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July 1, 2010

STEELED FOR SUCCESS

Vicki Avril decided as a young woman to “push the envelope a bit” to make something of her life. It worked.

Photo by Andreas Larsson

Not everyone experiences that stunning moment of clarity that shouts out exactly what industry is best for you. Vicki Avril, president and CEO of TMK IPSCO, is one of the fortunate ones, and her story demonstrates how a determination to make the most of your opportunities can lead to a rewarding life of professional accomplishment.

At the time of her epiphany, Avril was CFO of Wallace Computer Services, Inc., a $1.6 billion business- printing company based in Lisle, Illinois. Avril joined Wallace in 2001 after capping a 23-year career at Inland Steel Industries (ISI) by serving as the chief financial officer who helped divvy up its operations— Inland Steel Company sold to Mittal Steel and Ryerson Tull, the service center operator, moved on to independence. Avril oversaw the last financial steps to dissolution of what had been, when the lights were turned out in 1999, her first and only corporate home.

“When you’re with a company for 23 years, that’s a pretty hard thing to do,” says Avril. “I had an emotional attachment to Inland. But I had to refocus to move forward. I took some time off, and then Wallace was there.”

Wallace, like Inland, struggled with mostly undifferentiated products and low margins, familiar territory for Avril. Yet, somehow, she never fully felt the joy of commercial printing. Watching those big rolls of paper feed into the presses at Wallace printing plants, she kept calling them … coils. “That’s what they looked like to me, steel coils,” she says. She still refers to printing plants as “mills.”

What she soon realized was that steel was in her blood. Gaining a reputation as a CFO handy when a company was sold, she was part of the management team that dealt Wallace to Moore Corp. for $1.3 billion in 2003. Then she began looking for work in more comfortable territory. “I really felt that I brought more to the table in the steel industry,” she says. “I like making things and being associated with the manufacturing process.”

The best fit turned out to be IPSCO, Inc., which in 2004 was well below investor radar as a relatively obscure Canadian steel plate and pipe maker (the former Prairie Pipe Manufacturing Co., Ltd., of Regina, Saskatchewan) with its headquarters in Lisle, a Chicago suburb. Her timing could not have been better.

“As a financial person trying to get the stock known better, what better time could there be?” says Avril. “The market was starting to turn back up, they were coming on strong with new assets and the wind was at their back. Our CEO [David Sutherland] was fantastic in speaking to investors. Every time he spoke you could feel the love and excitement. So the stock moved up, and we got noticed.”

Yes, indeed. Bigger fish drooled at the prospect of dining on IPSCO. Merger queries accelerated. A bidding process in April and May 2007 included rapid-fire offers from four suitors. So frenzied was the competition that the winner, Sweden’s Svenskt Stål AB (SSAB), actually bid against its own winning offer of $156 a share simply because IPSCO executives, pausing to ponder the surprising bonanza, went silent for a few hours on the evening of May 2, 2007. Could that mean that another company had wormed its way into the lead? Alarmed, SSAB lobbed in another bid of $160 a share, or $4 a share more than its already winning offer. The total, $7.7 billion, represented a 48% premium to the average closing price of IPSCO common stock during the six-month period ended May 2, 2007. “Ten times the stock price when I first joined the company,” observes Avril. “A home run.”

Once again, Avril would soon be out of her CFO job. Sometimes, though, you make your own job. SSAB asked the impressive Ms. Avril if she would like to stay on and, if so, in what position? She knew that the IPSCO executive who ran the pipe portion of the company’s business planned to retire, so she asked SSAB if they would consider letting her run that business.

“I thought, OK, chances are about 2% that they’ll bite on this, but they asked, so it doesn’t hurt to tell them,” she says. “When we got close to closing the deal, they came to me and asked if I was serious. I said I was, and they said, ‘Let’s do it.’” She became senior vice president for tubular operations. “I was pegged as a CFO that sells companies, but what I really love is running companies, not selling them,” she says. “I love strategy and finance, and bringing in sales and operations puts the whole puzzle together. Right?”

So it would appear. But less than a year later, SSAB asked her to once again sell off parts of a company. In this final deal, SSAB retained IPSCO’s U.S. steelmaking operations, Russian steelmaker Evraz purchased IPSCO’s steel and pipe assets in Canada, and the largest Russian pipe maker, OAO TMK, acquired the U.S. pipe business. Avril was asked to stay on, and in June 2008, the low-key executive became president and CEO of TMK IPSCO.

TMK IPSCO operates 11 plants that make oil country tubular goods (OCTG), other pipe products and steel for its own use in the United States. Total pipe capacity is about 1.3 million tons (metric) annually, with threading capacity for 960,000 tons. A niche player, it holds more than 15% of the U.S. OCTG market, TMK says, but with its ULTRA™ Premium Connections product line, the company says its share of the rapidly growing onshore gas shale market for such advanced products is about 30%. To meet growing demand in the Marcellus gas shale region, TMK IPSCO opened an ULTRA Premium Connections threading plant in Brookfield, Ohio, in May.

Like the rest of the global metals industry, TMK IPSCO and the Russian company’s business in the Americas suffered significantly in the 2009 recession. Revenue in the Americas fell nearly 46% last year to $655.2 million. American sales volume was down 26.7%, to 358,000 tons of pipes sold. OAO TMK lost about $13 million on an operating basis in North America last year.

Avril, a native of Champaign, Illinois, joined Inland Steel’s finance training program in 1976. During her Inland career, she served, among other things, as pension investment manager, corporate development manager, assistant treasurer, treasurer and CFO. She holds a B.S. in accounting from the University of Illinois, where her father was an economics professor, and an MBA in finance from the University of Chicago. She is a director of Greif, Inc., an industrial packaging company.

Forward talked with her in her office in Downers Grove, Illinois.

Were there any experiences in your career that you consider to be formative of your professional views?
I started out in college studying both engineering and accounting to figure out which one I liked better. I knew I had to have a numbers-based study program. Numbers came naturally to me.

When it came to engineering, it seemed during those days that I was the only female in those programs. I ran into friction because of that. You know, like a professor saying, ‘Why don’t you make notes on the board because the class would rather watch you than me,’ or a professor who would post the average male score on a test and the average female score, with me as the only female. I just didn’t feel comfortable in engineering.

In the business program I felt more welcome. I graduated in 1976. I also married in 1976 and moved to Chicago with my husband, and took my job with Inland Steel that same year.

I also was diagnosed that year with Hodgkin’s disease and was told that I had six months to live. It changed my perspective. Before that time, I was going along, doing what you were supposed to be doing. So after high school you go to college. After college you get married. After you get married you get a job.

The diagnosis made me sit back and reflect on what I really wanted to do. I really wanted to be good at what I did. I didn’t want to just bump along. I wanted to stand out and be strong in what I did.

I didn’t accept that I had six months to live. I took the attitude that if you’re not happy with the answer, fight it. Push the envelope a bit to try to achieve what you’d like to achieve.

What did you like about IPSCO?
I joined IPSCO in 2004. I was looking for the right place to be. Remember, there were a lot of changes going on in the financial environment then. Finding a company with a high level of integrity was extremely important to me. Companies that had a higher turnover in CFOs didn’t always have the same standards.

IPSCO was a Canadian company, but it had a Midwestern culture, the values I was looking for and the right kind of personality.

Why did the company move its headquarters to the United States?
They built two steel plants in the U.S., but they were headquartered in Saskatchewan. If you’re going to fly anywhere from there it will take you a full day, way too long to manage effectively.

The other reason was that they weren’t getting enough attention in the financial markets. They had grown into the United States and built assets, but they didn’t really have a marketing department or an investor relations department. You would say the name IPSCO and most Americans had never heard of them. They took what I call a stealth approach to the market. They built market share, and no one noticed. Of course, that changed.

Is the fit between TMK and IPSCO a good one?
TMK is one of the top three pipe companies in the world. Before the acquisition they were a Russian company and we were a U.S. company. By bringing us together, we’re now a global company. We’re thinking globally, and we will market all of our products globally.

We’re also a good fit in terms of product lines. Our seamless pipe is made in diameters of up to 51/2 inches, while TMK’s seamless goes up to 16 inches. We make welded pipe up to diameters of 18 inches. TMK makes welded pipe with diameters of up to 100 inches. Our ULTRA Premium Connections are threaded and made for directional and horizontal drilling of the kind that you would expect in gas shale. TMK’s premium connections are threaded and coupled and ideal for vertical oil drilling and in Arctic conditions.

How would you characterize 2009?
That year was horrendous. Not only were consumption numbers terrible, but the overhang of inventory made it all worse. We were down to a capacity utilization rate of as low as 15%. By the end of the year, we got to the point where the inventories were being bled off. Consumption started to pick up, and that was combined with favorable rulings on trade cases against China. So we had an alignment of factors that were returning us to a normal market. Our capacity utilization rate now is over 80%.

Another factor is natural gas. I think gas drilling in the U.S., if anything, will be strengthened because it is a natural resource that is found here in abundance. It’s cost-effective and it’s cleaner to use than other carbon fuels. As we move toward energy self-sufficiency and being more environmentally friendly, gas is the answer. There will be huge growth in gas lines in the shales. In the natural gas market we have about a 30% share in the market for premium connections.

You’ve had an unusual opportunity to work in a variety of different corporate cultures— Canadian, U.S., Swedish, Russian. How do you compare them?
The differences you see in corporate cultures reflect the histories of the countries. Canadians are very similar to American Midwesterners and tend to be a little bit more forgiving than Americans in their nature. There’s a balance, but the U.S. culture tends to be a little bit more business-driven than Canada’s.

The Swedes I worked with at SSAB were a real mix of old and new business cultures. The older culture was rooted in the past and Swedes are comfortable with that. The new, younger management team was very focused on textbook MBA approaches to business. They speak excellent English. I understood that younger culture very well. They were enthusiastic about implementing ideas they learned in school in the business.

What about the fabled Swedish team building exercises built around the sauna followed by leaping into a frigid lake?
Yes, they would go in the sauna and jump into an ice cold lake. I was in Sweden for that at one meeting. But I did not realize that it was not a co-ed activity. It seemed like an open invitation, but it was actually a male activity. I picked up on that aspect of the culture very quickly.

In Russian business there can be a language barrier. Russians are more formal with their internal communications, and operations tend to be more heavily staffed than in the U.S. You will speak with one person who will delegate down to the next level. Often, this is done in the form of a formal letter. So, business is more structured and less free-flowing than what we are

I have been learning to work with their style, and they have been learning how to work with ours. We have exchanged information about our practices with each other. Our chairman in the U.S. is from Russia, as are our CFO and our head of technology. It is a steeper learning curve for all of us. Some aspects are going smoothly, and others still require some work.

I can tell you one story. Here in the United States we tend to be very informal. We go on a first-name basis. But in Moscow, they use the first name and the patronymic to address a person. I’ve had times when I have called an assistant and asked for somebody by their first name. They will say they don’t know who I’m talking about until I use the patronymic or last name. It’s humorous at times.

Have you achieved your goals you set for yourself?
I really like the position I’m in now. I have the broad communiscope of the business and can make a difference in its success.

In the two years that TMK has owned us, we’ve made huge strides forward in a very difficult environment. We have built the infrastructure we need to be successful. We have differentiated products. Our ULTRA Premium Connections product has matured and has a strong market position. We’re back to normal operating levels and we’re making normal profits again. We have a team that’s working very effectively together.

Our next step, now, is to relieve some of our debt, to build a stronger balance sheet. Then we can begin to grow the company more aggressively.

What about the curse of landing at companies that you ultimately have to sell?
The curse is gone. For TMK, pipe is their life. This is their business. They stuck with us through the tough environment of 2009. They did an early buyout of the second half of our seamless assets (the former NS Group). As a company, we are putting more resources into R&D and product development. This is how TMK evolved into a global company. They don’t have it in their mind to change it at all.