CHICAGO Worthington Industries Inc. has seen steel cylinders used to pressurize gases and liquids grow immensely as a profitable business due to key acquisitions in recent years.
"We have acquired 12 companies in the past four years for $585 million, (and) these businesses will contribute $140 million of Ebitda (earnings before interest, taxes, depreciation and amortization) in the coming year," vice president and chief financial officer Andy Rose said during a June 27 earnings conference call. "Several of these companies are in fast-growing markets such as alternative fuels, energy production and storage."
The integration and financial performance of Palmer Manufacturing & Tank Inc., acquired in April (amm.com, April 10), is proceeding to plan, Rose said. "We are already investing in new production capacity to meet current market demands."
The next step is to "add liquid cryogenics to our product offering," Worthington president and chief operating officer Mark Russell said. "We introduced industrial gas customers to our first-ever cryogenic cylinder prototype during the quarter. Regular production will begin in a few months and similar natural gas cryogenic products are in our development pipeline."
Chairman and chief executive officer John McConnell expressed confidence in the products commercial potential. "It was one of the only holes in the cylinder lineup we thought was important to close," he said. "We looked at a number of opportunities to get into this market, and the best way to do it is to develop our own."
The Columbus, Ohio-based company will develop a full line of cryogenic tanks "and just do a methodical march until we got them across the board," McConnell said.
Meanwhile, Worthingtons sales growth in energy production tanks and separators "continues to be nearly off the charts," Russell said. "To give you some idea about the potential for the upside, both Palmer and (September acquisition) Westerman (Cos.) were using only about one-third of their capacity. We immediately plugged them into our commercial machine ... and saw immediate order increases.
"Energy and alternative fuels continue to be among our best growth ideas," he said, noting that the two end markets alone "will represent more than one-fourth of total revenue (at Worthington) in fiscal 2014."
Russell said the shale gas "revolution is also driving impressive and sustainable growth" in cylinders. Products for those applications produce "some of our best margins, and that (business) is not yet global," he said.