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August 07, 2011 11:00 PM

Repi investing in US plant as sales grow

Simon Robinson
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    Report by Liz White, UT/ editor

    How do relatively small suppliers cope during periods of surging raw material prices - especially one dependent on polyols, where prices have doubled over the last year?

    This ought to be a quandary for Repi, which specialises in materials to colour polyurethane foams. But Michael Rath, manager of Repi's PU division, is relaxed about prospects.

    "We use polyol as a carrier in our formulations," Rath said. The company buys it by the truckload. And while the total Repi is paying for polyols this year will be about double what it paid in 2010, it is strong enough to cope well, Rath indicated.

    In fact, Repi is strong enough to be investing $5-6 million in building a new plant in Gastonia, in North Carolina, and also spent €1 million ($1.45 million) to expand the laboratory at its headquarters in Lonate Ceppino, Italy.

    Rath agrees that raw materials pricing is an issue: "Of course it is." But "If you are in a very good position, if you are strong in the market, if you are, from the financial point of view, really healthy, you can accept this for a time," Rath added, in a 17 June telephone interview.

    Since Repi, which sees itself as the market leader, has seen sales this year "already 25 % ahead of last year ... of course it is much easier to cover this cost," Rath said.

    Pricing pressure will result in some consolidation, he agrees. "Yes, we see this. I cannot say how many competitors, colour suppliers will disappear." But Repi will be strengthening its position, Rath said.

    The colour business consists largely of small­ medium private enterprises, with Repi having about 25-30% of the PU colour paste business in Europe. "Roughly 65 % of our sales are related to PU ... it is the main application and we have done colours for this since the founding of Repi in 1973," said Rath.

     

    Acquisitions are possible

    From a strong sales situation currently, Repi expects further growth. Rath pointed out that, "In 2009, while the polyurethanes sector, for example, decreased in volume by roughly 25-30% overall, we lost only 13 %  of our turnover. ... In 2010, the business increased 33 % and, even in 2011, we have an increase of roughly 25 % already, compared to the previous year."

    Rath also revealed that, "we are focused on organic growth, but we are also open to small acquisitions."

    Unlike many polyurethane suppliers, Repi does not currently plan to set up in China. "In Asia, it is very difficult to convince people to buy a quality product if it costs more than a local one," he explained. For a small, private company, "it is a risk to invest in this region."

    The major PU suppliers, the big groups, are "obliged to go to China, in order not to lose contact with the market," but for a company such as Repi, "I think it's better to stay where you are convinced that you can do business."

    In Asia, for colour pastes, the priority is price, said Rath. In the Americas, price and quality are equally important, while in Europe, quality and service in supplying pigment pastes is very important, he emphasised.

    There are "other growing markets," where Repi may invest, he said, not specifying where.

    Nevertheless, Repi's products are used in Asia, simply by a different route. Global customers with operations in China will buy materials from REPI and ship them to Asia.

    In the US, in contrast, Repi is already selling high volumes to large and small customers, who demand short delivery times. Having a plant there is vital - and it also helps avoid variations in exchange rate, Rath added.

     

    Strength in formulating

    Repi feels its machinery, technology and raw material quality allow it to make products in a better way than its competitors.

    "We're investing a lot of money in lab equipment to check the fineness in terms of particle size, colour strength, viscosity. We also blend in special additives to our colours, to be better in performance," said Rath.

    In a business with a lot of competitors, Rath said that for Repi its recipes, its formulations - "this is our strength. We have really a good team in our lab - roughly 14 skilled people, thinking about  better formulations."

    Customer support is also a crucial aspect: "We have very experienced technical staff going to the customers, analysing the whole process and finding solutions."

    Having doubled its lab space, Rath noted: "We have some new developments in our pipeline and some new products," adding that it is too early to announce more details.

    "We are developing some new colour formulations, special additives to improve the properties of the end products," he said.

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