Kerotest expects economic turnaround in 2020

Economic troubles dating back to late 2018 forced Kerotest Manufacturing in Mansura to make some very difficult decisions and some hard cutbacks, but company officials are expecting a turnaround by March.

“Our new expansion project is going as planned,” Plant Manager Greg Mayeux said. “We should begin production on our new product by the first of the year.”

Mayeux said the expansion project represents a $7 million investment in the Mansura plant to prepare to begin manufacturing a new product.

He said the company had a bad year, compared to the two previous years, and “”we had to take a step back and reduce the number of employees. We will add those employees back when business improves.”

Kerotest began its expansion in 2018 when it had experienced growth over the past several years.

A “terrible winter” in 2018 left high water in much of Kerotest’s market area during the peak work months of early 2019. Many of its customers felt the economic effects and “adjusted their inventories, so less of our product was required.”

The company’s sales lagged for most of the year.

FINANCIALLY STRONG

“In 2017 and 2018, we saw huge growth and we invested in upgrading the plant,” Mayeux said. “We expected 2019 to continue that trend. It didn’t.”

Mayeux said the company was still profitable in 2019, and is not in financial trouble or on the verge of bankruptcy.

“Those rumors go around quickly, but they are so far from the truth,” he said. “Anyone with concerns about this company’s future should call me.”

He said the company’s sales “fell to the 2017 levels, which is still great.”

That decline did force the company to reduce its payroll to ensure it finishes the year with a profit and remains economically strong in the industry.

“We have been here a long time and we plan to stay here,” Mayeux said. “We did have to make a huge adjustment in staff this year.

“Those were hard cuts and we lost some good people who had been with us for several years,” he said. “We will move on to the new year and we expect new orders will be submitted in March.

“With the expected uptick in business in 2020, the employment numbers will be back to the level before the cuts,” he added.

He said the valve manufacturing industry is seasonal, with sales lower in winter because there are fewer water and natural gas projects -- the company’s major customers for its polyethylene valves.

“Will we have payroll adjustments in the future? It may be likely,” Mayeux said. “Will we have mass hirings to meet increased demand? Most likely. That is the nature of this industry.”

The measure of Kerotest’s stability and financial strength is not in what happens in a given year, but in its results over the past 20 years, “which shows continuous growth,” Mayeux said.

‘HOW IT’S GOING’ MEMO

In early September, Kerotest president R.G. Visalli sent out a memo to employees he entitled “How It’s Going.”

After describing the company’s lackluster sales over the first half of the year, Visalli wrote, “That’s really ‘How It’s Going!’ Not well.”

Visalli wrote that Plan A, Plan B and Plan C were based on holding firm until business picked up. .

“That solution, which is still the best by far, has been taken off the table,” Visalli wrote in the Sept. 8 memo.

He said the company would “have to now match spending to bookings. That's the foundation of Plan D.”

There was a brief ray of hope when orders rose in July, but then new orders fell by 25 percent in August, prompting the “How It’s Going” memo.

Mayeux said sales were up in September and he hopes that is the beginning of a trend. However, he noted it is approaching the slow period when the ground is frozen in many areas of the Northeast and Midwest -- home to many of Kerotest’s valve customers.

TAX INCENTIVES

Kerotest received a package of state and local tax incentives to support the expansion project. In exchange, the company promised to create 50 new jobs at the valve plant.

The project includes a 30,000 sq. ft. addition to the plant in the Industrial Park in Mansura.

The projections were for the expansion to cost about $1.5 million for construction and $2.8 million was for the equipment. The company increased the project to almost $7 million.

The company had about 154 employees in 2017.

If the company does not meet the goals in the incentive package, the tax breaks will be rescinded and Kerotest will owe whatever the taxes would have been without the tax breaks.

Mayeux said Kerotest will meet its obligations to create 50 additional jobs, noting that the number of employees on payroll fluctuates during the year depending on demand for the product.

The new product, which should be announced and begin production early next year, will increase the number of employees on payroll throughout the year.

KEROTEST HISTORY

Kerotest began as Pittsburgh Reinforced Braising and Machine Co. in 1909. It opened the Mansura plant in 1989 and purchased the property outright in 2002.

The company is a major manufacturer of polyethylene valves used in private commercial and government natural gas and water systems. Its main customers are municipalities and utility companies.

This expansion is not Kerotest’s first at this site.

When it purchased the facility in 2002 it made a $4.5 million investment in the plant and new equipment.

It began producing the Polyball polyethylene ball valve in 2003.

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