responses submitted by Andrew Rooke, Chairman & C.E.O., ASV Holdings Inc.
In previous years, the BRIC countries were the primary areas of focus for global expansion and investment. Since then, Brazil and Russia’s prevalence seems to have waned. What do you consider to be the strong markets for opportunity around the world?
I see North America as the market with the most opportunity for ASV. Firstly, it is the largest market in the world for our compact track loader machines and a geography that is experiencing strong economic growth. General construction activity as measured by the Census Bureau is up 6.1% year over year, residential housing and household formations are still a long way from their historical averages, and the rental sector is predicting strong growth of between 4 and 5% over the next few years. This is also without any infrastructure bill from Washington. These are key sectors for ASV equipment where we can offer a differentiated product and the opportunity for users to be more productive, therefore providing greater return on their investment than with competing products.
Politics & Government
What potential policies are you keeping your eye on that could impact (or have already impacted) your company, for the better or worse?
- Steel & Aluminum tariffs; reciprocal tariffs: Yes
- Infrastructure bill: Yes
- Farm Bill: Yes
- Tax reform: Yes
How have or will these policies (or lack of policy) hurt or benefitted your business?
Steel & Aluminum tariffs; reciprocal tariffs
These tariffs have caused a rapid increase in the cost of domestic U.S. steel since the start of 2018. This is driving up our input costs and adversely impacting margins.
Funding from an infrastructure bill would benefit ASV by creating more demand for construction equipment like ours.
Demand for new equipment in the agriculture industry is currently low. A Farm Bill would improve farm incomes and provide more certainty for farmers to plan and make purchases.
The impact of the tax reform is still working its way through the system but lower corporate tax rates will incentivize capital investment.
With the benefit of the Tax Cuts, how have you used this to reinvest in your company?
We have used the benefits of the tax cuts to reinvest in our business. As a small growing public company we have limited resources and so the benefit of a lower tax bill and cash tax is very important to us. Recently, we have invested in new capital equipment for some component manufacturing where the after-tax return on an IRR basis was made more attractive by the reduced tax rate. This enabled our investment hurdle rate to be achieved and the investment made. The result is more work and employment for our company.
Diesel vs. Electric
Do you think there will always be a place for diesel powered equipment for heavy-duty applications? Why or why not?
I think the future will likely hold a mixture of power sources, blending different characteristics such as power, efficiency and environmental metrics.
What would electric power sources have to achieve in order to replace the diesel engine for heavy-duty applications?
Electric power sources could only replace the diesel engine in heavy-duty applications if the power source could generate equivalent or better performance at an equal or lower cost.
How do the diesel bans in several major cities around the world play into the direction your company is taking for electric vehicle development, if at all?
This isn’t currently significant to us, but we will watch the issue carefully. No company wants to be shut out of a potential market.