More troubles at Warren Buffett’s Australian outpost, as crane major Freo Group loses more senior executives and closes a key regional branch after contract losses.
The last year has seen a fair bit of turmoil at Freo, a subsidiary of Berkshire Hathaway’s giant Marmon industrial and construction group, which bills itself as Australia’s biggest crane hire and logistics company.
Perhaps not for that much longer, the way things are going.
Freo Group has been run by Canadian Marmon executive Tim Macleod since February, after the quickfire departures of former chief executives Sven Glade and Steve Rogers in only two years. It also lost chief financial officer Joseph Jeevaraj in February, and since then has shed its general manager of strategy, health and safety boss, and national recruitment manager.
The latest to depart, Margin Call hears, is commercial manager Thomas van Jaarsfeld, who quit only a few months after taking a promotion into the role and moving to Western Australia from the east coast.
A senior contracts manager has also left the business, and we’re told at least one other executive is out on indefinite leave amid the turmoil. That’s on top of a broader restructuring round that involved a suite of voluntary redundancies.
Freo has also rolled over its board after the unfortunate passing of long-term director Emmanouel Katsikandarakis in March.
For three months, the company and its immediate parent Marmon Construction Services Australia had only a single director, US-based Tim Benjamin, ahead of the appointment of Marmon’s Canada-based executive Jens Lanker and new Freo Group CFO Adam Botica at the end of June.
It’s all getting a bit tetchy inside the tent at Freo Group, Margin Call is told, with some departing staff forced to wrangle over repayment of expenses and even struggling to reclaim personal effects from their offices.
On top of that Freo is in the midst of shuttering its Kalgoorlie branch after losing a major contract on the mining city’s Golden Mile.
Tough times in the construction industry, perhaps, amid the collapse of a number of major building companies and civil contractors across the country over the last year.
Except that key competitors such as ASX-listed Boom Logistics seem to be doing OK, judging by a May upgrade to its full-year profit guidance.
And smaller local competitors are revelling in Freo Group’s troubles, snapping up senior staff from the crane major and happily poaching contracts said to be worth more than $50m in recent times.
Could it, perhaps, be a rare misstep in strategy from the Sage of Omaha’s company?
Industry sources suggest that might be the case, with Freo Group following the lead of its US parent in hiking prices and trying to focus on extending work with major clients – the biggest of which is BHP – and ditching short-term crane hire to smaller clients.
Except that’s where you can make a bit of cash from equipment idled from bigger contracts. And the price hikes are largely to blame for contract losses.
It’s all a bit grim for Freo Group’s remaining staff, amid persistent rumours the company is being prepared for sale. They might need to get on with it, though, while there’s something left to sell.
Rare run west
Say what you will about former treasurer Joe Hockey, arguably the North Sydney Bears rugby club’s most notable fan, but he’s not afraid to enter the enemy’s den.
It’s hard to move in Perth’s tight-knit business, political and media circles without tripping over a conflicting interest or two. So it was with some amusement that Margin Call noted that Hockey will be one of the headline speakers at a “resources showcase” run by Perth’s only daily newspaper.
The West Australian – owned by Kerry Stokes’ Seven West media, which has the broadcast rights to the AFL – has been no supporter of rugby league’s latest attempt to establish a beachhead in the AFL state via the Perth Bears.
The paper greeted WA Premier Roger Cook’s announcement of state government support for a new NRL club in Perth with a “bad news bears” headline, and plenty of critical coverage – not helped by the fact that former West editor Anthony De Ceglie was announced as the club’s inaugural chief executive.
A sold-out State of Origin rugby match in Perth was greeted by the paper with only minimal coverage, and tensions are still riding high.
Hockey was recently announced as a member of the Perth Bears’ founding board.
And yet the former federal treasurer joins BHP and Rio Tinto iron ore bosses Tim Day and Simon Trott as one of the headline speakers at the resources event run by the newspaper in August. He’ll be on stage at a lunchtime event with Caterpillar’s global technology vice president Corey Wurtzbacher. Curiously enough, Stokes’ Seven Group Holdings’ core business segment involves selling Caterpillar mining equipment.
Hockey is there in his role as the founder of advisory firm Bondi Partners, and the former Australian ambassador to the United States – no argument that his views will be of interest to the crowd. But still a slightly odd choice, given the state’s main trading relationship is with China.
Hockey’s short term as federal treasurer doesn’t rate a mention on The West’s promotional material. Hardly a surprise, mind you, given his fractious relationship with the state when in the job largely consisted of refusing to stack the GST distribution system in WA’s favour.
A bit of influence from former West Australian premier Mark McGowan, long a favourite of the WA paper and now on the Bondi Partners roster, might have helped things along.
And perhaps his presence will also enable a bit of outreach on behalf of the Perth Bears at the same time? Particularly if he heads west bearing a promise of a generous donation from the NRL to the Seven-backed Telethon fundraising event when it comes around in October – traditionally the best way back into Stokes’ good books in Perth.
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