operating strategy
POWERFUL NEW PRESENCE - MURRAY & ROBERTS STEEL


Pat Mooney, Keith Smith and Rob Noonan have been the strength behind Murray & Roberts Steel.

 By consolidating its steel operations into a single entity, Murray & Roberts is unlocking value and creating a powerful new market presence.

Murray & Roberts’ involvement in the South African steel industry is considerable. One million tons of steel are consumed or converted into finished products annually by the group, while steel activities account for approximately 25% of its total revenue.

 
With such a large exposure to the industry, Murray & Roberts is able to leverage greater effeciencies and create a stronger market presence. It is doing so by implementing a major transformation, involving the rationalisation and consolidation of previously disparate steel activities into one powerful entity - Murray & Roberts Steel.

Transformation

The rationale behind the Murray & Roberts steel strategy is to leverage greater buying power in steel and better performance by grouping together all of the operations that have in common the conversion of primary steel into finished products for construction, mining and industrial markets.

“In steel, success is primarily about volumes,” says Keith Smith, executive director of Murray & Roberts. “Too much fragmentation within the grouping could not generate the same benefits that a collective approach does. This gives us a competitive advantage in pricing from local steel mills as well as in international markets,” he says.

During the 1980s Murray & Roberts acquired the steel operations of Reinforcing Steel Contractors (RSC), which supplies rebar and roof supports to the construction and  mining industry.  The Cisco steel mill in Cape Town was added to the group in the 1990s.

As part of the transformation that is underway, Murray & Roberts has consolidated several more operations into the steel grouping to create a critical mass.  These include:

  • Genrec, a multi-disciplinary engineering and construction operation involving structural steel fabrication;
  • Hall Longmore, which commenced the manufacture of  welded steel pipes in the 1940s and has developed into the leading manufacturer of its kind in South Africa; and
  • Harvey Roofing Products, which manufactures steel roofing products.

Internationally, Murray & Roberts acts as exclusive agent for lscor to sell its rebar Into world markets and also conducts business in its own capacity.

Steel exports have become an important part of the steel grouping’s activities, doubling in volume last year. This has enhanced the company’s leverage in procurement and increased its exposure to international markets.

Strategic Focus

While other steel companies have been forced by tough conditions in the steel market to rationalise operations, Murray & Roberts Steel did not embark on its transformation for external competitive reasons alone.

Rather, it is the product of a well considered strategy, which is compelling in its logic because of the significant savings it will produce in the medium-term and the powerful marketing opportunities it creates.

Almost a year into the restructure, the back offices of each of the steel operations have merged In a relatively smooth process, Human resources, internal audit, financial accounting, Information technology, procurement, as well as safety, health and environmental departments all operate as one.

Murray & Roberts Steel is now greater, in profit terms, than the sum of its parts. In the medium to long-term, even more substantil benefits willI accrue from changes In the way that the business is managed.

Leveraging the collective spend on steel enables the group to look tactically at its procurement channel for new opportunities where Murray & Roberts’ massive exposure to this industry has not previously been leveraged to the full. It also enables the group to look more critically at its international competitiveness.

“It has taken time to get here. This type of leverage was not possible with the fragmented structure, so we first had to unify the businesses. This has taken a year to roll out,” says Rob Noonan, managing director of Murray & Roberts Steel.

Implementing change

“Management teams have not yet been significantly impacted by the process, But this is about to change as phase two of the restructure will require a complete shift in behaviour,” says Rob.

Change of this nature always involves something of a dislocation for - management teams as they start to experience the realities of a shift from a decentralised structure to a more central leadership framework.

Rob gives the assurance that the process will be accompanied by “as much communication, transparency and mentoring as is required to ensure that everyone involved is kept fully in the picture.”

An important component of the transformation has been the application of the Murray & Roberts single brand strategy. The steel group is now clearly branded Murray & Roberts, but to ensure that the goodwill associated with long-standing product brands such as Harveytile and Hall Longmore is maintained, these brands have been retained within the framework of the primary Murray & Roberts brand.

With the new structure in place Murray & Roberts Steel is well positioned to grow its business organically and by acquisition  - in South Africa and internationally.