Capital Equipment News February 2022

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functional, these unexpected repair and maintenance costs can end up rendering a project unprofitable,” he says. “What is happening in these cases is that any savings from the capital expenditure on the equipment is being eaten up by fast-rising operating expenditure.” Operating risk The irony is that it is often the companies whose profitability is already marginal, who try to survive by purchasing low- priced equipment upfront. He points out that this exposes the business to dangerously high levels of operating risk, as any unexpected downtime quickly wipes out the narrow profit margin. “One bad purchasing decision can push these players over the edge,” says Marais. “There is a mistaken belief that they can ‘save their way’ to profitability – which simply does not make financial sense in this competitive sector.” He emphasises that successful crushing contractors recognise the vital importance of mission-critical equipment in their enterprises and contracts. They earn their success and reputation by top-class performance, ensuring the production levels that customers demand – and thereby

The economic environment certainly makes many firms risk- averse, and this tempts them to trim their capex budgets to unsustainable levels

What is happening in these cases is that any saving from the capital expenditure on the equipment is being eaten up by fast-rising operating expenditure

One bad purchasing decision can push these players over the edge

Successful crushing contractors recognise the vital importance of mission-critical equipment in their enterprises and contracts

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CAPITAL EQUIPMENT NEWS FEBRUARY 2022 21