Officials at Americhem Inc. can't see the future it just seems they can at times.
The firm a leading color and additive masterbatch maker based in Cuyahoga Falls, Ohio last year decided to close two small plants in Salisbury, Md., and Elgin, Ill. Making that move before the U.S. economy worsened has strengthened Americhem's four remaining U.S. plants, officials said. The 68-year-old firm owned by the Juve family since 1958 also operates plants in Manchester, England, and Suzhou, China.
At NPE2009, Americhem (Booth W131023) is focused on the following new products:
* nGrain simulated wood grain, to supply the look of natural wood.
* dSperse minibead masterbatches, which can be dosed at rates as low as 0.05 percent or less.
* xCelmax cycle-time reducing additives, to reduce production costs by decreasing cycle time and increasing output.
* vDesign virtual product design, which quickens color and property design time and speeds product development.
* nCore chemical blowing agents, to offer density reduction without compromising strength.
* nDuramax high-performance additives offering performance benefits for outdoor applications.
Americhem executives Rick Juve and David Bouton recently met with Plastics News to discuss the firm's prospects and take a broad look at the plastics market.
Juve, 52, has been with the firm since 1982, and succeeded his father the late Richard H. Juve as president and CEO in 1993. Bouton, 50, joined Americhem in 2004 after a 24-year career with DuPont Co. and now serves as the firm's vice president and general manager for North America. Bouton also is a member of Americhem's executive committee.
Americhem has annual sales of $150 million to $200 million. The firm ranks as one of North America's 30 largest compounders and concentrate makers, according to a recent PN industry ranking.
Q: How has the recession affected Americhem and its product mix?
Juve: We're pretty diversified in a number of markets and some of them have been hit, like auto and construction. Other areas like packaging are slightly off but are doing pretty well. A couple of years ago, we embarked on a manufacturing optimization plan where we went from six facilities in the U.S. to four. At that time, we also expanded capacity at those four facilities and created four centers of excellence. We were fortunate to have done that at that time. So, coming into the recession, we were in a good position from a manufacturing perspective.
The other thing is that we've come out with a lot of new products in the last year in markets like building products, where sales are off, but where we've been doing a lot of work with customers on new product development. We've come out with several new products in wood grain effects and also have introduced a new line of blowing agents called nCore. We're seeing a lot of activity in blowing agents. They offer customers a high level of consistency and also the cost savings they're looking for.
Q: It looks as if Americhem was ahead of the curve in reducing its number of manufacturing sites. What facts did the firm see that led it to make that decision a year or so before things got more difficult?
Juve: We were fortunate to do that. We looked at the long-term future and around continuous improvement activities that we've always had. We've always looked for ways to produce more effectively at lower cost for our customers.
Bouton: We're always looking to provide optimum balance between quick service because 95 percent of what we do is custom products and also doing that in a cost-efficient way.
The two plants we consolidated were, by far, our smallest plants. They were fractions of the size of our larger plants, but they had cost structures that really, in the long term, made us much better off consolidating into four plants. Wheth-er that was great planning or good foresight, we'll take either one.
Q: Has visibility improved with the economy? Is Americhem seeing any signs of its markets turning the corner?
Juve: We've seen a slight uptick over the last month or two, but that's primarily been seasonal demand, primarily from building products. We believe from talking with customers that inventory throughout the chain is very low. We're planning for a long, slow recovery overall.
Bouton: But we had wondered if there would be any construction season this year at all. The good news is that we are seeing a season. Even if it's not what we'd normally see, at least we're seeing some positive uptick.
Q: Do you think that increase is an inventory correction or incremental demand?
Bouton: I don't think, with what's gone on with the credit markets and where the overall market is, that there's any company willing to hold any more inventory than they have to. So if there is an inventory correction, it's been very small. I don't think anyone in the chain has enough confidence yet to restock their own inventory because they think a recovery is coming. Credit markets are tight and earnings are under pressure. So I think what we've seen is a real increase in demand.
Q: Is Asia doing better than North America and Europe?
Juve: We saw last fall that business in China actually had a deeper drop in both percentage and speed that it happened than North America and Europe. Now we're seeing it come back more quickly and stronger the last couple of months. Europe is following the U.S. I believe they're three to six months behind us and it will probably be that way in the future as we come out of it.
Q: There's also been a big impact on markets from changes in resin pricing in the last 18 months. How has this directly affected Americhem?
Bouton: When you have massive changes in resin or oil prices, the only companies that win are the oil companies. It's very hard to get the full amount passed through, or to pass it through in the amount of time before you have to absorb it. The whole value chain, us included, took a hit. We did our part in working with customers to pass it through. Where we were different is in trying to bring technical solutions to help our customers. We'll work with customers and say, OK, we all know that resin has gone from 50 (cents per pound) to 90, but here are some ideas where we can work together to mitigate that. Now it seems we've come full circle and those programs that we put in place are good for our customers and ourselves.
One area that hasn't got as much play is the (price) run-up in pigments and additives, and unfortunately those haven't recovered as resin prices have. We're working with customers on modifying pigment selection on their designs. It's been a big piece of work we've gone through during this time.
Q: Have resin prices caused Americhem to change its production schedule or reduce days of inventory or make changes along those lines?
Bouton: Yes and no. Resin prices shot up last year and then demand fell off the table. So the whole chain was left with high inventory costs and low demand, so what we saw then was a huge inventory adjustment and the pain of bringing higher-cost raw materials through the system. Now it looks like it has worked its way through the system and we're back to a steady situation.
Q: When demand goes down like we're seeing now, are customers more likely to try new products or ways of doing things than when thing are flush? Do they pull their horns in or try something new to turn things around?
Bouton: If you look at construction as an example because that market in the last couple years has been hurt more than anyone what we've found is that customers have put more emphasis on critical programs. They want to know how they can make polymeric products look more like wood. They've been even more active in the area of simulated wood grain.
Another area we've focused in on is blowing agents. That's partly driven by resin prices going up and people asking how they can make their products less expensive and lighter. So there's been a lot of emphasis on blowing agents even through this down period.
The packaging side has been affected least of all segments. The focus there has been on how do you brand companies differently to Mrs. Consumer in the grocery store. [Packaging companies] are focusing in on unique designs and special effects, and they've seen a nice increase in that area. We have some new products that accelerate the molding process. So that market, even though it's not down that much, realizes that Mrs. Consumer is being more distinguishing in what she's buying. So they're asking how do they make their products pop a little bit better.
We've redoubled our efforts to focus on new technology and new product offerings. We've increased our launch rate of new products significantly. This hasn't been in response to the crash of the market, but what we've found is this is the lifeblood of our business. At NPE, we're focusing on these new products, like xCelmax.
Q: Americhem reduced the carbon footprint at its North Carolina plant by using a different kind of coolant. Why was it important for the company to do that?
Bouton: We believe that having a good environmental approach isn't just good for the environment, it's good for business. Ultimately, it reduces cost. We've had an internal team called our green team in place for several years, and they have some very specific goals and targets. As an example, we're recovering or reusing 100 percent of our polymer waste. We want to recycle or reuse all of our packaging material. I just saw a letter come across my office the other day from one of our suppliers thanking us for being a leading customer in wanting them to supply us with reusable packaging material.
We can certainly reduce the amount of energy we put into production and prevent any of our products from ending up in landfills. So we have very specific targets. But again, it's very good progress for the environment, but it also reduces cost. To me, the true definition of a sustainability program is that it has to be good both for your own business and for the environment.
Q: Is this all a matter of effort or have there been technology improvements as well?
Bouton: We've invested capital in technology in North Carolina, plus we're watching what we're doing and being a good steward of what we do every day, so it's a little of both. We try not to get hung up in all the greenwash or green talk you hear every day. That's why we like to have very concrete targets to go ahead and focus on, instead of just saying we're green.
Q: In the overall masterbatch/concentrate market, has supply balanced with demand? Is it close to a balanced market, or is there a need for more consolidation?
Bouton: If you look at the makeup of the North American masterbatch market, a recent study said that of 160 masterbatch companies, 24 of them make up 80 percent of the market's volume. So there's a huge fragmented tail in the masterbatch industry. Looking at what's happened in the last couple years with masterbatch demand down 4-7 percent and resin companies saying their demand is off 20-40 percent and coupling that with what's gone on with tightening of credit, and I believe there's going to continue to be some consolidation. We just can't predict who or where or when.
Q: Is Americhem's own supply/demand balanced now?
Bouton: We're in a very good position for an uptick, whether it happens six months from now or 12 months from now. We're in good shape from a production capacity and a fundamental cost position.
Copyright 2009 Crain Communications Inc. All Rights Reserved.