Steel Processing


Summary:

Site integration and profitable expansion of the business.

Date:

2000 (6 Months)

Assignment:

Steel Processing Business: Turnaround, Site Integration & Profitable Expansion.

Line Role:

Interim Managing Director

Assignment Length:

6 months

Background:

The Group, previously a UK quoted plc was taken from public to private ownership in 1998. Venture capital funding was obtained from Candover & about the same time, the steel processing division was acquired. In 1999, after an industry review, it was agreed with the support of the O.F.T., to rationalise the UK steel wire drawing industry to achieve international competitiveness. The assignment business, previously part of a large international steel processor had to transfer a number of products & processes to its previous owners as well as become an integral part of the new steel processing division.

The Group was internationally based, had £300m+ sales & was a major UK producer of cold drawn steel wires for bedding, seating, lighting, cotton, fasteners & nails markets world-wide. The assignment business was the largest UK producer of industrial nails & had sales rising to c.£45m from a 400,000 sq. ft. factory on c.22 acre site.

Assignment Brief

The role goal was to bring the company to sustainable profitability in the short & medium term. Integrating business from a closing sister site, adopting a multi functional team based approach to running the operation, preparing a budget for the new year & developing a strategy for the 3 year plan were essential elements.

Outcomes:

  • Confirmed a first half result of c. £250k O.P. cf. c. £2.75m loss in the previous year. This was achieved through concentrating on cost saving opportunities and the introduction of new business, including export.
  • Prior to the integration of business from the closing sister site, productivity was improved by c.33% in the core production areas and a c.7% price increase was managed into the nails market without loss of market share. New products developed included coloured nails which could be sold at over twice the price of the standard equivalent size.
  • European export volumes were increased further at the request of Group management. Prices for euro-land business were very poor, exacerbated by a deteriorating exchange rate. Up to 35% of weekly production could be devoted to this market, which was not covering overhead contribution going into the second half of the year. Replacement business from $US markets was actively sought. Prices for the euro-land export business were improved, enabling an overhead contribution to be made. Excellent payment terms were also negotiated, helping to improve cash flow considerably and achieving negative working capital.
  • The Group possessed about 80% of the UK market for bedding & seating wire and was the largest producer of industrial nails in the UK. Plans were established to influence the product mix sold to optimise short term profitability and improve penetration into value added areas through down stream operations.
  • The major site activity was to integrate business from a closing sister site, equivalent to a 30% uplift in sales. Capital projects of £1.5m+ value were undertaken to achieve this, along with a 20% increase in direct employees. Site clearance, the transfer of equipment and its successful commissioning took place over a 4 month period.
  • The budget was constructed taking the above into account, along with plans for the gaining of new business via existing and new processes. The strategy for the 3 year plan was based on the site becoming world class in its core production area of cold wire drawing and developing downstream value added operations to supply niche markets with steel based products.
  • To achieve all the above, team based activity was initiated wherever possible to improve working methodologies between functions. Team briefings, site management meetings, continuous improvement activity and capital project teams were all introduced. This approach was extended to key customers.
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