Specialisation, prudent decisions drive Hexpol

ERJ staff report, By Bruce Meyer

Middlefield, Ohio-The president of Hexpol AB's North American compounding business believes the custom mixing market is anything but a dying industry.

But then again, Tracy Garrison doesn't view Hexpol Compounding as your typical custom mixer. To him, that term is a bit too much of a catch-all phrase that really doesn't properly define his company.

“We're very specialised in what we do,” Garrison said. “We are diverse, which is why we fared better than most through this period.”

Over the past six years, the Hexpol group, which also includes an engineered products business, has seen annual growth in the range of 20 percent. Garrison said that has been accomplished through a combination of organic growth, acquisitions and greenfield expansions.Even during 2008, Hexpol's NAFTA compounding business was on a record pace through the second week of October, he said. Demand started softening in November and was a bit worse in December, but January was flat and February and March showed improvement.

For the full year, sales for the company's worldwide compounding unit grew 24 percent to more than $367.8 million, with operating profits up 14.9 percent to about $34 million, based on average 2008 currency exchange.

But that doesn't mean Hexpol Compounding has been immune to the negative forces in the market.

The company has had an undetermined number of workers on layoff at its North American business since late last year and will close its Magog, Quebec, plant by June 30, putting 60 people out of work. The facility has two 90-litre mixers with total mixing capacity of 16,000 metric tons of rubber per year.

Equipment from the Magog site will be moved to Hexpol's three other plants on the continent-in Middlefield, Mexico and Statesville, N.C. Garrison wouldn't say where the mixers eventually will go, just that some equipment will begin to be moved immediately.

The closing is part of an overall Hexpol restructuring. Garrison blamed the decision on the plant's geography and the fact that 90 percent of its business is automotive-based.

But as difficult as the decision was to make and share with the employees in Magog, he said in the long run it was necessary for the company and it also puts a stop to market speculation.

“We made a decision to say we're going to take this restructuring,” he said. “We need the capacity in the South. We need the technology here in (Middlefield) that we can move immediately from Magog. And we're going to take this one step and be done.”

And while 60 people will be losing jobs in Magog, Hexpol will add 88 positions at its other three North American units, with many of those coming back from layoff, according to Garrison.

In addition, he said the firm has been advertising to add to its technical sales force and is trying to convince four employees from Magog's commercial/technology staff to accept positions elsewhere in North America.

Aiming at upper end

Despite the Quebec facility's dependence on automotive, Garrison said in 2008 no one market accounted for more than 37 percent of total NAFTA revenue and that there were several market niches that were bright spots.

“Some of that is because they are recession proof by nature, and some of that is because we've had 13 to 16 months to 20 months of development effort,” he said.

Hexpol mixes just about any elastomer except silicone, but is by no means a commodity compounder. Its materials end up in such high-end applications as medical, aerospace, highly engineered fabrics, water management, specialized utilities, mining and energy.

Garrison said Hexpol has invested heavily in what he calls human capital. Many on the staff have backgrounds in engineering, quality and development.

“We've all grown up as chemists or engineers or as quality process engineers,” he said. “This industry is a very technical industry. We've got a certain viewpoint toward bringing solutions to the market, and we're very confident and very comfortable in some of those projects. It's a longer-term investment than just showing up, giving a quote and getting a truckload order.”

And the company has been careful to maintain a “right-sized business,” keeping capacity in line with demands.

For example, its Mexican plant started operations in August 2007 with one mixer and later added a second mixer. Garrison said the plant will get a third mixer, but not until it's needed.

Having a global presence as part of the Hexpol family also is an advantage because customers want product consistency wherever they do business, Garrison said. “Having a process worldwide where that customer can move through Western, Central or Eastern Europe, throughout Asia or throughout North America and have a standardized conversion process and chemistry-that's a value in the marketplace.”

From Tire Business (A Crain publication)

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