Westlund expands to serve customers across Canada

BY MORRIS R. BESCHLOSS

PVF and ecomomic analyst

Westlund Industrial Supply was formed in Edmonton Alberta in 1963 as a division of Western Supplies Limited, a plumbing and heating wholesaler owned by Alberta’s Graham family. The intent was to focus on the industrial PVF business in Western Canada primarily in the energy and resources sector -- oil and gas, pulp and paper and mining. A network of Westlund branches evolved from Vancouver to Thunder Bay, often combined with a Western Supplies branch to allow viability in smaller locations.

In 1986, Emco Corporation acquired the Western Supplies businesses from the Graham family. Emco had industrial PVF distribution in a number of its operations across Canada. Throughout the 1990s, a pattern of acquisitions and consolidations led to development of Emco’s industrial business, including Emco Offshore, a powerhouse in Canada’s offshore oil and gas industry under the Westlund brand.

Today, Westlund operates from 30-plus facilities across Canada, providing supply of pipe, valves and fittings (PVF) in stainless, carbon and alloy materials. Westlund is focused from coast to coast on key industrial markets:

• Oil & gas, petrochemical including heavy oil and oilsands
• Offshore oil and gas
• Pulp & paper
• Mining and smelting
• Water and wastewater management
• Food and beverage
• Automotive
• Marine
• Chemical
• Pharmaceutical

Westlund’s business has been built on commitment to customer service that is delivered locally, supported regionally and nationally and globally. For large clients and those with multiple locations, they have developed the Preferred Client Program for mro supplies including oilfield supply. Westlund has processes designed for those clients to track the value-add activities that Westlund builds with them.

Westlund has built a powerful project management capability for capital construction with dedicated project managers, technical and administrative staff as well as facilities, equipment and processes tailored to that function.

In both MRO and capital project work, Westlund has an enviable track record with major clients throughout each segment of the market.

To give you an exclusive insight into Westlund’s increasing involvement in Canada’s PVF sector, we have the privilege of presenting this q&a with the company’s vice president-marketing & sales, Guy Mersereau.

Mersereau was born and raised in Miramichi, New Brunswick, a town built on pulp and paper, mining and fishing. After graduating from Rothesay Collegiate in Saint John, N.B., he joined Crane Valve Group as inside sales supervisor at the tender age of 17. Crane provided excellent training and relocated him through Montreal Head Office Marketing, then as an account manager in Toronto, and later Calgary over a 10-year period.

Mersereau then joined Newman Hattersley, the Canadian distribution arm of British-based Hattersley Group (acquired in 1986 by Tomkins) in various roles as bronze and iron manager, Western sales manager then 11 years as managing director.

He joined Westlund as vice president in 1998, with regional and later national responsibility. Westlund is now a separate division nationally.

Mersereau is now vice president-sales & marketing, based in Edmonton, Alberta, with direct responsibility for the Edmonton hub and the Capital Projects Business.

Beschloss: With Canada’s focus on energy development in the past 15 years, Westlund seems eminently well-positioned to participate in this fast-growing PVF sector. What has been your company’s growth in PVF percentagewise since you joined Westlund in 1998?

Mersereau: Westlund has enjoyed steady growth in Alberta where we started and across Canada. As a private company, we do not share specific sales and market share information, but certainly we are more than double the size we were 10 years ago.

Beschloss: Since Westlund is a full-line phcp distributor, has PVF become an increasingly important segment of your activities?

Mersereau: Actually, Westlund is the PVF Division of the Emco which is the full-line phcp distributor. We are organized as much around customer types as products, so Westlund focuses on the energy and resources market but works closely with the mechanical PVF teams within Emco’s plumbing and fire protection business.

Beschloss: With tar sands literally setting Canada’s industrial business on fire, do you believe the Dominion’s growth opportunities will maintain the present pace?

Mersereau: Absolutely. The fundamentals for continuing investment in Canada’s energy market are strong. We have the resources, the technology and political stability that will continue to attract companies from around the world. While there will continue to be challenges from increasing costs of labor and materials, the sheer demand for safe and reliable supply of oil and petroleum products ensures continuity of opportunity. And the mining sector has been strong and is expected to continue.

Beschloss: With environmentalists in Canada and elsewhere attempting to inhibit the expansion of coal-to-oil conversion, due to CO2 emissions, do you believe such limitations will put a crimp in Alberta’s growth opportunities?

Mersereau: Certainly the challenge of meeting the energy needs of North America amid environmental concerns will be a difficult balancing act. However, as with many recent issues, I expect that innovations in technology will be developed to meet these challenges. And these solutions will provide new markets for forward-thinking suppliers of PVF. Alberta has coal in abundance as well as conventional and heavy oil and natural gas so as new processes are introduced in any of these segments, we will adapt.

Beschloss: With the federal government seemingly committed to ending the trust status of energy development and others, would such final determination slow further development of natural gas and coal-to-oil conversion?

Mersereau: It’s too early to know the complete effect of this change in regulation, but I don’t see that it will have a major negative effect on these markets. Some trusts will become takeover targets or will merge to get stronger. Some will take this opportunity to reinvest the trust payouts in exploration and development. In any case, the work will still get done as long as the markets stay strong. So, I would say however difficult the change may be for those involved, the basics of development will continue.

Beschloss: What other end-use subsectors present the most growth possibilities for Westlund?

Mersereau: The natural progression of the increased capital construction will be a larger installed base of plants that require the kind of mro management skills that we can bring to bear, so the same end-users but a different stage of the market. In addition, there are major mining and power operations planned across the country that suit our skills and experience very well. Canadian diamonds are sought around the world and an increasingly important market for our company. And we are quite expert in the pulp and paper business.

Beschloss: With America’s leading super PVF distributors McJunkin and Red Man Pipe turning their attention north of the border, will this competition be a stumbling block to Westlund’s meteoric growth?

Mersereau: We have kept our light under a bushel for a long time, but the dramatic increase in attention to our market, particularly the oil sands, has the effect of attracting both investment and competition. We have some very tough -- meaning very good -- competitors here already, so don’t see the added competition as a direct threat. In the end, each of us has to produce more in value for our clients than we take out in cost. That equation will apply to any new competitors as well. In most cases, like Red Man’s purchase of Midfield, the major U.S. folks recognize the need for local knowledge and skills to provide that value, so I expect that trend of acquisition to continue. To paraphrase Tip O’Neill’s comment about politics: “all business is local.”

Beschloss: Since so much of your success is dependent on energy development, are you optimistic about Canada’s continuing role as a main oil and gas supplier to the U.S.?

Mersereau: Unless there is a dramatic breakthrough in technology that makes internal combustion engines extinct, or the U.S. economy comes to a complete halt, the demand for energy will continue. And unless there is an even more dramatic breakthrough in global politics -- such that Venezuela gives back nationalized companies, and the Middle East becomes completely stable -- Canada will provide the best and safest source of energy for our American friends.

Beschloss: With your obvious commitment to the industrial sector, are you confident that Canada’s version of the PVF Roundtable will become operational?

Mersereau: I would like there to be a strong Canadian version and the PVF committee of ciph so far is the best option. At this early stage of development, it has made a strong start, but does not yet have the participation of the PVF Roundtable. So I see real opportunity for improvement, including higher participation from the Alberta-based oil and gas companies.

One key ingredient of the PVF Roundtable is the inclusion of the epc and end user community -- which encourages a view of the industry from end to end. The Industrial Piping Division of asa is more equivalent to the Canadian version with manufacturers and distributors involved -- I am a member of the Executive Council. Perhaps we can get the three organizations more closely aligned to address industry issues and provide a forum for developing our industry. We face a significant competition for talented people to join our industry. We need to work together on attraction of staff, education and training, so we need active and widespread participation. No one company can address this by itself.

Beschloss: With the “loonie” closing the gap with the U.S. greenback, will the subsequent higher prices in relation to the dollar act as an inhibitor to your sales?

Mersereau: The main concern will be for the effect on the export of energy and manufactured goods for our customer base, and any decline in investment as a result. On the supply side, it’s mainly good news for us, as we buy far more in U.S. dollars than we sell. On balance, it’s likely a wash.

Beschloss: Do you subscribe to an upcoming surge in oil prices in the foreseeable future due to worldwide shortages?

Mersereau: I believe that geopolitics and increased environmental controls will keep costs rise. Whether you subscribe to the “Peak Oil” theory or not, we are certainly running short of easy to get oil and gas. Fields around the world are depleting or becoming more expensive to produce, and the capital intensity of the oil sands and offshore projects means that cheap oil is not likely in the future. Rising focus on environmental issues and the strength of the nimby movement on lng plants or new refineries will only exacerbate the trend.

Beschloss: What are the growth plans, if any, by Westlund’s ownership through organic growth and acquisitions?

Mersereau: Westlund is committed to an “invest and grow” strategy. We are one of the few truly national organizations and have opened in a number of locations over the last few years where we find clients who will support our “Fast, Focused and Flexible” brand of PVF distribution. We always look for acquisitions to bring new skills and talented folks into the company, along with their grasp of local markets.

Morris R. Beschloss, a 50-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst for The Wholesaler.