machines has been less than promising. Good stock levels remain available around the country so if demand improves we expect to see more transactions for discounted prices.

Dealers around the country are reporting that inventory levels overall are plentiful and that now is a great time to buy.  Despite the general tightening of bank finance, support is still available at the right price further enhancing buyers’ prospects.

AssetsKms/HoursPrice
Achieved
% of
retail
State
2018 John Deere 6095MC Tractor63.7 Hours$57,000100%VIC
2017 John Deere 6110M Tractor362$81,000100%VIC
2014 John Deere 6110M Tractor5738.8$130,00092%VIC
2013 Case IH JXU 85 Tractor$35,00090%QLD
2017 John Deere 6105MC Tractor1,987 Hours$52,80085%QLD
2017 John Deere 6100MC Tractor2,187 Hours$52,80085%QLD

Aviation

The aviation sector has seen significant activity over the last quarter. There have been multiple helicopter and fixed-wing transactions in all categories. In the rotary sector, the Robinson R44 continues to be in very strong demand with multiple transactions throughout Australia. As always the strength of the Australian dollar against the US dollar plays a major factor in aircraft values as any new purchase of an R44 will transact in USD.

In the fixed-wing sector, single-engine piston aircraft transactions have seen an increase in demand for good timed aircraft, however, older aircraft such as Cessna 210’s and Cessna 206’s with high hours have seen a drop in value. With twin-engine piston aircraft, prospective purchasers are still cautious due to operating costs. Single engine turbine aircraft such as Cessna Caravan’s continuing to have a very strong domestic and international interest.

The specialist Slattery aviation practice has been actively involved in the sale of 30 aircraft via an expression of interest towards the end of the first quarter for an aircraft operator based in Victoria. The aircraft fleet includes a Bell 206B, Robinson R44, Eurocopter AS355 & Eurocopter AS350 as well as McDonnell Douglas DC-3, King Air B200, Cessna 206’s, Cessna 404’s, & Cessna 441’s. Through this process, there has been extensive enquiry from Australia and internationally.