Yesterday's machines, today's profit

The purchase of refurbished equipment for the start-up of a new seafood processing business or the expansion of an existing one can help keep costs under control. Still, it is a substantial investment, and a wrong decision can have serious consequences.

In addition to the advantage of a smaller investment, purchasing refurbished equipment provides the opportunity to buy a well-built machine that has stood the test of time and proven its success at performing a particular operation.

According to Ulf Grönqvist, “The life expectancy of a machine depends on how it is maintained. Normally, a machine can last for a minimum of 20 years. A completely renovated machine can last for an additional 10 to 20 years. One of today’s stainless steel machines can probably last forever”. Grönqvist has led the Swedish firm SEAC AB as president for 20 years. The company has more than 40 years experience with machines made by Arenco and VMK for processing pelagic species. It has been one of the main global suppliers of refurbished fish processing machines and now also manufactures its own line of equipment.

He recalls buying used VMK stainless steel machines that were built in 1985, and were still in operation. He has seen Arenco machines from the 1960s still functioning and points to two Arenco SFD-300s in Denmark, built in 1958 and 1959, that are still running. “These machines were particularly well built and seem able to run for 20 to 30 years without any trouble. But of course, they must be maintained”. He shrugs, “If you don’t take care of them, they won’t last long”.

 

Buyer beware!

There are many types of second-hand processing equipment with different origins and varying levels of quality. For example, a plant might be shut down as a company downsizes or goes out of business, and processing lines can be replaced or re-equipped. The condition of the equipment can range from almost new to showing various amounts of wear and tear.
Challenges in buying pre-owned equipment include determining the level of renovation that you either require or can afford, and finding a reputable dealer. Each firm has its own standards and way of working when it comes to selling pre-owned machines. They can be offered simply as is, or they can be partially or completely renovated. A renovated machine is stripped to its basic frame, it is cleaned, and parts are replaced as necessary when the machine is reassembled. Modifications can also be carried out to incorporate improvements made by the manufacturer since the machine was first developed, for example, modifications to allow the processing of additional species.

 

SEAC AB
A VMK-16 nobbing machine during complete renovation.

What standards?

Currently, there are no universally accepted standards for grading the completeness of a renovation. Grönqvist, who worked for years without success to introduce a form of certification, proposes a four-level classification of second-hand equipment (see the box on page XX) that might help buyers and sellers agree whether the renovation brings the machine to an acceptable standard of robustness and longevity, at an acceptable price.

Buying a used machine will cost considerably less than purchasing a new one, but Grönqvist is adamant that it’s important to buy a good machine that costs a bit more because, in the end, a machine that requires constant repair will be more expensive. “There are many things that are not immediately apparent. For example, you can’t see if the gearbox is worn out. The important thing is having a good guarantee. Sometimes, refurbishing the machine takes as long as building a new one”.

Roberts Dlohi, a member of the board of directors of the Latvian firm Peruza, agrees. “A large-scale renovation can often cost as much as a new machine. If the machine was well made originally, as is the case with the machines that Grönqvist mentions, the renovation will take less effort. But for machines that are not well made or are close to the end of their useful life, the renovation may not be worth it. The economics of the venture must add up”.

David Boyd, Chairman and Managing Director of Boyd Food Machinery, sees the process as a dialogue between the customer and his firm. “We are totally flexible according to the customer’s wishes. Our job can be as simple as cleaning and tidying up a machine or as complex as doing a complete renovation. Our seven engineers, working in our dedicated workshop, tailor solutions to the customer’s requirements.

“Some customers want a guarantee and others don’t need it”, he says. “In some cases, we offer a guarantee called Boyd Approved, which indicates that the machine has been stripped down and all of the hydraulics, electrics, and pneumatics, whatever is relevant, have been totally rebuilt”.

 

Peruza Ltd.
A view of the Peruza production floor. The company is located in Riga, Latvia.

A little history

After the Second World War, two companies emerged in Europe as the leading fish processing machine manufacturers. The Baader Group was founded in 1919, and by 1955, it was the most active fish processing company internationally.

The Swedish company Arenco was founded in 1927, although it traces its earliest beginnings to 1877. It combined the manufacture of fish processing machinery with a diverse range of products, including machinery to make matches, cigars, and wall paper, as well as machines for packing and tube filling and printing. In 1979, Baader acquired Arenco, which in turn led to the creation of two Swedish competitors, Norden and VMK, staffed by former technicians and management staff from Arenco. VMK acquired Norden in 1989. Ulf Grönqvist had been working at Norden when he joined the newly formed company SEAC AB in 1992. It started refurbishing old machines immediately.

 

The voice of experience

With this extensive background, Grönqvist is well qualified to offer advice about judging offers from the several companies in Europe that offer second-hand machines. “Today, there are many ways to renovate second-hand machinery, as well as a number of levels of quality”, he says. “This is often confusing for the customer. Prices for the same renovated model can vary by as much as US$10,000 to US$15,000”.

Grönqvist suggests that the first thing that a prospective buyer should ask is does the seller have any connection with any of the companies mentioned above. A working knowledge of the most important brands will contribute to a good renovation. Does the seller have his own workshop? How skilled and experienced are the firm’s engineers and technicians? The seller should supply a list of parts that have been replaced and the work performed. Does the seller guarantee the renovation? How long is the guarantee period and what is included? Grönqvist notes that “today, there are a number of different companies in Europe offering second-hand equipment, some small, some large. But among them, only a few offer any guarantee”. Does the seller offer any post-sales service? Can the seller supply spare parts? Does the seller offer installation and staff training? Finally, can the seller supply a reference list of other customers? 

Classification of second-hand equipment

A reputable firm will make clear the extent of the work done to pre-owned machinery. However, no universally accepted classification of second-hand seafood processing equipment exists. Here is a suggestion for classifying equipment, based on a presentation given by Ulf Grönqvist, president of SEAC AB, Sweden. We present it here with his kind permission.

As is The equipment can be in any condition. Even if the seller’s description is qualified by words like average, good, or excellent, it is impossible to predict its working life. No guarantee is offered. 
Overhauled This has been inspected by the seller, and some parts have been replaced. Sometimes, the machine has been painted but not dismounted prior to painting. No guarantee is offered.
Partially renovated This has been partially refurbished. Broken and some worn parts have been replaced. This step is similar to “Overhauled”, but offers greater reliability. Often, some form of guarantee is given.
Completely renovated/rebuilt

The following work is included.

Dismount the entire machine. Technicians experienced with this model check all parts, including the guards.

Dismount each gearbox; mount new gears, if necessary.

Replace all worn or damaged parts, including guards. This includes bushings, rings, hubs, lubricators, etc. Some parts are remanufactured specially, including shafts, hub wheels, and guards. Shafts have to be checked carefully because a defective bushing will damage the shaft.

Blast and paint galvanized steel frames and castings with protective paint in the original colour. Immerse stainless steel frames and undamaged guards in an acid bath.

Parts newly designed by the original manufacturer are added to the machine.

New water and electrical systems (with CE-compliant motors) may be mounted.

Post-sales service, including installation and staff training, must be included. The seller must demonstrate the ability to supply spare parts reliably. A guarantee of at least one year must be included. 

 

 

An EU sea change

SEAC started refurbishing machines in 1992. Last year, however, the company changed its focus to manufacturing and selling new machines. In 2012, they sold ten new machines and eight refurbished machines. There are two reasons for this change. First, EU subsidies are not granted for refurbished machines. Second, as Grönqvist put it, “We are back to making a new machines again because we have trouble finding old VMK and Arenco/Norden machines to refurbish. I suppose that’s because we have already sold so many refurbished ones”.

Grönqvist believes that the EU doesn’t wish to fund the same machine twice. He says, “I told them that our machines were manufactured before we entered the EU, but that didn’t help. It’s a bit of a contradiction. The EU wants us to save resources and the environment. If we can use the same machine again, isn’t that saving resources?”

Customers in most EU member states, especially new EU countries, are buying only new machines because of the support available. According to Grönqvist, the grants can cover 50% and up to 90% of the purchase price, depending on the location of the buyer and the seller. “Because of the EU ruling, 99% of the EU market for renovated machines is closed to us”, he comments. “But this has the advantage of pushing us into making new machines again. We are forced to search for new markets outside of the EU. For example, we have sold machines in Australia, Thailand, and Peru, among other non-EU countries”.

Peruza’s Roberts Dlohi offers a further explanation. “Support for the purchase of new equipment multiplies the benefits. They are felt by both the final user and the machine’s producer. The economy is stimulated at least twice. Refurbishing machines doesn’t encourage industrial growth. I think that’s the logic behind it”.

 

To refurbish or not to refurbish

For Dlohi, there are other downsides to refurbishing machines. “Someone in the market to buy a second-hand machine is very conscious about getting a low price. Often, refurbishing a machine takes more effort than it’s worth”. Dlohi says that manufacturing new machines is often preferable to renovating old machines. “When we make new machines, we can better meet the customer’s needs and demands”. Dlohi reveals that most of Peruza’s work is for export because of the limits of the local market, a situation similar to that of SEAC and Boyd Food Machinery.

Although Peruza was established in 1991, immediately following Latvian independence, the experience of its founders and specialists had been gained long before, working in the equipment-engineering shops of Latvian fishermen’s cooperatives and for the well-known Latvian enterprise VEF (State Electro-technical Factory).
Dlohi says that one of the company’s original founders, Arnis Petranis, still steers the company, providing the knowledge that allows the company to develop new machinery and technological solutions, up to and including complete turnkey plants. He explains that “limited resources in the past forced us to be creative in finding solutions to problems in the most cost-efficient way. That helps us to honour our company motto, ‘smart budget equipment specialists’. It doesn’t mean cheap. It means getting value for money”.

 

More than a low price
David Boyd cites his company’s 15 years experience refurbishing equipment, and notes that their number-one selling point isn’t actually price. “A full refurbishment of a machine is cheaper than a new machine, but it’s not 20% of the cost of a new machine. It is a significant investment”. He explains, “We actually sell a lot of our equipment based on quick availability rather than price.

“Last week a customer needed a machine very quickly to replace one that had gone down. He had only one machine remaining in the factory. We were able to ship the machine within one day of receiving the order. He couldn’t have gotten a new machine in that amount of time. It would have taken at least 13 weeks to supply a new machine. We did it in 13 hours!”

Boyd says, “Most of the time, we have these machines in the warehouse, rebuilt and ready to go. If not, we have a huge database of our customers around the world, and we can usually find what the customer needs very quickly”. The company has 20 employees, seven of whom are engineers. The entire sales staff is based in the company’s office; there are no agents in other countries. But staff members speak many different languages, allowing the firm, like the other companies mentioned here, to search for business globally, most recently in Australia, Spain, France, South Africa, Denmark, and Malaysia. More than 90% of their sales is outside the UK.

Boyd says that repeat business is very important to the company. “For example, if we sell someone a machine or a complete line to do 500 kg per hour and future increased sales leads to demand for two tonnes an hour, we will buy back the 500-kg-per-hour equipment and sell them the two-tonne machinery”. Although the EU does not encourage the business of second-hand seafood processing equipment, innovative firms within the EU have found ways to turn yesterday’s equipment into today’s profit.
William Anthony