Investors looking for overseas prospects with some growth potential could do worse than to buy into New Zealand engineering firm Scott Technology Ltd.

Launched 100 years ago as an engine-maintenance firm, Scott has evolved into a firm adept at making semi-automated and, increasingly, autonomous robotic assembly systems. Its major industries, listed by the percentage of revenue each contributes, are:

• Mineral-sample preparation (48%)
• Home appliance manufacturing systems (27%)
• Meat processing (13%)
• Industrial Automation (9%)
• Superconductivity (3%)

In fiscal 2013, ended Aug. 31, Scott recorded NZ$5.14 million in after-tax profit, a 16% drop from 2012. Revenue dropped from a record $63.7 million in 2012 to $60 million, almost 90% of which came from overseas sales. Earnings per share were 13.6 cents (basic and diluted), compared to 16.7 cents the previous year. Research-and-development spending was about 11% of profit, according to the company’s 2013 annual report (pdf).

Breaking Down the Sectors

Sample-preparation machinery, which is not robotic, sells primarily to mining companies under the RockLabs brand.

Appliance-assembly systems are as robotic as that of any modern assembly line. It has appliance contracts in the United States, New Zealand and China. This segment peaked in 2000, when it was exporting 100% of its stock to the United States. That business dwindled after the 2001 recession, and management diversified.

Meat-processing systems, a relatively new line for Scott, are sophisticated and highly robotic (more on this in a moment).

Industrial automation, including steel framing manufacturing lines, depends significantly on robotics, including welders.

It is unclear the degree to which robotics contributes to Scott’s line of high-temperature superconductor equipment.

Asked what percentage of his operations involves robotics, CEO Chris Hopkins reported being stumped. “We don’t track that,” he said. “Robotics is just a tool in our engineering toolbox.” As well, said Hopkins, the line between semi- and fully autonomous is blurring.

Robotic Meat Processing

The line is more severe in Scott’s meat-processing products, which are highly industrialized systems for disassembling lamb and beef with computers making decisions on the fly. It took about 12 years to get its first system on the market, and the company reports having recently signed “several large commercial sales.”

Carcasses ready for butchering come in on hooks and are first inspected by automated X-ray and visual cameras to, among other things, plan cuts. Hopkins said his firm has written sophisticated analysis algorithms for the X-ray components that are fundamental to system operation.

From there, robotic circular saws, grapplers and positioners break the bodies into large chunks before more refined cuts of meat are created.

It is eye opening to see the systems in operation, but most impressive are boning sub-systems that cut out unwanted bones.

Increased hygiene alone would argue for the acceptance of robotic butchers, but Hopkins said his systems also increase yields over hand-cuts. Speaking of which, automation can be expected to dramatically reduce slaughterhouse injuries. Meat processing is, by some estimates, the most dangerous job in the United States.

At the same time, Scott is within a growing season or two of commercializing a robotic cow milker through Scott Milktech. Work on the milker began in 2008. Should a calving robot arrive, the bovine subfamily could almost go without ever seeing the human race.

Scott Milktech’s robotic cow milker. Click to view additional images

But that is not happening in the near future.

Breaking Into Tough Markets

Agriculture is a historically conservative industry. Mistakes can bruise or wipe out profits for multiple seasons.

It can be argued that the meat industry in the developed world is less about agriculture and more about intensive protein production on massive scales. Yet the commercial giants providing chops and steaks in the United States, at least, have built an industry based on the cheap labor of immigrants, legal and not. Any move from the status quo would cost money – at least up front.

Hopkins has a potential answer to that: alliances and joint ventures with agriculture players. (Actually, Scott is an inveterate joiner, finding strategic partners in most of its industrial segments.)

It formed Robotic Technologies Ltd.with Silver Fern Farms Ltd. in 2004 to develop a fully-automated, X-ray-augmented lamb processing system. Silver Fern is a dominant processor of lamb meat in New Zealand.

NS Innovations Pty. Ltd. is a joint venture between Scott and Northern Cooperative Meat Company Ltd., an Australian co-operative red-meat processor. Formed in 2009, Northern Cooperative is building allies with Australian meat, livestock and processor firms.

In both cases, Scott nets both expertise and entry to target markets.

It’s a time-honored strategy. The question is: how fast can farmers themselves evolve?