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Sims Metal Management Ltd.

Sims Metal Management Ltd. CEO and Managing Director Galdino Claro brought more than 30 years of global executive leadership experience in the worldwide metals industry when he joined the company two years ago. Getting his start as a mechanical engineer in Brazil and working his way up the ladder holding different positions throughout the world helped shape Claro into the leader he is today.

“As our careers challenge us with situations put in front of us we develop a different perspective in our minds,” Claro explains. “We learn from that practical process and incorporate those experiences into the way we do business; it becomes our business model, our tool box … I started as a mechanical engineer, moved into the quality control department, new product development, sales and marketing, plant management, small and large, before taking responsibility for a profit and loss (P&L) division. I believe my success on managing my first P&L came from the very good exposure to many different functions in business I had before that point. I think the fact I gave myself enough time to learn and have a good understanding of all business processes and functions and how they are interconnected was extremely important on creating a solid foundation to success.”

Claro worked for Honda as a quality executive for four years; this was his first job after college and post-graduation as an expert in total quality by the International Labor Office in Chiba, Japan. He then left Honda and joined Alcoa, a global leader in lightweight metals engineering and manufacturing, in the late 80s. “I was at Alcoa for more than 20 years,” he says. “Alcoa has many operations and divisions in Brazil, from mining to fabrication. After moving quite a bit among different divisions and functions I assumed the P&L responsibility for an Alcoa division called Cargo-Van. They used to make trucks and trailers in aluminum. That was my first P&L leadership experience in life in 1987. And just the beginning.”

Claro’s success with Alcoa in Brazil opened up an opportunity for him to become one of the most successful international executives within Alcoa over his two-decade career with that company. Claro held various leadership positions after Alcoa Brazil initially in Budapest, Hungary, then in Milan, Italy and finally Geneva, Switzerland where he was based as president of Alcoa Extrusions Europe. “Those were the years of glory of Alcoa’s development in Europe with the acquisitions of Inespal in Spain, Alumix in Italy, British Aluminum in the UK and several others in Germany and Holland,” Claro says. He was responsible to integrate those acquisitions involving multiple locations and different cultures into one company and one way of doing business.

But Claro’s international career didn’t stop in Europe. From there, he served as president of Alcoa China, headquartered in Beijing, for five years and was responsible for the nine joint ventures and fully-owned operations of Alcoa in Asia. Claro came to the U.S. with Alcoa as packaging group vice president of operations during the divestiture of that group, which drove him to leave Alcoa and move into the private equity industry.  He was the CEO of the Metals Group for Heico Companies out of Chicago and the CEO of TPG’s Aleris Americas out of Cleveland. Most recently, Claro was the CEO of Harsco Metals and Minerals from 2010 to 2013, an industrial services company based in Pennsylvania. “Moving all over the world was good both personally and professionally,” Claro notes. “It was a good experience for my wife and I and our son, Pedro, who had the chance to be everywhere and [have] exposure to different cultures.”

As the CEO of Sims Metal Management today, Claro manages the company from New York, N.Y. The company, publicly trading in Australia stock market as SGM.AX, generates more than $8 billion in revenue annually and operates 300 locations worldwide with more than 5,000 employees. “Sims is a fascinating company,” he says. “It’s almost 100 years old and was started by Mr. Sims, an English man as a glass recycling company in Australia in 1917. People who work for Sims have more than just a job. We are a team driven by the same set of values, sharing our passion for recycling and with a unified commitment and determination to add value to our shareholders.”

Inspiring Leadership

In his role at Sims Metal Management, Claro leads by inspiring others. “In large global companies operating with different cultures and markets there is a much greater complexity than one person can handle and therefore the leadership skills shift from business knowledge to people knowledge,” he explains. “The complexity of the business equation is further aggravated when in public enterprises where there are several stakeholders involved and a multiplicity of management processes. You really must shift from doing it yourself to implementing business processes and performance measurement mechanisms that bring transparency to the business process while inspiring people to do what you have done before in previous stages of your professional career, but better than you have done it yourself because they can learn from your mistakes.”

Developing clarity and strategic direction at Sims Metal Management are just a few of the processes Claro oversees. “We have a clear strategy in place that we have developed together, which allows me to have my guys managing their business units while my position is to give them the resources, inspire them, challenge them and support them with what they need to execute,” he explains. “I don’t know if it can be called a management style, but it is my resolution from understanding both the business and the people who manage the business.”

To ensure his methods are working, Claro’s leadership style is driven by results and guided by business principles. “I must admit I am still very process-oriented because of my engineering background,” he explains. “I have a very well defined rhythm to manage a business with discipline, execution focus and an understanding of what we need to do. I developed a long-term strategy with my team and broke it down into processes and objectives that are clearly stated so everyone knows what is expected of them. Transparency makes all the difference sometimes.” 

Profitability Drivers

Sims Metal Management’s business portfolio includes four major business units: metal recycling, electronics recycling, municipal recycling and energy production from landfills. Metal recycling is the largest portion of the global business with electronics following. Its municipal recycling division handles all of New York City’s waste for example separating and commercializing paper, plastic and metals out of its Brooklyn facility.

“Sims is a very solid company, with a strong cash flow, but it goes beyond that,” Claro explains. “Working in recycling brings a special feeling, a special contribution to society by avoiding waste in landfills. It is a feeling that is enjoyed by management and all stakeholders.” 

The company sets itself apart in the industry by recognizing the importance of recycling over the past 100 years, Claro says, and its unique assets and port facilities allow Sims to supply products to customers worldwide. “Logistics are an interesting aspect of Sims and a strong competitive advantage,” he adds. “We trade globally better than any company in our industry without a doubt. Our strong relationship with our suppliers, our ability to search for the right material, process it with the right technology and make the best products to our global customers are among our most significant competitive advantages. But, in reality, it is the quality of our people and our ability to operate in a very culturally diverse global bases that most significantly differentiate Sims in the industry.” 

Sims Metal Management customers include steel mills, smelters, paper and plastics processors as well as high tech companies in the electronics manufacturing industry. Although the Electronics Recycling Group mostly interacts with municipalities and financial institutions to process used computers, the Metals Recycling Group’s suppliers range from peddlers to large manufacturing and demolition companies. 

Claro explains that to maximize efficiencies in such complex and diversified company, Sims Metal Management developed a business model driven by four drivers of profitability to generate attractive returns to shareholders. Its first profitability driver is supplier relationships. “By understanding our suppliers needs and expectations and what motivates them to come to Sims Metal Management versus a competitor, we manage to become the alternative of choice to our suppliers in the market place,” Claro explains. “Creating and maintaining high levels of supplier relationships is key for us. We perform detailed research to understand what makes them different, what services we can provide, as well as technological and financial support. We want them to connect with us in a more solid way than they would with other customers.”

Its second driver is logistics, which Claro says is vital for the smooth flow of materials. “Logistics is extremely important in terms of material flow, from local generation through regional processing material must flow naturally all the way to our well located exporting facilities and domestic bases,” he adds. “We export overseas a lot of what we produce.”

The third driver is operational excellence, “our ability to identify and fast implement best practices among our 300 facilities across the globe is vital to ensure our cost and commercial competitiveness. At this point, our ability to differentiate our products and services to our customers make the fourth driver of profitability at Sims. Typically we spend about $100 million per year on capital expenditures to ensure the continuity of our business model,” Claro notes. “We update technology and sustain what we have. We are looking at new separation technology all the time allowing us to extract more valuable commodities from the materials we process.”

Moving Materials

Sims Metal Management analyzes its material flow to determine the cheapest way to move a product from point A to point B, whether that is by truck, rail, barges or deep-sea large ships. “Logistics is key, as I have said, and every time we can simplify that flow it has a meaningful impact on our bottom line,” Claro explains. “Trucking products can at times costs multiple times more than if you would ship it by rail or water. Therefore, access to both brown and blue water is a must in our kind of business”

There is not a one-size fits all approach to the most efficient and cost-effective way to move materials, Claro adds. “Most of our larger operations are in port facilities close to the sea so we can export more efficiently from those operation” he says. “If you have channels or river access that is also ideal.”

Because a majority of its customers are global while suppliers are in essence local, Sims Metal Management needs to have a similar footprint among its business units with operations throughout the world including facilities located in United States, Europe, Australia, Asia and the Middle East. 

Long-term Focus

Moving forward, Sims Metal Management will continue to focus on developing or acquiring state-of-the-art separation technology. “Separation technology is more important at this stage than even logistics,” Claro notes. “If you look at what we process today, as a recycling company, it’s of course all obsolete materials. The cars we are shredding today are a good example of that, they are 10 to 12 years old and therefore extremely different than the cars we will recycle tomorrow. The amount of electronic components in today’s cars versus the models we are recycling currently are much higher which forces us to be constantly developing new technologies to be able to handle the products that will be recycled in the future. Appliances and computers are another good example of that.”

Electronics processed today are also very different from what is being made today. Sims Metal Management processes obsolete computers and televisions, but Claro says that whoever can extract more of the commodities in those products will be ahead of the curve. “Being able to continuously develop separation technology towards the types of materials we will be processing in years to come is a big challenge for the industry,” he explains. “We develop a lot by ourselves but are also engaged with independent labs and universities to work with us on that front.” 

In terms of leadership, Claro believes he has a well defined and inspiring strategy in place at Sims Metal Management based on which everyone works together in one direction to move the company forward. “Strategic view and execution discipline are equally important for anyone who wants to succeed on managing a global company like ours,” he says. “I have seen lots of companies with very well elaborated strategies getting nowhere because the execution discipline was not in place. On that front, we have developed a very robust project management office (PMO) capturing initiatives from the bottom up, consolidating and managing them to improve our four drivers of profitability. We have a group of 400 projects across the company under our PMO management to improve efficiencies within the company.” 

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