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Adapt or die: BGC boss

NEW business conditions have brought new demands from project owners and the contractors that can...

Andrew Duffy
Adapt or die: BGC boss

That’s the message from BGC Contracting CEO Greg Heylen, and so far it’s helped the company weather a downturn in the mining space.

In an interview with MiningNews.Net, Heylen said BGC had been able to expand through toughening conditions, but new demands from clients were making things harder.

“We’ve been able to grow our business and improve our profit, which is nice,” he said.

“But it’s getting more challenging. Certainly clients are now looking for businesses that can improve efficiency and add bottom line value to their business.”

With new demands come new contracts, and Heylen said BGC had seen a marked change in the negotiation process for new work.

Several challenges have been thrown up in these contracts, with owners now expecting contractors to foot more of the capital bill.

“We’re seeing that companies have less capital available to spend on mining equipment, and they’re asking contractors to fill that gap. That’s a challenge for most contractors,” he said.

Along with the higher capital demands Heylen said contracts had been designed to incentivise productivity and efficiency gains.

“We’ve definitely seen that coming through in terms of changing contract conditions,” he said.

“They’re different styles of contracts that reward the contractor for productivity and innovation.

“Previous to that it was ‘move as quickly as you can and we’ll pay you a reasonable price for it’.”

Like most other contractors Heylen has placed a big emphasis on flexibility. He told MiningNews.Net the companies that aren’t able to adapt could eventually pay the ultimate price.

“There has to be a wholesale correction in the business, and it’s the contractors that make that correction that will survive,” he said.

“Alternatively, the ones that can’t change what they deliver to clients will not survive.”

Despite the tougher conditions Heylen said an eventual weakening of the dollar should provide some cushioning from the downward pressure on commodity prices.

And while BGC has no impact on those indicators it goes without saying they’ll be watching them very closely.

Outside the doom and gloom, Heylen said BGC had been able to leverage a few key strengths to keep growing.

Along with a healthy bottom line the company has doubled its number of employees in two years, boosting its workforce from 1500 people to around 3000.

In part this resilience can be attributed to BGC’s iron ore focus.

On the other hand the company, which counts Atlas Iron, Cliffs Natural Resources and Arrium as its biggest clients, has had to make adjustments in order to stay competitive.

Heylen said the BGC’s strong balance sheet and private ownership meant it was able to make decisions quickly, and that structure had contributed to its good performance.

These positives have given the company a strong enough base to weather another of the industry’s worrying trends.

With owners increasingly looking to squeeze the margins many companies have moved mining services in-house, with the move providing benefits not just on the bottom line but in safety and control.

Small and big operators alike have made the shift; but there remains some division over the pros and cons of the move.

Heylen told MiningNews.Net coping with this new trend again came back to flexibility.

“It’s another challenge for us as contractors,” he said.

“What we’ve got to do is make sure that we can provide a product that’s attractive enough for clients that they don’t continue to do that.

“If contractors can be innovative and work with their clients, I think a lot of companies will continue to contract as opposed to doing the work themselves.”

Looking forward he was confident the company would continue to do well, despite the challenging environment.

And if the next few quarters play out like the last few have, BGC should manage to do more than keep its head above water.

“Don’t get me wrong, there are challenges ahead,” Heylen said.

“But I think the smarter contractors will be able to identify those challenges and react accordingly.”

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