How did this Perth-based, family-owned firm secure the world’s largest miners, aerospace and defence heavyweights as customers?
Faced with a local downturn, Hofmann Engineering expanded into new markets with its precision replacement parts and components, including gearboxes for wind turbines and the world’s largest forged steel ring gear, custom-made for a mine in China last year. “We’re going against the trend,” says Chief Executive Stephan Kirsch.
Since 1969 Hofmann Engineering has provided specialist engineering services to Australia’s industry leaders, and today the Perth-based firm counts the world’s largest miners, aerospace, oil & gas and defence operators amongst its clientele.
Hofmann’s primary business is engineered precision-replacement parts and components for the heavy engineering and mining industry, but particularly transmission gearing for the mining industry, and the company is expanding despite the mining downturn. Since 2010, Hofmann has acquired factories and workshops locally in Bendigo, Newcastle and Cheltenham, and established one in Chile. Another heavy duty workshop is currently under construction in Peru.
“We are going against the trend,” says Chief Executive Stephan Kirsch.
“Success is all dependent on your business model. The market is challenging, yes, but if you have the right business model and you apply the right tools you can be successful even in this environment.”
Hofmann’s exports stand at around 30 per cent of turnover at the moment, but Mr Kirsch expects that to accelerate to 40 per cent and beyond over the next two years as the firm expands in Latin America, with operations in Antofagasta, Chile and in Arequipa, Peru. Hofmann already counts the world’s leading miners for copper, gold, bauxite/aluminum and iron ore as its customers.
Mr Kirsch, who is the CEO and a member of the Board of Directors since 2014, says targeting niche markets has been vital to success. For example Hofmann is one of few firms in the world which makes the planetary gearboxes used in wind turbines. New installations as well as repairs generate good business for the firm.
“Versatility is a key to success. We have quite a vast product portfolio and, in particular for mining, our concept is improved engineering and operating cost saving,” says Mr Kirsch.
“In order to be successful we improve service life, which is the main game for mining companies because it is about plant availability. Whenever the mining companies need to replace components it means they incur down time, hence they lose production. So service life extension is very important.”
Hofmann achieves this by applying special heat treatment processes as well as using customised, higher quality alloy steel, especially for forged steel ring gears and Mr Kirsch says the medium-sized firm typically beat larger, less nimble firms on price.
Hofmann has also trained hundreds of apprentices in its history, around 30 per cent of the company’s 500-strong workforce today are ex apprentices, and up to 30 staff are currently undergoing an apprenticeship.
Hofmann typically produces items in small quantities, however, it does use robots in its manufacture of track pads, used in the undercarriage of earth moving equipment, which Hofmann manufactures in the thousands each year.
In recent years, the firm’s Bassendean, Perth, facility produced the world’s largest forged steel ring gear, which had a 13.2 meter diameter and weighed 73.5 tonnes. The gear, which was sent for use at a grinding mill at a mine in China, transmits 17,000 kilowatts when driven by two 9 tonne pinions, also made by Hofmann.
Mr Kirsch says Hofmann executives are frequently approached by State and Federal Government representatives and organisations asking for suggestions to improve manufacturing in Australia, and he says “value add” needs to be more emphasised to boost employment and generate more tax income.
“We are blessed to have many resources to mine in Australia and then to sell them overseas.
“It would be even better if we could add more value by refining certain resources into finished or semi-finished products. If you compare to the Germans they don’t have black coal, they don’t have iron ore anymore, but they are world-class manufacturers by developing their IP and by doing lots of R & D. German knowhow development originated when they had mines and minerals.”
“This transition takes a while. It is good that the process has started. It should probably have started 20 years ago. Those are key factors,” Mr Kirsch says.