May 12, 2009

STEPHEN DAFOE

Ritchie Bros. employee Lyndon Hutchings acknowledges a bid during the heavy equipment auction in Edmonton. The three-day sale netted $93 million, making it the largest auction in Canadian history.

Ritchie Brothers’ Edmonton heavy equipment auction sets Canadian record

STEPHEN DAFOE

correspondent

Bruce Reinhart watches his Caterpillar RD8 crawler move past the windows of ring theatre number 1, the head of a convoy of three similar units that are about to be auctioned in Ritchie Bros. Edmonton spring sale.

As he stands in the VIP lounge, reserved for auction house regulars like himself, Reinhart listens as the auctioneer elevates a onetime part of his fleet from an initial bid of $300,000 to $410,000 in just two minutes. The confirmed sale puts Reinhart and his company Reinhart Oil Field Services of Red Deer, Alta. one step closer to surviving in a tough economic climate.

Like many of his competitors in the oilfield construction business, Reinhart has found that the present economy, which has seen oilsands construction spending drop from $22 billion in 2008 to approximately $4 billion in 2009, has created a more competitive marketplace. As such, Reinhart has had to make some tough choices to keep his men working, including selling off part of his fleet.

“We had to kind of loosen up some payments, of course, with the pretty slack economy,” Reinhart said. “Usually you take the older stuff to the sale, but this is the first time we took the new stuff with the most payments.”

Reinhart brought five of his 27 pickups and a third of his fleet of 18 crawlers to the April 28 auction, the first of a three-day sale that saw 8,500 on-site and online bidders from 23 countries vying for $93 million in merchandise — the largest auction sale in Canadian history. Reinhart was able to sell all of the equipment and said he was pleased with the amount he received for it.

Reinhart remains positive that the disposal of assets will help him from having to take too low a margin on jobs just to keep his remaining equipment working.

“We’ll claw our way out of this,” Reinhart said, adding that in addition to benefitting from lower fuel prices, he has rolled back wages by 11 per cent for his 55 employees, a number that is about half of the staffing he had in 2006 during the boom. “We’ll get out of this, but it’s going to take some work.”

But not everyone who is trying to compete in the province’s tough economy is looking to shed a few units.

Fred Richardson of Richardson Brothers (Olds) Ltd. said he has been travelling the Ritchie Brothers spring auction circuit, since they began in Orlando, Fla. back in February, looking to buy some units for his fleet.

An estimated $93 million in heavy equipment was amassed in Edmonton recently for the largest equipment auction sale in Canadian history. The three-day sale included 8,500 onsite and online bidders from 23 countries, including Jordan and Pakistan.

“With the down economy, to compete we’ve got to buy the equipment at the right price,” Richardson said, adding that he purchased two Caterpillar 773 rock trucks that day for $100,000 each, the completion of $600,000 worth of equipment purchases at Ritchie Bros. auctions this year. “If people are going to bid a dollar and a half a metre for the dirt, I can’t go out and compete with a new truck because I can’t generate enough money to pay for it. So you’ve got to try and stickhandle around and try and buy equipment like I’ve been trying the last four months now to get myself so I can be more competitive.”

Like Reinhart, Richardson is finding that work is slim this year.

“We’ve got about $25 million worth of work — usually we do $50 million,” he said. “The prices are not so good in a down economy, of course, but you have to find ways to work around that.”

But while buyers and sellers like Richardson and Reinhart are using the auction house as a means to remain competitive in recessionary times, Jake Lawson, regional manager of Ritchie Bros. prairie division said that his business is recession-proof.

“When times are tough and there’s pressure out there, guys want to get liquid and sell redundant equipment,” Lawson said. “But when times are busy; there’s different motivations for selling; people are upgrading, they’re buying the next model, so they’re consigning their older equipment to us.”

Lawson explained that another aspect of his auction business that keeps it recession-proof is that it transcends any given geographical region.

“The one thing that is typical at any one of our sales is that 25 to 40 per cent of this equipment we sell here is going to leave our region,” he said, adding that among the thousands of buyers who came to the sale were buyers from Pakistan, Jordan, Egypt, Mexico and several other countries. “If it might be slow here, there’s still an appetite in a different area for a given brand or line of equipment.”

Closer to home, Lawson is definitely seeing equipment buyers looking to save money at his auctions.

“In times like this, people are a lot more shrewd and they’re using a lot of discretion when they’re buying this equipment,” he said. “There isn’t that frenzy of activity like there was three years ago, so there is less of an urgency to get out there and put it to work.”

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