Export Finance Australia’s Export Working Capital Guarantee helped export supply chain business Powerhouse Distribution secure a loan with their bank to help manage cashflow and project delivery costs.
When Percy Maguire started out in his own business, he would visit potential customers and ask them one question: ‘Which product do you have ongoing problems with sourcing?’
An electrical supply chain veteran, Percy has over 45 years’ experience in the industry, including a stint as Regional Manager for MMEM, a subsidiary of the world’s largest electrical wholesaler.
In 2002, he and his wife Laura formed Powerhouse Distributions, a manufacturing agency that imports and distributes electrical products in Australia’s mining industry.
Since then, Powerhouse Distribution has become a provider of electrical components to many of Australia’s major mining and construction projects, including Gorgon Gas in Western Australia, the Brisbane Airport upgrade, the Ernest Henry mine expansion, Xtrata’s Mount Isa facility, and BHP’s Olympic Dam in South Australia.
Breaking into a closed shop
Percy says the company faced considerable challenges early on, as companies in the industry typically deal with established preferred suppliers on their vendor lists, making it hard for new players to get a foot in the door.
So Percy used his knowledge of the industry and the networks he’s built over the years to find the gaps in the market – and to fill them.
“Once I identified which products my potential clients couldn’t find, we were able to turn their need into an opportunity,” he says.
“For example, before the mining downturn, both Newcastle and Adelaide lacked a reliable source of cable,” says Percy. “So we opened branches in both of these cities.”
“We also started importing stainless steel products, as no one manufactures them in Australia anymore,” says Percy. “We ended up providing all the stainless steel ties for Gorgon Gas.”
Building strong relationships
Percy put in many travel miles building relationships with suppliers from as far away as Oman and Poland. He says that creating and maintaining strong relationships with both customers and buyers is imperative – and finding the right person to talk to is key.
“In a large organisation especially, there’s a danger that you could be talking to the wrong person – and that could go on for years,” he explains. “So often it’s a process of elimination to find the decision maker.”
But the greatest challenge, he says, was establishing security of payment in the export supply chain.
“For example, in Papua New Guinea, it can be difficult to transfer money out of the country,” he says. “I had a customer that had to pay through a payment plan of small increments over months, which meant I was out of pocket for a considerable amount of time.”
Securing a guarantee through Export Finance Australia
It was trying to manage his cashflow that first brought Percy to Export Finance Australia. The company was awarded an important contract to provide copper wiring to BHP.
To meet its obligations, Powerhouse Distribution needed to start placing orders – and make ongoing deliveries each month – all before receiving any payment.
“We incurred large upfront costs for the BHP project, and to top it off, the price of copper increased at the time – but my price was locked in,” says Percy. “So I had to cover the import costs, and receive a reduced margin.”
Powerhouse Distribution’s bank suggested they approach Export Finance Australia to guarantee a bank loan that would cover their costs while they were waiting for the money to come in.
“Export Finance Australia were lifesavers,” he says. “Before I applied, I was ready to walk away from the project.”
Working with both Powerhouse Distribution and their bank, Export Finance Australia were able to provide a guarantee to the bank which allowed them to provide a loan to the business. Having access to extra working capital meant that Percy could manage his cashflow and the continuing project costs.
“With Export Finance Australia’s help, the business is floating along a bit more easily now – and our relationship with our providers and customers is really good.”