UNCERTAIN FUTURE

By Brad Dawson, Rubber & Plastics News Staff

August 26, 2002

A string of acquisitions, mergers and sell-offs within the rubber roller industry may be an indication of future consolidation, with fewer companies at the fore.

How many firms end up buying or selling-or being bought or sold-will be based on how they survive the tough conditions brought on by the economy and the race to provide better technology, product and service than the guy down the street.

The last few years, there have been several transactions within the industry, some involving major players. For example, in March 2000 aircraft parts supplier Reinhold Industries Inc. purchased roller maker Samuel Bingham Co.; Finzer Roller Inc. acquired Atlantic Roller Inc. in August 2001; and equity firm CM Acquisitions L.L.C. in December bought American Roller Co.

Russell Foster, president of roll maker Champion Roller Inc., believes the future rubber roller industry will have fewer, larger companies because of mergers and partnerships formed to stave off competitive challenges. Solid small and midsized firms still will exist and grow, but through acquisitions and mergers rather than organically as in the mid-1990s.

Ten years ago, there were more small, start-up companies in the industry, but that trend likely will be reversed, said Dean Armstrong, president of roller machinery manufacturer Roller Equipment Manufacturing Co. Armstrong believes we'll see more acquisitions by larger companies for the foreseeable future.

``The market may have been oversaturated with too many companies,'' he said. ``If you're weak, you go out of business or get absorbed.''

But Lenette Rucker, CEO at Columbia Rubber Mills, believes the recent movement is little more than coincidence. She does agree those firms not keeping up with changes over the past decade won't stay in business. ``We all need to figure out how best to succeed when the economy is tough.''

Many point to technology as the impetus for success in coming years. ``Technology may not be everything, but it's damn close,'' said Tom Ryan, Finzer president and CEO. ``It's basically adapt or die.''

Ryan added there will be a place for ``mom and pop'' shops, but they are falling further behind every year. And the key is not technology itself, but the use of electronics and other applied technology.

For example, Finzer recently increased throughput speed in one department by 15 percent with a modest investment, Ryan said. ``But some can't afford the $20,000 or whatever that upgrade would cost.''

Doug Angel, executive vice president of Perma-Flex Inc., said the future is exciting because of new product development. He mentioned technology in spray-on ceramic covers for rolls that wear longer, and the replacement of steel cores with carbon fiber rolls that are stronger and lighter-weight.

Armstrong said there also is a potential need for replaceable sleeves for rollers as a substitute for removing entire rollers from the machine and shipping them across several states. ``It simplifies the replacement process and makes sense,'' he said.

Roll-covering also will become simpler as time goes on, Armstrong said, an attribute to compounders and coatings producers who have made polymers and other materials easier to process. That doesn't necessarily make his job easier, as customers have come to him and asked for a machine that will work for both rubber and plastics, he said.

``It's easier said than done, but we've been doing it,'' Armstrong said.

The rubber roller industry typically has been regional, with manufacturers serving a relatively small geographical area. Even some of the larger companies with several plants serve only a limited area with each facility.

That shouldn't change, said John Baldwin, former Atlantic Roller owner. ``You need to be in range of the customer. With delivery costs, you have to be cost-effective.''

Foster said the market isn't conducive to overseas business. An upside of that is U.S. manufacturers don't have to compete with foreign companies.

Despite the recent rockiness of the industry and the challenges that threaten to linger even after the downturn rights itself, many roll manufacturers and suppliers are optimistic about its future.

The economy is weeding out companies that can't compete, but those that focus on quality and service will be around for a long time, said Steve Bunecke, general manager of Carolina Rubber Rolls. Firms also have to be flexible, especially when serving multiple industries, he said.

REMCO has built up more international business during the recession, but Armstrong said he's confident business in the U.S. will rebound. Rucker believes the market will stabilize in the near future-as it has in the past-and everyone needs to remember that.

``My outlook is still positive,'' she said.