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Prime Mover Magazine

Below par capital expenditure behind ageing Australian fleet: ANZ

Increased capital expenditure (capex) has been fuelled by the first returns seen for five years in the Australian road transport industry according to new analysis by the ANZ Bank.

According to the report an uptick in revenue for financial year 2017 characterises a reversal of decline seen over the previous three years.

Sampling 35 Australian trucking companies with combined revenue of over $11 billion, around 27 per cent of the total industry, the ANZ report found capital expenditure, when compared to global peers, had been underspent by an estimated $5 billion.

It was a key driver behind ageing fleets and further consolidation in the industry.

An increase in recent truck sales suggested the trend should revert over the medium term.

Australia’s average fleet age of 14 years is now more than twice the age of its US counterparts, 6.5 years, driven in part by the consistent two per cent less devoted in capital expenditure in contrast with global peers.

Businesses who focused on specialised cargo generated double the margins in comparison to companies that relied on industries and cargo on a non-specific nature.

Graham Kerr, ANZ State Director & Emerging Corporate and Tim Suffield, Associate Director Client Insights and Solutions co-authored the report.

“Road transport is a large and significant portion of the Australian economy but the industry continues to consolidate due to fierce competition and increased operating and safety costs,” it stated.

“The demand for trucking services will continue to be strong but the landscape will change.”

Future changes expected to have a positive effect on the road transport industry according to the report included increasing demand for merchandise imports and exports, Australia’s proximity to the manufacturing hub of Asia, online retail growth driving final mile services and increasing safety.

Skill shortages, however, were highlighted as negative driver likely to increase wages. Other potential factors to hinder growth included reduced efficiency from traffic congestion, the impacts on volume of regional drought conditions and the mining industry as it transitions away from development and capital expenditure and ramps up production.

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