PAWTUCKET, R.I. — Unlike their counterparts at publicly held competitors, executives at privately owned Teknor Apex Co. don't have to watch the firm's stock price gyrate wildly as their stomachs turn flips and they mentally recalculate the value of their retirement accounts.
They also can make moves that run counter to conventional wisdom without risking a shareholder revolt. This year Teknor of Pawtucket is doing just that by building a thermoplastic elastomer facility and increasing its capacity in both PVC compounds and color compounds, while many of its competitors are hunkering down in a slowing economic climate.
"We want to operate a portfolio of businesses that are all interrelated through common raw material technology," Senior Vice President Bert Lederer said in an April 20 interview in Pawtucket. "We've got diverse markets, but they're all based on core technology."
Teknor expects to see sales growth slightly higher than estimates for U.S. gross domestic product growth of around 2 percent, officials said. The firm does not release exact sales figures, but estimates peg its total sales at more than $500 million last year, with more than $300 million coming from its PVC, TPE and Teknor Color divisions.
Those three divisions have the most direct link to plastics. Its other three divisions are chemicals, rubber and commercial products, which includes one of the largest garden hose operations in the United States.
Based on its own estimates, Teknor would rank as one of the 25 largest U.S. compounders, with a market share of around 3 percent.
New TPE plant
The biggest growth item on Teknor's 2001 agenda is the new TPE plant, a 45,000-square-foot facility in Henderson, Ky., that will create as many as 50 new jobs. The plant will start with two extrusion lines, but will have room to add three lines if needed.
The site will produce Teknor's full TPE line, including styrenic block copolymers, thermoplastic polyolefins and thermoplastic vulcanizates, said TPE business manager Suresh Swaminathan.
In 2000, SBCs accounted for half of Teknor's TPE sales, with TPOs bringing in 40 percent and TPVs the remaining 10 percent, Swaminathan said.
PVC compounding is Teknor's largest single business, and the company is the largest nonintegrated PVC compounder in the United States. Capacity in this area is expected to increase by 15 percent in 2001, largely through improvements made to compounding lines in Brownsville, Tenn., according to PVC business manager Robert Brookman.
Teknor does all of its work in flexible PVC, with the wire and cable market accounting for about half of its sales. The firm also does a good deal of business in medical tubing and other medical applications.
Teknor entered the business in the 1940s when war-related rubber shortages caused a switch from rubber to PVC insulation.
In recent years, Teknor's PVC growth rate has been 4-5 percent, which Brookman says is double the average of the overall flexible PVC market.
Although a number of nonintegrated PVC compounders — including Synergistics Inc. and North American Plastics — have been gobbled up by integrated competitors in recent years, Lederer says Teknor's PVC unit is not for sale. He added that by not participating in PVC resin production, Teknor can avoid some of the industry's pitfalls.
"When PVC is in a down cycle, [PVC makers] bleed red ink," Lederer said. "Resins and compounds are countercyclical, but even a company like Georgia Gulf, that's fairly well-balanced in PVC resins and compounds, has struggled a bit lately. Our cost of resin has to be higher, but we also avoid that down cycle."
Teknor's approach in PVC also is markedly different from that of a major resin maker, Lederer added.
"A resin maker needs high-volume throughput to maintain profit. A compounder has a different focus. We make custom products in short runs."
Color unit expanding
Teknor's color unit will increase capacity 10-15 percent this year by replacing old single-screw equipment with twin-screw lines at several locations. The improvements will be the first major initiative for the color unit since it opened a new blending facility in Jacksonville, Texas, in 1999.
The unit posted annual growth rates of 8-10 percent from the 1980s through the mid-1990s. That rate slowed to 4-5 percent in recent years and could be flat to down 5 percent in 2001 because of a major manufacturing slowdown in the United States, said Alan Bruder, vice president and general manager of Teknor Color.
Bruder said the unit's strength is in color compounds based on PVC, but added that it also does work in polyolefins, styrenics and engineering resins. Wire and cable is one of the color unit's larger markets, with a 15 percent share, while recreation, toys and automotive also bring in sizable pieces of business.
Teknor teaming up
On the technology front, Teknor has enjoyed success with recent alliances with other materials companies including DuPont and Uniroyal Corp.
Teknor and DuPont formed a partnership last year to develop modified polyolefins for caps and closures applications. The deal calls for any products to emerge from the combined research to be marketed by Teknor in the United States and Canada and by DuPont in South America and Mexico.
The Teknor/Uniroyal alliance dates to 1999 and aims to develop new TPV-related technology that Teknor could use in its TPE unit and that Uniroyal could apply to its ethylene propylene diene monomer business.
With 2,100 employees and 10 manufacturing locations, Teknor is far removed from its origins as Apex Tire and Rubber, a tire distributor and retreader that opened its doors in Providence, R.I., in 1924.
The firm was founded by Alfred Fain and his son-in-law Al Pilivan, with their families running the firm until it was sold to Continental Oil (later renamed Conoco) in 1963. Conoco sold Teknor back to the Fain family — as well as to the Baxt family and other investors — in 1967. Teknor has remained private ever since.
Jonathan Fain — Alfred Fain's grandson and son of former Teknor Chief Executive Officer Norman Fain — currently serves as CEO. Victor Baxt is vice chairman.