UPE expertise puts it in pole position

07 January 1996 00:00  [Source: APC]

Universal Process Equipment is one of the world's largest companies for the sale of complete used plants and equipment. UPE president Ronald Gale explains the used process plant market to Alan Tyler.

UNIVERSAL PROCESS EQUIPMENT specialises in the sale of plants and equipment for the process industries, including chemical, petrochemical, pharmaceutical, food, mining and steel. It maintains the world's largest inventory of used and new process equipment, and markets worldwide through its extensive customer base and company-owned sales offices.

UPE operations are directed from its nerve-centre in Robbinsville, New Jersey, and it has branches in China, Russia, the Czech Republic, Poland, Turkey, Mexico and Germany, as well as affiliated offices in Argentina, the UK, Israel and Romania.

The company is a selected liquidator of used equipment for many companies including DuPont and Cyprus Amax.

Through subsidiary Universal Industrial Refrigeration, UPE manufactures and sells new vapour recovery units, low temperature and speciality design refrigeration packages.

R Simon (Dryers) manufactures steam tube dryers, drum dryers and flakers. Universal Envirogenics manufactures new and rebuilt high-temperature furnaces for the carbon fibre and ceramic semi-conductor and specialised metallurgical industry.

Bethlehem Corp is a supplier and builder of Porcupine indirect paddle dryers as well as new and rebuilt boilers and industrial equipment. UPE, with its joint partner, the Pfaudler Co, claims to be the world's top seller of used and refurbished glass lined equipment, through its subsidiary UGE.

So what kind of qualifications are needed to become involved in the used plant or equipment business?

According to UPE president Ronald Gale, having a range and depth of experience is of paramount importance. 'Our companies have nearly 350 people worldwide in all our businesses.

'We have engineers and chemical specialists to business people, financiers and economists. It is almost essential in our business that staff can make decisions quickly, be willing to take risks, and understand the value of hundreds of various different types of equipment.

'Like many other companies, ours is customer driven. Our company is marketing and sales oriented, with highly-trained, multi-lingual and experienced personnel, including innovative sales and telemarketing staff, engineers, technicians and equipment specialists.'

Gale adds: 'The business is conducted on a global scale, with equipment and sales representatives throughout North, South, and Central America, Europe and Asia. Over 60% of Universal's business is in the international market place. This is a complete reversal on ten years ago.'

So does UPE ever buy a plant without having a buyer lined up?

'We buy complete plants for stock without having a buyer to hand,' says Gale. 'In much of today's economy, you manufacture a product with the reasonable expectation that a customer is waiting to purchase it. This is often the exact opposite of what we do.

'If there is a glut in the nitric acid market, we may be negotiating to buy a nitric acid plant simply because it is a viable process and the plant is complete. It gets a bit dicey when you have to hold this facility for a period of months or even years before it is resold.

'The used plant business is fraught with risk - you may lose the earning power of dollars while they are tied up in plants and equipment. Often we have to move an entire facility and then move it a second time when you sell it. The costs incurred with match-making equipment, rigging, transportation and re-erection can be significant.'

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Why wouldn't a company prefer to keep the equipment and save it for a future project?

Says Gale: 'Companies usually try several alternatives when closing a facility. They may try to sell the plant as a going concern; that is selling the land, buildings and complete production process plus all employees, as an operating business. Often that is a realistic approach, but generally not with a facility that a company intends to close.

'We have to look at the reasons why a company is closing the plant. Usually, there are three main reasons: that the company is producing a product in a market where there is a temporary or semi-permanent glut; that the direction or focus of the company is changing, thereby eliminating the need for this facility; or that the facility has become out-moded, and a new and more efficient facility is needed.'

Gale adds: 'However, there can be many reasons and multiple variations on any of them. Name a company that is not downsizing and/or out-sourcing.

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'Corporations are searching for new strategies to become more profitable, cost efficient and competitive. We are all experiencing change. Global competition is increasing and change is happening at a faster rate than yesterday's traditional thinking can react to.'

Says Gale: 'If you are closing the plant because there is a glut in the market, it may also be unlikely that someone else would want to take over that facility, and themselves start producing a fertiliser or chemical when the market is experiencing a glut.

'If the facility is out-moded, then in the same vein, would someone else want the headaches of trying to produce the same product in the same market place with an outmoded process or less-than-efficient technology? That's where we step in.'

But are there other reasons why a company should sell the plant to UPE rather than trying to sell it themselves?

'When we buy a plant, we buy it "As Is Where Is",' says Gale. 'That simply means that we undertake to assume all the risk, except environmental, with reference to buying, rigging, removal and transportation of the plant.'

UPE may also take on the responsibilities of rebuilding the equipment, handling, dismantling or even financing.

'In addition, the breaking up of a plant is devastating to the value of it as a whole. If you cannibalize certain pieces of equipment that may be of value, you dramatically decrease the value of the plant as a whole. The pieces are worth a fraction of the complete plant.

'One of the newer and more innovative programmes we have implemented allows a multi-national company to sell a used plant not for cash, but for credits against future used equipment that can be bought at a fixed discount,' he adds.

'For example, XYZ Chemical Company is looking to sell one of its plants. Some of its other facilities could use a pump, reactor, column and a condenser, perhaps immediately. It could cannibalize the existing plant, but the value of that plant would drop dramatically. It may take items which it may use at some point, but it may also find that those items are still sitting around years later unused.

'With our programme, it can get compatible items as it needs them, direct from UPE, and trade the value of those items it needs against those items it does not need.'

But if a company decides to sell a facility itself, would there be any need for it to get involved with UPE or a similar company?

That depends on the individual company involved, says Gale. 'Recently, a multi-national company in Europe wanted to sell a small facility. However, the buyer wanted to use the land, because its location had substantial value over and above the process equipment that was part of the facility.

'The buyer was concerned because the sellers wanted to be compensated for the property with a complete on-site process facility. The numbers were not working. UPE stepped in and purchased all the process equipment and arranged for a cheque to be issued to the buyers at a simultaneous closing held a few hours after the main closing.

'This type of innovative financing can be the basis of our becoming involved in plant closing and restructuring. These situations would otherwise be costly and time consuming for companies which should look to their areas of expertise to make money.

'A company that is competent at producing ammonia may not have the resources, expertise, time or where-withal to become involved in the sale of a major asset, which may over a period of months or even years become frustrating and less-than-rewarding.

'If you are good at making money in one area of expertise, use your time and effort in continuing to make money. Let someone else have the headache, especially if it is their primary business.'

Gale said the key questions asked with reference to a used plant are:

• How old is the plant?
• When was it closed or when is it scheduled to close?
• When it was shut down, was it mothballed, or were any steps taken to protect the process equipment? Was it cleaned?
• Who was it designed by?
• Who was it constructed by?
• Was it batch or continuous process?
• What is its size or capacity?
• Can the seller supply a list of all major pieces of equipment for sale?
• What is the asking price?
• Is the majority of processing equipment going to be left intact?
• What is the timetable?
• Is the plant available for inspection?
• Are there environmental issues?
• Are consumption efficiency figures available?

So where does UPE sell most of its plants?

Says Gale: 'If I said where UPE sold plants yesterday, that would not necessarily mean that we will sell them there tomorrow. The industry moves as rapidly as the stock market.

'We find there is demand for pre-owned plants in most parts of the world. China, India, the Pacific Rim and South America are particular areas of basic or core industry expansion, yet each of these areas has its own specific problems which cause the business cycle to shift,' says Gale.

'China's economy, for example, has grown so rapidly over the past few years that inflation has caused the central government to restrict expansion in certain areas. Knowing which areas and being familiar with the playing field is a full-time job.'

Universal Process Equipment, PO Box 338, Roosevelt, New Jersey, 08555-0338.

Tel: +1 609 2593701.

Fax: &$43;1 609 2591794.

By: Alan Tyler
+44 20 8652 3214

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