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Interview

with Torstein Erevik , Managing Director, Sverdrup Hanssen Spesialstål AS

30.09.2009 / Energyboardroom

Sverdrup Hanssen was originally created in 1919, and has operated in its current incarnation since 1992, having grown from a local supplier base to a global supplier base…

It sounds fantastic when you say global supplier, and the reason we are a global supplier is because we are an important niche player! We are stocking a broad selection of high-nickel alloys, which we deliver all over the world, and in fact Sverdrup Hanssen ranks among one of Europe’s largest stockers of high-nickel alloys. With only 22 employees and a turnover of NOK 435 million last year, which means that the Sverdrup organization is exceptionally efficient and competent.

Last year was a challenge when it came to the fluctuation of price in raw material. This fluctuation has always made it even more important to have competent people dealing with the market.

Before discussing more about the strategy of Sverdrup Hanssen, could you highlight for our readers which were the main milestones since 1992 that has lead Sverdrup to such high performance?

Of course as we are located in Stavanger, we turned to the oil industry and saw that the materials they needed were hard to get in Norway. That was the start; to find out what kind of materials they actually needed and to establish a stock for it. Back then, it was just a colleague and me taking orders while I traveled the country, and we have been growing ever since.

In 1994, we lacked the capital capacity to expand, and went into cooperation in order to grow, but still we control 54% of the company. The partners taken on were a good step for Sverdrup Hanssen, being well-orientated in Europe with an existing customer base that we could act on. Sverdrup Hanssen has grown to be a very solid company over the years.

Speaking to this growth and turnover, 2005 was one of your most exciting years with 40% increase in turnover, and now you said that 2007 was also one of the best years as well. With the recent economic slowdown, we’ve seen many company change their strategy – how would you asses yours strategy during this time, and secondly, assess your growth in the past year and your ambitions for the next few years?

As I said, Sverdrup Hanssen has a very slim organization and that makes us less vulnerable in these times. We can have the same people employed, and I would say we have very competent people. That’s very important, because we don’t want and don’t have to let them go – we can wait out the market until it turns. The strategy has also been around using more money on advertising and approaching our customers. We just bought another company, called Laholm Stål AS in Oslo, which exposes us to a new niche. Although not very expensive, Sverdrup Hanssen had the necessary funds to make the acquisition. The financial strength is one of the company’s strongest assets.

In addition to this acquisition, Sverdrup Hanssen is also the main stakeholder in Cronisteel, with 75 % of the company, of which you are also the Chairman of the Board. Could you speak behind the rationale of buying Laholm Stål AS, being a majority holder of Cronisteel, and the relationship Sverdrup Hanssen has with both companies?

I felt it was time to move and get a bigger part of the Norwegian market. On the other hand we wanted to keep Sverdrup as lean and efficient as possible, to maintain our competitive edge so to speak. The way to achieve the growth we wanted was to establish a daughter company in Oslo. There where multiple advantages of setting up this new company. It gave us direct presence in the geographical market of Oslo and the surrounding area. It would be a small and easy maneuverable company and we could offer co ownership to key personnel, giving them the right incentive to make Cronisteelwork. The people we brought onboard hold 25% of the shares in the company. Thy had the mutual respect for us and the business idea we presented and gave up top positions in other companies to venture in the founding of Cronisteel. I asked them to join us, and to a large extent put up our fortune in their hands. Last year their turnover was NOK 110million with 4 employees.

I feel that in all businesses one of the main factors is streamlining the organization . What we have obtained now are three interesting companies with a platform for growth with the goal to expand up to 1 billion NOK within the next six years. I think we have all the possibilities in the world.

While you are based in Stavanger, you are naturally involved in the Oil and Gas industry, but also involved in aviation, construction, etc… Could you speak to the importance of the oil and gas sector to Sverdrup Hanssen’s activities, and how you want to see that evolve in the future?

There is a lot of oil out in the North Sea not yet being drilled for because of, what I will call, unjustifiable fear. Hopefully new fields will be opened up and secure the future of the oil business in Norway. There are fields out there that that have been producing for 30 years, and still have 50 years to produce. In the future it will also be very important for us to increase the export. Round the world new offshore-oilfields are opening up and need the materials that we stock. In our business, the availability of the material is a key word. There is a lot of knowledge required. It looks very simple to say that we are selling steel, because everybody can do that – but they can’t. In this business there is a lot of specifications to follow, and a lot of know-how required. The industry has to be certain to get the right steel. We are trying to build up a profile saying: Come to us, we will serve you, you can believe in us.

It’s interesting that you say that the price is a bit the same everywhere, but also that you from China or Australia only to re-sell around the world. What is Sverdrup Hanssen’s added value compared to a lower cost country, like China or even closer in Eastern Europe where the cost of labor is much lower?

The important point is that the cost of products are more or less the same because who produces them is what counts. It is a qualified work that can produce them. If for example, NOK 100 both in Europe, China or Russia, it’s the trusted one where the clients will go. The price of raw materials fluctuates. Therefore, experience is crucial to know when to buy or not, that will give you an advantage compared with our competitors. Ultimately, knowledge separates competitors, and I would say that Sverdrup Hanssen is sitting on a lot of knowledge.

You spoke earlier about how your business is global, but you have not yet set up an office outside of Norway. What is your strategy towards internationalization?

The strategy is to use the internet as the new way to communicate. Of course if there is a huge market where we really need to obtain market shares interesting enough to place somebody there we will. Although, I think we can, as I said, expand up to 1 billion NOK without having to do this, and just by keeping the organization very slim – and the bottom line not slim!

You mentioned that you’ve been doing many things to increase the awareness of Sverdrup Hanssen not only in Norway, but internationally, so how do you assess the visibility not only in NCS, but around the world?

I think they see us as a supplier they can trust and we have in our quality manual a quality survey that we send to our customers, and they give us ratings for how good we are. There we can see what to improve. There is always room for improvement, of course, but that gives us an indication as to how they see Sverdrup Hanssen.

You said that in the next five to six years Sverdrup Hanssen has the platform to achieve 1 billion in turnover; could you give us a road map of the next steps toward this?

The first step, if we were going to open a foreign office, would be Scandinavia, probably Sweden, where we know the culture. We will see as the way goes how to approach other markets. To have a representative in another country does not necessarily mean that you have to place a stock there, because within two or three deays you can reach most places by air. The important thing is that you can deliver the right material by a shut down, very quick, than the price does not matter that much a shut down is when you stop production for doing maintance.

What is your final message, not just to the NCS, but also to Houston and all over the world where oil and gas decisions are taken?

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