The challenge
Multi-million-pound transactions and lengthy time frames
Mechatherm is a leading provider of bespoke casthouse equipment to the aluminum industry. Established in 1973, Mechatherm began trading internationally in the 1980s and now exports to over forty countries worldwide. It represents a real success story, having won the Queen’s Award for Export three times, and is well placed to shed light on the challenges exporters face and the help available to achieve success.
The logistical challenges are significant when dealing with overseas territories. In a post-COVID world, just getting a face-to-face meeting is more problematic than it used to be, with different quarantine requirements in different countries. It can also be difficult to obtain the right work visas, or knowing who to speak to at an embassy, when your starting point is a Google search. Many companies simply don’t have the resources or expertise to deal with the administrative burden, which takes up valuable time that could be spent focused on other priorities.
There are also financial challenges to overcome. In Mechatherm’s case, when dealing with multi-million-pound contracts and giant multinationals, the scale of the numbers involved is alarming. Mechatherm’s bank wanted it to deposit funds in a security account, and with no large parent company in the wings to provide support, there were huge implications for cashflow. There is also the question of foreign exchange risk. Mechatherm could be sourcing materials from five or six countries for a project in a different territory altogether. Funds might be coming in at payment milestones over a one-to-two- year period. Any move in exchange rates could potentially be fatal for a business, when working with such huge numbers.
The solution
Tailor-made fx risk strategies
Mechatherm received the advice and guidance it needed on exporting from the Department for Business and Trade (DBT). With a named contact who was extremely responsive, they found it was easy to find out who to call in an embassy or what the fast-track route was to get work visas granted. The DBT also helped with applying for funding to partly fund overseas business trips, and the Bank Guarantee Support Scheme helped to free up cashflow and allow Mechatherm to forge more aggressive deals with clients.
Mechatherm also found support for managing its fx exposure through Convera, who provide support with strategies tailor-made for the large- scale, long-term, multi-currency projects that characterized Mechatherm’s business. Freed from the limits imposed by the bank, they were able to hedge much larger amounts, and with no need to deposit funds in a security account, cashflow was much more fluid.
The results
An export success story
Mechatherm now boasts a turnover that is more than 95% driven by exports. There is no question that without exports, the company would have struggled to survive, as the UK market for their products is so limited. Its success in exporting has been helped by the practical one-on-one advice and support from DBT and the foreign exchange hedging expertise of Convera.
I’d encourage every UK company to export. I would tell them not to be scared as there is so much help available. Just picking up the phone to DBT can make such a difference, and most people don’t realise how the department can support businesses with their in-depth exporting needs.
I would also recommend using a specialist dealing house such as Convera. When I think back, our business growth was very restricted by our bank’s policies on currency transactions, and I also can’t believe how much time I used to spend online watching currency movements to safeguard our profit margins. Having a currency specialist partner has made life so much easier.”
Alan Burrows
Managing Director of Mechatherm
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