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Bravura
Performance
Through
acquisitions and internal growth,
Performance Fibers is on the fast track
to becoming Richmond's next $1 billion
company - and the region's largest
independent specialty fibers
manufacturer.
by
Peter Galuszka
Imagine
a scene a few years from now: A massive offshore oil drilling platform floats in
what the oil patch calls “ultra-deep” water off the coast of Angola in
southwest Africa. With crude oil prices approaching $100 a barrel, drilling for
oil in the ocean floor more than a mile down is now economically feasible but
also technically challenging.
The
rig, a masterwork of offshore engineering, carries a price tag of $1.5 billion.
Holding the precious platform in place are thousands of feet of mooring cables
strengthened by high-strength fibers. The polymer-based strands can handle the
weight of the long lines of cable better than steel-based ones used commonly in
shallower waters. Those fibers are developed by Performance Fibers, Inc., a
specialty fiber company, headquartered in downtown Richmond.
Today,
Performance, along with a group of graduate students at Virginia Commonwealth
University and the University of Richmond, is studying just that possibility.
The team, which includes VCU business students and UR law students, is on a
marketing hunt for global sites where ultra-deep offshore drilling might open
sales opportunities for the maker of high-tenacity fibers. Besides the west
coast of Africa, other promising areas include the Gulf of Mexico, the North Sea
and tracts off Asia and Australia.
“Offshore
mooring has been a huge industrial segment and is growing rapidly,” says Gregory S.
Rogowski, president and CEO. Once an obscure unit of the giant Honeywell
conglomerate, Performance Fibers is transforming itself through internal growth
and global acquisitions into the largest independent player in high-performance
fibers based in the Greater Richmond region and doing business globally.
The
company, which manufactures industrial fibers for use in products as varied as
tire cord, safety belts, high-pressure hoses, timing belts, marine and industrial
ropes and fabrics for awnings and tarps, moved its headquarters from a manufacturing facility in
Colonial Heights to downtown Richmond earlier this year. The
company had considered Raleigh as a candidate for the headquarters because
Performance has a manufacturing facility and a research laboratory near there.
But the company decided upon a headquarters location that was separate from its
factories.
“Downtown
Richmond is a great place to do business and we wanted to be close to the legal
and financial community as we grow the business,” Rogowski says.
Moreover, Performance Fibers’ 40 or so H.Q. employees liked the Richmond
region, and Rogowski didn’t want to burden them with a corporate transfer while
the recently spun-off company was on an acquisition and sales roll.
Performance
Fibers is a perfect fit with downtown Richmond, observes Gene Winter, senior
vice president of the Greater Richmond Partnership, Inc., the economic development
organization for the Richmond region. Not only is Richmond a major center of corporate headquarters -- a dozen Richmond-area companies are ranked
in the Fortune 1000 -- but downtown has large clusters of law firms and equity
financiers that are accustomed to conducting deals on a global basis. Says
Winter: "Performance Fibers can find nearly all of the professional talent it
needs to support its growth within a five-minute walk!"
Since
parting ways with Honeywell in 2004, Performance has been
purchasing manufacturing capacity around the globe. In March of 2005, the firm
added a second manufacturing plant in Kaiping, China, doubling its capacity
there. A half year later, the firm acquired Diolen Industrial Fibers, which
operates two manufacturing facilities in Alabama. And just last month,
Performance announced a letter of intent to buy the European operations of
competitor INVISTA Resins & Fibers, adding production and research
facilities to complement their existing operations in France. “Through
acquisitions and internal growth,” Rogowski says, “we’ll round out our
portfolio and serve our customers better.”
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Fiber operations
in Kaiping, China |
The
buying spree plus organic sales have boosted privately held Performance’s
revenues from $400 million at the time of the spin off to $600 million today.
Rogowski says the company should approach the $800 million level by the end of
this year as still-secret acquisition plans unfold. His goal is to reach sales
of $1 billion by 2008.
Rogowski
and deputies attribute their quick, nimble performance to ownership by Sun
Capital Partners, a private equity firm based in Boca Raton, Fla. Sun, which
manages $3.5 billion in capital, invests in diverse firms from drug stores to
cranberry juice producers. If the firm spots a good opportunity, it provides
funding without waiting for extensive approvals. Sun’s website notes that it
routinely handles corporate acquisitions in 30 days, a remarkably short time.
“Sun
has been absolutely fantastic,” says Rogowski. “It really shows the
difference between a privately held and a publicly held company.” When
Performance was a unit of Honeywell, he says, “We had frictions and a lot of
bureaucracy to deal with. Sun has eliminated all of that, and that has become a
huge competitive advantage.” Adds Alan P. Giangregorio, vice president for
sales and marketing, “One of the beauties of Sun is that we are not at the
beck and call of shareholders from quarter to quarter.”
With
Sun Capital’s support, Rogowski has adopted a “flat” management structure
with a lean headquarters staff overseeing factories serving regional markets.
That represents a significant departure from the not-too-distant past.
Performance’s roots date back to Allied Chemical, an industry behemoth that
started a fibers group in the 1960s and operated a large plant in Hopewell. In 1971,
Allied opened a performance fiber plant in Moncure, N.C., followed by a fiber
plant in Longlaville, France.
Along
the way, Performance introduced a number of special industrial fiber products
including DSP fiber, one of the first high-modulus, low-shrink fibers, and PEN (polyethylene
naphthalate),
used in fibers, packaging and film that Rogowski says has great promise for the
future.
A
period of some uncertainty followed the 2000 merger of Allied Signal, Allied
Chemical’s successor, with Honeywell. The corporate giant put much of its
operations in the Hopewell-Colonial Heights area on the block for several years.
When
Honeywell spun off Performance Fibers, it conveyed about $40 million worth of
technologies that the new firm is steadily adding to. About half of the
company’s revenue is in industrial applications, including specialty,
high-strength fibers used in mechanical rubber goods, automobile seat belts,
conveyor belts, automobile timing belts and rope, such as SeaGard Finish, a marine
overlay finish for offshore mooring.
The
other half comes from tire applications. Performance Fibers supplies fiber for tires
on all types of vehicles and works with all of the major tire makers, including
Goodyear, Michelin, and Bridgestone- Firestone. Performance Fibers employees, for
example, are in regular contact with Goodyear’s technical center in Akron,
Ohio, making trips back and forth to help coordinate changes in tire designs.
Tire
sales are playing a big role in China, where Performance Fibers recently bought out
a minority share of its Chinese operation. The company expects the sales of
tires to take off when China’s nascent automobile industry ramps up to large
production, says Mark Tallent, vice president for technology. When that happens,
demand for Performance Fiber’s polyester fiber should surge. The company also is
looking at expanding in India, where there is also a burgeoning demand for
tires.
The
recent agreement to acquire INVISTA plants in Germany represents the flip side of the
China strategy. In China the idea is to produce low-cost items with local
value; in Germany, the intention is to leverage advanced technologies with
limited local applications by taking them global.
Meanwhile,
Performance Fibers is building ties with North Carolina State University and Virginia
Tech, which both have strong laboratories dedicated to creating new polymers and
fibers. The company also intends to upgrade its links with foreign universities.
Rogowski, who has a degree in chemistry from Virginia Tech, says there also are
opportunities to deal with universities in the Richmond area, citing the
marketing work being done at VCU and the University of Richmond Law School.
According
to the trade journal Chemical Week, R&D spending in the high-tenacity
fiber industry is flat as the sector undergoes restructuring. Performance Fiber’s
two
main competitors are INVISTA, a former DuPont business now owned by Koch
Industries, and the South Korean firm Hyosung. Performance Fiber’s planned purchase
of INVISTA’s European units is part of that restructuring. But Performance
Fibers executives say they intend to increase their R&D – from three percent of
sales now to five percent in the future.
Performance
Fibers has concentrated much of its research in the Raleigh area, and Rogowski hopes to
open a technical center in China within three to five years. Among the fields
the firm expects to explore is nanotechnology, which, Rogowski says, will make
it possible for fibers with nanotechnology elements to perform special
functions in industrial applications.
Performance
Fibers executives expect to develop more applications for the advanced polymers invented in
the 1990s, replacing nylon in various applications across the globe. One
practical possibility, says Tallent, the R&D chief, would be to use special
polymers in more advanced versions of side-curtain airbags used to protect car
passengers.
Rogowski
says that more acquisitions are in the pipeline and may be announced by the end
of this year. As that happens, Performance Fibers may expand its headquarters staff in
the Richmond area.
Rogowski also
is looking to the future – when Performance Fibers reaches its sales growth
target of $1 billion. The company might then consider an Initial Public
Offering, he says. Going public might change the dynamics that have helped
Performance Fibers perform well. But it will be a sign of another fully
realized,
fast-moving and globally focused company thriving in the Richmond area.
-- April 20, 2006
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