LEMCO: Turnkey Structural Steel Diversification

In September 2018, one of the Western Cape’s most prominent structural steel businesses was booming. LEMCO, a family business established in 1967 by Pieter Laubscher, was busy erecting steel buildings across multiple sites, bringing its well-recognised brand of quality to customers old and new, but always with the same result – complete satisfaction.

Andries Laubscher, second generation family leader, explained that by partnering with clients on an EPC basis and simplifying the construction process, LEMCO could deliver projects at large scale, high quality, affordable cost, and with speedy turnaround.

Over the last three years, the economic climate in South Africa has deteriorated further – fuelled by the pandemic. But LEMCO has continued to position itself as the partner of choice for structural steel. At the same time, a diversification strategy has helped the Andries and Pieter, the Laubscher brothers at the helm of the business, to remain happy with circumstances.

“We have increased our footprint and we now have a 3500m² production area. We have a 250m² sand blasting booth, and 750m² for paint,” Andries Laubscher tells Enterprise Africa.

The company has a portfolio of work dating back decades, listing major brands among clients. The likes of Takealot, Number Two Piggeries, Seaflower Group, GRI, Strickland Industrial Park, Apollo Air, Best Cheer Stone, GoGo Fruit, Alexandershoek Boerdery, and many more have trusted LEMCO to deliver industrial units, distribution centres, agricultural sheds and barns, shopping centres, showrooms, retail developments and more.

The Chalala pig farm from Number Two Piggeries in Malmesbury is a great demonstration of LEMCO’s abilities. Large, robust, weatherproof steel structures that cover vast tracts of land in an agricultural setting is bread and butter for the company. LEMCO was active on a portion of this project in 2018, and it continues to expand three years on.

“The client has kept us very busy and we have probably done in excess of 45 football fields under roof. Right now, everything is finished and we are waiting for the next one. There seems to be no intention on their side of stopping so we are confident on continued involvement in future projects. We certainly deliver excellent service and great pricing, and it seems to be working,” details Andries.

Word of mouth is important in construction, and for LEMCO this has helped the business grow into sub-Saharan Africa, exporting structural steel products far and wide to country’s including Namibia and Kenya, and even Somalia.

The nature of the product from LEMCO lends itself to export. Designed to be simple for construction teams, components fit together without the need for extensive welding and complex engineering.

This concept has also been taken into the property development space by the Laubschers and is providing decent margins.

DEVELOPMENT

“We are involved in light industrial mini units,” explains Andries. “You don’t have to be a rocket scientist to run a project like that and for us, coming from the structural steel industry, we already do a quarter of a property project’s Rand value. The rest, we manage ourselves and use subcontractors. If you take everything together, including what you pay for the land and the work we put in priced as cheap as possible, there is a good margin in it.”

Slowly, the company is building a portfolio which is helping to drive residual income and providing stability during the pandemic where work in the general construction industry was put on hold.

“We have reached a bit of a ceiling and, in terms of personnel, we reduced by around 15-20% over the past year, and I don’t see that picking up soon. For 2020 and 2021, we sustained our growth by starting to diversify and starting to enter the property development market,” says Andries.

“Obviously, we had some declines in work but, all things considered and compared to what I see with other contractors, we are still well off and very blessed. I do see that the market we operate in – the production of steel – is in a lot of stress. We are very blessed with the clientele and market that we service. Probably 95% of our work we do is design and supply. That gives you a little more margin as you sell a bottom line on a project, but when you tender with several other hungry companies for the same work, the guys who only work in that market will die a slow death.

“Steel itself will always be our big cash flow generator but to sustain in the future, development will be a good avenue and that has been proven over the last three years,” he adds.

Asked whether the future holds more of a focus on the traditional structural steel business, built by the family over the past half century, or whether property development will become the core focus for LEMCO, Andries is keen on the idea of consolidation while South Africa rides out the pandemic and refocuses its attention on reviving a critically unstable economy.

“I think we will focus as a core on expanding the property development arm of the business and we will look to utilise key personnel across both sides of the business to tap both skillsets. Then, we will consolidate what we have and look to achieve the average margins we have for the past three years and we can then take that to develop property as cheaply as possible. We have kept everything we have built so far but hopefully in the future we can sell some too.

“When you start to get rental income, it become very addictive,” he adds. “In construction, you have to do something to get something. In rental, you start small and you keep building up and then you get the rental income at the month end; and then you can do another building – it becomes a snowball effect. We generate good profit if the right structural steel job comes along and we have good rental income on the property side. We will continue with this and consolidate what we have. We are a family-owned business and so we are not forced to shoot for the moon. We are able to work hard and be comfortable.”

HIGH-PROFIT, HIGH-QUALITY

Consolidation is a key strategy for most right now, with the uncertainty in the South African economy present before the pandemic seemingly shot into overdrive, businesses must ensure long-term sustainability, and this can mean a period of consolidation before revisiting long-held growth strategies and ambitions.

“We want to sustain our profit by doing less work with less people. Rather than doing 10 projects for a mixed gross profit on each, we would rather do three large projects with bigger gross profit to maintain the same profit at the end of the year. We intend to sustain the profit quantity and not profit margin, but that can mean us facing less turnover in years to come. To achieve that, you have to throw a wide net. We have experience working around the south of Africa and so are happy to price on jobs, even they are further away from us,” says Andries.

The often-essential work carried out by LEMCO has and will continue despite the pandemic, and with demand unabating from all industry sectors looking for a design and supply offering that is focused on quality, now is an interesting turning point in the history of the company.

Using all of the market knowledge held in the company, the decision to diversify into property development – while focussing on key, high-profit, high-quality projects – will drive LEMCO in the future as the company repositions for a post-pandemic environment. One thing is certain, quality and customer satisfaction will remain at the heart of everything this proudly South African company does.

“Structural steel is designed to be simple. That is why we like to work on EPC contracts. We can do the design and fit that design to suit our equipment. My father always said ‘never adapt your labour force to the work, adapt your work to the labour force’. We make things simple and there is not a lot that can go wrong, that is why we have returning customers and a reputation for quality,” Andries concludes.