XTEK to shut Adelaide site, move manufacturing to US

Defence contractor XTEK has told shareholders that it will shut its Adelaide site by 2024 and move the factory’s manufacturing and R&D operations to the United States, citing opportunities in that market.

XTEK supplies defence products, such as drones, and develops its own, including composite armour based on its proprietary XTclave process. XTclave is a liquid-based, ultra-high-pressure curing technique able to create strong, lightweight, complex shapes such as combat helmets.

The company said on Thursday that after two years of running XTclave at its Adelaide Manufacturing Centre, the operation would end, with the XTclave equipment disassembled and shipped to Ohio.

The Adelaide factory was opened in 2020. The number of jobs to be shed there was not given, with Group CEO Scott Basham telling @AuManufacturing between a quarter and up to a third of key engineering staff working on the XTclave technology will be offered the opportunity to relocate.

It estimated the cost of moving and recommissioning in the US (in Q1 2024) at approximately $0.8 million, with Basham adding that Adelaide-based staff would receive outplacement support, help with CVs and interview technique training. 

Basham told @AuManfuacturing that building in Australia affected its ability to penetrate the U.S. market with its armour products, in particular the U.S. Department of Defense (DoD).

“The key issue is that while we do a lot with law enforcement agencies using our existing facility, the DoD have very strong regulations around where it can buy uniforms and apparel,” he said.

“Where it can buy products is dictated by Buy America Act and the Berry amendment, which are very prescriptive.

“The reality is we have exiting relations with U.S. Army Research Lab to collaborate and cooperate with research and development, they love the product we are making in XTclave but they currently can’t buy it because it is not made in America. This relocation solves that.”

Basham went on to tell @AuManufacturing that it was a hard decision and no slight on the quality of the Australian craftmanship, “it’s simply a matter of international trade and protectionisms, and we can’t have an underutilised asset when there is potential for it to be running at full steam in a different market.”

The company said annual savings in the order of” $2 million would be realised after the relocation.

“The Board believes the consolidation of our global manufacturing and R&D operations under one roof in the US,  is the right decision for the business going forward,” Basham said in a statement.  

“By being physically co-located with our existing US manufacturing operations, we will realise savings and  synergies of around $2m per year, benefit from greater staff and asset utilisation, and see improvement in our  overall profitability.”

XTEK has a factory in Ohio, at which it has recently been producing armour for the battlefield in Ukraine. It gained a presence in the US via the purchase of HighCom Armor Solutions in 2019.  

“With this acquisition we now have the largest distribution network in the US and with this facility in Australia we have the manufacturing capability necessary to address the US military market,” its then-Managing Director Philippe Odouard said in 2020.

Earlier this week, XTEK announced an intention to rename as HighCom Limited and change its ASX ticker code to HCL.

Picture: credit XTEK

Further reading

XTEK opens new Adelaide factory, heralds creation of ‘up to 40 new jobs’

XTEK intends to rename as HighCom, citing international expansion

Near record sales drives Xtek manufacturing expansion

Xtek makes first commercial sale of armour produced through proprietary curing tech

Pressure and performance: Australian company pushes to be a global leader in armour

Ukraine creates perfect conditions to prove XTEK composites