It’s no secret that the South African economy is under pressure. And yet, in an environment where mere survival is considered an achievement, Stalcor continues to grow – in fact, its business has almost doubled in the past three years alone. Clearly, it’s mantra of “Delivering the Exceptional” has some basis.
In June 2015, Stalcor completed a merger with Global Roofing Solutions (GRS) to form Consolidated Steel Industries (CSI), with Stalcor and GRS as its two principal operating divisions. The efficiencies and benefits of the new, streamlined structure is giving Stalcor an edge as it looks to the future – and to Africa.
“I think a lot of our success has been due to the ability to be extremely creative in an environment that is challenging,” says Craig du Plessis, Stalcor Managing Director. “We have introduced depth and mix to our basket of goods and seen growth across all of our product classes – including stainless steel – which has increased our profit”
“The way we’ve been performing in Durban and Cape Town has also bolstered our growth. Gauteng has always been a strong segment for Stalcor, but it’s taken time to get things right in the coastal regions and we believe we’ve achieved that now.”
The merger isn’t just a symbolic exercise – the two divisions will be moving into a shared home in Isando, near OR Tambo International Airport. The new building offers a staggering 50 000m2 of floor space for storage and manufacturing. “Both Stalcor and GRS had run out of infrastructure capacity in Gauteng – we were bursting at the seams,” says du Plessis. “It made sense to consolidate our resources and team on to one site and have all of our management on one site. And since our leases on our existing facilities had run to term, the timing was great.”
The sheer size of the new facility creates a valuable opportunity for the company to take a fresh look at its processes, both in terms of how it plans to operate and how it uses its available resources. This “All Under One Roof” approach will allow Stalcor to achieve more while simultaneously spending less on infrastructure.
Alongside the warehouse, a new office block is under construction, which will serve as the group’s new corporate headquarters. They look forward to moving in by the end of the year.
GETTING IT DONE
The benefits of operating under one roof aren’t limited to cost efficiencies, says du Plessis. “As our business grew and gained momentum, it became necessary for key people to meet more and more often, but with strategic personnel at warehouses in Marlboro, Germiston, Boksburg and Kempton Park, we were spending too much time on the road.”
“In the new building, it’s just a walk down the corridor and we can meet in 5 minutes when we need to discuss something quickly. We can make decisions faster, which comes down to increased productivity.”
WHY IT MAKES SENSE
Clearly, sharing a single facility provides cost savings across the group, because redundancies can be quickly identified and eliminated. Both entities enjoy a much larger pool of resources and equipment, which allows for new, creative approaches to inventory management, an optimised receiving and despatch system and new possibilities in product development.
But another motivating factor for the move, says du Plessis, was the opportunity to consolidate the balance sheet. “We’re now able to overlap purchases, which gives us significantly better buying power and better standing with our creditors. Because we’re moving product in much larger volumes, we can forge better pricing.”
“In turn, that puts us in a position to serve our customer base better and a lot quicker.”
During 2012 Stalcor launched its Customer Loyalty Program, unprecedented in the South African stainless steel industry, which effectively provides its customers with a 14% interest in the Stalcor business together with an annual loyalty-based return.
This landmark initiative reflects Stalcor ’s continued commitment to building and supporting lasting partnerships with its customers– a significant differentiator for Stalcor in its market.
During 2014, Stalcor further refined its shareholding structure and customer loyalty program by prioritising its annual loyalty-based return ahead of shareholder distributions, yet still providing its customers with a 14% interest in the business.
Stalcor calculates this annual return on a customer-by-customer basis in proportion to each customer ’s contribution to the total annual Stalcor turnover. An impressive R1,6 million in cash has been returned to Stalcor loyal and valued customers over the past three years!
CAN DO, WILL DO, MUST DO
Stalcor was established in 1973. Over the 42 years of its existence, it has developed a strong corporate culture and a unique ethical stance.
Given its age, you might assume that these traditions would have a limiting effect on how the company operates. Not so, says du Plessis.
“I think that this industry has a phenomenal norm where people do things simply because it’s always been done that way. But Stalcor has always had the ability to question whether something we’re doing is still right for our business. And if it’s not, then we challenge it. We challenge every aspect.”
Like all South African companies, Stalcor is keenly aware of the lacklustre performance of the local economy. To protect and balance the group’s trading activities, it’s placing an increased focus on expanding its business into neighbouring African countries. Interestingly, this expansion strategy is a key area where Stalcor has benefited from the merger. “GRS has a current African infrastructure – they have exposure, they have a brand and they have business that we’ve been able to overlap into. We’ve gained a route to market through the wider consolidation of our two businesses, which is people, logistics, sales, branding, marketing and so on.”
“We’re opening up a chain of Express stores. They aren’t fully fledged branches, but they sell an element of stock that the market needs. Right now we’re in Botswana, but within a year or so, we intend to be in Zambia, Ghana and Mozambique.”
Du Plessis maintains a pragmatic perspective on the South African economy. “We all depend on the macro-environment improving, but we have no influence on external market dominance. We have to work towards better consumption of stainless steel per capita. We would like to see government lay out a clean infrastructure development program and have it formalised.”
He is cautiously optimistic about the future.
“I think there are opportunities in the contracting market. People become reluctant because they get pulled into macro-negativity and withdraw from the marketplace. But every time someone says no is an opportunity for us to say yes. The risks we take are calculated, measured and chosen because we can extract some benefit. Because realistically, at the moment any benefit is good benefit.”
“Stalcor has good market presence and very good people that work for it. I’m proud to be its Managing Director.”