(From the May 28, 2012, issue of Rubber & Plastics News)
LAS VEGAS—Veyance Technologies Inc. is nearing the five-year mark as a stand-alone company, and officials of the non-tire rubber product maker said its fortunes are running high.
Sales levels for 2012 in North America should exceed prerecession levels for the Fairlawn, Ohio-based firm, said Charles Seymour, Veyance vice president and general manager for North America. He also said its private equity owners have backed capital investments to add capacity, encourage engineering efforts and provide boosts for other functions such as IT, ERP and customer service.
“Although the top line continues to do well, we're looking to plow that back into the business,” he said, “and we have very good support from our ownership to make those investments.” Seymour and two other Veyance officials talked about the company and its plans during the recent NAHAD annual convention in Las Vegas.
It was Aug. 1, 2007, when the Carlyle Group closed its $1.48 billion purchase of Goodyear's Engineered Products Division. Veyance, in fact, continues to do business as Goodyear Engineered Products and will continue to do so for the foreseeable future.
But as a company it still is striving to stake its own identity as a producer of a wide-ranging product portfolio that includes industrial, hydraulic and automotive hose; conveyor belting; power transmission products such as synchronous and V-belts; hose, belts, air springs and other lines for automotive and transportation applications; rubber tracks for the ag market; and a variety of other rubber goods for military and consumer uses.
“One of the advantages we have is we play in such a diverse market that the ebbs and flows of individual markets tend to offset each other,” Seymour said. “Then the innovation we bring allows us to grow across the entire spectrum of our products.”
He said 2011 was a “very good year,” and the company is off to another good start in 2012. In 2010—the last full year for which data is available—Veyance posted worldwide sales of $1.79 billion, with $957 million of that in North America.
To support that growth, Veyance has been making capital investments around the globe.
It started with $45 million to expand its conveyor belt businesses in Brazil and Australia. That was followed more recently by roughly $10 million in spending on hose operations in Canada, the U.S. and China.
Its Granby, Quebec, facility got an additional line for hand-built hose. Seymour said it is one of the factories that support Veyance's business in oil and gas markets, which have been big growth areas for the firm.
In Norfolk, Neb., the rubber product maker spent money on increased capacity along with process improvements as the company continues to grow in the hydraulic hose arena. “There are different dynamics in run rates of hydraulic versus industrial hoses, and the difference there has allowed us to get more product out of the Norfolk facility to satisfy our continued success in the hydraulic market,” he said.
And in China, Veyance earlier this year added its first hydraulic hose production at the Aneng, China, joint venture firm it is a partner in that previously made just conveyor belting. “We're looking to see how we can leverage that asset not only from a domestic China standpoint to increase our presence in that market but also to see how we can leverage that on a global basis,” Seymour said.
While the Norfolk factory manufactures the bulk of hydraulic hose Veyance sells in North America, he said it is important to have an alternative hydraulic hose production facility. The company has had some initial success with its sales efforts in China, but still is very early in the process.
“Right now we're tracking to plan from a commercial standpoint and probably a little ahead from a production standpoint,” he said.
Direction from CEO
It's been more than 18 months since John Hamilton became Veyance president and CEO, succeeding Timothy Toppen. And in that time, Seymour said Hamilton has been clear in his vision for the company, both in the short and long terms.
“His clarity of direction has helped us deal with the commodity inflation we saw last year and in focusing our resources to have the most impact in servicing the customer as well as bringing innovation to the end users,” Seymour said. “I can't say we've dramatically transformed the business from where we were to where we are. I think we've been able to pick our heads up and look downfield a little bit more on where we want to be in three to five years.”
Some of the change, Seymour said, is less a function of having a new leader and more part of the evolution of being a spinoff. In that five-year period Veyance has gone through the independence phase, the recession, the commodity inflation of last year, and now is looking more at taking control of its own destiny under Hamilton's leadership.
From a North American standpoint, that means positioning the firm properly across all of its different market categories. With that comes the flexibility to invest where Veyance sees significant growth in both revenue and profit, as well as the freedom to walk away from businesses where there is no strategic fit with the firm's long-term business plan, according to Seymour.
In the past six months or so, Veyance announced plans to close a molded goods plant in Quebec City—a product the company will exit—and a power transmission plant in Owen Sound, Ontario. The production from the Owen Sound site will be picked up by facilities in Lincoln, Neb., and Chihuahua, Mexico, according to Jim Hill, general manager of the company's industrial products business.
But Seymour said Hamilton is bringing a different challenge to Veyance staff members: it's easier to walk away from businesses than to make them work. “One of John's mantras is, 'We're going to work hard, and as a result of working hard, you want to do something great. You want to do something that nobody else has done and nobody else is capable of doing.' ”
And the leadership team Hamilton has put in place at the firm has put Veyance in the position to figure out how to make businesses work, Seymour said. That means if a unit is struggling, the leaders must determine what resources are needed—be that commercial, capital or human—to create a solution.
“When you look at the strength of our brand, of our heritage and of our engineering capability, when focused appropriately, we can and will make a business successful,” Seymour said. “We just have to make sure that we're not spreading ourselves too thin.”
He said it's significant that Veyance will reach prerecession sales levels this year, particularly with the significant cuts in military spending during that time. That speaks well of the health of its other business units.
For example, the auto industry continues to be bullish, so all products related to that—particularly on the original equipment side—continue to be strong, Seymour said. Air springs also are doing well for heavy industry and transportation uses.
Products such as belts and rubber tracks for the ag market remain strong as farmers have more money to buy larger tractors and implements, he said. In addition, the power transmission products business continues to grow, the hydraulic hose market has exceeded expectations and industrial hose—as it relates to oil and gas—has shown “fantastic growth.”
Besides military, the conveyor belting market presents the biggest future challenge for Veyance, Seymour said. Although the firm has had good success in the past and signed on new customers over the past 18 months, the reduced price of natural gas has put some pressure on the thermal coal market.
“As a result, some of the mines have ratcheted back their production,” he said. “This doesn't allow us to grow as fast as we like. We're on plan, but that's one of the concerns that we have going forward.”
And while Veyance remains a relative newcomer in the hydraulic hose business, it will take steps to ensure that it remains as a market leader in such areas as industrial hose.
“Our breadth of products is exceptional in industrial hose, not only in rubber but also plastic, and from small to large diameter,” said Product Manager Ted Henry. “Also, we've got the best distributors in the industry.”
Veyance particularly looks at its ability to be the leader in innovation as the backbone of its efforts to remain one of the top non-tire rubber product manufacturers. And Seymour said that competitive advantage is derived from its expertise in compounding and processing to understanding the end use applications.
It's using these strengths to create new products that breed success—not differentiation simply for the sake of having something different, he said.
To measure that, the company uses a “vitality index,” where it strives to have 20 percent of revenue derived from products launched in the past three years. “We're not there yet,” Seymour said, “but it does speak to the fact that innovation has been part of what's created Veyance as well as what we look to do in the future.”