TR Fastenings: Holding Industry Together
An interview with Malcolm Diamond, MBE, Executive Chairman, Trifast plc
TR Fastenings designs, manufactures and distributes mechanical fasteners on a global basis and delivers to more than 50 countries through its 25 locations across Europe, Asia and the US.
Although supplying multinational original equipment manufacturers (OEMs) as its foundation business model – which currently yields 40 per cent of the sales – this strategy is underpinned by five additional target markets:
- TR Direct: standardised off-the-shelf fasteners for next day delivery to OEMs in the UK
- Lancaster Fastener Company: expanding range of catalogued standard and specialised fasteners for next day delivery to distributors in the UK, Europe and beyond.
- Plastic fasteners and spacers for global OEMs – available both from inventory and to customer specification.
- Manufacturing licences acquired for specialised highly engineered large volume fastener applications for automotive and electronics OEM multinationals.
We caught up with Executive Chairman, Malcolm Diamond, to discuss different markets, the factors underpinning the company’s growth and the opportunities on the horizon.
Q: What makes Europe an attractive market to you?
Malcolm Diamond: As TR Fastenings, our trading subsidiary already has successful logistics distribution facilities in Norway, Sweden, Holland, Southern Ireland and Hungary plus our recent acquisition of VIC in Italy (that is a major fastener manufacturer with distribution facilities already well established), it is our ambition to spread our network further within Europe where multinational OEMs have assembly plants. Of particular interest is Central and Eastern Europe, which still offers relatively low cost/high skill resources that attract inward investment for high volume manufacturing and assembly.
Q: Why was VIC in Italy such an important acquisition?
MD: We had already established a relationship based on mutual respect with Carlo Perini (son of the founder and now VIC Managing Director) several years ago, and when the major private equity shareholder reached its five year investment anniversary, it recognised that VIC would benefit from being part of a larger global fastener group, and TR was one of several potential acquirers that they had identified.
Several meetings were held, which clearly pointed to both an excellent cultural and strategic fit that motivated both parties to aim for a mutually beneficial successful merger. VIC’s strategy was to have the networked resources to grow further within Europe whilst developing the white goods and first tier automotive sectors in Asia and the US. TR has the sales, marketing and logistics capabilities already in place to support these aims.
Anti-dumping duties imposed by the EU on some Asian products present a certain level of threat to many European fastener distributors. Therefore, to have VIC’s high quality fastener manufacturing capacity, that is price competitive and consistently profitable within the EU, is a logical risk management opportunity that we were delighted to have been offered. Prior to this, our domestic appliance customer sector was relatively small, and now it represents nearly 20 per cent of the group’s revenue thus significantly raising our capability profile to potential new customers on a global basis.
Q: Outline your expansion strategy in Europe.
MD: We operate 13 business teams within the UK and mainland Europe and every team has budgeted for organic growth over the forthcoming period. However, with the fastener supply market forecasted for around 4 per cent annual growth for the next five years – but highly fragmented and with no obvious market leader, it is clearly an opportunity for consolidation.
TR is constantly evaluating potential right fit companies to add to the group, but with the strict criteria we apply with regard to their potential growth, current profitability and ambitious management who want to stay in office post deal, then our choices become more selective.
As TR is rare in combining manufacturing with distribution (thus fulfilling the role of a full service provider), then our search for acquisitions covers both disciplines. However, unless the distributor fulfils a niche market position, then our preference is to increase our manufacturing activities. High volume assembly OEM’s in automotive, electronics and domestic appliances expect design and engineering support for new product development and for line side production trouble-shooting, and the engineering capability that TR has by being a manufacturer is essential to these customer sectors.
Q: How’s the European branch performing compared to the US and Asia?
MD: Fundamentally, there is no real variation in performance around the group, as fortunately we are enjoying encouraging business dynamics right across all of our activities – both with regard to revenue and improving margins. We acknowledge the low level of confidence that the EU has suffered over the past five years, but the fastener market is still huge – even during this recent savage recession, and TR’s market share is so small that it falls well below any constraint for our future growth. In simple terms, if the “cake” becomes smaller, then we just sell harder for a bigger slice, and throughout our 40+ year history we have sustained our growth through at least three recessions. The only exception being 2007-2009 when there was a change of leadership – along with a switch in core strategy that failed. Under the current management structure put in place in April 2009, we have delivered high quality product through quality customer service as well as shareholder value, via a mix of self-help initiatives, and new business and rebuilt our position through the revitalised network of high calibre motivated people.
Q: The group revenue grew by 7 per cent from 2012/2013 to 2013/2014. Outline the factors behind this.
MD: Clearly TR benefited from improving market demand, but fundamentally we have become more competitive within a very price driven environment, and so have grown by gaining new customers and selling more to existing ones. For the past three years our teams have recognised the improvements in operating efficiencies that we can instigate from within and so offset any slippage from market forces ie work smarter, not harder. These initiatives include: consolidating and leveraging our extensive supply base, negotiating more efficient delivery policies with customers, IT upgrades that allow consistent costing and pricing with global multi-site customers, and increasing our marketing budget to accommodate trade exhibitions in new geographic markets.
Q: Underline the core of TR’s success, and also the outlook for the years ahead.
MD: It’s all about our people. My colleagues and I are under no illusions as to what is driving us forward in size, capability and profit, and so for that reason, we are in awe of what our TR management and their teams are achieving through a can-do attitude.
Looking ahead, underlying organic growth remains encouraging and this has been bolstered by the introduction of VIC into the group and the opportunities which this brings. We are continuing to benefit from the uplift in economic confidence and manufacturing output, this is being seen across a number of our key sectors and our business units. We will also look to pursue opportunities that add geographic coverage, product range and customers to the TR footprint.
The combination of strategic and dynamic business streams highlighted earlier is not only driving our current organic growth, but will continue to do so for the foreseeable future. Moreover, as the fastener supply sector remains highly fragmented, there is also ample scope for consolidation by acquisition.
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