Service Centers
Wednesday | 01 November, 2006 | 4:12 am

At your service

By Lauren Duensing

November 2006 - Lourenco Goncalves, chairman, president and CEO of Metals USA, Houston, thinks the entire service center industry needs to understand how important they are to the market. "We are the biggest buyers of steel in this country, and we can be very helpful to suppliers and customers, or we can be the root of their problems. It is up to us." He says that one of the biggest challenges in the industry today is people that really don't understand the idea of profit. "Service centers are in the Stone Age as far as understanding how important they are to the supply chain."

Implementing a new strategy
A company's role in the supply chain is an important part of Goncalves' strategy. He joined Metals USA in early 2003, shortly after it exited Chapter 11 protection, to lead the company's turnaround. Prior to joining Metals USA, he served as president and CEO of California Steel Industries Inc. In addition, he has held various management positions at Companhia Siderurgica Nacional (CSN) Brazil. He is a metallurgical engineer with a master's degree from the Federal University of Minas Gerais State and a bachelor's degree from the Military Institute of Engineering in Rio de Janeiro, Brazil.

In his position at Metals USA, he has embarked on a commitment to reliable service. Metals USA is now one of the top 10 metal service center companies in North America with approximately $1.8 billion in sales per year. "The changes were all made in the way we do business," Goncalves notes. "We are much more efficient and we have fewer layers of management--in fact we have a very flat organization." This streamlining allows Metals USA the agility it needs to make changes in order to better serve its customers.

However, none of these changes could have been put into place without the help of a dedicated staff, Goncalves says. "I found good people when I came to the company. You can't implement change if you don't find open-minded, competent people. I found a lot of great professionals who were open-minded, willing and eager to change." One of the biggest assets to Metals USA, according to Goncalves, is the combination of leadership and people that are willing to accept change and go the extra mile to make these changes.

The company has four divisions: the flat-rolled and non-ferrous group, the plates and shapes groups East and West, and Metals USA building products. These four divisions cover many diverse product groups. Flat-rolled has aluminum, coated, cold-rolled, hot-rolled, red metals and stainless. Plates and shapes encompasses bar, beam, pipe, plate, structural and tubing, and the building products division serves the home and remodeling industry. Goncalves and Metals USA have a commitment to the customer in all of these divisions, which he characterizes as selling service. "The meaning of 'we sell service' is that we are not the cheapest guy around," he notes. "If the customer just wants to buy the cheapest material, we are not the right fit for them. On the other hand, if they want to have reliable service and continued support for their business, then Metals USA is the right partner for them.

"This does not mean that we only team up with big national accounts," Goncalves notes. "[Customers] can be a huge account or they can be a fabricator anywhere in the United States. They are all treated the same way."

Wide range of locations
The company has a broad network of facilities to help serve its customers. "We pretty much cover the entire United States," says Goncalves. And, Metals USA is adjusting to the marketplace by changing its emphasis on certain products. It is emphasizing the importance of nonferrous products by adding them to the flat-rolled division's name, changing it to the flat-rolled and nonferrous division.

"We are growing nonferrous and de-emphasizing carbon flat-rolled," he notes. "We are also growing our building products division. In the building products industry, we are not a service center, we are a manufacturing company. We basically manufacture and sell building products and stone-coated steel roofing. I think that we're really going to see good things from our building products division through 2007. Home remodeling is a market that has not had a bad year since 1990 and it continues to grow."

As part of the restructuring, one of the biggest changes the company underwent was to centralize its operations at its Houston headquarters. "We have centralized finance, centralized IT and centralized HR," says Goncalves. And the IT department is a huge priority in the operation. "When I came to Metals USA back in early 2003, IT was in Detroit, and our IT guys were not willing to relocate to Houston. They believed IT could be placed anywhere in the U.S. I said 'IT can be anywhere as long as it is close to me.'" So, the company started from scratch in Houston. "When I say from scratch, I mean from the first server," he notes. "We hired new people and bought everything new and re-implemented all of the systems so everything here is state-of-the-art."

Growing through acquisition
Having such a strong IT department is an asset to the company when it comes to integrating an acquisition. "They are the first guys to get on the ground," Goncalves notes. "First, we see what they have, and then we progressively implement our systems."

But Metals USA doesn't focus solely on acquisitions as a means of expansion; in fact, it focuses on three different directions of growth. The first is internal. "Some of our locations have been growing greatly since I came on board because of the business they are in and the type of customers they are supporting. We have been expending capital, buying new equipment and growing downstream."

The second part of company expansion is growth by acquisition, and the third is adding new business. "While a business like building products initially seems to be an odd thing for a service center company, at the end of the day it's not, because it uses metal and it puts us in a position that positively differentiates us from other service center companies," Goncalves says.

He notes that he is not geographically driven. "I'm more profit driven. If there's profit to be made, I'll be there. So sometimes I'll go to places that people don't really expect, like our acquisition of Port City in the state of Oklahoma. We already had three locations in Oklahoma. And then we bought Port City in Tulsa. An outsider would not expect that we would be making this acquisition . . . but that's a big, sound and profitable business with a great management team and employees. That's why we bought it."

However, Goncalves doesn't expect to expand outside of the United States and Canada. "If there is an acquisition that makes sense, a profitable company with a good management team that is willing to stay with the company and work together with us, that's the type of target I'm going after."

Metals USA continues to do well in "terms of operating as an integrated company with a high value-added proposition in the service center business," Goncalves says.

"It is not correct to call Metals USA a distributor," says Goncalves. "We add value on 100 percent of the metal we touch." However, he notes that Metals USA is proud of being a service center company. In addition, "the more we grow our building products division, the more we can be called an OEM," highlighting the company's three-pronged approach to success. MM

By Lauren Duensing, from the November 2006 issue of Modern Metals.

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