Specialty manufacturer Derwent Industries secures $15 million Australian Business Growth Fund backing

The Australian Business Growth Fund (ABGF) has now deployed more than $100 million in capital, thanks to a new $15 million investment in Derwent Industries, a manufacturer of specialty pipes, clamps, and fittings for infrastructure projects.

The ABGF, a public-private partnership between the Federal Government and six of Australia’s biggest banks, revealed the investment on Monday, declaring Derwent Industries a perfect fit for its unique investment criteria.

Unlike early-stage venture capital firms or funds which seek equity in established multinationals, ABGF specifically targets small and medium Australian businesses with a minimum of three years of profitability and revenues of at least $2 million.

The new investment, which secures a minority stake in Derwent Industries, marks the eighth of its kind in roughly 18 months.

For Derwent Industries, the funding injection will allow the company to upgrade its robotics capabilities and retool its Wodonga facility, where it produces stainless steel clamps and couplings.

The company will also expand: the ABGF estimates the investment will lead to an 18% boost to Derwent Industries’ headcount across its Wodonga, Hobart, and Bendigo manufacturing sites.

With the investment in place, Derwent Industries is now eyeing expansion to Brisbane and Perth, and the potential for export markets beyond its existing New Zealand and Pacific Island operations.

Investment aims to bolster sovereign manufacturing capability

The ABGF’s investment in Derwent Industries follows COVID-19 restrictions, trade disputes with China, and the war in Ukraine, which have rocked international supply chains and made it difficult for some Australian businesses to access specialty products manufactured overseas.

Anthony Healy, CEO and managing director at the ABGF, said Derwent Industries is uniquely placed to service local buyers in the water, mining, and rail sectors who require supply chain certainty.

“People’s notion of risk and risk management when it comes to supply chains has changed,” Healy told SmartCompany.

“And so for Australia, it’s critical that we re-onshore a lot of that capability, that our sovereign capability gives us a level of resilience and reliance when you have global disruption.”

Its focus on ‘just in time’ manufacturing means it can be more responsive to the needs of buyers than other offshore manufacturers, Healy added.

“Local contractors minimise risk and time delays in major infrastructure projects by working with us,” Derwent Industries CEO Craig Evans said in a statement.

“We are delighted that ABGF is supporting us so we can also compete on a global level and ensure the sustainability of local manufacturing capabilities.”

ABGF takes long-term view as economic climate cools

While fears of an economic downturn have spooked many investors and battered market valuations, Healy said the ABGF is still well placed to continue investing.

The fact the ABGF does not hold a slew of pricey investments in pre-profit businesses gives the fund latitude to invest where others might not.

Some 46,000 businesses across Australia technically fit the ABGF’s base investment profile, he added, meaning there is still great potential to dig deeper into the fund’s $540 million stash.

“Now of course, a lot of them won’t need capital now, or may not be investable now, but it’s a very large pool of potential opportunities,” he said.

“We’re not going to be short of opportunities, I don’t think, because there are so many SMEs out there, many of whom have capability and ambitions to grow.”

The fund’s long-term approach to growth means it is ready to ride out medium-term economic volatility, Healy added.