A year and a half in the making, Ryerson Inc.'s restructuring is positioning the company to focus locally—a focus that will help the Chicago-based metals distributor and processor drive to fill its geographic holes, according to company executives, although that's only one piece of the multi-point growth plan.
Ryerson went "from a highly centralized to a far more decentralized organization" as the company implements its growth strategy, Stephen Makarewicz, Ryerson's chief executive officer, said in an interview with AMM.
"All the purchasing and credit activities were run out of Chicago, (but now) the company functions better decentralized in terms of touching customers and suppliers. We wanted to increase the local activity. We wanted the credit people to understand the credit profiles of local customers and work with them more closely," he said.
Ryerson now has presidents for six North American regions—five in the United States and one in Canada—reporting to Matthias Heilmann, the company's new chief operating officer as of the end of January. The Chicago headquarters purchasing staff continues to negotiate with key suppliers, however, and Chicago sales executives still negotiate with the largest contract customers.
Platinum Equity LLC, Beverly Hills, Calif., bought Ryerson in October 2007. "We learned we were able to reduce the size of our organization and take costs out of overhead from the purchase date to mid-2008 and into 2009," Terence Rogers, Ryerson's executive vice president and chief financial officer, said.
The company has reduced head count by at least 15 percent since the buyout, with some slimming still taking place. Ryerson is shutting down a stocking location in Loudon, Tenn., and shedding five positions there. Customers will be serviced from the Chattanooga, Tenn., service center.
Makarewicz acknowledged that "suppliers weren't initially thrilled with having to negotiate with our different regional operations, but they have come around," in part because the scale of the regions ranges from $800 million to $1 billion in annual sales. "Once they adjusted to our desire to create value, they have come on board 100 percent," he said.
"Having senior people closer to the customer helps them react more quickly in local geographies," Rogers said. The planned new service centers in Salt Lake City and McAllen, Texas, were decisions "based on senior managers recognizing the need for growth in those markets."
One component of Ryerson's growth strategy is geographic expansion. "We don't have many geographic holes, but there are a few areas we would like to expand to—important but smaller," Makarewicz said. "We are also trying to grow in areas where we have strength, such as fabrication—burning of heavy plate, second-stage processing, putting together parts for our customers. We are also looking at complex fabrications, where we manage the supply chain for customers. We make parts in our own service centers, put together kits and the customers assemble them."
A third component is international growth. Apart from doubling its ownership stake in a Chinese joint venture, "we have plans to re-enter the Mexican market," Makarewicz said. Ryerson had operated a joint venture called Collado Ryerson, formed in 2003, but the two partners separated last year. "We have no investment in Mexico now, but we will try to expand directly rather than as part of a joint-venture structure."
Lastly, acquisitions will be featured in Ryerson's growth. "We are actively looking right now, and one or two look promising," Makarewicz said. One sticking point is that sellers are "optimistic about the value of their companies, which is a bit problematic." Nonetheless, "we are absolutely committed to growing through acquisitions. We can fund these internally."
Rogers credits Platinum Equity with contributing ideas and with supporting Ryerson's acquisition plans.
And both Makarewicz and Rogers said that Platinum Equity had helped make Ryerson healthier in terms of capital structure and working cash management. "We entered this downturn with a better cost structure and better liquidity, which will help us to thrive and take advantage of opportunities," Rogers said.