by Mike McNulty, Rubber & Plastics News staff
When the crashing economy caused massive problems across virtually all markets, most urethane processors were able to hunker down, continue to fill their customers’ needs, keep the lines of communication open for new business opportunities and wait out the storm.
They could do it because it’s a diversified industry — serving mining, medical, marine, aerospace and numerous other industries — and US urethane companies are generally quite innovative when it comes to product development, according to Michael Katz, president of Port Washington, Wisconsin-headquartered Molded Dimensions Inc. and current president of the Polyurethane Manufacturers Association.
The same also held true in Canada, said Scott Woodworth, president and general manager of Calgary, Alberta-based Duraprene Industries Ltd and president of the Canadian Urethane Manufacturers Association.
“Like the rest of the world, manufacturing, including the polyurethane industry in Canada, felt the brunt of the economic downturn,” he said. “Talking to processors and suppliers alike, average sales and production were down between 20 and 40 percent over the last 18 months.” So far, 2010 has been better, but both officials are cautious about the prospects for the remainder of the year. Each, however, said there should be some improvement over 2009.
“This too shall pass — everybody’s scrounging but because most (urethane companies) have no debt, they’ll survive,” Katz said. “I think the industry in general is looking to be slightly up from the previous year.” Woodworth said there is scattered optimism within the Canadian sector that the recession is subsiding “and that production and supply will resume, albeit at a very slow to moderate rate.”
Debt is key factor
“One thing that most of us have in common is that in general, we have low debt as an industry group — so when there are opportunities to compete with other materials like rubber, plastic or metal, we can do it because we can invest in the project,” he said. “This certainly helped all of us weather the storm.” Woodworth said smaller companies have an advantage because that allows a firm to develop a closer, interpersonal relationship with customers and suppliers.
“This provides better communication through all channels and a faster response to processor or customer requirements.” Another factor that played a role in Canada was the country’s banking system.
Financing in the country slowed but didn’t stall as it did in other parts of the world, he said.
Duraprene, for instance, faced no disruption in its financial services “and we were able to borrow money for some equipment at the peak of the financial crisis.” Very few polyurethane product makers in the US went out of business or left the industry because of the 2009 economy, according to Katz, but the number of processors in Canada has declined in the last 18 months, Woodworth said.
“This is not necessarily a bad thing. … I would call it more of an ‘industry correction’ that has been weeding out some of the mom-and- pop shops that long term are bad for our industry,” he said.
Market opportunities
While 2009 may have been a difficult year for many businesses to boost sales, it also was a year of unprecedented opportunities to add talent in sales and engineering, as well as a chance to capitalise on new equipment at discounts, according to Hank LeMeur Jr, president and ceo of Superior Tire & Rubber Corp.
The Warren, Pennsylvania-based industrial tyre maker had cut its workforce in March 2009, but was able to spend time and money on training the underutilised employees that remained, he said.
Superior — which designs and manufactures solid polyurethane and rubber industrial wear products — has since brought back a number of workers it laid off and added higher level technical and sales posts as it overcame the severe economic conditions.
LeMeur said the material-handling equipment, infrastructure and road-building equipment markets came to life in the first quarter of 2010 with bookings increasing by 30 to 50 percent.
“We are seeing this in both OEM build schedules as well as the aftermarket,” he said.
“Fortunately, we are extremely diversified. While the markets mentioned have been strong, some of our other markets have not rebounded as dramatically; but no markets are continuing to drop.
“The Class III industrial truck market (motorised pallet trucks) performed relatively stronger than the other industrial truck classes due to its heavy presence in food distribution.
On the other hand, general purpose counterbalance trucks (Class I) and counter-balance reach trucks (Class II) used in big-box retailers dropped precipitously and have been slower to come back. These are the major markets for urethane tyres.” Superior, which is a member of the PMA, relies heavily on its innovation, and because it has a strong technical department in place, it introduced several products during the downturn, including its XL-AC tyre line and height adjustable shock absorbing caster line, both targeted for use in large warehouses and distribution centers.
The polyurethane product manufacturers and suppliers who gathered at the recent Polyurethanes Manufacturers Association meeting in Las Vegas remain upbeat, if cautious, when assessing the current market and future prospects in 2010. For example, Jamie Schmidt, vice president of manufacturing for USA Drives Inc. in Burr Ridge, Illinois, said that it’s hard to tell if the current uptick his company and others have experienced will continue.
In 2009, Schmidt said, companies did not move as much food as in the past, affecting sales of USA Drives’ urethane and silicone belting operations.
Industrial Wheels Inc. in Willoughby, Ohio, has experienced a surge in orders this year, president Walter Klevay said. “I think the rise will continue,” Klevay said, but admitted he’ll remain cautious until he’s convinced it is sustained growth.
And that’s the key, according to Corey Barge, president of Axiom Industries Inc. in Tualatin, Ore. He said inventory levels have become low for many companies, so naturally orders are up over last year.
Axiom didn’t have as bad a year in 2009 as others because it’s a diversified custom products company that produces goods for a number of markets, including the roller and recreational industries. The business it did lose last year has returned, he said.
Barge would prefer to see steady growth, allowing companies to adjust accordingly, rather than experience a roller coaster ride; therefore he’s hopeful the increase in orders will remain consistent. If not, then companies could be in trouble.
Paul Fitzgerald of Birch Vale, England headquartered Dow Hyperlast, said he was glad to see 2009 come to an end and his company has experienced improvement in 2010. Like Barge and other PMA members, he said sustained growth without dips would be a welcome change from last year.
Dow Hyperlast, which is part of Dow Polyurethanes, specialises in cast elastomers for the marine, engineering resin, oil and gas pipeline, and automotive industries.
Membership in the PMA rose about 5 percent last year, its president Katz said.
PMA and CUMA members get strong support from these associations.
Milwaukee-based PMA “is a driving force of knowledge for the industry,” Katz said, through networking activities, mainly at the annual meeting, a strong website, newsletters and Facebook and LinkedIn.
In addition, the PMA is the industry’s voice on safety and environmental matters, which can have a big impact, he added. The organisation monitors events by state, region and country on exposure standards and chemicals.
As the industry moves forward in 2010, Katz, LeMeur and Woodworth, along with several suppliers, figure innovation will continue to play a key role throughout the remainder of 2010 and beyond. That and superior product performance give urethane companies an edge now and in the future, Katz said.
DURAPRENE: STRONG POSITION
Key initiatives made by Duraprene Industries Ltd in 2009 have had a significant — and positive — impact on the firm as it emerged from the 2009 economic downturn.
The Calgary, Alberta-based manufacturer of a variety of urethane products last year purchased a small competitor, Smart Tech Rubber; absorbed part of the business of a urethane goods maker that closed its doors in Canada; and invested in new equipment at a fraction of the original cost.
Both acquisitions “opened up new markets for us and helped us through the lull (in the economy), which hit us later than it did other provinces in Canada,” said general manager Scott Woodworth, who also is the current president of the Canadian Urethane Manufacturers Association.
“In the long run, they strengthened us,” he said.
For instance, the Smart Tech purchase helped bring a substantial customer into the Duraprene fold. That client was a key reason for the acquisition, he said.
The purchase of the small product maker included some equipment, moulds, “and a lot of business in new areas for us, areas we never considered or approached before,” he said.
Last year was difficult for Duraprene, with sales dropping about 25 percent, Woodworth said prior to the recent CUMA conference in Las Vegas. But the firm viewed the economic downturn as an opportunity, which is why it made the moves it did.
Duraprene has had a recent surge in orders.
“We are extremely busy, with activity coming from all sectors of the business,” he said. “We have actually hired four new production staff, which hasn’t happened in close to two years.” The firm has a workforce of about 22 working out of an 11 000-ft2 plant in Calgary, where it moulds custom polyurethane parts for companies in numerous industries, including oil and gas, mining, military, recreation, communication and transport.
Duraprene has been successful over the years because of four key elements, Woodworth said: creation of and investment in a working culture where employees want to remain long term; development and maintenance of a strong working relationship with quality suppliers; establishment of a loyal customer foundation through continued commitment to service and quality; and diversity.
RISK PAYS OFF FOR STATEMIX
StateMix Ltd took a calculated risk in the midst of the 2009 recession and moved to new quarters, doubling the size of its production plant.
The polyurethane equipment maker needed the additional room because the 20 000-ft2. plant it occupied with State Industries Ltd, a separate sister operation that manufactures cast urethane parts, lacked the space it needed to grow, according to Payam Towfigh, president of both Winnipeg, Canada-based companies.
So Towfigh found a site nearby that spanned about 40 000 ft2 and set up the two businesses in separate quarters.
“We saw the slowdown coming in mid-2008, but we still went ahead and expanded,” he said, because StateMix felt it had to make the move.
The company needed more space for research and development, manufacturing, engineering, spare parts inventory and its new line of Vortex motors, Towfigh said, adding that it also invested in machinery and new products.
In addition, the equipment maker wanted to plan for future growth and more additions to its expanding product line, he said at the PMA conference, held recently in Las Vegas in conjunction with the CUMA meeting. StateMix is a member of both organisations.
While many businesses fared poorly last year, Towfigh’s companies held their own because “we’re not heavily leveraged so we’re not as exposed” during economic downturns, he said.
That made it easier for him to secure the funding needed for the expansion.
Smaller polyurethane product makers and suppliers fared reasonably well in Canada in 2009 despite the poor economic conditions, he said, because the majority don’t have a lot of debt.
“Most just tightened their belts,” developed new business and waited out the storm.
He said StateMix remained on its present course throughout the year. “I didn’t want to be too reactionary,” he said. Because of that, the company made one or two layoffs and kept the overall work force at about 50.
StateMix has been a primary player in the polyurethane dispenser and auxiliary equipment field for the last 10 years, serving markets in the US, Canada, South America, Europe and India.
State Industries makes durable cast urethane parts for a variety of industries, including automotive, mining and agriculture.
