It’s been a rough year so far for the stock market and Fed policy makers have made it clear that the rate hikes will keep on coming. This will do more damage to equities, but US President Joe Biden may have heavy equipment companies like American bellwether Caterpillar Inc and AmeraMex International Inc (OTCQB:AMMX) covered.
Chico, California-based AmeraMex, which leases and sells new and refurbished heavy equipment, is an obvious winner of an uptick in the Biden administration’s infrastructure spending.
In November 2021, the $1.2 trillion infrastructure bill was signed into law, and it will put $110 billion into roads, bridges and other projects. Any demand for forklifts, rock trucks, scrapers and excavators as construction takes off in the US will spell business for AmeraMex.
In fact, AmeraMex which has over 30 years of experience in heavy equipment sales and service, is headed for a bumper 2022.
“Anytime you have interest rates climbing like they are now, there’s a recession that will decrease the need for machinery. Except there’s a special circumstance right now — the government is doing a lot of bridge work, highway work and construction that will continue even with a recession. So, demand will remain intact from the people that buy equipment,” AmeraMex CEO Lee Hamre told Proactive.
“Our position isn’t as volatile as some other businesses might be. We have orders in place for the next 14-to-18 months so we will continue to sell machines.”
Hamre has been in the heavy equipment and heavy haul business for over three decades. In 1989, he launched Hamre Equipment Company with a partner, Warren Murphy. AmeraMex was incorporated on May 29, 1990, in Nevada, and Hamre took the company public in July 2019.
AmeraMex has transitioned from Hamre’s passion-driven startup to a sustainable heavy equipment company without losing sight of any of the founder’s knowledge and enthusiasm for machines.
“My father owned an equipment business in the San Francisco area. I worked for him for 13 years as a sales rep. My two older brothers ran the business as family often do,” said Hamre, who later struck out on his own in Chico.
“I was born into it. I was sandblasting and painting machines on the weekends, after school and in the summertime from age 12. My dad paid me a dollar an hour so I could get $8 a day. I remember when it increased to $1.25.”
Blueprint for success
Hamre has primed AmeraMex for leasing and selling both new and refurbished heavy equipment to logistics companies, construction firms, US military installations, and forestry conservation organizations.
It has forged key agreements with ASV Holdings to market their mastication equipment: Taylor Machine Works for their forklifts and container handlers; Terex Heavy Equipment to market their front-end loaders, scrapers, and excavators; and Magni Telescopic Handlers for their line of rotating telescopic handlers.
The company recently introduced new product lines.
“We're the new dealer for Kovaco Electric which changed its name to First Green Industries. They offer two models of electric skid steer loaders built in the Czech Republic,” said Hamre. “We’re doing well with it. There’s great interest from clients and we’ve sold a few of them.”
With no noise and emissions, electric equipment is encouraged in several states demanding equipment adhere to certain emission standards.
AmeraMex has three defined business units:
- Hamre Equipment: Has grown from a forklift dealer in northern California into providing heavy equipment to industries. It has an inventory of new and refurbished machines and includes the revenue spinning rental department. It buys used machines, refurbishes and sells them.
- Hamre Heavy Haul: Offers transportation services and has a licensed fleet with permits in 48 states and three major Canadian provinces.
- Hamre Parts and Service: Has trained service technicians, a service facility has advanced diagnostic equipment, overhead cranes, a paint shop, and a welding-fabricating shop. The warehouse contains a parts inventory to maintain and repair lines of equipment the company represents.
Dominating the refurbished market
Hamre has long factored in the refurbished market in AmeraMex’s game plan. The company buys used equipment and ships it to its refurbishing facility in Northern California, which renovates millions of dollars’ worth of used equipment and resells it to customers in the US and internationally.
This creates a healthy circular economy and AmeraMex winds up hitting a customer that it wouldn’t hit in another way.
“It is the cornerstone of our business,” noted Hamre. “We're aggressively buying used machines — we bring them in, strip them down, and refurbish them. This is something we can control because we do all the work. There are some supply chain issues for the components we need, just like the manufacturers are experiencing. But we've got to deal with it. We can get a machine out in two months.”
AmeraMex sells the refurbished equipment to the fast-growing markets in the Americas, Africa, and Asia. The refurbished equipment is large so its broken down into pieces and trucked to the customer. Once the equipment has arrived, a mechanic is flown in to have the equipment reassembled. The sale of refurbished equipment generates between 25-to-40% gross margins for the company. AmeraMex sells new equipment to the same geographies for gross margins between 6-to-10%.
Sales growing at a good clip
In August, AmeraMex announced it received equipment orders for $1.9 million, which Hamre says lifts total year-to-date sales to approximately $18 million for 2022.
“We’re just finishing our third quarter and as mentioned in our 2Q financial release, we had a $3 million backlog of equipment to ship this quarter in addition to our 3Q sales,” said Hamre. “Our supply chain problems and transportation issues are improving, and our team of mechanics and drivers have been working overtime to move out as much equipment as possible.”
Still, Hamre said AmeraMex has received a lot of new orders and contracts that can't be delivered immediately.
“We know the business is there. We've got signed contracts and we have plans to fulfill them all,” said Hamre, revealing that AmeraMex had secured a contract by itself that's over $6.5 million.
“The machines can't be shipped from the manufacturer for that contract until around December of 2023,” he added.
Hamre says the strong dollar hasn’t dented equipment sales to other countries. He plans to focus on global sales as his nephew — AmeraMex president Brian Hamre — takes on more of the day-to-day running of the business.
The younger Hamre is cast in the same mold as his uncle and has over 36 years of experience in the heavy equipment industry.
“Brian was with Hamre Equipment for 22 years. When the recession hit in 2008, he moved to another company. I just got him back as a new company president,” said Hamre.
Refurbished port equipment is one of the biggest generators of international revenue, so Hamre is eyeing an acquisition in Central America.
“I've got one project in Central America — if I can put it all together, it will be several million dollars in profits. It is getting close, but we don't have it yet,” said Hamre.
“There's stuff in Africa too. I will work more on international as my nephew takes over as president. I'll have more time and hopefully we'll be able to close more deals,” he added.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive