We sat down with Alex Aubel, HBM’s former Corporate Controller, now a CFO with Schafer Industries, to learn more about how his role with HBM prepared him for the future, the challenges his new position presents and why he’s so excited about the opportunities ahead.
AA: A great aspect of the corporate controller role at HBM is the fact that we do financial diligence in-house, which gives us an added level of visibility into the company that we’re buying. A lot of companies will use a public accounting firm to conduct due diligence, leading to people at the corporate level not having intimate knowledge of the financials and what is driving profit. The fact that we rely on our team, specifically through the associate program and corporate controller role, to dig into the financials and really understand what’s driving profitability of the business is an effective strategy that sets HBM up well to transition into the business.
What are some of the projects you will be focused on during your first six months as CFO?
AA: The market dynamics of the gear industry, like most industries over the past year, have changed. A big focus during the first six months will be the preservation of our profit margin in a rising cost environment. This requires an in-depth focus on our material, labor and overhead costs. A key project we are currently working on is a full review of our material surcharge arrangement with customers to ensure we are adequately passing on tariff and inflation-related cost increases. I will also be focusing on capital investments across all of our locations.
Schafer is a company that has a lot of opportunity from a capital investment standpoint and the effective deployment of capital in all of our business units. Our capital investment plan, if implemented and managed correctly, will allow us to execute several cost reduction/operational efficiency and several customer/market growth opportunities which align with our strong growth plans over the next five years.
On top of these profitability initiatives, I am working with the finance team to find several process improvement projects across Schafer. Currently, we are implementing a consolidation, budgeting and reporting tool which should provide better visibility into the business financials and streamline the time required pulling key financial reports. I have tasked several of my employees to reassess their processes and figure out how IT can enhance the transactional aspect of the finance function with a specific focus on accounts payable, accounts receivable or treasury. The majority of middle market businesses do many things manually and implementing new IT finance tools to streamline our processes will allow us to scale Schafer as we continue to look for organic and inorganic growth opportunities.
What are some of the challenges you foresee not only for your new role but for the niche manufacturing space in which Schafer operates?
AA: The toughest thing about Schafer is its location complexity. Schafer is a business with three distinct units that require an equal amount of attention and focus. From a logistics standpoint, it is often tough to prioritize travel between South Bend, IN, Roscoe, IL and Columbus, OH. Also, each business has several large projects that need to be executed over the next couple of years. From a management standpoint, I need to stay in-tune with what’s going on at each location and have to rely on the people in my organization to keep me informed about any issues when I am not on site. My coordination and communication with my staff are crucial in addressing this complexity, and this will be something I need to focus on as I transition over the next couple of months.
What about opportunities?
AA: This company has endless opportunities which is why I thought Schafer was such an interesting business during the due diligence process. The gear industry is exposed to several different end markets including aerospace, agriculture, construction, and off-highway/on-highway vehicles. The Driveline business also has several growth opportunities in rear axle offerings for several other potential end markets as well. The organic growth opportunities at our current plant are all very interesting and having Eric Van Rens, a commercial strategy specialist, as our CEO is a perfect match for the business. Finally, on the gear side of the business, the industry is very fragmented and there are several opportunities for bolt-on acquisitions to continue to build a strong network of gear manufacturing plants.
How would you describe the team and culture at Schafer?
AA: Although we are making several improvements across the organization, I feel like all Schafer employees within each business are driven to continue to grow the business. Eric Van Rens has done a great job setting expectations for each business unit and communicates a culture of integrity and accountability. All of our employees have reacted well to this new “tone at the top” and the organization is thriving under the new leadership.
In what capacities will you continue working with the HBM team?
AA: I envision working with Don Roberts as he continues to guide the portfolio company finance departments. Whenever we have large capital project initiatives, the HBM Leadership team is involved in the approval process. Further, we are working on the budget for 2019 as we speak and we will present the budget to the HBM Leadership Team in November. I also see utilizing HR for benefit related initiatives and also would utilize IT for the IT finance projects discussed earlier. Finally, on the deal side, since there are several acquisition opportunities, I envision working with Andy Fulford and the Corporate Development Team.