Usha Martin Management Q&A May 2023

Usha Martin Management Q&A May 2023

A. Management Intent
Now that most of the vexing issues are behind you, major capex is getting completed, and restructuring for the future is truly on, we would love a glimpse into the future. What are the exciting aspects for you to steer UM towards in the next 3-5 years

Aspiration-wise we would like to reach a position of being THE Preferred Supplier for Global customers. Today in some markets like the US, we are seen as another competent, developing country supplier. In the next 3-5 years that should change as customer perception of Usha Martin brand becomes much more established.

Please tell us more about Steel Wire Ropes biggest market - the US, and how is Usha Martin positioned there? And in EU

To give you a better perspective let’s consider the European Market first, where Brunton Shaw/UM is prominent and established as a Domestic brand. It has a very strong presence since last 30+years. It is already among the most preferred for Steel Wire Ropes critical applications. Today Brunton Shaw/UM and the 2 service organisations De Ruiter and EMM Corp, present a combined face to the customer. They are well positioned and leading to better seamless co-ordination among the 3 wings, reinforced with some decent string of wins recently.

US Market is tough and difficult to crack open. Customer perception wise, it is a very tightly segregated Domestic and “Imports” Suppliers market which has operated this way for many decades. WireCo and others like BBRG, Wire Rope Works (Bethlehem Wire Rope), belong to the domestic preferred supplier category. Next is the “imports” competent supplier tags where Korea and India are probably bracketed.

Having said that we have found initial successes. An interesting example is where a 2nd generation family run business finally gave us the breakthrough recently. The first generation have never looked beyond domestic players.

Similarly, LatAm markets like Mexico, Chile, Brazil are important markets.

Which means bolstering the Sales Organisation is critical to sustained growth for UM. Please elaborate a little on the sales process, key leadership hires, geographical coverage, and team sizes as possible?

As you know high- end sales is not distributor driven. This involves Consultative Technical Relationship-based selling. We are aggressively hiring Sector experts in key geographies with cross-functional expertise. They are working closely with the Design Center and driving new product opportunities. Australia we have very good team for mining. We have been able to hire someone based in EU who is very experienced and has very strong core expertise and relationships with target customer base in important markets like Mexico, Chile and Brazil.

In the US we have teams positioned at Houston, Pennsylvania, Nevada, to handle sales/operations. We are shoring up Brand UM by regularly participating in the main trade shows in US as also LatAm, where there are many regional shows.

B. Organisationally Gearing up
The latest Presentation provides a glimpse into a highly ambitious tech-enabled, efficient, transparent operations set-up by 2026. Will be good if you elaborate on how central a role this plays, and if this at the heart of the future UM analytic/strategic enabling set up

As mentioned in the presentation, we are implementing SAP and Salesforce across the organisation. We are doing this module by module at each location. That will enable a unified single view across locations and go a long way in shoring up synergies and operating efficiencies across UM locations. While US had its own system, earlier too we had SAP implementations in India, Dubai, and UK but they were operating in Silos.

Please give us a sense of how you are gearing up for Talent Retention/Attraction
Competency Metrics mapping. Performance tracking and KPI Management.
We have hired someone recently with 15 Years HR experience in a manufacturing environment with international exposure. She will be instrumental in nurturing and giving shape to next rung of leadership for UM.

High-Performance individuals are identified and groomed and given specialised training. Cross-functional, rotational training will be the norm for all roles. Everyone has to spend some time at the factory too. Younger persons are being groomed for leadership positions.

The focus is on better Collaboration. There exists tremendous technical talent within different pockets at Usha Martin – at GDC, within Brunton Shaw, in India. Besides there are these segment experts for high value segments like Mining. We are making sure that they are talking more often. Instead of knowledge remaining in individual heads, we are trying to institutionalise that.

Talent attraction messaging is clear for Usha Martin. We are now seen as a progressive employer within the industry. We are seen as growing, establishing a stronger presence in high-value segments, and getting future ready with an emphasis on Digital, ESG. Our Linked-In presence and messaging is getting responses from the right talent.

Mr Modak is back after having helped set up Bharat Wire Ropes. How instrumental is he to the modernization and optimisation initiatives underway?
Yes, he is full of ideas. Many of these are being taken up progressively and he will be taking on more responsibility.

Please give us some idea on Usha Martin Team sizes and structures in different markets
Totally Usha Martin today would be about 3100 employees. About 2100 are in India, 250-280 people in Europe among Brunton Shaw, De Ruiter, EMM; 450-500 in Thailand, about 80 in Dubai, and 10-12 in US.

How are the synergies picking up between different regions, subsidiaries, and Indian Ops?
Earlier there was some element of working in Silos in different regions and even among say Brunton shaw and the two service organisations in Europe. Overall, we are on track now, business incentives within the group are getting aligned better, synergies are shoring up well.

What are the ESG initiatives undertaken by the company so far?
We have undertaken several sustainability initiatives within the group, some examples being – (1) Safety: We engaged a consultant to carry out an assessment of existing safety procedures at our plant at Ranchi. On the basis of their recommendations, we have initiated Safety Excellence journey to achieve Zero Harm; (2) Water & Waste Management: We have assessed our existing water management system to identify potential water saving opportunities and aspire to reduce freshwater intake by at least 50%; (3) Air Emission Control: With the end purpose of recording, monitoring and controlling air emissions, we have installed online monitoring systems at plant premises. These are just a few examples among the various projects underway.

C. Sources of Growth/Quality of Growth
With a high-quality design centre and excellent execution set ups in India, UK, and right marketing profiles being recruited, one would expect growth prospects much higher than the teens. Where do we see the opportunities, and what are the main challenges for us? Are there opportunities that UM will be able to address only after a couple of years, what/why?

In the EU we are not just another player. As mentioned before Brunton Shaw/Usha Martin is considered a domestic business. Together with our service arms EMM, De Ruiter and GDC (Global Design Center) we are positioned as a one-stop shop for our customers. This gives us more opportunities for cross-selling, services to our customer base.

GDC is approaching its 10th year Anniversary and has been instrumental in our technical sales led growth and in monitoring Quality closely. Testing and maintaining execution quality is key, there can be no compromise on that. That is the way for Repeat Orders, maintaining constant touch with customers and knowing their needs.

Offshore Oil & Gas is a big long term business opportunity for us. Offshore Wind in a major upcycle currently is another very long-term business that we foresee. Cranes is probably the next big opportunity market for us. Mining is also doing well for us. This is what we are seeing in developed markets. In the US we also got a breakthrough with a OEM Cranes player, took us 2+ years to get the approval.

Middle East – UAE+GCC – the Ports segment is very important. Cranes Ropes, Oil & offshore are also picking up.

Post the recent supply disruption, in every region we are seeing customers being more open to trying to diversify beyond their main vendors who couldn’t supply in time. Usha Martin could maintain a lead time of 3-4 months, and thus got to see many doors open, and execution has been good. With that initial experience Customers are now ready to place more faith in Usha Martin quality products and delivery.

D. Closer Look at Competition
UM is probably #4 or #5 in the world today and is slowly but surely taking away market share from bigger incumbents. Would be great to hear UM perspectives on the major players like BBRG, WireCo, Kiswire, and others

US Market VeRope (Kiswire JV) is a key competitor in Large Cranes Ropes market. In Fishing segment Olivera (part of WireCo) is the main competitor, and is expanding Crane Ropes segment by setting up capacity in US. Bethlehem Ropes a local player is strong in Elevator ropes segment. We have refocused attention over the past year in the US Market, teams are organised and energised now. Usha Martin Market share is probably just 2-3% but is able to grow by taking away market share incrementally. With a low base, even a 1% market share gain would mean 50% growth for us.

Bharat Wire Rope has good presence in some markets in Europe and Middle East. For high-end Ropes, BBRG is the main competitor in Europe.

Overall, the Wire Ropes market globally is probably growing at 5-7%. Usha Martin would be at a sub 5% market share and as we get our act together, we should be able to grow by taking away market share from incumbents.

For high-end wire ropes please give us a sense of where does Usha Martin stand with respect to the big incumbents like BBRG and WireCo. Are there major gaps in terms of high-end product-basket offerings? How long will UM take to catch up?

Purely from a design capability and execution perspective, don’t think there are any gaps. Given the opportunity, UM is able to match every customer requirement.

E. Future Product Segment Expansions/Enhancements
High-end Wire Products
As you are aware high-end wire products are a big segment for Bekaert, so yes, possibilities for product extensions exist here for UM too. Right now, its not like the high end ropes market is getting saturated though. For the next few years we have our plates full executing on high-end Wire Ropes segment. Post that is when we might start looking seriously at that. Having said that, we have made a start at the Ranchi plant.

F. Global Design Centre (Italy/Brunton Shaw/India)
While the GDC in Italy is probably at the heart of UM Technology Strengths, would be great to understand how Brunton Shaw R&D is catching up, as well as India based R&D.

There are regular interactions on an ongoing basis now. As mentioned before there are joint technical sales call being made besides training programs at the GDC. The Sector Experts as mentioned before interact regularly with the design team creating new products. Identified Technical Team leaders from India have been to GDC 3 months at a stretch, come back and trained others back here.

G. India Domestic
We believe there has been some overhauling of domestic operations and dealer policies. Kindly educate us on the same.

No major reorganisation as such. UM is organised into 4 zones East, West, North and South.
We have reviewed dealer policies which is business as usual.

H. Inorganic growth options
Usha Martin is spending 540 Cr for setting up a 58000 T Capacity. Did you consider the acquisition route instead of undertaking the capex plan?

Usha Martin capex spend is not only for capacity addition but including complete factory - water management, and infrastructure. Also, for balancing out already existing equipment and modernisation needs. It’s not as if just adding on capacities elsewhere, would have sufficed.

Having said that, for enhancing capacity we are also open to acquisitions at a fair value.

I. Carbon Tax Impact for UM
Proposed Carbon Tax is on Steel. There is nothing on value-adds on Steel. So there is no impact for Usha Martin.

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