Q&A with Dr. Willem van Niekerk, Senior Vice President and President, Strategic Planning and Business Development
What is your role at the company as Senior Vice President, Strategic Planning and Business Development?
Our management team understands that our new position as the world’s largest vertically integrated producer of mineral sands and pigment gives us a tremendous opportunity. That’s why we have laid out a bold but achievable vision to double our profit by 2017. My role is to help implement the strategy and identify the value-creating opportunities that will enable us to achieve our goal, as well as to continuously monitor our progress.
What is the company’s strategy?
Our strategy stands on three pillars:
First, profitable growth. We are going to look to expand our own production when it makes sense, and we’re also looking to grow inorganically when value presents itself. We will pursue M&A in areas related to our industry, and we will seek to play a larger role in the emerging-market growth story that will anchor global GDP in the coming years.
Second, we will strengthen our position as a low-cost provider. We will leverage technology and continuously improve our processes so that we can produce high-quality mineral sands and pigment at a lower cost than the broader industry. The resulting margins will flow through to our shareholders or be reinvested in the business.
Third, building a winning culture as we further integrate the mineral sands business into Tronox. Tronox has a diverse workforce comprising different ages, ethnicities, genders and beliefs across multiple continents. Yet we are united by a common set of values that are moving Tronox forward –health & safety, responsibility, teamwork, customer service, results and investing in our people.
Tronox produces more titanium feedstock than its pigment production requires. Does the company classify itself as a vertically integrated pigment producer or as a mineral sands and pigment provider that runs two different businesses?
Tronox is doing something new and unique in the industry. Our model is predicated on capturing profit margins and promising opportunities wherever they exist on the value chain – be it in mineral sands or pigment. While we run two different businesses, these businesses work together to lower our costs and maximize shareholder value. During some periods of the business cycle we will sell certain grades of ores from the mineral sands business to third parties because it’s in the company’s best interest; at other times our pigment business would consume more of those same ores internally to lower the input costs and increase the profitability of our pigment products. Put simply, we will be more flexible in which feedstocks we use and which we sell. Meanwhile, Tronox’s financial performance will improve as mineral sands contracts with third parties – which were negotiated at lower prices – roll off over the next year and we enter into new contracts at market prices.
From a supply-chain perspective, what is Tronox doing to achieve the full benefits of vertical integration?
Management has invested in building a first-class supply chain organization to serve as the central nervous system of our operation. We are going to identify value wherever it lies, and leverage our global scale and flexibility to benefit from it.
Tronox also is setting up a coordinated procurement effort to lower costs across the business. Whereas each of our locations generally operated and competed on its own, we are identifying big-ticket strategic-sourcing items around the world. We will be lowering our costs, for example, by capitalizing on bulk discounts and putting more of our purchases under contract, which leads to less paperwork and ad hoc spending.
You’ve held leadership positions for many years both in technical/operations and strategy/business administration roles. How has your previous experience prepared you for your current task at Tronox?
I’ve had the good fortune to be able to work in multiple capacities for three or four different commodities. These functions have over my career covered the entire gamut of the value chain, from R&D to operations to sales and marketing. I think this has helped me appreciate the vast potential of Tronox’s vertically integrated approach. If we execute on our strategy, we will be far better off than we would have been had the [Exxaro Mineral Sands] acquisition not been implemented – and that’s the case no matter what kind of macroeconomic or supply-and-demand environment the business cycle presents. Also, I have come to realize how critical a well-run supply chain is to the smooth operation of a company, as well as its value-creation potential.
Why has 2012 been a challenging year for TiO2 and why will the market improve?
2012 has been a tough year in the titanium dioxide industry as our customers have worked down rather than replenished their inventories. This process was touched off by heavy buying by end users in 2011 as pigment prices soared upwards. The ‘destocking’ that ensued has been made worse by the weak global economic conditions stemming from anti-inflation measures in China and the debt crisis in Europe.
But as [Tronox CEO] Tom Casey has said, the fundamentals remain strong and we see a pickup in the second half of 2013 that will be amplified by a resurgence in U.S. housing and Chinese GDP growth. Titanium dioxide is an established business and demand for it is not going away. As people in every part of the world aspire – as they achieve a better standard of living – they move to cities or suburbs, buy homes and buy cars. This requires TiO2 as there is no real substitute for the product.