Interview: Emerging Stronger from Tough Times at Aleris

Q (gtnews): To begin, perhaps you could give a brief history of your company? Aleris was formed in 2004 as one of the world’s biggest producers of aluminium. However, as its website frankly admits, the company has encountered some testing times over its first 10 years.

A (Ellen Cornelissen): Aleris is actually a downstream aluminum processor, not an aluminum producer. We are a global leader in rolled and extruded products as well as recycling and specification alloy production. We serve a variety of industries including aerospace, automotive, defence, building and construction, and transportation.

The company was established in 2004 following the merger of Commonwealth Aluminum and Imco Recycling and its headquarters were established in Cleveland, Ohio, USA. Aleris has grown rapidly over the years through multiple acquisitions, including the 2006 acquisition of Corus which added key sites in Europe, including the company’s Duffel, Belgium and Koblenz, Germany sites – two world-class facilities that serve technically demanding end uses including automotive, aerospace, and defence. 

The Koblenz facility served as the blueprint for the company’s new state-of-the-art aluminum plate mill in Zhenjiang, China, which was opened last year. The plant very recently received Nadcap [the former National Aerospace and Defence Contractors Accreditation Programme] certification; a prerequisite for inclusion on the Qualified Product List [QPL] for major aircraft manufacturers and an outstanding accomplishment for such a new facility.

Since its inception, Aleris has grown from a US$1bn US company to a US$4bn global company. Like others in the aluminum industry, the company had to weather some difficult times following the global recession in 2008. In Aleris’ case, that meant filing for Chapter 11 in 2009 to restructure. The company emerged in 2010 with a newly-developed growth strategy that included further investment in our automotive capabilities and the new plate mill in Zhenjiang, which will supply the global aerospace industry as it responds to significant growth in demand in Asia Pacific. The company’s financial position is strong, and we recently completed the acquisition of Nichols Aluminum, strengthening our position as the number one supplier of aluminum to the building and construction industry in the US.

Global trends are driving greater use of aluminum in a number of key industries, particularly as manufacturers look for more lightweight, sustainable solutions. Given our industry-leading position serving industries like automotive, aerospace, and building and construction, we believe there will be significant growth opportunities for Aleris over the next several years.

I believe that you joined Aleris in 2009, when it was feeling the impact of the global financial crisis most keenly. How had your career progressed up to that point and what was the incentive for joining the group at a time when its future must have been uncertain?

I decided to join Aleris for the simple reason that it was an exciting opportunity in a country that I love, but mostly because I had no doubt after my interviews with our management that the company would emerge from the aftermath of the financial crisis a stronger company that was positioned for success. I was convinced by the optimism and professionalism of so many people.

As someone with experience of working in the banking sector, do you feel that the tough stress tests and other demands being placed upon banks by the regulators are justified?

In my personal opinion some of these tests do not really serve the need for control and still allow for ‘deviations. I do agree that a tighter control is necessary, however, I am not that convinced that the current controls give that security that is needed.

How do you see the business outlook in 2014? It appears to be one of gradual improvement but do you have concerns that some of the mistakes that created the financial crisis six years ago might be repeated?

I believe the global economy is recovering, and we are expecting modest economic growth in 2014.

As we continue to look ahead long-term, however, at Aleris we are encouraged by projections in demand growth for the industries that we serve. In the aerospace industry, for example, the combined order backlog of Airbus and Boeing is over 10,000 airplanes. About 75% of that backlog is for single-aisle aircraft, which use a great deal of aluminum. With our new plant in China, we are well-positioned to benefit.

The outlook for the automotive industry, too, continues to be bright for aluminum. The automotive industry is embracing broader aluminum use as a means for lightweighting vehicles, in order to meet more stringent fuel efficiency standards that are being implemented worldwide. Last year, we opened a new automotive facility in Duffel, Belgium to respond to that growth in demand, and we continue to look at expansion opportunities in North America and China, as car makers in those regions move toward greater aluminum use in both cars and trucks.

As one of the largest suppliers of aluminum sheet to the building and construction industry in North America we remain encouraged by projections for increased housing starts in the US. With the recent completion of our Nichols acquisition, we believe we can capture that growth as well.

As Europe director of treasury, what three issues are currently at the top of your agenda? Would you have answered similarly five years ago, or have some other issues lessened in importance?

Five years ago my main target was to support the company as it completed its restructuring and to set up a solid treasury structure in Europe.

At the beginning of the year the need to finalise our single euro payments area [SEPA] migration was highest on my list and we completed the migration in January. My priorities now are to help the company move toward further standardisation in financial systems and controls, improve the credit and collection structure in Europe to protect our balance sheet and to implement/improve the treasury and credit and collection structures in China.

All in all, some priorities change over the years due to legal requirements, such as SEPA and the European Market Infrastructure Regulation, but the fundamental treasury tasks remain as important as they were.

Would you agree that treasurers are far more likely to be listened to and have influence at board level than they were before the financial crisis? If so, is their influence likely to grow further in the years ahead?

I think this depends on the organisation. I have seen the influence of treasurers grow as more companies realise the impact on the balance sheet a proper treasury management can have. All in all, yes, I do think that treasury has become more important than it was 10 years ago and that the function’s influence will grow, particularly seeing that the current ‘crisis’ in Europe is still not over.

Could you outline your main duties and responsibilities and those of your colleagues in the treasury department? Do you have such a thing as a typical day?

In principle the regular treasury duties: communicate with the banks, cash management (making sure funds are available at the right time and in the right place), determine the cash position and foreign exchange [FX] management, intercompany netting, Sarbanes-Oxley [SOX], (intercompany) loans, optimising of accounts receivable and accounts payable [AR and AP} etc.

Also being responsible for the credit teams in Europe, I spend a good part of my day working with sales and customer services to avoid overdue payments and improve our AR position.

The treasury team is responsible mainly for the day-to-day cash management and for forecasting. We pay a lot of attention to the forecast and try to improve this by working together with all stakeholders.

Have technological advances made your job easier and has Aleris opted for a treasury management system (TMS), or does it believe a module within an enterprise resource planning (ERP) system is more efficient?

Aleris does not use a TMS but we work with our ERP systems (and Excel). We hope by further standardising our systems, soon we can improve our cash management and reporting and have an easier access to global data.

We should probably say a little more about SEPA. Would you say that the concept is good, but the actual implementation has been poor? When did Aleris begin its own SEPA project?

We started implementing SEPA at the end of 2012 and completed on time in January 2014. From a corporate perspective I see some advantages in the reduction of payment cost; however, looking at the implementation cost (and time spent on that), the return on investment will take some time. Also, as a fair amount of our payments need to be executed with specific value dates, SEPA can be unreliable from a timing perspective so we use regular cross border payments.

Lastly, are there any tips of recommendations that you would offer other treasurers and financial professionals – particularly those in smaller companies who may have more limited access to funding?

Optimise your forecast, have a cash pool in place and possibly centralise your AP and AR to have better control. It was once said: ‘Cash is King but Information is Queen’.