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Foray into export market saves company from brunt of mining sector's slump.

Foray into export market saves company from brunt of mining sector's slump

If Rahnmet Inc. president Marc Lacasse had not started selling his company's products in offshore markets, the company could have been in financial straits because of the downturn in Canada's mining industry.

"There's no question about it," said Lacasse from his North Bay office. "It (the downturn) would have killed us.

"But no matter what Canada's economic problems are, there is a market for us, and it's a promising market."

The 60-year-old company, which manufactures bronze-wearing crusher parts for aggregate and underground mining and remanufactures crushers and crusher components, primarily serviced the domestic mining industry until it entered the export field late last year - a move expected to generate sales of $840 million for the year.

The sales increase comes approximately two years after the company re-established itself as a supplier for the industry, a role it filled until 1963 when it entered an agreement to provide equipment for a single company. According to Lacasse the agreement meant customers were at the mercy of the equipment's original manufacturer.

"The parts are priced pretty steep. That's when the real money is. It's not in selling the equipment," he explained. "We're the Canadian Tire of the crushing business."

Besides lower prices for the remanufactured parts, what has helped Rahnmet establish itself in the export market is the absence of competition.

According to Lacasse there are only two similar remanufacturing operations in North America - one in Illinois and the other in the southwest United States.

"We never knew how unique we were until we looked at the export market," Lacasse explained. "We've found there is a market for our goods all over the world. The people from France actually came to us looking for parts."

The initial contract for crusher parts netted the company $88,000 and resulted in the establishment of a receiving yard in the village of Ales, north of Marseille. Since the initial foray into the off-shore market, Rahnmet has begun shipping to the Pacific Rim and has made initial moves to establish agents in the Caribbean and in South America.

Lacasse noted that the French facility also puts Rahnmet in an enviable position to capitalize on the formation of the common European market in 1992.

"A lot of European community money is going into countries like Portugal and Spain to put an infrastructure into place," he said. "Players like Germany and France have loaned money to the weaker sisters to strengthen themselves."

With a number of road construction projects underway, Lacasse said Portugal and Spain are prime targets for Rahnmet. He said the company will utilize its French facility as a base of operations and will be in the two markets within a year.

The potential increase in business also necessitates the posting of a sales representative in Ales, a move which will push the company's employee total to about 45. On this side of the Atlantic, Lacasse said he believes "Mexico is a big opportunity for us."

Lacasse said that at the current rate of expansion he expects export sales to equal domestic sales within two or three years.

With the expected boost in business, Lacasse would like to see the purchase of larger equipment to better handle some of the remanufacturing chores, but he quickly noted, "We could triple our sales without doing anything to the plant, because we're operating at less than capacity."

However, Lacasse said the company is also examining opportunities in the domestic mining secton. Among the promising areas being considered is the aggregate mining sector in both Northern Ontario and Quebec. But he remains somewhat pessimistic over the impact of any new domestic clients on his sales base.

"There are only so many places you can go," he cautioned.

HURDLES

Even though the payoff for nurturing an export market is high, there are always a number of hurdles which need to be overcome, noted Lacasse.

Among the hurdles is the plethora of red tape created by governments at both ends of the transaction. Lacasse credits officials involved with the PEMBD (program for export market development) of External Affairs and International Trade Canada for clearing the path to establishing Rahnmet's foothold in Europe. According to the Rahnmet executive, the officials not only gave quick approval to the company's export plans, but they also explained potential pitfalls regarding the market.

"When you do things like this, you never know what obstacles you'll meet," he explained.

The obstacles not only arise during the establishment of an export market, but they can also crop up after a company has been in a particular market for a period of time. Chief among these hurdles is nonpayment for goods.

"No one can afford to lose $100,000," Lacasse explained. "It's too much of a risk for companies to take."

To circumvent potential payment problems, Lacasse said he requests payment in advance and has recently taken out an insurance policy with the Economic Development Corporation (EDC), a federal Crown corporation. The export credit insurance protects a portion of the contract value against commercial and political risks.
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Article Details
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Title Annotation:Rahnmet Inc.
Author:Krejlgaard, Chris
Publication:Northern Ontario Business
Article Type:company profile
Date:Dec 1, 1990
Words:848
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