Stainless Steel
Thursday | 15 January, 2009 | 8:33 am

A solid foundation

By Lisa Rummler

January 2009 - Size helps define a company. Depending on your perspective and the business objective, being a small operation can help--there’s a fighting spirit or hunger to achieve that comes from being the underdog. But there are also benefits that come with being a huge corporation, including a broader reach and higher profits.

In that sense, Universal Stainless & Alloy Products Inc., Bridgeville, Pa., has the best of both worlds. Chris Zimmer, vice president of sales and marketing, says the company exhibits the strengths of both a large and a small business, which might have had something to do with Universal being named to Forbes’ 200 Best Small Companies list in 2008.

"Even though, in the big picture, we’re a relatively small company in the steel world, we have a lot of the characteristics of a larger company because of our ability to operate efficiently and be a low-cost producer," he says. "But being a smaller-sized company--we’re only about $230 million in sales--allows us to be a lot more nimble and agile to respond to our customers and respond to markets with more speed and urgency than I think a larger company can."

Founded in 1994, Universal has about 500 employees across its three facilities (the other two are an operation in Titusville, Pa., and Dunkirk Specialty Steel LLC, Dunkirk, N.Y.). And although the company strives to grow, Zimmer says it continues to build on the market position it established from the onset 15 years ago: being a best-in-class producer of specialty steel products.

The most common grades of stainless steel Universal produces in AOD, ESR and VAR melt variations include 15-5, 17-4, 403, 410, 422, 440C, 330M, 4340, 9310, 52-100, A286 and Alloy 450.

The product forms of these stainless grades include semifinished ingot, billet and forged rounds, as well as cold-finished bar in round, hexagon, square, flat and block. Universal specializes in the production of tool steel plate 7 inches thick or less, and the most common grades of the material that it sells are A2, D2, S7 and 420 ESR. The company also performs conversion services for many of its customers in its rolling mill.

Despite the large and varied product portfolio, Zimmer says Universal’s employees are what really define the company in the marketplace. This goes back to Universal’s relatively small size, which gives it the ability to work closely with customers and grow with them.

"It’s not just the products that make Universal stand out, but it’s our people, know-how and technology supporting our material that give our customers a competitive materials advantage," says Zimmer. "We’re material experts in the market segments we serve and consider the technological materials development that we collaborate with our customers on as one of the major areas that sets us apart."

Moving heaven and earth
Denny Oates, president and CEO, says Universal wouldn’t be the company it is today had it not been for the hard work of individuals such as its founder, Clarence "Mac" McAninch, who has retired but will remain chairman of the board through 2010. (Oates joined Universal’s board in October 2007 and has held his current positions since January 2008.)

"Over the past 14 years, there’s been a great job done in positioning the company in markets that have some good fundamental growth profiles going forward," Oates says. "Those are aerospace, petrochemical, power generation and tool steel plates. Those are the four markets in our sweet spot, mostly domestic business."

Further, Zimmer says the aforementioned industries allow Universal to exhibit some of the small-business attributes in which it prides itself.

"These are markets that are evolving constantly, so our ability to work through our distribution partners and, in some cases, to work with the engineers at the user level is critical," says Zimmer. "We can take the needs that they have from a materials standpoint and quickly apply them to our operations through investment and through restructuring of the organization so that we can remain agile with our markets. And these are areas that we feel have a good, long-term growth potential."

This description also applies to Universal, according to Doug Nesbitt, vice president of sales and marketing at Service Steel Aerospace Corp., Tacoma, Wash.

Nesbitt says Service Steel has done business with Universal since 1992 and that their working relationship has always been a good one. Nesbitt also says the new faces at Universal, including Oates, will bring a lot to the company and its customers.

"We’re excited about the new management team at Universal, and we feel the next generation of leadership is a good thing for Universal’s future," says Nesbitt. "We look forward to continue working with them in the future. We’ve met with [the new leadership], and we’re encouraged with the direction they’re taking the company."

Pouring money back in
The direction Nesbitt mentions entailed a great deal of internal development at Universal--something that’s part of the company’s philosophy, says Zimmer.

"As a public company, Universal doesn’t pay a dividend," he says. "Instead, our profits are invested back into our business toward maintenance and investments in equipment and people to expand our capacities and capabilities. The decisions of where and how to invest back into the company come from collaborations we have with our customers, as the markets develop."

Some recent examples Zimmer cites are acquiring additional annealing furnaces, rebuilding the round bar finishing line and relocating it from Bridgeville to Dunkirk, expanding capacity in the quench and temper department and (most significantly) upgrading the company’s melt shop, an effort that will carry on into 2009.

Oates says the past four years of record profitability have helped provide the impetus for Universal to develop capital programs, which will allow the company to build on what it’s already accomplished. "We’re particularly looking at capital programs, which will give us the ability to be the best in class when it comes to delivery for our customers, shortening our cycle times so we can reduce our lead times to our customers and enabling us to broaden our customer portfolio in terms of number of customers and our participation with the customers we already have," says Oates. "As a small guy, to be competitive, [even though] we have that broad portfolio of products, we have to be faster and more nimble than some of the bigger competitors we see in the marketplace every day. That’s our major thrust. And we’re using our capital dollars and our strong balance sheet to invest to be able to do that. You have added market share, and you have additional capabilities from capital."

Forward thinking
Today, Universal is primarily a domestic company, but it’s begun to explore the option of tapping into international markets. The activity and interest are there, Zimmer and Oates say, but the company doesn’t expect that to turn into a tangible part of its sales portfolio for at least another year, if not longer.

"For many of the products we manufacture, there are parties overseas that are interested in them and in getting a North American source," says Oates. "So as we begin to improve our performance and increase our capabilities, we’re beginning to introduce ourselves to those markets. We’re kind of in what I would describe as the courting phase, where they get to know us, and we get to know them. We have a lot of activity overseas, primarily Europe, but some Asian [companies], as well."

Oates also says acquisitions might become part of Universal’s long-term strategy but that it’s not the only expansion opportunity the company has considered.

Zimmer says Universal is in an overall growth mode and that the expansion will likely occur through a combination of partnerships, organic growth and acquisitions, as well as increasing production at its current facilities.

In regard to the development of the sales team, Zimmer says it offers the opportunity for two-way communication--the employees can inform the marketplace of what Universal has to offer, and customers are able to provide feedback to the company, ultimately improving the operation, through their interaction with the sales staff.

"This growth isn’t only for melting and pouring steel," he says. "It’s on the technology front, and it’s on the sales front. So we’re well-equipped throughout the entire organization to not only better serve the customers that we have today, but we’re also prepared to take on new customers and new business as we move forward."

And no matter what Universal accomplishes or how it evolves, Zimmer says the company will retain the nimbleness and speed that have helped define it over the years and have contributed to building the solid base from which it’s growing.

"It’s an exciting time for us," says Zimmer. "We’re a good company today, and we’re evolving into an even better company tomorrow. The customers and markets that we serve have some good days ahead of them, and we feel like we’re well-positioned to participate in those markets." MM

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