Q: What is the history of Ferroloy?
A: Ferroloy Foundry was started in 1950 and for the first 50 years of its operation was captive to a company called Easton Corporation. We moved to our current location in 1968. In 2001, The Easton Corporation shut down and Ferroloy Foundry, Inc. turned its focus toward becoming a supplier to the agricultural equipment industry.
Q: Why did you decide to purchase the company?
A: I had been with Koch Industries for the last 19 years and was a CFO, controller, treasurer there for the various businesses. I got to the point where I wanted to own my business. I came across this opportunity and decided to look into it a little further. When I decided to leave Koch I originally intended to invest in several small businesses. What I wanted to do is buy a few small businesses that I could earn a nominal salary and earn profit from value I created through an equity investment.
Q: What were some of the challenges Ferroloy faced when you took over ownership and what changes did you implement to address them?
A: When I came across this company in January 2017 and they were in financial trouble and near bankruptcy. I made an immediate investment in it and bridged them through a difficult time. Then the owner of the business, Paul Kolbeck, passed away in February 2017, so I ended up buying it from the estate in August of that year. Part of that process was renegotiating the debt with the bank.
Basically, we were over-reliant on ag machinery, but I felt that the company had an opportunity to diversify and grow. I just felt like we had a good opportunity, a good team, and that I could diversify the company. I had a pretty good idea there were opportunities in other industries and so the first step in the process was hiring a salesperson that had a lot of experience in the industry.
I hired our first salesperson in August 2017 (John Rockey, Vice President of Sales) which made an immediate impact and we began to diversify the business right away. Over the last two years, we’ve gone from being 94-percent reliant on ag machinery to right at 75 percent and we’re currently growing the business.
Q: What sectors is Ferroloy pursuing and how will that affect the company’s history as an ag machinery supplier?
A: Our agriculture customers are very important to us, so we’re not by any means abandoning that market. We’re in Wichita Kansas, so there are several ag equipment OEMs within 90 miles of us that we have worked with for years and will continue to work with. Even though the percentage of our reliance on ag equipment has decreased, we have actually increased our ag equipment business as we’ve experienced growth.
As far expansion goes, the biggest areas has been valves and pumps, some oil and gas, and just general industry. We’re kind of in the back yard of the oil business, with refineries within 45 miles of Wichita. We do have oil and gas fields here, but we’re also only five-and-a-half hours from Dallas, so we have some good opportunities to expand our presence in the energy sector as well. The other thing that’s happened is other foundries in our area have shut down, so the industry sector has tightened up. We’ve been able to take advantage of the contracting of the market in our area.
Q: How have the changes you’ve made impacted your current workforce and what are your expectations for future workforce growth and development?
A: Since I purchased in 2017, we have almost doubled our workforce. We have hired two salespeople and one part-time employee in accounting, but the rest of our hires are all on the production side. Our growth has really been the result of increasing our brand recognition and the efforts of our sales team over the last two years.
I believe hiring is going to become more and more of a challenge for us in the future because it’s tough work and it requires a strong work ethic. I’m not sure our current generation of Americans is interested in this type of work.
We’ll invest in automation as automation makes sense for us. We do have CNC grinding, milling and lathe machines and our mold machines are automatic. I do think robotics will play a role in our business niche at some point, but the costs are going to have to come down before we make that investment.
Q: How are federal tax cuts and other economic policies coming out of Washington D.C. positively and/or negatively affecting Ferroloy?
A: We’re kind of old-guard industry, so, in my opinion, if our political leaders want to continue to have a strong manufacturing base they’re going to have to make it economical to do it. They can make it un-economical through new taxes or punitive regulations. Many people, think of us as a dirty industry, but we don’t produce VEOC emissions, and we’re technically a recycler. We take scrap iron and melt it down and reuse it in new applications, so we are front-and-center a recycler. We do consume a lot of electricity, but we pay our people well and we have great benefits for our employees.
My intent is to reinvest in the business. We now have a positive cash flow and we’re putting money back into the business. I think there is an opportunity for the business to be very profitable, but, as you know, things can happen in Washington that just yank you around. In our industry, consistency is vital.