Business Spotlight: Got it Covered

Many businesses realize diversification of products is key to surviving a down economy, but ArmorThane USA Inc., a Springfield manufacturer of various polyurethane coating, has taken that a step further by diversifying into the export market.

The company manufactures and sells 15 coating products, including linings for truck beds; secondary containment for oil, sewer and other potentially hazardous materials; coatings to assist in blast mitigation; polyurethane foam insulation; and coatings for sewer rehabilitation and containers in acidic environments.

The company bore down through the recession and has posted revenue increases the last two years, finishing 2011 at $8.1 million, a 50 percent uptick from 2009.

“I attribute our growth to being sensitive to our customer needs, diversity and our expansion into export markets,” says Garry Froese, founder and CEO of ArmorThane USA. “The growth of developing countries is phenomenal, and the U.S. dollar devaluation has made doing business with U.S. companies more attractive.”

With 28 percent of its business in export sales last year, ArmorThane already is shipping goods to South Africa, Nigeria, Egypt, Kuwait, United Arab Emirates, England, Australia, Thailand, Hong Kong, Peru, Ecuador, Brazil, Canada and several Caribbean countries. Froese is projecting 2012 exports to produce 40 percent of all sales.

Called from Canada
In 1989, Froese was working as an industrial engineer in his native Edmonton, Alberta, Canada, when he inspected a new product that would provide a protective coating for the beds of pickup trucks.

“I thought I could make something similar,” Froese recalls before starting the company in Edmonton with four employees and growing the staff to 15.

By 1998, Froese says the Canadian and U.S. markets were saturated with truck bed liners, and he wanted to expand his business into other areas. He began scouting for a spot to open a distribution facility in the Midwest. He had targeted St. Louis, but a friend – retired insurance man Jim F. Morris – swayed him to Springfield. “It was really a good choice due to material cost. Land and labor was also cheaper,” Froese says.

In 2002, Froese moved the company’s manufacturing and research and development base to Springfield, and four years later, he purchased a 12,000-square-foot body shop in northwest Springfield, 2660 N. Eastgate Ave. A separately run distribution center remains in Canada.

Truck lining products still account for 30 percent of U.S. sales, but Froese says that a reduction in truck sales due to higher gasoline prices, as well as a saturation of the truck bed lining market has diminished that portion of the business.

The company has since ramped up development and marketing of its other top-sellers – secondary containment coatings and blast mitigation products. Sales of secondary containment coatings, which protect barrels and other holding tanks from leaking hazardous chemicals into the ground and environment, have doubled in the past two years, mainly due to interest from the oil and gas industry. Froese says containment coatings now account for 40 percent of stateside sales. Blast mitigation products, which help contain blasts in mines or on government buildings, represent 30 percent of U.S. sales, he says.

One of the areas growing in the U.S. is in polyurethane insulation foam. “We’ve always had this product, but we are growing and expanding in that market,” Froese says. “People are interested in the energy savings.”

Froese says a $10,000 investment to reformulate and market its foam insulation product has paid off with sales doubling in the past year.

Bill Hrynkiewicz, vice president of Polyurethane Machinery Corp. in Lakeway, N.J., has worked with ArmorThane since the company became an authorized dealer for Polyurethane Machinery’s coating equipment.

Hrynkiewicz says ArmorThane increased its high-pressure sprayer orders with his company by 25 percent last year, and he expects to see another 25 percent increase this year. “We know they are increasing their marketing efforts, and we’re offering them new equipment as well,” says Hrynkiewicz. “We also haven’t seen other companies increase their exports to the level of ArmorThane. I think that is key for growth in this industry.”

Moving the goods
ArmorThane seems to be following a trend of many U.S. companies trying to enhance sales through exports. According to the U.S. Census Bureau, the goods and services deficit increased to $558 billion in 2011 from $550 billion in 2010, but exports of goods increased by $202 billion in 2011 from $265.5 billion in 2010.

ArmorThane began concentrating on exports about four years ago, when company officials began attending trade shows in Frankfurt, Germany, the Netherlands and Romania.

Froese found the company’s top sellers overseas were blast mitigation products, coatings to protect surfaces in acidic environments such as mines, and sewer rehab coatings that afford old sewer lines a new life by coating them rather than replacing an entire system.

Ali Ozsahin, technical sales representative for Huntsman Polyurethanes in Auburn Hills, Mich., says ArmorThane’s export expansion, particularly in the sewer rehab and secondary containment coatings, will grow by 50 percent the volume of polyurethane chemicals it sells to ArmorThane for production.

Froese hopes to increase ArmorThane revenues to $10 million in 2012, $6 million in U.S. sales and $4 million in exports.