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Haas TCM: Customer Base Expands
Chemical Management Services Find Wider Appeal

Article from Chemical Week Magazine
By John M. Doyle

The market for chemical management services (CMS) has grown about 30%/year over the last few years, and Haas TCM (West Chester, PA), which says it is the largest independent CMS provider, has been positioning itself to take advantage of opportunities by expanding geographically and diversifying its customer base. Haas TCM’s revenues have risen more than six-fold since 2002, topping $473 million in 2009. Haas TCM is privately owned and does not disclose earnings, but says that between 2008 and 2009 its Ebitda rose 25%.

Fortin: Demand from aerospace sector has outpaced automotive.

CMS entails not only helping customers in a consulting capacity to more efficiently manage use of chemicals, but also covers all aspects of supply chain management (SCM). Contracts can cover management for all chemicals and gases used, including procurement, inventory, delivery, waste disposal, and data management, as well as research for chemical substitutes. Contracts also include incentives for “shared savings” from reductions in chemical use and purchase costs as well as improved process efficiency, Haas TCM says.

Automotive was the first big sector to adopt CMS, but it has since expanded to other large manufacturers, particularly in the aerospace sector, but also among electronics, food and beverage processing, and power generation industries. “Even in mature markets, each market is only 50% penetrated by CMS, so there is a lot of room for growth,” says Haas TCM CEO Thad Fortin.

Haas TCM was founded in 1925 as a specialty chemicals producer. Its corporate structure and strategy shifted over the next several decades, eventually evolving away from volume chemical sales and more toward managed programs. Fortin’s father, Jack Fortin, ran the company from 1975-1996.

In 1994 Haas TCM landed its first CMS contract with General Motors. “We weren’t the first company to offer CMS, but we were an early provider,” Fortin says. In 2002, Haas TCM bought Radian International’s (Austin) CMS business, a move that gave it a sizeable presence in the aerospace sector, as well as its SCM software platform, which Fortin says is key to the company’s success.

Over the next five years, Haas TCM’s growth was organic, and then between 2007 and 2009, the company made a flurry of acquisitions. It first bought Kemfast Aerospace (Ringwood, U.K.), a chemical distributor serving the aerospace industry. That deal broadened Haas TCM’s offerings to the aerospace OEM and maintenance, repair, and operations markets, and also established logistics facilities in Europe.
Later that year Haas TCM was bought by private equity firm The Jordan Company (New York). Jordan already owned a CMS business, Avchem (St. Louis), which was merged with Haas TCM in early 2008.
Haas TCM acquired two more aerospace chemical distributors in 2008—Aeropia U.K. (Crawley, U.K) and Aviation Products Europe (Cologne). It also formed a joint venture with Nalco in 2008 to provide CMS to customers in the process industries, including chemicals, petroleum refining, and pulp and paper manufacturing.

Prior to the Radian acquisition, the automotive industry accounted for 95% of Haas TCM’s sales. Now, aerospace and defense account for 56%; the U.S. government, 20%; global manufacturing, which includes automotive, 18%; and process and electronics, 6%. By geography, the Americas is its largest market with 73% of sales; followed by Europe at 23%; Mideast/Africa at 2.5%; and Asia at 1.5%. Haas TCM anticipates “big demand” from Eastern Europe going forward due to the large number of aerospace manufacturers located there. Demand is also expected in Asia, primarily from automotive, electronics and communication, and commercial aerospace.

The aerospace sector is an obvious client base for Haas TCM. The aerospace industry uses thousands of different chemicals in low volumes, many of which have short shelf lives, and CMS can provide substantial cost savings, Fortin says.

Global demand for CMS has been growing steadily, and Haas TCM says its sales in the first half of 2010 were up 7% over first-half 2008, and 48% over first-half 2009. “Since 2000, there has been only one year when we didn’t hit our [financial] forecasts,” Fortin says.

Several factors are driving growth in the CMS market, and providers predict that the global market for CMS will more than triple in the next 5-10 years. Increasingly stringent environmental regulations are elevating awareness of CMS among manufacturers and are expected to drive adoption rates, providers say. Also driving CMS adoption is the trend toward shorter lead times and made-to-order production cycles, which require sophisticated supply chain management, Fortin says. “You either have to outsource SCM or build up your own capabilities.” Haas TCM keeps track of day-to-day events that impact the supply chain, including which chemical plants are down for maintenance, and manages inventories accordingly. During Hurricane Katrina, for example, Haas TCM was able to keep customers supplied despite the disruptions along the Gulf Coast, Fortin says.

Going forward, Haas TCM says it intends to increase its sales by at least 10%/year. About two-thirds of that growth is expected to be organic, but acquisitions will also be a major driver, Fortin says. “We are actively looking for more acquisitions in the chemical supply chain, such as storage and logistics, with an emphasis on the aerospace industry.”


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