A decade of growth has seen Condea develop from a regional to global player. There has been nothing random about the action taken to achieve such dramatic expansion. This is a focused company which has its feet firmly on the ground. Marjorie Walker reports.
Condea, the chemicals division of RWE-DEA, is a company where management has a very clear idea of where it is going and how it is getting there. It has seen spectacular growth over the 1990s, taking it from a regional position as a northern Europe-based producer of fatty alcohols, aluminas and oxygenated solvents to become a leading global supplier to detergent producers, with a global position in surfactants, fatty alcohols, oxygenated solvents and high- purity aluminas. It is also an important producer of PVC and PVC compounds in the US market.
Even so it is not a company that courts or needs publicity, warns Georg Schöning, the RWE board member for chemicals, when interviewed in Hamburg in August. Schöning is not keen on predictions about where Condea will be in five or ten years' time, or talking about target levels for turnover, market share or return on capital. 'This is fine for the financial world but it is not the way we like to do things.' Condea is not out there actively seeking acquisitions, he says, but if the right opportunity arises it is ready for it and parent RWE has supported all expansion efforts so far.
Over the past decade a series of acquisitions in Italy, the
US and recently Germany has lifted Condea's turnover from
DM660m ($232m) in the early 1990s to around DM4.5bn in 1998,
if a full year's contribution from the 30 June acquisition of
the Hüls surfactant, solvent and oleochemical businesses is
included. Schöning emphasises that there has been no 'leap
into the dark', nor will there be in the future. Businesses
acquired have been well known to Condea and each acquisition
has a clear logic in terms of using the same technologies,
operating in the same market or filling in geographical and
product gaps in the company's portfolio.
Parent RWE celebrates its centenary this year having moved a long way from its roots in energy and mining. Activities now encompass refining, chemicals, waste management, engineering, telecommunications, construction and civil engineering as well as the original oil and gas, mining and raw material interests. In 1999 RWE-DEA also celebrates 100 years since its foundation as Deutsche Tiefibohr AG.
The Condea name arose in 1961 as a joint venture between DEA and Conoco to produce fatty alcohols from petrochemical feedstock using the Ziegler process at the north German site of Brunsbüttel. Ethylene was supplied by pipeline from the refinery 30 miles to the north.The business became part of Deutsche Texaco in 1986 which in turn was acquired by RWE in 1988.
The RWE-DEA company was formed to encompass the exploration, refining and chemical interests of the RWE holding group. Condea includes the chemical interests of Condea Chemie GmbH in Europe, Condea Vista in the US, Condea Augusta and Condea Chimica DAC in Italy, Servo Delden in the Netherlands and Condea Nanjing Chemicals, the Chinese joint venture.
The first sign that Condea was entering a new growth phase was the move to internationalise through the acquisition of Vista in 1991, a business well known to Condea on several counts. Vista, a management buyout from Conoco, competed with Condea in the US. Condea knew the market, it knew the products and at least some of the people involved - it had worked with them as colleagues. The technology used in the fatty alcohol/alumina business was the same as that used in Brunsbüttel. It was an obvious fit in terms of adding US manufacturing capacity, and a significant step towards becoming a global supplier to the global players in the detergents and surfactants markets. Vista's Lake Charles ethylene cracker supplied both alcohol production and the VCM, PVC resins and PVC compounding business.
The next step was to move from being purely a supplier to the surfactants producers to acquiring in-house surfactants capacity. This was achieved with the 1992 acquisition of the privately owned, Milan-based, DAC. A new ethoxylation plant was already planned by DAC at Terra Nova dei Passerini and investment in the site continues with DAC's sulphonation capacity currently being increased by 20 000 tonne/year to 56 000 tonne/year. This new capacity will be used to make linear alkyl benzene sulphonates and other products that until recently have been made in-house by manufacturers of detergents and cleaners. This reflects the trend for these players to concentrate on production and marketing of their finished products and to buy in the raw materials they require.
In 1995 Enichem's Augusta business came on the market. 'A perfect fit to our existing business in Europe,' is how Schoning describes the Augusta business. Condea had acquired LAB production capacity in the US with the Vista purchase. Augusta added LAB production in Europe, n-paraffins and alcohols, as well as additional ethoxylation capacity. Once again the Condea management felt it was on familiar territory. Augusta had a sizeable LAB supply contract with Hüls. Condea too had close business contacts with Hüls. It knew the technologies. It knew the markets.
Then came the realisation that Hüls management was restructuring its business. For some time management of the Condea and Hüls surfactants businesses had been aware of the advantages of combining the two operations, so news that Hüls considered these businesses as non-core to its future and was willing to sell Contensio, its surfactants business, part of its oleochemical business, its solvents business Oxeno, and the Servo Delden site, was good news to Condea. The DM500-600m deal was announced in May and completed on 30 June following approval from the EU competition authorities.
It looks a good deal, adding around DM1bn in turnover. One of
the most attractive aspects is that the purchase included
little in the way of overhead costs so the new owner is not
involved in significant cost reductions, only the removal of
some overlaps in sales efforts in a few areas.
The purchase of the Hüls businesses adds manufacturing capacity for surfactants and surfactant raw materials at Marl, one of the largest and most important chemical sites in Germany. The lack of ethoxylation capacity in northern Europe had been seen by some as a gap in the Condea portfolio, which has now been effectively plugged by the Marl capacity, which is supplied by in-house ethylene oxide production. Schoning says a low-cost debottlenecking at Marl could raise capacity at the 150 000 tonne/year EO plant. Condea had already announced a programme of debottleneckings at the existing alcohols units at Brunsbüttel, Lake Charles and Augusta, which will add120 000 tonne/year capacity by 1999. Condea is also planning to increase the paraffins production capacity at Augusta by 120 000 tonne/year.
As well as new capacities and products, the Marl and Delden sites offer another advantage. They are located close to major detergents manufacturers, which Schöning believes will enable Condea to improve the quality of its service to European customers.
Schöning believes that Condea's surfactants business is now in a strong competitive position to supply the global market. Low-cost production means Condea is able to offer product at a very competitive price, but Schöning says that Condea's real strength is in the width of its product portfolio and its ability to supply the market very flexibly using a variety of feedstocks and a variety of technologies. It can provide soapers and other surfactant producers with what they need, whatever the trend or fashion in the market.
The Condea/Contensio deal has strengthened Condea's position in the European market, and ICI Surfactants is merging with the Unichema business. Further consolidation in the European surfactants and surfactants raw materials markets is expected over the coming years. There are still a large number of small producers out there, but Schöning indicates that for the time being Condea will concentrate on the organic growth of the business and on merging the Condea and Hüls businesses.
Schöning acknowledges that the absence of an Asian production base could be seen as a gap in the global surfactants portfolio, but says that at this point in time it is a gap that Condea is quite comfortable with. It does have a joint venture between RWE-DEA and Nanjing Surfactant Co at Nanjing producing ethoxylates, sulphates and ether sulphates, and is concentrating just now on developing markets to utilise fully the capacity at the unit.
Condea has a strong position in the global market for oxygenated solvents - a position that is considerably strengthened in Europe by parts of the Oxeno purchase. Oxeno adds additional IPA capacity, ethanol and butyl glycol so Condea can now offer a full portfolio of oxygenated solvents to European customers. Putting together production of isopropyl alcohol at the Condea Meerbeck site and the Hüls Herne site strengthens Condea's position in the IPA market, reduces the number of producers in the European market and reinforces Condea's position as a strong number two to the European market leader, Shell. Condea's MEK at Meerbeck, and Hüls' ethanol capacity at Herne and butyl alcohols at Marl make up the new enlarged Condea solvent offering. A cost-cutting programme at Meerbeck in 1992-93 ensures that production at the site is cost-competitive.
Within the product range there are few true specialities says Schöning. The bulk of Condea's products are high volume. However the high purity aluminas produced at the Brunsbüttel, Lake Charles and Baltimore sites and the performance chemicals of Servo Delden are specialities.
The European production and marketing joint venture with Huntsman in maleic anhydride announced in July 1996 was finalised in 1997 and is headquartered at Meerbeck. The joint venture is a sensible compromise between two players with ambitions in the European marketplace. Huntsman, the world's biggest MA producer, had technology and wanted Europe-based production. Condea had a site and a plant that at 12 000 tonne/year was too small to compete with new worldscale capacity. Construction of the new 40 000 tonne/year MA plant, which will supply the joint venture will be completed in the first quarter of 1999 with startup in quarter two.
Schöning is comfortable with the position of the US PVC interests acquired with Vista. He believes there is little to be gained from being a global player in this market. The production has the advantage of downstream integration to ethylene from the Lake Charles cracker. Condea has demonstrated its commitment to the business with its joint venture with PPG to expand VCM production at the Lake Charles site which came onstream in late 1996. Parallel to the VCM capacity expansion, the PVC capacity at the Condea Vista Oklahoma City and Aberdeen sites was increased from 450 000 tonne/year to 650 000 tonne/year. This expansion was finished in May 1998.