Conti aims to capitalize on retreads acquisition

LONDON—Continental Tire Group officials rolled into London Feb. 22 to show off the recent acquisition Bandvulc and explain some of parent company Continental A.G.'s plans for the retread tire sector.

Acquired last summer, the Ivybridge, England-based truck tire retreader is seen as representing a "missing piece in the jigsaw" for the German group—a relative newcomer to this sector.

Embarking on a strategy to offer a "full life-cycle package" to the tire market, Conti opened a retread plant for truck and bus tires at its site in Hanover, Germany in 2013. The $10.6 million, 100-employee facility is designed to link retreading with recycling operations at the site.

Then came the acquisition of Bandvulc—now a wholly owned subsidiary of Continental U.K. Group Holdings Ltd.—in July 2016. The United Kingdom company employs around 460 people and has an estimated turnover of around $75 million, generated largely in the U.K. and Ireland but also from accounts in Europe.

In addition to the retreads production unit in Devon, Bandvulc says it has a large fleet management operation with 1 million wheels, three distribution facilities and five service centers.

As much as 70 percent of Banvulc's sales comes from its service operations, which manages more than 130,000 vehicles. The fleet portfolio covers a large number of major retailers, supermarkets and logistics companies and will complement Conti's own fleet strategy, according to David Smith, Continental Tyre Group managing director.

Bandvulc's manufacturing unit produces around 4,500 retreads per week, using rubber compounds produced by its own BV Mixing unit. The "hot" retreading and casing-management facility at Ivybridge now makes retreads in both ContiRe and Bandvulc brands.

At the London press briefing, Smith said Conti planned to further invest in the Ivybridge plant, in part to increase production of its ContiRe brand retreads in the U.K. He cited the addition of a "unique" robot unit at the facility as a sign of things to come.

"Bandvulc supplies ContiRe products and the plan is to take more production of the latest generation products into the U.K. to fulfil market needs," Arthur Gregg, transition manager, Continental Tire Group, said. "The intention is that most of the volume for the U.K. and Ireland will be produced locally and most of the production for the European mainland will be produced at the Stoecken plant."

The timing of Conti's acquisition could have been better: it was agreed to the week before the U.K. voted to leave the European Union.

Despite the uncertainty created by the referendum vote, Smith said Brexit had actually enhanced the business case for acquiring Bandvulc—which had been on Conti's "to-buy" list for several years prior to the deal.

"Brexit for us was, immediately, a very worrying thing because we did not know where the [Conti] board was going to go with it. But they signed it off… as still the right thing to do," Smith said.

"We are actually, in some respects, better placed for the future [after Brexit] because we have local production in the market for the market. I don't have to worry about where this [UK-EU] deal is going to end up."

Asked about current trends in the truck tire business, Gregg agreed that Chinese brands had taken market share in recent years. But, he said, "over the last couple of years, we have seen [new tire] imports from China declining. This has had a positive effect on the [hot] retread business and we hope that continues over the coming years."

The Chinese decline, Gregg said, was in part because "the price they were selling that was not sustainable, increased shipping costs and, probably customers realizing if everyone goes down to the lowest price then there is no profit opportunity there."