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McCullochs Group

The McCullochs Group comprises three divisions: manufacturing, hydraulic sales and service and drilling & boring, which according to third-generation brothers Ron and Ken McCulloch are each of equal importance to the business. Also important is diversification, which, taken together with the company’s view to expansion, results in a dynamic atmosphere in a company that started in agriculture, has recently specialised in drilling rigs, and is now seeking challenges in other specialised manufacturing fields.

Originally, all aspects of the business were together under one company banner, but four years ago the decision was taken to move the manufacturing into a separate division. The front end of the business, McCullochs Hydraulic Engineers, which handles payroll, accounting and other common functions as an umbrella organisation, has been going since 1945 and the divisions “help each other out,” explains Ken. There are around 70 people on site (all the company’s activities are concentrated on one location in Bendigo, Victoria) and almost half are involved in hydraulic sales and service.

McCullochs Drilling & Boring is the new business division, set up at the end of last year to look after sales of imported drilling rigs as opposed to the manufacturing side which turns out the company’s own range of rigs. The McCullochs were introduced to a drill manufacturer in South Korea – Hanjin D&B Drilling Equipments Co Ltd – which manufactures not only drills but a number of other mining-related products, “some of which we were looking to manufacture ourselves,” says Ken. “But when you see the quality of what they produce at such a low price, we decided we could not compete there. Rather than compete, we have taken on the Australian east coast agency for the drilling products and they are going well. We are getting lots of enquiries, especially for something new.”

In terms of rigs, Hanjin’s products operate in a similar space to the units that McCullochs want to market. But the latter’s units are much more customised and Ken says it’s like comparing a standard compact car with a luxury limo. As with cars, there are all sorts of different brands you can buy and different customers have different requirements as well as budgets. McCullochs is thus “providing something that perhaps the Korean rig maker doesn’t want to.” As Ken points out, his company has produced 30 truck mounted rigs in the last five years while Hanjin, since its inception some 20-odd years ago, has produced 5,000 worldwide – it’s much more about series production. “We basically custom-build each unit with a number of set options, but we are also always prepared to do things we have not done before.”

Ken’s team will design and construct to an individual customer’s requirements whereas the Korean firm offers a series of off-the-peg solutions to applications. Thus the two product ranges – McCullochs’ brand and the Hanjin units – are complementary and enable the company to span the range of drilling requirements pretty much from A to Z. “We had the Korean engineers out here and they stood beside one of our rigs and agreed with me that there was no conflict of interest because the two ranges are not in the same marketplace,” explains Ken. “Last thing we would want to do would be to compete with ourselves.”

The reason for diversifying is that the drilling industry itself is very diverse – water drilling, drill and blast for quarrying, open-cut mining and many other applications – but McCullochs with its premium rigs had been locked into just one sector of the mining industry. That sector has been buoyant over the last five years or so, says Ken, “but it will come to an end.” Looking back in history, when the mining industry wants to back off, he says, whether due to government policy or international forces such as the price of resources, the first tap they turn off is exploration. “On that side, it tends to be boom and bust and when the tap is turned off it is not a gradual decline but an overnight halt.”

Ken recalls that when Kevin Rudd floated the idea of the mining tax, “at that time we were getting three or four enquiries for quotes per week but from that moment we didn’t get a single phone call for two months. I remember distinctly that as soon as Julia Gillard, as new Prime Minister, announced she would negotiate with the miners over the 40 per cent tax, we quoted three rigs in four days. The miners can switch off and on just like that,” and Ken wants to avoid getting caught in a rough spot. “We want to diversify into other areas,” he says, “because when the drilling boom finishes we need alternatives.

“We want to open up our options. The staff we have here and the facilities make it really easy to change direction. The guys have a very ‘can-do’ attitude to their work and they are very good at what they do; we have in-house design capability and can manufacture all parts of a new machine. We can build it all here on site with our fabrication and machine shop, put it together, paint it and test it without having to go outside for anything.” The machines are becoming more complex – customers are wanting more and more – and “our staff just rise to the occasion. We are getting super feedback from the guys who actually use our drills, who are looking for safety and functionality, and from the contractors who own them, who are looking at low down time which equates to dollars and cents.”

Not only in mining, of course. The hydraulics aspect is second nature to McCullochs after 50 years so that comes easily. Ron and Ken’s grandfather and father were both agricultural contractors who modified machinery to suit individual needs; part of that involved hydraulics, which were in short supply after the war. “The first cylinders we used,” says Ken, “came from army disposal sales, cylinders from the undercarriage of Beaufort bombers. No one knew much about hydraulics then and we sort of worked it out as we went along.”

The hydraulics sales and service division is spread over a very wide range of industries and thus is relatively insulated from the boom-bust cycle, says Ken. It does have its ups and downs as exemplified in the agricultural industry which went through a bad drought in central Victoria. “Forty years ago we were 100 per cent in that sector and in those days we would have just stopped.” But the company has learned from such hardships and wants to make sure of avoiding any repeat.

Ken himself has three sons working at the company, two of them already assuming part-ownership of the business and “securing the fourth generation. Working in a regional setting as we do has some disadvantages – transport and the easy availability of parts, for example – but the advantage is loyalty. You get quality, long-serving employees. In the regions it is not always an easy matter to change jobs quickly like you can in Melbourne but there is the bonus of the lifestyle, which we really enjoy.” The big city is not so far away anyway, he adds, but there is the lifestyle of a country town which is a true community and the company, as a family outfit, takes on its own sense of community too.

McCullochs employs apprentices to grow its own tradesmen. With the workforce nearly doubling in the last four years it is sometimes necessary to look outside the area for staff, but “we have done really well with our apprentices and that has fuelled quite a lot of our expansion.” In 2009 the company won the Victorian Training Awards ‘Employer of the Year.’ Manufacturing in Bendigo is doing very well and unemployment is down at 4.9 per cent. Ken says government, schools and the community have combined well to produce initiatives to get youngsters to understand the opportunities they have in the town without having to move out – “you can have a good career path here in Bendigo without going anywhere.”

At McCullochs, hydraulics, design, machinery fabrication and assembly in virtually any industrial application are the elements of the job Ken likes most. One recent project involved supplying four rigs to one client at a cost of around six million dollars; another currently in the workshop involves a similar rig but this time on tracks, the first such model for the company. “We are always keen to get stuck into something we have not done before. It is deeply satisfying to sit down and work out how something needs to be designed, then see the drawings, and then some time later see the finished product and get the customer’s feedback. It’s a real buzz.” Ken is confident someone in an unrelated industry would be convinced of the company’s abilities after taking a look at any of its drilling rigs, which display the full range of skills anyone is likely to require. “They are world-class and that’s the view of our users.”

Going forward, the company is looking at expansion, and plans have been drawn up for an extension to the company’s workshops. “We want to apply all the skills we have built up in a broader context,” explains Ken. “Until we started the drill rigs we worked only within around 100km radius of Bendigo, but we now regard ourselves as an Australian company rather than a Victorian company.”

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June 22, 2018, 5:18 PM AEST