Hadleigh: Celotex ready for new era as part of Saint-Gobain

Thermal insulation manufacturer Celotex, which is based at Hadleigh, was recently acquired by the French building products giant Saint-Gobain. DUNCAN BRODIE spoke to Celotex chief executive Richard Pemberton about the Suffolk company’s rapid growth over recent years and its future prospects

CELOTEX began life in London in 1925 but has now been based in Suffolk for just over half of its 87-year history.

It was formed as part of the Celotex Corporation of America as an importer of fibreboard insulation manufactured by the United States company in Marrero, Louisiana.

The success of the UK sales operation, originally based at offices in The Strand, led to the creation of a factory at Stonebridge Park, in north-west London, where work started in 1937.

That factory flourished during the years of reconstruction which followed the Second World War but in 1966 the owners decided to close the plant, selling the London site and replacing it with a warehousing and distribution facility in Lady Lane, Hadleigh – where the business is still based – which opened in 1968.

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Originally, the company’s insulation board was made from bargasse, a by-product from sugar cane processing, with Tate & Lyle being a major supplier of the raw material.

In the 1970s, however, the Celotex Corporation introduced a new type of ceiling tile made from the polymer isocyanurate which led eventually to development of the current product range, with production of rigid polyisocyanurate (PIR) starting at Hadleigh in 1980.

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Although the excellent thermal insulation properties of PIR were recognised, it remained something of a niche product for many years.

However, the onset of stricter building regulations since 2002, requiring ever-higher levels of insulation as part of the drive to reduce carbon emissions, has seen PIR come into its own, as less efficient materials would take up too much space if used in sufficient thickness to provide the levels of insulation now demanded.

Not that success has fallen into the company’s lap. Although the Hadleigh plant is now the largest PIR facility in the UK, Celotex is by no means the only player in the game and, says chief executive Richard Pemberton, it has had to work hard to build its market share.

It has achieved this, he says, by developing innovative products and providing stand-out levels of customer service while also focusing on running a competitive, low-cost manufacturing operation.

Mr Pemberton, who joined the company six years ago, since when its workforce has risen from 138 to 170, said: “We have had some tough years, as you would expect for a building products business, particularly in 2009 and 2010. However, 2011 was much better and, with a year-end in August, we can see that 2012 will be a record year for profit.”

Meeting the increased demand has meant overcoming a shortage of capacity but, unusually for a manufacturing business, the constraint for Celotex was warehousing space rather than production capacity.

Following production, PIR insulation panels have to “cure” for between two and four days, depending on thickness, and the increasing thermal specifications which products have to meet mean that panels are significantly thicker than in the past.

Together, these factors put huge pressure on storage space but this was overcome last year by the creation of a new �3million warehouse and distribution centre on land across the road from the manufacturing site.

The two sides of the operation are linked by a bridge over the road which, via a conveyor belt with a lift at either end, transfers finished products from the factory into the new facility without the use of lorries. Besides achieving environmental benefits, the investment has also had the advantage of removing the distribution operation – typically involving the despatch of 65 to 70 lorry loads a day – well away from the residential area which adjoins the Lady Lane Industrial Estate.

The increased warehousing capacity, combined with scope to increase production through alternative shift patters (the lines current runs for 16 hours a day, five days a week), means that Celotex is now in a position to meet a 50% increase in demand from current levels without significant additional investment.

“I would rather take the risk of building too early rather than too late,” says Mr Pemberton. “The cost of building early is that you have tied up money in the investment.

“The cost of building too late would be far greater, in terms of lost opportunities and the damage to reputation which would result from an inability to supply.

“We are already starting to see growth coming through and I believe we have got the timing right.”

The company’s strategy, says Mr Pemberton, is to be a low-cost producer but the focus is on reducing the use of materials rather than labour, with raw materials representing by far the larger share of production costs. This means “being clever” with the formulations used to produce the foam-based panels and looking for economies of scale.

However, being a low-cost producer does not mean that you have to sell your product cheaply, he says, and Celotex aims to enhance its offer through innovation, service and support.

“Only one person can be the cheapest in the market,” says Mr Pemberton. “I don’t want to be that, because we are worth more than that.”

Innovation has included the introduction of insulation boards laminated with plasterboard, which sppeds the construction process on-site. “Generally speaking, building sites are not good places to build things,” says Mr Pemberton. “It is much better to do things in a factory environment when you can.”

Celotex also seeks to add value to its brand by providing performance data for its boards, so giving customers confidence in its products and saving them the time of having to do their own calculations in order to satisfy building controls.

The company also offers the greatest range of PIR products, including both the thinnest and the thickest boards on the market. Thicker boards help meet the higher levels of insulation now required, but demand for thinner products is also expected to grow as they are useful for “retrofitting” in existing buildings where space is at a premium.

This range of products is backed by a service commitment that orders received by 4pm one day will be despatched the next and be with the customer the day after that.

Celotex operates two production lines which operate slightly different processes but both involve two chemical mixes being sprayed into each other and on to a moving belt where they then react together to expand into a PIR foam which then sets hard.

The formulation, temperature and pressure if the mixes all have to be tightly controlled for the process to work successfully. The reaction between the mixes is exothermic (producing its own heat) but the belt travels through an “oven” to ensure a consistency of temperature throughout the process.

The newer of the two lines, used to make boards ranging in thickness from 100mm to 200mm, involves a “restrained ride” for the foam, meaning that the thickness to which it expands is controlled.

The other line, for products of up to 90mm, uses “free rise” technology, where the expansion of the foam is controlled by the quantity of the mix used, the speed of the reaction and the speed of the line.

The current thickness of the foam appears as a read-out on a screen, with a machine operator being responsible for keeping the figure within tolerance. This process is unique to Celotex, says Mr Pemberton, and helps give the company a competitive edge as the free rise process is significantly faster than restricted ride.

The completed board, faced on each side by a metal foil, is then trimmed and cut to length, on the same line in the case of restricted ride products but separately in the case of free rise panels, in order not to slow the process down.

Once strapped together in date-coded batches, the boards are held on the factory side of the site to cure before being moved by forklift for the journey over the bridge to the distribution area.

Celotex has contracted its distribution fleet to Ipswich-based Magnus, which handles journeys which can be completed out-and-back in a day, while longer journeys are sub-contracted, many of them to Norfolk-based Bartrums.

Mr Pemberton says Celotex has retained a “family business” culture, with many employees staying for many years, and sometimes with several generations of the same family working for the company.

The catalyst behind the company’s growth in recent years was a �21million management buy-out in 2004, backed by private equity group AAC Capital Partners, which provided investment capital for an initial expansion of both production and warehouse capacity.

That deal came four years after the death of Celotex’s former majority shareholder, US businessman Jim Walter, in 2000, following which his stake was acquired by a number of minority shareholders.

In private equity terms, Celotex has proved a relatively long-term investment for AAC Capital Partners, which at the time of the deal in 2004 was part of the Dutch banking group ABN Amro but was spun-out as a stand-alone business three years later.

Mr Pemberton sees the acquisition of Celotex by Saint-Gobain as a natural development for both parties.

While Celotex generated turnover of �69.7m in its last full year, to August 2011, Saint-Gobain had sales of 42.1billion euros (about �35bn). However, while it is already involved in the UK insulation market with its Isover brand it has no current involvement with PIR technology.

Celotex will continue to operate under its current brand name, with the existing management team remaining in place.

Mr Pemberton said of the deal: “It offers opportunities for the business to grow, opportunities for career development for people within the business who are looking for that and it offers security for people who want to stay in Hadleigh.”

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