September 2010 Vol. 65 No. 9
Web Exclusive
UCT Exhibitor Spotlight: Kem-Tron’s About Face
Editor’s note: As we prepare for UCT’s first show in its Houston home territory in four years, Underground Construction will be spotlighting some of the Houston-based companies who teach, exhibit and do business at UCT. For information about attending or exhibiting at UCT, contact Karen Francis at kfrancis@oildom.com or go to http://uctonline.com.
In 2009, integrated systems manufacturer Kem-Tron barely broke even. Despite a market that’s flat in more ways than one, the company’s president says that as of September 2010 revenue has already matched the full year totals for 2009, with 30% growth expected by the end of the year. What made the difference?
The first challenge was to stop the bleeding, as the worldwide recession took its toll. President Michael Rai Anderson, P.E, explains, “We definitely saw a big impact from the economic downturn. Revenue was down about 40% from our 2008 high. So we came into 2010 knowing we needed to focus on rightsizing the company.”
Rightsizing meant determining which markets showed promise, and which were a waste of resources. Then the same analysis was turned on products and even the industries the manufacturer served. “We’d had kind of a shotgun approach in targeting geographical areas and industries, and we cut back.” The end result was fewer products offered in fewer markets and promoted to just two industries.
Cutting Back To Find The Sweet Spot
“We decided to focus on conventional drilling in oil and gas markets and HDD in underground and infrastructure markets. Geographically, we’re targeting six areas,” including North America, Russia, India and South America.
Cutting back isn’t usually the strategy that spurs a company to rapid growth, but for Kem-Tron it seems to be working.
Anderson admits the approach is counterintuitive.“It’s not easy to go to the board and say, we need to drop products, markets, and industries in order to succeed. But we’ve already achieved the same revenue as last year’s total right now in September, and we’re on track for a 30% increase in revenue. We’re going from breaking even in 2009 to a 20% profit margin.”
With the company’s focus newly defined, the next step was messaging to communicate that focus to the market. “We had to define our core competency, define a message that’s both marketable and memorable. We’re building a name-brand identity for our equipment.”
That memorable brand, Anderson says, is “solution-driven mobility—integrated mud-recycling units on the move, with all systems integrated.”
In the company’s on-site machine shop, Anderson points out a gigantic red-and-white HDD mud recycling system, nearly finished and bound for the Bakken Shale in North Dakota. “That integrates all the systems you need, and it’s skid-loaded,” so it can go where the jobs are. Other mammoth systems in the shop are ready to be mounted on the back of an 18-wheeler for easy road transport. Most are electric, but the company is close to ready to begin testing another option: “At UCT this year we hope to display our first fully hydraulically operated mud recycling system—a fully integrated, mobile hydraulic system.” Parts of the prototype are at the welding stations as we speak, and Anderson says the target for getting all the pieces together is Oct. 15. “After that, we’ll spend a month troubleshooting before placing it in the field for testing. We hope to get enough mileage on it by UCT to really have all the bugs worked out.”
Filling The Gaps
The push for the hydraulic option dovetails with another characteristic of the new Kem-Tron: R&D. Research and development is a budget item on Kem-Tron’s balance sheets for the first time in five years in 2010. “R&D is something we probably let coast over the last few years, and now we’re making up for lost time. This year, $1.2 million of our profits is devoted to new technology. We have eight full-time engineers now working in production and R&D.” Although the tax cuts on R&D spending currently under discussion in Washington are no more than a happy coincidence, Anderson welcomes any encouragement to throw more resources toward development. It’s a crucial part of the third step of his plan for Kem-Tron.
With markets and core competencies identified and the integrated mobile market the company’s focus, the next step is to find and fill gaps in that marketplace with new products and innovations. “If we end up not making a cent at the end of the year, if it all goes to R&D, and employees, and our name brand, that’s fine with me.”
However, that’s not to discount the work that goes on in the back shop. For Anderson, fabrication is an equal, if often undervalued, partner to R&D. “The nature of an OEM is its products. If you don’t combine intellectual property with the ability to actually manufacture the equipment, you can’t maintain a dominant economy. Integrated intellectual property and manufacturing is the only way to create a durable competitive advantage.”
Getting Wrapped Around The Work
Kem-Tron’s workers are another area where Anderson has focused energy during 2010’s aggressive reorganization, although not in the usual way that a company in a recession handles tough personnel decisions. “I spent a lot of time this year making improvements in accountability and the humanistic aspects of the business: personnel development, what we do here on a day-to-day, person-to-person basis.” The company has had to terminate 10 people—but it has hired on 20 more.
“Being in Houston gives us access to good people—we have the best talent out there when it comes to skilled employees, and you can’t find more diligent, loyal, hardworking people to work in the back shop.”
The rush of growth is contagious. “It’s been exciting to see morale improve as much as it has. The economy is in rough shape, but people are seeing compensation improving, there are raises again, the company is flush, we have work coming in the door. The team is pretty excited to get wrapped around the work again.”
With Kem-Tron’s growth rate projected to keep on climbing, they might just need that energy.
FOR MORE INFORMATION:
Kem-Tron http://www.kemtron.com/
Kem-Tron at UCT http://uctonline.com/exhibitor/kem-tron-technologies-inc
UCT 2010 http://uctonline.com/
Comments