Industries Inc.s pressure cylinder business continues to
grow, with the units employed capital now outpacing that
of its steel segment and more acquisitions likely on the radar,
the companys top executives said.
"The continued strong growth of
cylinders has driven us to a notable milestone in the history
of Worthington," president and chief operating officer Mark A.
Russell said during an earnings call March 21. "Since 1955, the
steel company has been Worthingtons largest entity by all
key measures. The growth of cylinders has been so significant
that we now have more capital employed in the cylinders
business than in the steel company."
Worthington, which last year purchased tank and pressure vessel
manufacturer Westerman Cos. (amm.com, Sept. 18), is
seeing strong demand from customers in the cylinder sector and
will likely target more acquisitions in short order, executives
"The integration and financial
performance of Westerman, our entry into the oil and gas
production space, exceeded our expectations," vice president
and chief financial officer Andy Rose said during the call.
"Were already investing in new capacity for this business
in anticipation of strong growth over the coming years.
Were exploring a number of other acquisition and
The energy production and
alternative fuels markets, in particular, will be key growth
areas for the cylinders business, Rose said. "Energy production
in alternative fuels will continue to be among our best growth
ideas," he added.
Worthington today supplies the
fuel cylinder for the natural gas model of the Honda Civic,
chairman and chief executive officer John P. McConnell said.
"Were working with the other automakers on special
products, and thats a market with just huge growth
The biggest driver of
todays market, however, is commercial vehicles, with more
fleets than ever purchasing natural gas models, Rose said.
Even some railroads are starting
to test natural gas-fueled locomotives (amm.com, March
"Anything with wheels moves most
cheaply and cleanly on natural gas," Russel said.
The strategy in the cylinders
business is to seek out new products, new geographies and
concentrate market position, Rose said. "Were trying to
acquire in higher growth end marketsenergy, alternative
fuelsand higher-margin businesses. ... We find the margin
profiles of a lot of these (cylinder) companies are attractive.
We can buy them at reasonable prices. There are almost always
synergies. We can plug them into our global sales force
There might also be steel
purchasing synergies, so the combination of all these factors
"make that an attractive market for us to continue to
consolidate," he added.
In terms of transaction sizes,
Rose said he doesnt expect Worthington to spend $1
billion on one deal. "One, we dont like that risk
profile. Were not a bet-the-ranch kind of company.
Secondly, there just really arent any huge cylinder
acquisitions out there. Most of the industry is relatively
small and fragmented, so its a good structure for us to
Worthington will invest in its
cylinders units organic growth as well, McConnell said.
"This is where were putting a lot of our energy and our
focus. We have two cryogenic prototypes working at the moment.
We are looking at every opportunity, and there are a lot of
them. Its a fast-growing market and were very
focused on it," he said.