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Passing the test

By Duncan Bridgeman

Friday 11th July 2003

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After a whirlwind period of global acquisition, farm equipment manufacturer Tru-Test is on the hunt for more distribution outlets.

The Auckland-based company has expanded its operations into the US, Australia, Brazil, Mexico and Europe and now wants a bigger slice of those markets.

"Our main goal now is to win distribution and expand that overseas," category manager for electric fencing Sam Davidson said. "That could mean either developing new products or bettering our existing ones to fit that premium market."

Tru-Test is one of the country's biggest exporters, with annual sales of more than $125 million. It employs 500 full-time staff worldwide and exports to more than 80 countries.

The company is a world leader in milk metering, on which the business was founded 40 years ago, and is now world number one in electronic weigh scales. It is also well on its way to global leadership in electric fences.

The firm has committed huge amounts of time and money to entering new markets and making them profitable to the extent that managing director Des Scott believes the company is New Zealand's second largest exporter into South America after Fonterra.

The company's growth strategy is built around extending the distribution network by working vigorously in one market at a time.

"Battles on multiple fronts are not a winning strategy," Mr Scott said. "We are patient in our development of products and of markets, much more than the average New Zealand corporate would be."

The company is looking at opportunities to enter into joint ventures with distributors in the US to help push its products in that market.

In New Zealand it has been very aggressive, targeting rural services companies with exclusive deals. Listed company Wrightson now provides sole distribution for Tru-Test fencing equipment.

The company's multi-brand strategy enabled it to do that, Mr Davidson said. "We've got three electric fencing brands, which gives us flexibility and enables us to give exclusive rights to some retailers."

Much of the company's local market is taken up by wire products for mass selling, which is why New Zealand sales contribute most to the company's revenue. Australia and the US are the biggest revenue-contributing markets, with 23% and 20% respectively. Sales in Europe make up 9% of overall revenue.

Mr Scott said research and development was key to success in the "lumpy" world of agriculture. "Most people in New Zealand think research is engineering but to us it's about having no guaranteed product outcome ­ it involves original science and that's higher risk."

Tru-Test is no longer restricted to agricultural products. The company recently received a $1 million grant from the government to help its subsidiary, Brainz Instruments, develop monitors to detect brain injuries in babies. Tru-Test bought Brainz from biotechnology research company NeuronZ last November.

Brainz is using a Technology New Zealand grant to develop disposable sensors to attach to babies' heads, carry out trials of the monitor for premature babies at Harvard University in Boston and to extend the technology to full-term babies.

Established in 2001 after Auckland University medical associate professor Chris Williams developed the monitor over 15 years, Brainz is understood to be close to receiving regulatory approval for the brain monitor in the US. It is also expected to soon have approval to sell in Europe and the US.

In January Tru-Test confirmed it had aborted a long-awaited sharemarket float because of international volatility and a dull local market.

The company had intended listing before the end of last year to provide access to capital markets and stock liquidity. The decision to abandon the float cost the firm significant amounts of time and money but management has not ruled out a future listing if market conditions improve.

Tru-Test has 180 shareholders, including 10 institutions that trade shares on a secondary market. Last year, a share spilt increased the number of shares on issue from eight million to 32 million.

Meanwhile, the company continues to refine its products and more are likely to be introduced in the market over the next year or two, particularly if the company eventually gets around to listing.

In May Tru-Test released a new range of electric fence energisers developed specifically for smaller farms and lifestyle blocks. The new energisers have the same high-performance features of those designed for large properties.

Mr Davidson said the company had also developed special nine-volt energisers for the European market.

Another innovation is a new weighing indicator with advanced features to monitor individual animal performance. The system provides multiple ID numbers for individual animals and records full animal treatment histories.

With wholly owned subsidiaries in three countries, Tru-Test has been working hard to integrate its manufacturing and logistics network. Acquiring another four companies in 2001, including Sunbeam Agricultural and Cyclone, has added to that urgency.

Mr Davidson said attracting labour was difficult in some areas but the company's rapid growth and multinational status meant there was no shortage of skilled labour.

"Once you lose them it's hard to get some quality back into the medial jobs, but as far as engineering and R&D, people want to work there."

Tru-Test is a world leader in milk metering, on which the business was founded 40 years ago, and is now world number one in electronic weigh scales. It is also well on its way to global leadership in electric fences

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