Specialist
Former SVP US Pipe at Forterra Inc
Agenda
- Forterra’s (NASDAQ: FRTA) operating environment and recent growth factors
- Structural and operational benefits and challenges – Forterra vs competitors
- Forterra’s recent leadership change and ability to rebound share price and revenue
- 2019-20 outlook and potential growth areas
Questions
1.
What is your updated perspective on the piping industry, pulling out a few key themes or trends you think we should be monitoring in the sector?
2.
On the Q2 earnings call, Forterra’s CEO, Karl Watson, said neither water nor drainage are a commodity business. You don’t seem to agree with that sentiment. What do you think he meant by that and why do you disagree?
3.
What are the different demand drivers for drainage pipe and water pipe?
4.
What are your thoughts on current demand and the most recent trends? Essentially, has the market cycle peaked?
5.
You mentioned plastic rapidly taking share. How quickly has plastic pipe taken market share, and do you expect that rate to increase or decrease, moving forwards?
6.
What are some of the differences between concrete and plastic piping? Can you lay out the arguments for and against plastic piping and how it compares to concrete?
7.
What are your thoughts on Forterra’s overall positioning and what are its strengths and weaknesses?
8.
It’s my understanding that decentralised leadership is very important in the industry, in allowing local managers to make pricing and bid decisions and giving them that independence. How does Forterra manage that, and are there ways it could improve?
9.
Forterra had previously been criticised for lacking a pricing strategy. It’s Forterra’s job to dictate pricing as the major player in the sector. Has it currently done a better job of effectively dictating pricing and more formalised strategy in that regard?
10.
With the competitive pressures from plastic piping, are you expecting Forterra to concede in pricing and try and be more competitive on that end? Would you expect its strategy to maintain pricing and focus on having a superior product that dictates higher pricing?
11.
Does Forterra reap any benefits from being the largest player in the market, or are the markets so segmented that it’s hard to realise any true synergies? Are there economies of scale present?
12.
What are your thoughts on the quality of the manufacturing facilities? How does Forterra’s facilities compare to that of its competitors, in terms of the state of the asset bases and automation?
13.
What utilisation rates were the facilities running at when you were there, and how impactful is that utilisation rate on US Pipe’s margins?
14.
You mentioned that US Pipe should be rationalising its footprint. Are there specific facilities that you personally felt should be divested?
15.
Outside of rationalising the footprint, is there anything else in terms of cost that US Pipe has at its disposal, where it could realise additional cost savings?
16.
You have experience working with the previous company leader. How confident are you in the leadership team that is still there that you have worked with?
17.
How should we assess the company’s cost structure in terms of raw materials? Have there been any recent pricing trends in aggregates or scrap, or do you have an outlook on the cost?
18.
How widely could margins vary between a plant that is running at around a 55% utilisation rate compared to an 85% utilisation rate?
19.
It’s my understanding that most of the time, piping is sold directly to engineers and cities, but is there an element of distributors in there? Can you help us understand that value chain, and if distributors are involved, how much inventory do they typically hold?
20.
Is there anything we haven’t discussed that we should be investigating as we’re assessing Forterra’s and the broader industry’s outlook?
21.
Could you summarise one or two key points, as well as one or two strategic objectives you feel the company should prioritise, going forward?
