Case study

Mechatherm secures major contract in the Middle East

Black Country manufacturer and supplier wins contract exporting to Bahrain with UKEF support.

Mechatherm equipment

Mechatherm exports to countries across every continent, but has found particular success in the Middle East. In 2017, Mechatherm was approached to supply aluminium-molting equipment to Aluminium Bahrain (Alba).

Mechatherm needed sufficient working capital to allow it to fulfil the order, so the buyer offered part of the payment upfront. However, the terms of the export contract required Mechatherm to provide an advance payment guarantee, as well as a performance bond from its UK bank as reassurance for the buyer that Mechatherm would deliver on its commitments.

In order to issue bonds, banks usually ask the exporter for a cash deposit, to offset the risk of default on the bonds. This meant that, due to the high value of the contract, it was unfeasible for Mechatherm to be able to both put up the cash for the deposit and still retain sufficient liquidity to fulfil the contract.

Securing the deal

UKEF was able to help Mechatherm secure the deal using our Bond Support Scheme, as Anne Lockett, Export Finance Manager for Herefordshire, Worcestershire, Shropshire and the Black Country explains:

We offered Mechatherm’s bank, Barclays, guarantees for 80% of the value of both bonds under our Bond Support Scheme, ultimately freeing up the cash the company needed to deliver. This was an important piece of business for Mechatherm, and is a great example of how important UKEF support is in helping UK companies take full advantage of opportunities for their business abroad.

As a result, Mechatherm was able to successfully secure a multi-million dollar contract with Alba, significant within the context of a challenging period for the aluminium industry, as well as secure its reputation as a quality supplier in the region.

Mechatherm was also able to increase its headcount, and is now making preparations to continue and grow its exporting efforts in the Middle East, including the planned opening of a Dubai office.

Chairman of Mechatherm International Limited, Andrew Riley, said that:

Without the UKEF guarantee, we simply wouldn’t have had the financial flexibility to afford the deposit required of us and we would have been forced to turn the contract down. We’re extremely grateful for the support given to us by UKEF and the fact that we were able to take on this order has been a great success for the company.

About Mechatherm

Mechatherm International Limited is a leading provider of equipment for the aluminium and other non-ferrous industrial sectors. With an annual turnover of £8 million in the 2016/17 financial year, anticipated to reach £20 million in the next, international sales have been central to the company’s success. Mechatherm has won the Queen’s Award for Exporting three times in its history and in 2017, its Chairman Andrew Riley was chosen as an Export Champion for the Midlands, a recognition of the company’s excellent track record of exporting and willingness to help other fledgling companies do the same.

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Published 20 July 2017