RAT - Investing In Ceramics: The Making of a Refractories Giant
In January of this year, RHI AG, formerly Radex-Heraklith Industries, the Austrian holding company of Veitsch-Radex Didier, acquired Global Industrial Technologies and its leading subsidiary, Harbison-Walker Refractories Co. A new company, RHI Refractories America (RHI America), was formed when RHI combined Global Industrial Technologies with VRD-Americas and its major U.S. holdings, including North American Refractories Co. (NARCO).
Together, Harbison-Walker, NARCO and the rest of the former VRD-Americas represent the largest refractories producer in the Western Hemisphere. More importantly, after eight decades of competition, the companies are combining their rich histories of superior products, technical innovation and responsive customer service to give heat processing customers a new refractory company of great strength, diversity and technical support.
The NARCO StoryNorth American Refractories Co. was formed in 1929 in a merger of seven independent manufacturers of fireclay brick and specialty products. North American Refractories, Ltd., a Canadian affiliate, was also acquired at that time, and the new company was headquartered in Cleveland, Ohio. The merger was quickly followed by diversification and growth through the 1930s and 40s, with several additional acquisitions adding new manufacturing capacities and extended product lines.
In 1960, NARCO began manufacturing conventional, basic refractories. In 1965, the company became a subsidiary of Eltra Corp., which was then acquired by Allied Corp. in 1979. Subsequent acquisitions by Allied led to major reorganizations, with NARCO ultimately becoming part of Allied's Chemical Division.
In the early 1980s, NARCO entered two new refractory market areas-the manufacture of slide gate systems for the steel industry and contract services. This gave the company an opportunity to be involved with the product's design, installation, curing and delivery to the customer in a ready-to-use state.
In 1986, NARCO engineered a leveraged buyout by a group of investors and top management to once again become a private, independent entity. Two years later, Didier-Werke AG of Wiesbaden, Germany, purchased a 35% interest in the company and in 1989 obtained controlling interest. In 1991, NARCO merged with Didier Taylor Refractories Corp., a 100% owned Didier-Werke AG subsidiary, and the resulting company retained the NARCO name. Additionally, Zircoa Inc., now a wholly owned subsidiary of NARCO, was acquired in 1994 from Didier-Werke AG.
Veitsch-Radex Group of Vienna, Austria, acquired controlling interest in Didier-Werker AG in 1995. In 1998, RHI, the holding company of Veitsch-Radex Didier, repositioned all of its organizations under the RHI nameplate. Three refractory divisions were created to reflect this new global entity: VRD-Americas, VRD-Europa and VRD-Asia Pacific. NARCO officially became the headquarters of VRD-Americas in 1999, and the organization's responsibilities expanded to include Latin American sales units in Mexico, Venezuela and Brazil.
The company manufactures a variety of fireclay, high-alumina, basic brick and monolithic products. Along with eight manufacturing facilities, NARCO has seven warehouses throughout the U.S. to facilitate distribution of products to customers in nearby territories. NARCO's Canadian affiliate, NARCO Canada Inc., oversees facilities in Burlington, Ontario, and Bécancour, Quebec. Eight of the facilities, including the two in Canada, have received ISO 9002 certification.
The Harbison-Walker StoryHarbison-Walker Refractories Co. is a Pittsburgh-based producer of industrial furnace linings. The company was founded in 1865 as the Star Fire Brick Co. and assumed its current identity in 1875, when Samuel Harbison and Hay Walker, two Star Fire shareholders, purchased the company and renamed it after themselves.
Before its acquisition by RHI, Harbison-Walker was North America's oldest refractories company and the fifth largest in the world. A major milestone was achieved in 1998, when Global Industrial Technologies, Harbison-Walker's parent company, acquired A.P. Green Industries, Inc.
Harbison-Walker had considerable international holdings in the 1950s, which it abandoned during the steel crisis of the 1970s and 80s. The revival of the company's international expansion began in 1995, when INDRESCO, Inc., the precursor to Harbison-Walker's current parent company, Global Industrial Technologies, purchased Refractarios Mexicanos S.A., Mexico's largest refractory producer. Along with providing a line-up of solid refractory products, the acquisition allowed Harbison-Walker to establish a presence in the rapidly industrializing markets of Central and South America. The company's expansion into these markets was fortified several months later with the take-over of Refractarios Chilenos S.A. of Santiago, Chile. Lota-Green, another Chilean refractory company, was acquired shortly thereafter.
In 1997, Harbison-Walker turned its attention to Europe, acquiring Magnesitwerk Aken, a refractory producer in the former East Germany. The company's most valuable asset was one of the newest refractory manufacturing facilities in Europe. With Harbison-Walker's technical guidance and management, the company flourished and is reaching unprecedented levels of performance and profitability.
As 1997 drew to a close, executives of Harbison-Walker and A.P. Green announced a deal that would join the two companies, forming one of the five largest refractory companies in the world. After the deal was formally approved, managers from both organizations worked closely to streamline product offerings and build business in markets that were complementary. Harbison-Walker's strength, for instance, had always been its high quality and performance of its high-alumina and basic refractory brick. A.P. Green, meanwhile, had proven to be a leader in the development of high-strength castables. With the ability to sell both products, Harbison-Walker successfully positioned itself as a leading single-source refractory supplier.
Research Activities ConsolidatedIn February, RHI Refractories America announced that it would consolidate its North American research activities at Harbison-Walker's Garber Research Center (GRC) in West Mifflin, Pa. As a result, the existing NARCO Technical Center in State College, Pa., was closed and technical personnel consolidated at the GRC facility.
Jess Hutchinson, CEO of RHI Refractories America, said "the decision to maintain the West Mifflin facility was a purely logistical one. All things being equal between the two facilities, we felt our interest would be best served by having our executive headquarters in close proximity to our research center."
RHI America is headquartered in downtown Pittsburgh, about 10 miles from the GRC. RHI AG also maintains a refractory research facility in Leoben, Austria. These two facilities will cooperate in RHI's worldwide research strategy.
"RHI customers around the globe will benefit from the world's largest refractory product development force," said Hutchinson. "With our combined product development and technical resources in Europe and the U.S., RHI intends to build on the heritage of innovation established by all its refractory organizations. As we move into a new millenium, our goal is to offer customers the most comprehensive array of high-performance refractory products and services in the world."
The consolidation of the two research operations also dramatically enhanced the GRC's pilot plant and physical testing capabilities. "The combination of Harbison-Walker and NARCO affords us the opportunity to develop a new kind of organization," said Hutchinson. "One that is focused on, and responsive to, the refractory needs of individual industries and companies. By assembling a highly skilled staff of engineers and scientists, and providing them with the very latest research and product development equipment, we're well positioned to meet that goal."
The Future is BrightThe new RHI America is projected to produce almost $1 billion in annual sales to refractory consumers. Prior to the acquisition by RHI, Harbison-Walker generated annual revenues of about $580 million, and NARCO had yearly sales of approximately $350 million.
Manufacturing facilities and affiliated companies now owned by RHI America are located throughout the world. In the U.S. and Canada, the former Harbison-Walker operated 25 plants, while NARCO maintained eight facilities in Ohio, Kentucky, Pennsylvania, Michigan, Missouri, Indiana and California.
In addition to these manufacturing sites, RHI America now has affiliated companies throughout Central and South America, Europe and Asia. VRD-Americas member organizations that are now part of RHI America include: NARCO Canada Inc.; Zircoa Inc.; Intertec; and Tri-Star Refractories, Inc. RHI America also holds the Harbison-Walker companies in Canada, Mexico, Chile, Germany, Indonesia and the United Kingdom, all of which had previously been properties of Global Industrial Technologies.