Newdell cuts wide swath in today’s industrial valve sector

BY MORRIS R. BESCHLOSS
PVF and economic analyst

Newdell was established in 1999 by valve industry veterans Dave Scott and Chuck Hulbert as a manufacturer and wholesaler of industrial valves used in the petrochemical, chemical, and refinery markets. Today, Scott and Hulbert work in conjunction with two additional partners and more than 70 employees at a 72,000 square foot facility in Houston, Texas. Smith is unquestionably the crown jewel of Newdell’s offerings. It is a trademark brand owned by the Newdell Company. However, Smith is just one of the product lines owned and marketed by Newdell. Other associations include:

• Diamond Gear -- A manufacturer of industrial gear boxes used for operating quarter-turn and multi-turn valves. In addition to manufacturing, Diamond Gear is the North American exclusive representative of the Air Torque line of pneumatic operators for quarter-turn valves. (www.diamond-gear.com)
• Ladish Valves -- A manufacturer of stainless steel and high-alloy valves for the pulp and paper, chemical, and petrochemical industries. Ladish also offers a complete line of gate, globe, and check valves in a variety of materials including Hastalloy C, monel and nickel. (www.ladishvalves.com)
• Pk Valve -- A Korean valve manufacturer with one of the most extensive product lines available. The Newdell Company is the exclusive distributor of pk valves in the western hemisphere inventorying millions of dollars worth of pk Valve products for distribution in the U.S., Canada and Latin America. (www.pkvalve.co.kr)

Smith is one of the most celebrated brand names known to valve industry veterans. Founded in the mid-1950s by James DeWolf Smith, it focused from the outset on the production of forged gate, globe and check valves for use primarily in the petrochemical industry. A forged brass ball valve line was added 10 years later. By the mid- 1970s, Smith was acknowledged as one of the leading producers of industrial valves in the oil and petrochemical industries.

With son Tony taking over at that point, exotic stainless and alloy items were added. This greatly expanded product line was relocated to a new production facility.

Unfortunately, the early 1980s recession brought a virtual shutdown to domestic oil production and forced Smith to sell out to a private investment firm. A production interlude in Longview, Texas, failed to halt the downward trend. Smith’s assets were bought in 2000 by Newdell, and production was moved to Italy.

A substantial reversal to the upside allowed the Newdell owners to return manufacturing to the U.S. in 2006, locating in Houston. A new manufacturing and warehousing facility has just recently been completed. Smith’s production rate has now reached 20,000 valves a month and is growing rapidly.

Newdell will be celebrating its 10th anniversary. Its two key executives’ biographies spell out the expertise that they bring to this fast-growing venture.

The following Q&A with David Scott, a highly respected personal valve industry associate of long-standing explores Newdell, the contemporary valve industry, and the future of the PVF sector during these turbulent times.

Beschloss: David, let me start by congratulating you on founding Newdell as an instrument by which to implement your vaunted valve industry talents, which you manifested so elegantly at Zidell Enterprises. What prompted your initiation of this new venture at the turn of the century.

Scott: The Zidell family made the decision to sell the valve group in the late 1990s. Chuck Hulbert and I had been fairly successful at growing Zidell Valve Corporation under the auspices of a family business. However once the company became one of many companies within a private equity group our mutual skill sets were probably not what they needed in order to run the business successfully for the future. Hence we ventured out on our own to form the Newdell /Diamond Gear Companies.

Beschloss: In Smith and pk Valves, you certainly have under your wing two highly-recognized brandnames. Outside of Ladish Valves, which you own separately, and Diamond Gear, of which you are the exclusive North American representative, are there other lines available to you?

Scott: Smith, pk, Ladish, Diamond Gear and Air Torque are our only product lines. Being a small company we have decided not to handle any competing product lines and to focus our efforts on penetrating the market with these core products.

Beschloss: Since Newdell is obviously a valve specialist, with manufacturing and marketing activities throughout the U.S. and Canada, would you classify Newdell as a manufacturer and master distributor of your branded products, as well as a marketer of AirTorque and Diamond Gear?

Scott: Smith, Ladish and Diamond Gear represent products for which we maintain design, manufacturing, quality, marketing and trademark control. Obviously for these three products lines we are seen as the manufacture. We represent pk Valve exclusively in the western hemisphere, so in this territory our customers view us as the manufacture. The same can be said for the Air Torque product line with the exception that our exclusive marketing rights extend only to North America.

Beschloss: Could you describe your inside/outside sales organization, and the extent of its interaction with distributors nationally?

Scott: All of our products are sold through distribution. We have found the distribution community to be loyal and supportive of our efforts. Today we have five outside sales people, 10 inside sales people, and two project quotations personal.

Beschloss: Those of us who remember the predominance of Smith Valve, especially in the qtr-turn arena, are thrilled by the comeback that prestigious brandname is making. Could you bring us up-to-date as to the success of your efforts?

Scott: We purchased the Smith product line in 2000 from Grinnell. Grinnell had done a very good job of maintaining the quality of the product and hence the brand name remained strong. However, the Smith Valve line was a very small piece within Grinnell and I believe the Grinnell management struggled with funding allocations amongst other profitable departments. When we bought the Smith valve line the production volume was about 3,000 pieces per month. Today we are producing about 25,000 pieces per month and our sales continues to grow. However, we recognize we are a very small player in the api 602 Forged Steel valve market, but our domestic production provides some niche positions that work to our advantage. Obviously the owners have dreams of returning the Smith product line to its former stature but today these are only dreams and we have much work in front of us before this will happen.

Beschloss: Would you please amplify your sales/marketing coordination in promoting Ladish Valves, as well as the pk valve line and Diamond Gear?

Scott: Ladish Valves and Diamond Gear are operated separately from Newdell. Ladish Valves, managed by Bill DiStefano, manufactures and sells exclusively Ladish product and is located in a separate facility from Newdell and Diamond Gear. Diamond Gear, managed by Kevin Hansen, focuses all of its efforts on manual quarter and multi-turn gear boxes as well as the Air-Toque product line. Newdell markets and sells the Smith and pk valve product lines.

Beschloss: Have your efforts and successes been mainly focused in the Greater Houston area and the Southwest in general? Are plans underfoot to expand your intensive coverage nationally?

Scott: We have been most successful in the Southern and Eastern U.S. and in Western Canada. We have a real need for distribution in the Western U.S. and in Eastern Canada.

Beschloss: Having experienced the deep PVF recession of the early 1980s, are you concerned that our sector’s intense momentum could be endangered in 2009?

Scott: I believe that 2009 will be more difficult for those of us in the oil related sectors than what we have experienced over the last few years. Momentum will slow as major projects are placed on hold or cancelled.

Beschloss: Based on your expert knowledge regarding the PVF sector, especially the valve component, are you optimistic about the future of the product lines which you are manufacturing and/or marketing?

Scott: I am certainly optimistic for our product lines. I believe that we offer the market high quality products and first rate services at fair prices. If I have any areas of concern they have to do with overall market demand prospectively and the high concentration of low price Chinese product that seems to be flooding the market.

Beschloss: Are you being benefited by the substantial decrease in costs of components and raw materials? Does the cost/selling price relationship which you anticipate allow you a reasonable profit as we approach the major part of the 2009 business year?

Scott: It is true that the raw material markets have cooled down and that the prices of scrap and some materials have dropped from their peaks, but I don’t think these reductions in raw materials will result in big decreases in valve prices. There are simply too many other costs associated with delivering finished valves to market that play significant rolls; and even if our costs do go down, the user community is quite deft at making sure we pass any cost savings along.

Beschloss: To put Newdell’s future in proper perspective, what are you and your Company’s long-term objectives within the framework of the PVF sector?

Scott: Obviously we would like to win a few more strong positions within the distribution community. We have many good competitors and fighting for a strong distribution position is something all manufactures strive to do. Our long term goal is to continue to gain market share via the distribution community. Hopefully our continued efforts to bring safe, quality products and services to market at fair prices will allow us to grow our core business.