INTERVIEW: Astec's international ambitions
By Chris Sleight10 September 2013
Last year US-based Astec Industries, which makes equipment for the mining, infrastructure and energy industries had revenues of US$ 936 million. It has set itself the task of doubling that over the next five years – so about +15% growth per year – and moving from the current 60:40 so split between domestic and international business to 50:50.
The headline growth figure is ambitious enough, but these figures imply an enormous international expansion to take revenues from the US$ 364 million achieved in 2012 to somewhere north of US$ 900 million.
That task will fall in a large part to Ben Brock, who was named as successor to his father and company founder Dr J. Don Brock earlier in the year. The succession plan is due to take effect before the end of 2013, and it will see current CEO Dr Brock become the company’s executive chairman, with Ben Brock taking over as CEO.
Astec Industries owns more than a dozen individual brands in the asphalt, road building, aggregates and underground construction businesses. It has a decentralised structure, where each of these businesses and brands stands on its own to a large extent, with its own management running them.
So questions about how to grow internationally do not just include How? and Where? but also What?
Mr Brock said, “We are working on an asphalt plant design that would fit international markets a bit better than what we have at the moment and the aggregate group is coming out with some smaller crushers. You often have to change what you do a little bit, of course, to meet local codes and requirements.
“Of course we continue to look at acquisitions, and not all of them will be in the US.
“If you look at that +15% annual growth figure we put out, our goal is +10% organic and +5% through acquisitions. The organic component would be things like changing products to meet market needs, or coming up with products we don’t have yet to have a better fit in other countries.”
Acquisitions are a fundamental part of how Astec has grown over the years following its foundation in 1972, and this has seen it move into other areas away from the initial asphalt plant business (the name ‘Astec’ comes from ‘Asphalt Technology’). However, Mr Brock said any new additions would be likely to tie-in with its existing businesses.
“I think we’re always going to be tied into the three areas we’re in now – infrastructure, energy and mining. We’ll stay close to that. We might consider an acquisition outside of those, but it would have to be fairly sizeable and have great management, because we are quite decentralised and we wouldn’t want to jump into an area where we’re not already present,” he said.
In terms of expanding its footprint, the company has licensing agreements in place to serve India and China, and has its own subsidiaries in Australia, Brazil, Canada, Germany and South Africa, and according to Mr Brock, these locations are all ripe for expansion. For example, He said, “We are investing heavily in Brazil right now, and that is a pretty clear signal. If that goes well, it could be expanded into a sales operation.”
As far as the company’s US business is concerned, Mr Brock said there were some promising signs in a flat market. “The aggregates group has performed very well. Typically that will start and 12 to 18 months later the asphalt business will come through. We haven’t seen that yet, but we see pockets where it is trying to come back. But the rain here has been incredible this year. I was with a customer in Chicago before 4th July, and he had not worked a full week this year because of the weather!”
And of course, for a company so focussed on the road building sector, the lack of secure funding for the country’s roads (see this month’s Regional Report) is a bone of contention.
“The Federal Highways programme in the US represents about 50% of the hot mix market, but it is 90% of the hope, and that Bill is not there yet. At the moment it is the private sector that is driving what growth there is,” said Mr Brock.