CHICAGO Processor and distributor A.M. Castle & Co. plans to focus on two key areas in the year ahead: integrating its legacy Castle Metals Oil & Gas business with Tube Supply Inc., and realigning its Castle Metals Aerospace unit.
There was little overlap between Houston-based Tube Supplywhich it acquired in December 2011 for $165 millionand Castle Metals Oil & Gas, president and chief executive officer Scott Dolan told AMM Feb. 26. "The beauty (of integrating the two) is to provide customers with one-stop shopping for the full array of oil and gas needs, both transactional and program business," he said.
Oak Brook, Ill.-based Castle has long focused on program business, supplying contract volumes of heavy nickel alloy and stainless steel bar products to such major oilfield services companies as Baker Hughes Inc., Halliburton Co., National Oilwell Varco Inc. and Schlumberger Ltd. Tube Supply, a highly transactional business that sells heavy-wall mechanical tubing, stocking a lot of inventory for fluid control, downhole and numerous other applications.
Oil and gas accounted for 25 percent of Castles revenues after the Tube Supply acquisition, up from 12 percent previously, Dolan said, conceding that the energy industrys demand cycles are uneven. "Its had some wild swings ... but long term, its a great end market to be in and will have great growth," he said. "Tube Supply leverages us better to meet customer needs in any cycle and take out some volatility."
By creating a new structure under one commercial leader, Castle will leverage its sales force to "cast a wider net, up toward the Bakken (shale) region," for example. "Thats exciting. It also opens up international opportunities. We are doing some (energy-related) business in the U.K., leveraging our industrial facility there by stocking oil and gas products," he said.
Asked why the integration didnt happen last year, Dolan said Castle brought the sales teams together but they lost some focus on the legacy business while focusing on Tube Supply. "We are now trying to get back to balance"integrating systems, warehouses, internal business processes and the sales approach, he said.
The companys aerospace business also represents 25 percent of total revenues. It has long supplied heat-treated aluminum plate to the aerospace sector, but over time "we have been trying to focus on complex subsystems using nickel alloys for (such aircraft components as) engines and landing gears," Dolan said.
Castle still sells heat-treated plate, but the company has become a supplier to the F-35 Joint Strike Fighter program. Its Trafford Park plant in northwest England performs complex machining for BAE Systems Plc and supplies Eurofighter GmbHs Typhoon plane, a special project that became operational in the fourth quarter of 2012, Dolan said.
Although Castle will close its Kent, Wash., plant this year, it will continue to service its aerospace customers from other warehouses.
"The build rates and growth for aerospace continue to look good. We havent gotten our fair share, probably, but we are doing our best to deliver better product on time while staying lean," Dolan said.