Ammann SA is the South African arm of the Ammann Group, the Swiss-based leading manufacturer of asphalt plants, compaction and road-building machines. In this Hotseat, Ammann SA’s managing director, Rocco Lehman, speaks to IMIESA about the company’s growth and development.
THE COMPANY, which provides its offering on an integrated basis, concluded a strategic partnership with ELB Equipment six months ago and is focused on penetrating the local machine market as well as looking north to Nigeria, Kenya and Ghana (to name a few), establishing the Ammann global brand as a pan-African giant in the road-building business.
Last time we spoke, Ammann SA was demonstrating the latest intelligent compactor, the ASC 110 Acepro. What has happened since?
RL You might recall, we had provided a demo model to Hillary Construction at their site in Polokwane. After understanding the machine’s advantages, we are happy to say they bought the first one. We have even sent one of Hillary’s young engineers, who is writing his dissertation on the compaction of various aggregates in the road-building sector, to Switzerland for full training to ensure the company gets the most benefit out of the compactor.
What do you think sold it?
This is a newgeneration compactor. There really isn’t anything else like it available in South Africa today; it’s different from what most people understand an intelligent compactor to be. It essentially has two specific, advanced functions: one is measurement, the other is controlled measurement. It measures and compacts in a measured, controlled manner. An important factor as well is that in South Africa, we measure density; the ASC 110 measures stiffness, so the correlation between the two needs to be made. It is able to automatically adjust amplitude and frequency on the fly.
What is driving the adoption of this technology in South Africa?
Well, SANRAL is very keen on getting intelligent compactors on to their job specs for a host of reasons. Their impact on the quality of the road is profound. Although the initial investment is higher than standard machines, the resulting cost savings make for a persuasive business case. This is a seriously cost-saving piece of equipment.Because of its precision, you need to less compaction effort, do less compaction and avoid failures.
Failures are a major part of every contractor’s day. You also avoid the typical situation that arises between the civil contractor and the surfacing contractor, in which neither takes responsibility for failures. Because you can perform more controlled measurements, you know where the failure has occurred and who is responsible for it. Now that this sale has been concluded, we look forward to getting the ASC 110 Ace Pro to more contractors.
How important is the machine side to Ammann?
It really is a major focus for us right now. It’s not an easy market and one way to distinguish ourselves is in our service offerings. Obviously our machines are up there with the best in the market place, but our commitment is to our customers’ long-term user experience. It takes a lot of coordination between us, our dealers and our factories, and we are getting it right. We think this is the reason there is much interest in our machines from the market at this time. We are very competitive in terms of price and service. Also, economy of scale is crucial to the machine business, and our ability to deliver better-priced quality equipment improves exponentially with each order. One thing we really want our local contractors to understand is that although we are Swiss-based company, Ammann SA has an African mindset, catering to the market on its own strengths.
An important factor on the machine side is your partnership with ELB Equipment. How is the partnership going?
It is now six months old and going very well. We are well into the operations of our working relationship and they have been a great partner thus far. Their sales staff truly understand our range and we are there to deliver the goods and support them as much as we can.
You’ve mentioned Africa as a key market for Ammann. How is this unfolding?
Well, first of all, you have to understand that it is not one market. It is many markets, all working differently, with unique challenges and processes that force you to adapt. My advice to any outfit looking to do business north of our borders is to be wary of any arrogance you may have, and learn to roll with the punches.
I just got back from Nigeria last week, and I could not have been more excited. You have 175 million people, all needing infrastructure. There are massive contractors who have set up shop there – big players. We have an asphalt plant currently being commissioned in the Congo, and the whole process is unfolding in its own way. We have had to accept that we don’t know how it works there and put our arrogance aside. Some of the problems will be painful but they are part of the learning curve; you have to keep the business moving forward no matter what. They need the equipment and we will find a way to deliver it. We are learning to focus only on what we can control.
There seems to be global mind-change regarding business in Africa.
It’s a market we can’t ignore. It’s important to remember the size of Ammann globally. The company has operations in Europe, India, South America and now Africa. Our preferred method of growing in Africa is through working closely with locals and finding the right partners. Ammann is learning very quickly how to adapt to massively different market conditions, and from our perspective at Ammann SA, this adaptability has shown impressive results: our turnover has doubled in the last six months and much of that growth has been very organic. Ammann also recently purchased ELBA Concrete, another big brand in Africa, which manufactures concrete plants. Ammann’s presence and growth in Africa are gaining a lot of momentum.
You say the business is growing organically, but what would you cite as strategic moves that have aided this?
Our decision to manufacture components locally has been paying off. The non-technological components, like the steelworks, are locally manufactured and this has enabled us to be more competitive, cost-wise, and has improved our turnaround time. But I must add, the decision to do this was a pragmatic one and the benefits are showing now. It also allows Ammann SA to contribute more to the local economy and job creation, so it’s a win-win. We maintain the same global standards but with a portion of the business that is ‘own risk’. This has really unlocked value for us and, beyond local manufacturing, we are also able to transact in rand values, thus transferring risk from our clients back to us. So Ammann SA has the option of buying machines directly from Amman and selling them at our own risk. Where this is an attractive proposition, it is an option.
The relationship between the Ammann Group and Ammann SA sounds like a very healthy one.
It is. We are potentially significant contributors to the business as a whole and the factories in particular.
We can’t end this interview without talking about the asphalt plants. How is this side of the business faring?
We are very market responsive and the new plant we recently delivered to Hilary Construction in Polokwane demonstrates this. It is truly a unique plant: it is semi-mobile, 140 t/h and is capable of the 40 per cent recycled asphalt. Additionally, it is capable of foaming the bitumen, which is a process that significantly reduces energy consumption, as it reduces the asphalt mixing temperature. This energy saving is increased by the use of recycled asphalt, which is blended in using the transferred heat. This does come at a cost, but Ammann is conscious of the great need for environmental consideration. This plant ticks all the boxes and will be a major contributor to road manufacturing in Africa.
There has been a lot in the news lately about the shortage of bitumen; what are your thoughts?
This is an on-going challenge and is symptomatic of the fact that bitumen is a secondary product, resulting from the refinement of crude oil. Increasingly, local oil refineries prefer to deal with light crude, which yields a much lower percentage of bitumen.
Finally, what are your thoughts about the state of the road-building industry in South Africa today?
I am bullish. There is enough work for everyone and it is a very professional industry. If you look at the roads agencies, these are very well-run entities and Ammann is looking forward to continuing its contribution. It is important for Africa to have the presence of companies like Ammann: large global operations capable of operating on sound business principles and ensuring the right equipment is available for the market, even if it requires some internal cross-subsidisation. It is an effective way of ensuring the right equipment remains available to the market, and only a company of this size is truly capable of that.