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Coated Coil
Tuesday | 19 April, 2022 | 12:40 pm

Continuity

Written by By Corinna Petry

Above: Vorteq Coil Finishers has a new ownership structure and a plan to grow organically and serve customers with more specialized products.

A management buyout and securing a mill partner in Mexico positions toll coater for strategic growth despite global turbulence

April 2022 - The management of Vorteq Coil Finishers LLC and other investors completed a buyout of the company in late November. Working with Shadowbriar Capital Partners, the company’s senior leadership acquired the business from Peninsula Pacific, a Los Angeles-based private equity firm.

“Peninsula Pacific was a great supporter of this business from 2014 to 2021,” Vorteq CEO Jim Dockey says. “They were at the natural end of their investment holding period, and it was time for them to monetize the value they held in the business. We had a great partnership with Peninsula Pacific, and our business clearly grew tremendously during those seven years.”

Dockey and his fellow investors were able to persuade the firm that they were best suited to move forward with the company. Helping this transition was the fact that Shadowbriar Capital Partners was founded by a former Peninsula Pacific executive who believes Vorteq has a very compelling growth strategy.

“This new ownership group has a very long-term view on the growth prospects for Vorteq, while providing a great deal of continuity to our employees and supply chain partners,” Dockey says. Before his transaction was completed, “there was always a little worry at Vorteq about who might buy the company. Several kicked the tires but none seemed to be an optimal outcome for our management team.”

The new ownership team consists of experienced metals industry business owners and former executives. “We orchestrated the buyout with partners from different corners of the industry. Most are from Pittsburgh, which is the hub of the metals market,” according to Dockey.

Headquartered in Oakmont, Pennsylvania, Vorteq has finished steel and aluminum coils since 1982, operating nine lines in Pennsylvania, Wisconsin, Illinois, Tennessee and California. The company has grown by acquisition and organically over the past half-dozen years. It purchased Prior Coated Metals Inc. (2016), Wheeling Service & Supply Inc. (2018) and Western Metal Decorating (2019).

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Vorteq operates nine coating lines in Pennsylvania, Wisconsin, Illinois, Tennessee and California.

Exclusive channel

Last year, Vorteq established a partnership with Almexa, which operates an aluminum rolling mill and paint line in Mexico. Almexa was formed from the merger of the Mexican subsidiaries of Alcan and Reynolds Aluminum.

Through the partnership, Vorteq is Almexa’s exclusive channel to the U.S. market for its grade 3105 common alloy coil.

The products are made for the building products industry, specifically gutters and downspouts. “We are distributing 100 percent of the available tonnage to our customer base,” says Dockey, adding that he and Almexa CEO Michael Otero have a long-standing relationship of mutual support.

“Almexa is looking to invest heavily in the business to increase capacity, and Vorteq will continue to market additional product” from its coating lines. “We named that product Vorteq Global—that’s the entity representing the partnership. We are providing technical support on quality requirements for painted aluminum coil in the United States. Our teams work together on production quality and the sales effort.”

The third partner in the cross-border strategic sourcing, says Dockey, is Sherwin-Williams, “the preferred supplier of coatings to Vorteq.”

Cap ex strategy

“We are continuing to expand our Vorteq Pacific division [in Rancho Cucamonga, California] since acquiring it,” Dockey says. “We invested capital to redo the entry and exit ends of the coating line, which has helped add capacity. We also added a new slitting line at the plant, which helps our customers get certain size material that they cannot get elsewhere. We have seen increased deliveries of offshore metal and, in today’s tight market, we want to be able to have our customers source wider foreign material and support that material with wide slitters,” he explains.

Over the next few years, Vorteq will invest in existing locations to increase productivity and, eventually, capacity. “For example, we have upgraded some ovens [which cure the coatings] and our quick-change coaters.” The latter tool allows Vorteq to change colors on the fly, which means the lines can operate at 90 percent uptime, rather than 60 percent.

With the support of new ownership, the executive team is keeping “a keen eye on acquisition opportunities,” including tuck-ins that blend with and complement the existing assets and capabilities.

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Market conditions

Vorteq’s activity in the residential construction market continues to be “extremely robust,” says Dockey. This includes end products such as patio, garage and entry doors, rainware, metal roofing and all other residential building products. “The combination of strong housing demand for new construction and favorable interest rates for repair and remodel has led to significant investments into housing. Our products are found all over the exterior of a house,” he notes.

In the commercial construction market, “we see strong demand for roof decking at data centers and warehouses. The pop-up warehouses and centers have flat metal roofing,” which is galvanized or coated steel and aluminum.

The products that sell into the transportation market, particularly recreational vehicles and cargo vans, continue to see strong demand. COVID-19 dampened air travel, especially as people were wary of getting on airplanes and staying at hotels, so purchases of RVs and trailers hit record numbers. RV shipments surpassed 600,000 units in 2021, data from the RV Industry Association show. In the near term, however, “high gas prices might affect that demand,” Dockey says. “That might temper our bullishness. Inflation is a concern.”

Because Vorteq operates as a toll coater, it only paints metal and doesn’t take ownership of the material “so we are mostly insulated from commodity risk,” says Dockey. However, “we follow the LME futures market closely, and there has been a huge escalation in the price of aluminum. Just last week, aluminum futures prices were more than twice what they were a year ago. The increased cost of goods affects our customers wanting to find metal in a tight supply chain.”

As for shipping costs, “most of our products’ freight is customer controlled.” Nonetheless, Vorteq wants to deploy strategic thinking “in a tight freight market so, as part of our value-added services, we partnered with PGT Services in Pittsburgh. They have a national network of carriers that can provide future freight solutions at our locations,” Dockey says.

All in all, he concludes, “we are excited about the new ownership structure and bringing stability to the servicing of customers nationally.” MM

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