The Economy, Imola, Aquafil and NeoCon East: Startegic Exchange
By Kemp Harr
Last month we watched another bout of political bickering and once again the can was kicked further dOwn the street. Should we be relieved? Perhaps, like someone who was shot at but not hit. The situation is hardly something to celebrate. Standard and Poor’s estimates this shutdown will cost the economy $24 billion and that fourth quarter GDP will be affected by about 0.6%, so instead of the economy growing 3%, we’ll see 2.4% growth.
The question we have to ask ourselves is what the net effect of October’s government shutdown will be on the floorcovering business. Some warn that the hit to consumer confidence will act as a deterrent to retail sales, especially for big-ticket deferrable purchases like floorcovering. They argue that most consumers recognize that all that really happened in mid-October was a 90-day deferral and that we’re going to have to find a longer term solution to the nation’s spiraling debt. Others would argue that Americans see this policy brinkmanship as just another chapter in the Washington political saga and things will work themselves out in the end.
Americans do need to take a longer term view and focus more on the patient’s overall health as opposed to the ailment of the day. One solution to the debt crisis is reducing the size of government and reforming the tax code. Or, as Clinton discovered during his presidency, grow the economy fast enough to at least stabilize the spiraling debt situation. These are the areas where Washington needs to focus its time. Squaring off on Obamacare, given where the balance of power stands today in Congress and the executive branch, is borderline quixotic.
Fortunately, while politicians are out chasing windmills, private industry is busy investing in infrastructure that will bring more jobs back to America. I mentioned in this column last month that the floorcovering industry is in the process of breaking ground on capex projects that total well over a billion dollars here in the U.S. We can only hope that the distractions in Washington don’t stifle the momentum that’s been building as we continue to recover from the last recession.
IMOLA’S ADVANCED CONTINUA LINE
The Italians continue to lead the world in tile manufacturing. In 2012, Italian tile companies produced 34% of the $19.5 billion (wholesale) worth of tile made around the world. At the Cersaie show in September, one of the oldest tile companies in Italy, Cooperativa Ceramica d’Imola, was celebrating its 100th year of making tile. As the name suggests, this tile producer is owned by its employees; it has been a cooperative since 1874. Much like Crossville here in the U.S., Imola is named after the city where it is headquartered. The town of Imola is located on the Santerno River in north central Italy, about 30 miles east of Bologna.
Prior to getting into the tile market in 1913, Imola’s product focus was on tableware. And while the company has maintained the artisan focus from that era, it now operates five production facilities throughout Italy, employs 1,800 associates and has an annual capacity of 25 million square meters. Over the years, Imola has grown its presence here in the U.S. and it operates a major distribution center in Miami. The company’s logo is the symbol of the worker bee.
Less than two years ago, Imola enhanced its capacity to produce distinctive looking large format tiles with its state of the art Continua line. This new tile line cost $55 million and produces tiles that are approximately four feet square. Using equipment built by Sacmi, this line not only produces 5,000 square meters a day but does so with zero waste. The line is also super automated and requires very little human interaction. It creates distinctive through-body visual effects by layering raw materials on a moving belt, which are then precompacted and eventually compressed with the largest tile press in the world.
AQUAFIL’S ECONYL PLANT IN SLOVENIA
Thanks to Aquafil’s recent expansion (with its acquisition of Xentrys) in Germany, the company now commands over 200 million pounds of annual capacity for nylon 6 BCF carpet fiber, making it a major supplier to the carpet industry. With 13 facilities around the world, this privately held company now employs 2,100 people and 85% of its $685 million in annual revenue comes from supplying BCF nylon 6 to the carpet industry. The company’s factory in Cartersville, Georgia, which is on the verge of another expansion, currently produces 35 million pounds of nylon carpet fiber.
These figures by themselves are impressive, but the best part of the story is what the company is doing on the sustainability front. In the past several years, the company has invested $50 million on its Econyl depolymerization plant in Ljubljana, the capital city of Slovenia. This investment was motivated by the increasing demand for carpet that contains post-consumer recycled content, and, as Giulio Bonazzi, the company’s CEO, says, “Our business is carpet and we wanted to make carpet more sustainable.”
One twist to this operation that sets it apart from the other recycling facilities around the world is that one third of its post-consumer waste comes from discarded nylon fish nets. Bonazzi quoted a United Nations statistic that estimates there are 1.5 billion pounds of abandoned fish nets in the sea and the number increases every year. These abandoned nets can wreck havoc on the underwater habitat for fish and turtles, so recycling them into carpet fiber is better for the environment.
At its current pace, the Econyl plant is converting ten million pounds of used fish nets into nylon carpet fiber on an annual basis. The remainder of its waste nylon feedstock comes from recycled carpet fiber. Of the 33 million pounds of renewed nylon fiber produced in Slovenia, half of it ends up back in the U.S.
While on a recent tour of the Econyl plant, I asked Bonazzi why he chose Slovenia for the location of the Econyl facility. He told me there were multiple reasons. Aquafil first moved into Slovenia in 1994, so there was already some infrastructure and real estate that could be expanded. But he added that the Slovenians are not only well educated but they were also one of the first societies in Europe to focus on recycling and minimizing waste. And lastly, Slovenia borders Italy on the northeast corner of the boot, so the Econyl plant is only four hours from Aquafil’s headquarters.
NEOCON EAST PERFORMED WITHOUT GOVERNMENT ATTENDANCE
NeoCon East has always been a major venue for architects, designers, manufacturers and contractors who target the GSA market. This year, though, the Baltimore show lacked the traditional crowds of government employees—they normally account for about 12% of attendance—because of the government shutdown.
In spite of the shutdown, this year’s attendance was only slightly down from last year’s because architects, designers and other non-government visitors—most of whom come to see products on the GSA schedule—showed up in greater numbers than last year.
Many of the manufacturers who exhibited said they rely on the GSA for as much as 50% of their total NeoCon East sales. They might have been disappointed by the no-shows, but there was still an air of optimism among both show-goers and exhibitors. Overall commercial flooring sales are up slightly so far this year, and the commercial market is expected to grow even more in 2014.
The beautifully designed Baltimore Convention Center is a considerably smaller venue than the Chicago Merchandise Mart. More than 250 exhibitors were spread out over a single floor, in spaces much smaller and more intimate than in Chicago. One of the more prominent spaces belonged to Bentley Mills, which won the Large Booth Award for its unique Western lodge look, which proved to be the ideal setting for its new product line, Western Edge. Like many exhibitors, Bentley showcased one or two important collections in the smaller spaces.
A total of 28 flooring manufacturers were among the 250 commercial product manufacturers who showed their products in Baltimore this October. Prominent among them were Atlas, Bentley, Bolyu, Crossville, Flexco, Forbo, J&J, Johnsonite, Mannington, Masland, Mohawk, Parterre, Patcraft, Roppe, Shaw Contract and Tandus.
Newcomers to this year’s show: Capri Cork and Centiva. Centiva, which was acquired by Tarkett in 2010, exhibited with Tarkett’s carpet brand, Tandus. Capri rolled out its new Mediterra Studio collection of cork tile with decorative details and borders for elegant custom looks.
If you have any comments about this month’s column, you can email me at email@example.com.
Copyright 2013 Floor Focus
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