Even after 85 years in business, Teknor Apex Co. (Booth W92020) is seeking new realms to conquer.
The Pawtucket, R.I.-based specialty compounder recently entered the bioplastics market through a licensing deal with technology firm Cerestech Inc. of Montreal.
Teknor also has realigned its manufacturing operations to better serve its customer base with a lineup of PVC compounds, thermoplastics elastomers and color concentrates.
Teknor employs 2,000 at 12 plants worldwide. The privately owned firm has annual sales estimated at more than $600 million. Executive Vice President Bert Lederer, a 31-year Teknor veteran, recently spoke with Plastics News in a far-ranging telephone interview that covered numerous topics.
Q: Can you talk about steps Teknor is taking to make it through the recession?
Lederer: We had to take some very serious steps and do things that we would have preferred not to do, but that were necessary. We closed a color plant in Lodi, Ohio, and reduced employment throughout the company, as we had less work to do at our plants. We reduced labor and overhead throughout the company, and that was a fairly significant change.
We sold our PVC color business, but with the consolidation of our non-PVC color business into plants in Kentucky and Texas, it's a stronger business. It's a business that we want to regain and build.
We definitely want to be in that business and we've invested a great deal of money in the last year-and-a-half in our Kentucky color plant.
One part of it was relocating equipment from Ohio to Kentucky, but the other part was new equipment and a new layout to drive efficiency and productivity at the Kentucky plant. It's been a time of very carefully looking at what we spend, but also of continuing to spend on productivity improvements and things to enhance our business.
Q: Did the last 6-9 months cause Teknor to change its market focus? Or is the company looking at the current situation as a short-term correction?
Lederer: We haven't changed our market focus. Key markets are still key markets. One addition we've made is bioplastics and biomaterials. That's in its infancy, but there's still an excellent opportunity to carefully invest in that business.
Q: What conditions are you seeing in Asia?
Lederer: The market there has certainly dipped, but it's come back and we hope that comeback is sustainable. We've seen better improvements in Asia today than we've seen in North America.
Our business in Asia is largely related to export business. We don't make products that are directly sent to Europe or North America, but our Asian customers make products [that] go to North America. That portion of the export market has suffered a great deal throughout Asia and, as a supplier to that market, we suffered right along with it.
Q: What impact have drastic changes in resin pricing had in the last 12 to 18 months?
Lederer: That's certainly been a huge focus of attention. We had to change prices and adjust up and down as appropriate. It took a lot of time and energy just dealing with that.
But when you think about resin pricing, you have to think about our suppliers and what our purchasing people had to go through, because a number of suppliers have decided to rationalize product lines. You would go to place an order and the supplier would say, Oh, we're not making that product anymore. So you have to find an alternative, and when you need to find an alternative, purchasing has to spend time doing something that's not really productive. Then when you find it, your technical department has to look at it and in some cases your marketing department has to look at it. So, because of the roller-coaster performance of our supply base, it's taken a huge effort just to maintain supply.
As a specialty compounder, we want to buy a lot of specialty products to make differentiated compounds. And some of the grades that were eliminated were important to us. Here's a time where business is not so good, and we've put a lot of effort and energy just to stay in place, when we want to put effort and energy into developing new products for our customers or develop other customer opportunities.
Q: During a down period such as this current one, are customers more interested or less interested in new products?
Lederer: Both can be true. Certainly we've had customers who said Sorry, we have to focus on our core business, we don't want to look at new products or new opportunities right now. But we've had other customers who might be right next door say that they have to bring new products to their customers, so they want to see new products from us. We haven't reduced our investment in product development or in supporting customers who need product modifications. To run development efforts up and down like a yo-yo is not a good idea.
Q: What makes this the right time for Teknor to enter the bioplastics market?
Lederer: There's a lot of interest in that marketplace, but there's also a lot of confusion. A number of new polymers are coming to market: [polylactic acid, polyhydroxyalkanoate] and a number of other materials that may be based on sustainable materials. We're compounders, so we need to find a good opportunity to work with a number of materials in this space and modify them for customer needs.
Naturally, a polymer has a limited set of performance characteristics, and if someone needs it filled or modified or improved, there's room for compounders. We put in a lot of effort in acquiring a technology that's particularly good with thermoplastic starch and that can be used with a number of different polymers that are entering this space. We think it's a very good match, but we're not stopping there. There may be other technologies we can license or purchase or develop.
Q: Does Teknor have a good supply and demand balance right now?
Lederer: We're well-balanced, and don't see any other changes of that type coming along. We closed the Lodi plant and brought some of that equipment to Texas and Kentucky. With business being what it is, to operate a small number of plants more efficiently was the right thing for our company and our customers.
We can operate two plants for less money than three. We might have to pay a little more in freight, but if we plan well we can meet customer needs. We had a very good retention of [Lodi] customers. It was a matter of being competitive in the marketplace.
Q: One area that sets Teknor apart from other compounders is that the firm has a large garden hose manufacturing business. What are the trends in that market?
Lederer: In the beginning of [gardening] season, when we were talking to customers, a number of them felt this would be a good season for lawn and garden. They felt that in the current economy, consumers were less likely to travel and more likely to stay at home ... [and] spend money on their gardens.
So lawn and garden has been very good for Teknor and for most retailers. It's been a strong season. We've had to increase our garden hose production. We're running weekends and scrambling to meet customer needs. We're meeting those needs, but it takes a lot of effort.
I was talking to a friend of mine in the pool business and he said home-use swimming pools are doing well for the same reason. People are barbecuing in their backyard instead of going out to a restaurant.
Q: When you look at the broader North American compounding market, have demand problems led to the shakeout of companies that a lot of market watchers are anticipating? Or is the market more resilient?
Lederer: We know in the PVC compounding business that one of our competitors [PVC Compounders LLC of Kendallville, Ind., which was acquired Feb. 9 by McKinney, Texas-based Manner Plastics LP] has dropped out of the business and several others are weaker. But we don't want to underestimate the staying power of people in the compounding business, whether it's companies making PVC compounds or other products.
Will others drop out? Will others have to change their business plans a little bit? Perhaps. But we can't predict a significant shakeout or consolidation. Factors are there to make you think it could and should happen, but those things don't always happen when they should.
Q: Is Teknor seeing any signs of an uptick in the economy or signs that it has hit bottom and is turning up?
Lederer: The economy has many segments, and if you only look at automotive, you might not see any signs of an uptick. But if you look at medical, it's pretty stable. Housing and construction are still pretty soft. Some consumer products are pretty strong, but those are more economical ones and not high-end.
My belief is that the economy is non-uniform. It's got some bright spots and some dark spots. I heard an interesting comment from a customer in the packaging business whose focus is on high-end products. They see [premium brands] as much softer than store brands and economic brands in the marketplace. But that's typical.
If you can pick the right product and have the right customer relations, you can see some rebuild. But if you're tied to some of the industries that aren't rebuilding yet, it's going to be tough.
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