Transport industry risk analysis

The Australian trucking industry is characterised by low barriers to entry, in particular, low capital requirements, relatively low skilled operator requirements and a diverse and wide customer and supplier base. As a result the industry is:

• fragmented
• price driven and very competitive with low profit margins
• suffering from low customer loyalty and restricted opportunities for service differentiation
• evolving relatively slowly with only incremental advantages offered by technological developments. These benefits are passed on to the customer relatively quickly and translate into a lowering of the base price rather than increased margins to the operators.

The financial well being of the trucking industry is largely dependent on the economy. Fuel price hikes create enormous pressures on the industry.

Unsustainable return on investment and very low margins are expected in the general trucking sector as a result of:

• oversupply caused by cheap debt finance
• a decline in the freight market caused by a slowdown in the GDP following sustained growth over the past 7 years
• political machination, be it in relation to

- live cattle exports overseas

- OH&S issues

All impact the viability of the transport industry.

In the medium term, strong competition is expected in the long-haul market from a rejuvenated and privatised rail sector. Medium sized transport operators are likely to be the hardest hit as they do not have the size to command market share and better price control and are being undercut in price by small operators with lower overheads.

In the experience of Macks Advisory, early intervention and assistance by insolvency experts will greatly assist the chances of insolvent businesses working out any unexpected difficulties and surviving.

Macks Advisory can help businesses implement the voluntary administration process in order to help give business owners the second chance that may be needed to grow and survive. Members with queries are invited to contact Peter Macks on 08 8231 3323 or email pmacks@macksadvisory.com.au