What slowdown? Growing Kraton keeping busy

By Frank Esposito Crain staff (PN)

Houston, Texas -- Kraton Polymers LLC continues to invest and grow in its second full year as a public company.

Houston-based Kraton, a major producer of styrenic block copolymers, spent $8 million on improvements last year at its plant in Belpre, Ohio, including a new lab that opened in August. In 2009, the firm spent $15 million on a new SAP global computer system.

Kraton also is in year three of a four-year, $40 million system upgrade plan in Belpre. When completed, the system will improve the quality and consistency of materials made there, company officials said in a March 22 interview in Houston.

By midyear, Kraton also expects to announce the location of its first production plant in Asia. The selection process “is down to a couple of very viable locations,” said investor relations director Gene Shiels. The plant could be operational as soon as mid-2013, he added.

Other upcoming projects include the conversion of a production line in Belpre to allow it to make isoprene rubber as well as SBC, and the move of a semi-works pilot plant from Houston to Belpre, where it will be used as a semi-commercial line. That move is expected to happen within two to three years, according to Rick Ott, vice president of global human resources and communications.

This whirlwind of activity has not hampered Kraton's financial performance in any way. The firm's 2010 sales total of more than $1.2 billion was up 33 percent vs. the prior year. Kraton also showed a 2010 profit of almost $97 million after losing almost $300,000 the year before.

Kraton's sales are split about evenly among its three operating units: Advanced Materials, which includes most traditional plastic moulding applications; Adhesives, Sealants & Coatings; and Paving & Roofing. The firm generates about 40 percent of its sales from the Americas, with the fast-growing Asian market at just over 20 percent.

Wall Street also has approved of Kraton's efforts since owners TPG Capital LP and JP Morgan Partners LLC took the firm public in December 2009. The firm's per-share stock price debuted around $13.50, but has climbed steadily and was trading at around $40 on March 30.

TPG and JP Morgan continue to own about one-third of Kraton stock. Shiels described the two firms as “great stewards of our business.”

On the new product front, Kraton continues to see strong results from its Nexar-brand SBCs, which first were commercialised in 2009. The materials now are being used in the heating, ventilation and air-conditioning market as a membrane in air-conditioning systems. Membranes made with Nexar can take humidity and water out of air, resulting in energy savings, Shiels said. The membranes now are being used in parts of Asia and are expected to be commercialised in other parts of the world.

In the medical market, Kraton's hydrogenated SBCs are being used as PVC replacements in medical packaging such as intravenous bags and blood bags. The firm is working with medical supply giant Baxter Healthcare Corp. on formulations for these products, Shiels said.

Over in electronics, Kraton's SBCs have found a home in ear-bud cables for Apple iPods. Its products are part of Apple's efforts to make its products 100 percent recyclable, Shiels explained.

On the jobs front, Kraton employs about 900 worldwide. The firm added at least five new employees at its innovation center in Houston in the last year and plans to add 20 technical support staffers companywide by mid-2012. Kraton's production site in Paulinia, Brazil, also has added 20 jobs in the last year. The firm also operates plants in Wesseling, Germany, and Berre, France.

The plant that Kraton operates via a joint venture in Kashima, Japan, was not damaged by the recent earthquake and tsunami there, but has been taken off-line because of power issues in the area.

Like many users of butadiene feedstock, Kraton has been challenged by supply issues in the past year. Shiels said the firm has access to as much butadiene as it needs, but has been confronted with higher prices for the material. To date, Kraton hasn't had to curtail production at any of its local sites because of a lack of butadiene.

Looking toward the remainder of 2011, Ott said Kraton “expects to continue to see a good growth rate.”

“We have a lot of innovative applications, especially in compounding, that can be commercialised fairly quickly and then spread to other applications,” he said.

From Plastics News (A Crain publication)