Key challenge
In the first quarter, Engineered Products' sales decreased by 3.2 percent to almost $44 million and 2.7 percent to $87.4 million in the first six months, compared to the same periods last year.
Schoch said that the key challenge currently facing the Engineered Products segment is that "the automotive business in general is a little softer, and our costs in North America haven't come down as much as they need to."
Within the Engineered Products segment, he said, the defense business is focused on fulfilling key contracts received in 2018 and it is developing the next generation of the firm's low-burden mask. "This will hopefully be completed before the end of the fourth quarter."
The defense business won't remain part of Engineered Products for long. Earlier this year, AirBoss agreed to form AirBoss Defense Group through the merger of the defense business with Critical Solutions International Inc., a Charleston, S.C.-based global supplier of route clearance vehicles, countermine and survivability products to U.S. and foreign military forces.
The deal received approval from the U.S. Committee on Foreign Investment on Sept. 4, and as a result both parties agreed to extend the closing date to Jan. 1.
Upon closing, AirBoss will own 55 percent of the standalone defense goods business. AirBoss will continue to manage the production of military and first response products, including chemical, biological, radiological and nuclear boots, gloves, gas masks and decontamination shelters.
AirBoss' aim is to help build the defense business faster through the merger and develop a broader array of products.
In the first six months of 2019, AirBoss has invested about $7.5 million in its Rubber Solutions segment and it anticipates capital expenditures for 2019 will fall in the range of between $18 million to $20 million before they decrease to levels closer to depreciation in 2020.
Yet, despite heavy investments in its operations thus far this year and the softer automotive sector, the company has remained profitable and recorded earnings and sales increases for the second quarter and the first six months of the year.
Consolidated net sales for the three- and six-month periods ended June 30 increased by 1 percent to $82.6 million and by 1.8 percent to $165.2 million, respectively, compared to second quarter and first half results in 2018.
Net income in the quarter increased to $3.3 million from $2.6 million a year ago. In the first six months, net income rose to $6.2 million from $5.8 million in the same period in 2018.
Growing segment
AirBoss' Rubber Solutions segment was the driving force behind the improvement. The segment's sales increased 6.2 percent to $38.7 million in the second quarter and 7.3 percent to $77.8 in the first half. Gross profit in the segment increased by 23 percent to a little over $7 million in the quarter and by 24.4 percent to $13.9 million in the last six months.
With the heavy investment by AirBoss in the segment during the first half, Rubber Solutions is in the midst of making a number of significant improvements at two of its key production facilities.
Thus far, investments have led to the addition of new mixing lines at the firm's plants in Kitchener, Ontario, and Scotland Neck, N.C.
Annual capacity will be boosted by 20 million pounds at the Kitchener site while the Scotland Neck facility will add 50 million pounds to double its capacity. The line in Scotland Neck was expected to be installed sometime in July or August while the startup for the Kitchener line is planned for February.
With a new color and specialty polymer mixing line at the Kitchener factory, the company can focus on more specialty products, AirBoss President Chris Bitsakakis said.
He said the firm has plans in the works to add another large volume mixing line at the Kitchener complex. At present, the company estimates the line will be installed by the end of the year.
Those additions will support production of a broader array of white and color compounded products as well as provide enhanced flexibility in attracting and fulfilling new business, the company said.
AirBoss is also in the process of adding a new state-of-the-art laboratory and development center in a building located adjacent to the firm's mixing facility in Kitchener. The building will be connected by a corridor to the main building.
Bitsakakis said the project involves gutting and renovating the adjacent building, previously used to house administration offices and a smaller research and development laboratory on the second floor and the maintenance department on the first floor. The maintenance department was moved into the main plant, which spans 1 million square feet, and that frees up the first floor for a reception area and a lobby for customers and suppliers, he said.
Sales and purchasing department offices, along with a large conference room, will be located adjacent to the reception area, he said, and conference rooms will be available for customers and suppliers to work with AirBoss staff members on new business development.
A technical library and seating area will be located on the upper level "for the brainstorming of ideas in a casual setting," Bitsakakis said. In addition to the library, "we are building a new, much larger state-of-the-art laboratory for research and development."
Upgrading the office and laboratory facilities at the Kitchener plant will help support enhanced collaboration with customers and better reflect the company's focus on innovative research and development and proprietary technical solutions, the company said.
