The new boss of Aggregate Industries is working overtime to ensure a recovering market has all the materials it needs and to improve the firm鈥檚 relationship with the supply chain
Pat Ward would like to meet you. The new chief executive of Aggregate Industries - one of northern Europe鈥檚 largest aggregates, concrete and asphalt producers
- has spent his first six months in the role getting to know the firm鈥檚 main customers, many of whom are contractors, architects, and other firms in the construction supply chain; companies probably like yours.
This interview is part of Aggregate Industries鈥 charm offensive. After years of competition inquiries into the aggregates market, it鈥檚 an industry that has had its share of bad PR, even if no evidence was found of anti-competitive behaviour in the specific markets AI operates in.
It takes place alongside the European leg of the International Holcim Awards for Sustainable Construction, held in Moscow, an impressive event put on by Aggregate Industries鈥 (AI) Swiss parent company Holcim to celebrate the best in sustainable thinking in the built environment worldwide. The two-day event is drawing to a close, and
an hour has been scheduled to speak in the lobby bar of the striking Stalin-era high-rise Radisson Royal, known locally by its former name Hotel Ukraina, about Ward鈥檚 plans for AI.
There鈥檚 a lot to talk about. Suppliers have been thrust into the limelight recently as the UK鈥檚 recovery puts pressure on materials producers and their prices; then there鈥檚 the small matter of Holcim鈥檚 proposed mega-merger with fellow aggregates giant Lafarge. Over a beer, the jovial Scot discusses these matters, and an uncomfortable home truth.
Talking capacity
Aggregate Industries is a large and diverse business. It has 350 facilities ranging from quarries to ready-mix plants and two-man operations, across the UK and Northern Europe. Its facilities produce 34 million tonnes of aggregate a year. Its primary production bases are in the UK and the firm is a net exporter from the UK. While aggregate production is its primary business line, AI also has a growing construction services business. This business works as a contractor in areas such as major road paving jobs - current works include upgrades of the M1 and M8 motorways - and it also has a research and development arm that produces tailored or mass-producible concrete products for contractors or architects. This R&D function is an important resource for the firm, and Ward says AI should be able to launch products to tackle 鈥渟ome big challenges, watch this space鈥.
With parts of the construction industry rapidly moving from famine to feast in the last 12 months, security of materials supply and pricing has become a hot topic. Ward is keen to reassure AI customers that there鈥檒l be no issues for AI in ramping capacity back up again to meet demand. 鈥淭here鈥檚 concern about availability of supply, but the product availability is there and it could be enhanced if there鈥檚 more construction,鈥 he says.
While the market has recovered in recent months, Ward says the aggregates market is still well down on the pre-recession peak. The firm鈥檚 production fell around 50% during the recession, Ward says, with sites mothballed under drastically reduced demand. Some facilities have closed permanently, others temporarily, with the latter able to be brought back on stream to meet demand if required. He stresses 鈥減roductivity gains鈥 at the firm鈥檚 remaining facilities mean AI can operate at 鈥渉igher capacity from fewer sites鈥.
At the moment AI鈥檚 focus is on improving or replacing existing facilities rather than opening new or mothballed sites. The firm is in the process of replacing its Bardon quarry with another close by entailing a total 鈥渓ifetime鈥 investment of around 拢80m. The project will be broken down into packages, including civils packages and some tunnelling work, all going to market imminently. The firm has also completed a massive project to upgrade its Scottish quarry with a new crusher facility and 鈥済lory hole鈥 delivery system, where quarried material is pushed down a 300m vertical shaft to an underground conveyor belt and out to waiting ships.
鈥淭hese projects are a huge vote of confidence in the UK business,鈥 Ward says. His main concern in terms of capacity problems is logistics. 鈥淟arge companies like ours have been able to weather the storm and have cut our cloth accordingly. But haulage companies have had to make deep cuts, and there is less transport available.鈥
Another area of concern for firms is skills shortages, but AI reckons it鈥檚 cracked that too. It has long-running apprenticeship and graduate programmes that are being ramped up. The success of AI鈥檚 apprenticeship programme has attracted admiration from elsewhere in the Holcim group, according to Ward. 鈥淪ome of the other [Holcim] companies are struggling with how to deal with the skills issue. So they鈥檙e reviewing how we do ours,鈥 he says.
The Holcim and Lafarge merger would create a 拢32bn turnover firm with EBITDA profit in excess of 拢6bn, providing it clears the necessary regulatory hurdles. Both firms are selling off assets around the world to appease competition authorities, including Lafarge Tarmac in the UK. But Ward is cagey on the subject and insists planning for post-merger is not a priority for AI, in fact quite the opposite. 鈥淭he merger was announced within a week of me arriving,鈥 Ward says. 鈥淪o my first job was to make sure our people weren鈥檛 distracted. The first key message to get out was that was not our priority for the year.鈥
He won鈥檛 be drawn on what the deal would mean for AI, or the UK construction industry: 鈥淔rom our perspective it鈥檚 business as usual. It has been a long time since the announcement and [the deal] is a long way off.鈥
Quarrying in the blood
Ward has quarrying in his blood. He鈥檚 a lifer, with 19 years under his belt at AI, Holcim and their various forerunners. He got a degree in quarry management and took on various technical and operational roles at AI, including a brief stint in Saudi Arabia, before moving to the US to become senior vice-president of Holcim鈥檚 Western and Mid-Atlantic US business for 15 years. When the AI chief executive role came up 鈥渢here wasn鈥檛 any hesitation at all鈥, he says, given he 鈥渃ame from the business originally and always had retained links with it鈥.
Sustainability is important to AI, and Ward says this goes from the ground up to Holcim board level. This is partly reflected in the Holcim Awards, which in this cycle celebrated everything from solar shading cladding products for towers to the winning proposal to reclaim industrial wastelands in Southern Italy with marshlands, while retaining the industrial landmarks. Holcim鈥檚 board sets challenging carbon reduction targets, 鈥渂ut there鈥檚 nothing to say we can鈥檛 be more aggressive,鈥 Ward says. AI has set up a sustainability board to drive improvements. 鈥淲e want to embed sustainability in all aspects of the business. We have got pockets of excellence at the moment, but we want to spread that best practice across the business,鈥 he says.
That said, there is no escaping the fact that AI鈥檚 operations are energy intensive, for which it is penalised under UK and EU emissions trading schemes. Ward says he feels these carbon trading schemes can be improved, but says 鈥渆veryone鈥檚 on the same playing field鈥. AI offers a special line of aggregates products for eco-conscious customers called the 鈥淟ife鈥 range, which is low carbon and low water.
Ward emphasises safety as a key priority for AI. He has taken it upon himself to 鈥済et to several of our projects, to see that we鈥檙e set up well鈥 in this respect. These projects include the M8 paving job at night, where conditions are challenging: 鈥淲hen you step out on a motorway job at night, where one or two of the lanes are still in operation, it鈥檚 noisy and intimidating. But after 45 minutes you start to lose your awareness of it, and that鈥檚 the danger.鈥
But not everything will be so straightforward. There鈥檚 a job to do to improve the firm鈥檚 relationship with the construction supply chain. 鈥淭he feedback has been it鈥檚 not as easy to do business with us as it was,鈥 Ward admits. 鈥淚鈥檓 going to do my best to address that.鈥 Part of that will be trying to 鈥済et involved earlier鈥 on projects and 鈥渋ntegrating more closely鈥 with its customers鈥 supply chains.
And that too is all part of AI鈥檚 charm offensive. Ward seems to have the credentials and the personality to win the construction firms back around.
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