Competitive Dynamics in the US Piping Sector
He explained that one of the biggest tests faced by the three main competitors, US Pipe, McWane and Acipco, is from plastic piping – employing a newer and cheaper material than they have traditionally used.
Plastic piping comes with its own negatives, for instance its long-term durability compared with concrete. But, according to the specialist, plastic pipe “will continue to gain market share” if companies in the piping industry do not detail the advantages that concrete piping has over plastic.
The decentralised leadership structure at Forterra relied on the quality of talent among employees, which was one of the company’s “weaknesses”. The fact that it is an “old” industry means that companies like Forterra have not moved to a more modern manufacturing business structure.
While Forterra is the largest player in the piping market, there has been some short-sightedness in terms of positioning the business for long-term success, according to the specialist – although the quality of its manufacturing facilities is “world class”.
One of the biggest industry-wide problems is overcapacity, which affects margins and profitability. One of US Pipe’s facilities could be rationalised in order to improve margins, while the focus on manufacturing activities should be shifted to some of its other sites.
Although the specialist has “fairly high confidence” in the senior management at Fonterra, he noted that “the money is made at the plant, not at the corporate office”. And at this level there are cultural issues that could impede future success.
To access all the human insights from Third Bridge’s Forterra & the US Piping Sector Interview, click below to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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