Welding products supplier Weldamax has embarked on several rightsizing and consolidation initiatives to mitigate the effects of a contracting local welding sector and the cost pressures that welding equipment end-users face.

“Weldamax focused on premises rationalisation by consolidating the Boksburg branch into the company’s central distribution centre, also located in Boksburg, Gauteng, in December,” says Weldamax MD John Smithyman.

Other focus areas over the past six months include logistics improvements and enterprise resource planning for improved stock management.

Smithyman tells Engineering News that Weldamax’s business rightsizing has centred on streamlining the supply chain through supplier consolidation, adding that these initiatives will continue for the next six months.

Further, Weldamax’s three trading brands – Maxweld and Braze, Selrod Welding and Unique Welding – have been consolidated under the Unique Welding Alloys brand.

Nevertheless, end-users will still have full access to the entire product range of all product brands, says Smithyman, adding that the increased efficiencies will result in enhanced customer services, providing subsequent benefits for the end-user.

Contracting Market
Smithyman highlights the decline in the manufacturing industry, which he believes is exacerbating the state of the welding industry.

“The welding industry’s contraction could also be attributed to a volatile exchange rate, increasing input costs – including utilities and labour costs – and delays in the proposed infrastructure projects.”

He further laments the state of business confidence in the sector, mentioning documented results from business indices, such as the monthly survey of purchasing managers in South Africa’s manufacturing sector, the Kagiso Purchasing Managers Index, which provides leading indications of business conditions in the sector.

According to the Bureau for Economic Research, “the index edged up to 47.9 index points in March 2015 from 47.6 in February”, which brought the average for the first quarter of 2015 to 49.9 index points – just below the neutral 50-point mark. However, the report notes that this was 1.3 points lower than the average recorded in the fourth quarter of 2014.

While the South African Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) recovered by 0.8 index points from the lower 89.1 recorded in March, standing at 89.9 in April, it is 2.7 index points lower than the 92.6 of April last year, says Sacci.

The chamber reported last month that the first four months of business in 2015 “suggest that the business climate is heading towards a more dismal 2015 than 2014, if the present inclination continues”.

Similarly, the manufacturing sector’s contribution to the gross domestic product declined from 15.3% in 2004 to 13.9% in 2014, according to the National Advisory Council on Innovation’s yearly ‘South African Science, Technology and Innovation Indicators’ report.

Smithyman highlights another industry trend that concerns distributor reductions. “As a result of declining margins in the sale of welding equipment, including the market challenges resulting from the 2008 global financial crisis, several distributors realised they could not compete with direct sales.”

Subsequently, distributors are opting to import welding equipment directly from the manufacturers in other regions, such as Asia, to save costs.

However, Smithyman warns of the pitfalls of discounted products and sales that depend on a fluctuating exchange rate. “It is an art to manage imports,” he says, emphasising the importance of good- quality assurance and reliable product supply.

Nevertheless, as Weldamax specialises in welding, the company has decided to buy only from top-quality specialist suppliers in Europe, the US, Asia and local South African manufacturers.

Meanwhile, Smithyman says Weldamax’s services and repair workshop at its head offices, in Boksburg, has enjoyed much success because end-users would rather repair equipment than buy new equipment.

“Weldamax has performed almost double the amount of repairs on all models and competitors’ machines, compared with last year’s repairs. This is the heart of our business, as end-users will buy a machine, knowing that Weldamax offers a repair centre, services and spares,” he says.

He further highlights the company’s successful partnership with Italian welding torch manufacturer Trafimet, through which Weldamax supplies welding torches to the local market.

African Success
Despite the contracting market, Smithyman highlights the sales increase of Weldamax’s brand of Thermamax welding equipment and consumables.

He also notes a sales and market-share increase in the sub- Saharan Africa region since the company decided to increase its supply network through distributors in Namibia, Botswana, Zambia, Mozambique, Madagascar, Zimbabwe and several West Africa countries.

Further, the company has formed partnerships with established distributors in the past two years to distribute the Thermamax range and other products throughout these regions.

Through its Thermamax brand, Weldamax has also entered the African corporate market, selling its welding equipment brands directly and through distributors to large corporates.