No Country for Old Fleets

Companies will come and go. That is hardly news. In any business environment the growth of the few will come at the expense of the many.

As global economies course correct to the inflationary environments of cash-strapped governments doubling down on their willingness to print money, top up depleted treasuries by importing a new tax base, precipitating overburdened infrastructure and the destabilisation of energy sources in which businesses and manufacturing, and businesses dependent on manufacturing, rely, each new economic headwind can have cyclonic effect to the point any semblance of how a company might have once out-competed others at the edge of the market in a niche space, cultivated, in some cases, for decades, will invite overtures from corporates looking to expeditiously consolidate around areas new to them even if they are the bread and butter of others.

Now comes the opportunity for any legacy independent businesses, no matter how many generations they have been in the family, to better understand if theirs is the same appetite that originally built the operation from the ground up.

On the lower rungs, where the margins are so thin, production has ceased on oily rags.

Strategic growth via acquisition is the increasingly widespread dialectic in boosting revenue in a soft market of diminishing returns. It’s one avenue, as recent years have borne out, for fleets to bolster numbers when the external forces of material shortages and delays in supply warrant containment.

Even so. Growth is a force imposed on the market. Like gravity there is little point in fighting it.

Investment must buck austerity. Often the better option, when confronted with the reality of long-term viability, is to start again.

Ron Finemore and perhaps a handful of others have been able to scale this mountain. It’s not just trucking startups that have enjoyed the flowing tap during the unreserved consumer demands of COVID who have entered a different domain and had to desperately reevaluate cashflow and capital.

For some longstanding players it’s more a matter of getting the timing of an exit right when it becomes evident there is no longer a seat at the table.

Before Christmas Hawk Logistics announced it was going to acquire Newcastle carrier 91-year-old Farragher Logistics. It happened the same week Butler Freight bought out Coynes Freight Management, just one year short of its 75th anniversary.

The equipment stocks of both buyers have naturally seen an immediate boost. Silk Logistics, something of a gold standard for strategic acquisition in the industry, having increasingly modelled its own meteoric growth in recent years this way, was itself acquired by DP World or Saudia Arabia’s Australian branch of it — subject to a review by the ACCC.

Border Express itself purchased by Freight Management Holdings, a subsidiary of Singapore Post, has been adopted by a new parent in Pacific Equity Partners, a Melbourne-based private equity firm.

In late 2023, PEP acquired a majority stake in Australian electric vehicle charging solutions provider EVSE for $250 million. That the acquisition contains two of the biggest last mile fleets in the country makes sense long-term in light of such an investment.

The horizon like the future can appear a long way off. Whether chasing a bigger slice of the pie or entering new markets as Flex Contract Logistics did via acquisition when it snapped up Lobethal Freightlines & LF Warehousing and Distribution in South Australia, this time last year, the big pond isn’t getting any bigger despite there being just over 60,000 road freight transport companies in Australia, a rise of 2.4 per cent since the 2020 peak.

The boom-bust cycle, in which brokers are drastically undercutting rates, is nothing new under the sun but in a synchronous debt accumulation super cycle, like the one underway, it’s much tougher being an independent player, especially one just starting out.

Servicing debt in an economy offset by heavily subsidized renewables is a tightwire act performed between the two World Trade Center buildings long after they are gone. The environment that welcomes new outfits is not for the faint of heart.

Food demand is expected to increase by 50 per cent, energy demand by 50 per cent and water demand by 30 per cent over the next decade. Not everything, however, contracts in the cold. The refrigerated transport segment is currently estimated to be worth $8.41 billion.

Growing at a compound annual rate of 3.73 per cent over the next five years a Mordor Intelligence report forecasts the market will be valued at just over $10 billion.

While the supply chain disruptions that affected 37 per cent of all businesses just two years ago, according to Australian Bureau of Statistics, are not nearly as confronting they do, hoewever, continue to persist.

Despite the rising challenges in the market, cold chain logistics is experiencing solid growth in Australia due to the surge in demand for food products, meat, pharmaceuticals, and other goods which require temperature requirement and end-to-end delivery.

By the first quarter of last year the nation’s refrigerated warehouse capacity had increased to 10.2 million m³ up from 8.4 million m³ in 2020 according to CBRE data. While the Truck Industry Council does not specifically record sales by emission type, its figures for 2024 relay approximately 45 per cent of last year’s truck and van sales were ADR80/04 (Euro VI).

The more drastic changes to fleet composition, especially from internal combustion engines, are certainly underway albeit remain embryonic at this point in time.

Sales of diesel/electric hybrid trucks, 0.36 per cent of the market, fell last year to 185 from 214 units in 2023. Battery electric trucks, however, did improve considerably from 217 sales in 2023 compared to 272 in 2024, 0.53 per cent of the total market.

Another trend continued unabated with the freight industry’s move away from Medium trucks into either smaller Light Duty trucks, or to larger Heavy trucks.

The Q4 sales record for the category was set back in 2007. TIC Chief Technical Officer, Mark Hammond points to the rise in e-commerce that has resulted in an increase in first mile and last mile deliveries and ongoing operator shortages affecting the industry.

He says greater demand for light-duty trucks and vans, most of which can be driven on a passenger vehicle licence rather than the truck licence that a medium-duty truck requires is a major factor.

“Larger medium-duty trucks are more difficult to drive and park in a metro environment,” he says.

“In the other direction, better efficiencies can be gained by moving freight on larger trucks like 3- and 4-axle rigid trucks and more semi-trailer combinations around city and urban areas have seen operators move out of a smaller 4×2 medium-duty truck to these larger more freight efficient trucks. A single driver moves a lot more freight in one of these larger heavy-duty trucks than he or she can in a medium-duty truck.”

Being an election year there will be high hopes that change might be wrought, at least economically, from having new gloves at the levers.

Failing that, the current federal government has allocated, as part of its campaign, $9 billion for rehabilitating the Bruce Highway, that vast and crumbling 1,679-kilometre-long transport corridor, which hangs like a Sword of Damocles over the many carriers that use it and abuse it, vocally and justifiably.

Major fleets like Followmont, Gilders, Lindsay Australia, Blenners, Toll, OzWide, Nolan’s, Simon National Carriers, Armestos Transport, a fleet unbeknown to many that runs a fleet of over 100 prime movers, Team Transport & Logistics and Richers, to name just a few are up and down the corridor daily.

The $9 billion upgrades, should they go ahead, will offer long-term advantages for safety and efficiency but with short-term pain as periodic disruptions accompany works that are undertaken.

Priority sections north of Gympie where the highway is still, inexplicably single carriage, will also incorporate channels like Maryborough to Benaraby, where general freight movements are high, Rockhampton to St Lawrence and Bowen to Townsville in which resources adjacent businesses have a big presence and Ingham to Innisfail, a rich agriculture region that requires cold chain services.

For many general freight carriers and even other applications, 100 prime movers generally has proven to be the sweet spot for the ideal enterprise scale for business advantages that have provided opportunity to spread fixed costs further, establish better-equipped maintenance facilities, while also allowing the business to compete for company-scale work, where larger uplifts, contingent to seasonal forces and market requirements are demanded.

It will be interesting to see, as businesses caught in between the small and medium tier offerings, carefully undertake strategic downsizing and what impacts will eventuate on suppliers.

Increased costs and material shortages amid an environment producing a near-insatiable hunger for new, expansive digital integration and automation, have forced the hand of many multinationals to make concessions when it comes collaboration especially with competitors.

Partnership is the new leadership is something of a rallying cry for many manufacturers.

It might also be the way forward in business if the businesses that make up the private sector are to have a dog in the fight going forward. Instead of having the dog wagged for them.

To paraphrase the advice passed down from a previous generation to Sheriff, Ed Bell, in No Country for Old Men, there was nothing to set a man’s mind at ease, like waking up in the morning and not having to decide who you were.

That itself is a model of sustainability — ongoing purpose.