The Backing Business - January 2010

By Darius Helm

The last decade has seen a transformation in the carpet backing business, all driven by two issues—performance and sustainability. New technologies and innovations have led to specialized backings that significantly improve the performance of carpet, increasing tuft bind, dimensional stability, edge ravel and moisture resistance, to name just a few. And in terms of sustainability, until a couple of years ago the greening of carpet was almost entirely based on the development of sustainable backings.

While all these technologies continue to develop, the pace has slowed significantly in the last couple of years as a result of the weakness in the market. And even though several mills and backing producers have managed to continue to innovate, 2009 was not an action packed year.

However, it’s not just the economy that has slowed innovation. A decade ago, the vast majority of backings were produced by independent producers like Amoco, Synthetic Indsutries and Wayn-Tex, and that competition for mill business drove a lot of innovation. But after Shaw purchased SI’s (Synthetic Industries) backing plant and Mohawk purchased Wayn-Tex and part of Amoco, and with the other big carpet mills increasingly doing their backings inhouse, much of the backing volume is now produced by those who consume it, so there’s less pressure to innovate. Fortunately, the remaining independent producers have not lost their appetite for new ideas.

Wayn-Tex, which used to be the third largest independent backing producer, until it was acquired by Mohawk in 2005, closed its doors last month. The Waynesboro, Virginia based primary backing specialist first entered the business, under a different name, in 1950.

On the acquisition front, Propex came out of 14 months of bankruptcy last April through an $82 million acquisition by Wayzata Investment Partners, a Minneapolis based private equity firm. In June, Textile Rubber & Chemical’s Polymer Technology Group acquired Applied Coating Technology, a Dalton based latex supply company. And coming up in the first or second quarter of this year will be the sale of Dow’s latex, rubber and plastics business, now called Styron.

Recent data suggests that things may be looking up for the backings business in general. According to Frank Hurd, vice president and COO of the Carpet and Rug Institute, November’s primary carpet backing numbers were up 14% from November 2008. Since all carpets are tufted into primary backings, the numbers mirror growth in actual carpet production.

The last month that primary backings showed growth over the previous year’s numbers was back in early 2006, more than three and a half years ago.

However, year-to-date sales from January 2009 to November 2009 was just over a billion yards, compared to 1.8 billion yards for the same period in 2005, so peak to trough numbers are still down about 41%. It’ll be a few years before volume recovers.

Sustainability continues to drive innovation in the backing business, in terms of dematerialization, recycled content, recyclability and bio-based content—along with a range of company-wide practices like energy, water and waste reduction. It’s becoming standard among the big mills to have commercial backings made largely or entirely from recycled content, and bio-based chemistries like soy polyols are also prevalent. Dematerialization, which is not just green but also good business, has significantly reduced backing weights over the last few years.

This environmental progress is largely on the commercial side of the business, where it offers a significant competitive advantage to everyone from manufacturers to designers and end users. On the residential side, demand is far weaker, particularly in this slow economy. In fact, the timing of the housing slowdown could not have come at a worse moment for the green movement, which was primed to target the residential market right when the housing bubble burst.

It’s not yet clear the extent of the damage from this critical loss of momentum, which has been further slowed by the collapse of the overly inflated crude oil prices over the last two years. Many of the green technologies owed their cost-effectiveness to the rapid climb in oil prices prior to mid-2008, which saw barrels of crude rise up to $140. While prices have been steadily rising over the last year, it will be a while before we hit $100 again. A handful of mills and backing producers had to mothball a range of green programs because they simply couldn’t compete with the cost of virgin materials.

Since a rapid rebound in the economy and a rapid increase in energy costs are both improbable in the short term, it’s likely that the green movement’s traction will proceed at a more moderate pace. However, the silver lining is that a steady, cautious pace may be exactly what the movement needs. The bubbles and busts of the last decade—e-business, telecom, housing, etc.—have ultimately hampered growth and many experts believe that a slower pace is more sustainable in the long run.

THE INDEPENDENT PRODUCERS
Propex Operating Company LLC is the new name of the U.S. arm of the biggest independent backing producer in the industry. Its new owners, Wayzata Investment Partners, took advantage of the opportunity to buy a firm with plenty of ideas on the drawing board at an extremely attractive price.

Wayzata immediately began investing in the business, including adding four senior sales and marketing people. The new director of sales for the furnishings division, which includes flooring, is David Gartshore, who brings with him 30 years of experience, including a tenure as commercial director, Americas, for Dow Reichold Specialty Latex. The new president and CEO is Stan Brant Jr., who was previously executive vice president and COO of Propex Inc.

In 2008, the firm came out with PolyBac primary backing with the EX3 Advantage, developed at the firm’s German facility. It uses one third less material and is friendlier to the tufting needle than standard PolyBac, enabling clearer pattern definition, and because it weighs less, the rolls hold more product so mills can get longer runs, which reduces both labor and energy. Over the last year a number of mills have been sampling the backing, and this year should see it being adopted into a range of carpet products.

Mattex, a Saudi firm with operations in Jeddah and Dubai, has been in the U.S. market for five years, first through distribution and since 2007 direct through warehouses in Georgia and California. The firm has a vast offering of primary woven polypropylene backings for both the residential and commercial markets—literally hundreds of SKUs—and it also has a significant artificial turf business. The residential market accounts for about half its business, turf makes up another 35%, and the balance is in the commercial market.

Mattex’s U.S. business has been growing by double digits since it entered the market, and in 2009, a down year for most other players, Mattex still managed single digit growth—all three sectors showed gains. The firm has recently expanded its loom capacity at both its Dubai and Jeddah facilities and has also expanded its geotextile business.

The firm anticipates a return to double digit growth this year, and it expects a pricing advantage, since polypropylene prices in the U.S. have been increasing but they’ve remained stable in the Middle East as a result of increased capacity without an accompanying increase in demand.

One of Mattex’s most prominent products is Equalmatt, a straight pick backing with a guideline every yard to ensure that the tufted pattern does not skew.

Textile Rubber & Chemical is another major backing producer with a number of backing divisions. The XL Brands Division produces flooring adhesives for broadloom, carpet tile and six foot goods. Not only has the firm made great strides in the greening of its adhesives but it has come out with a biodegradable packaging system as well.

The firm’s ThermoTex Division makes 100% recyclable thermoplastic backing systems—mostly polyethylenes—which are used as precoats, laminates and cap coat systems for carpet tile and six foot goods, and it offers commission coating at its facility. The Polymer Technology Group division recently acquired Dalton’s Applied Coating Technology, a latex supply company, and the acquisition has helped strengthen the firm’s latex based offerings to the carpet and rug industry.

The Polyurethane Group Division, which produces a range of residential and commercial polyurethane attached backing systems—KangaBack, KangaHyde, KangaTrac, Epic and KangaGold, among others—recently received third-party recycled content certification from Scientific Certification Systems. The new systems feature 30% post consumer content and 10% bio-based content from rapidly renewable resources. In addition, certified green energy is used in the processing of the polyurethane attached cushions. Also new at Textile Rubber & Chemical is its brand new website, trcc.com, a comprehensive site covering all the firm’s products, divisions, global production facilities, extensive contacts, and much more.

United Textile Technologies (UTT) is best known for its bio-based EnviroCel and BioCel backing technologies, engineered for a range of specific carpet applications. The firm’s environmental journey took a giant leap in 2004 with the introduction of BioCel, a third-party certified high performance backing using UTT’s BioBalance soy polyols and Celceram, a highly refined coal fly ash that exceeds all of the EPA’s drinking water standards. The product, which features a moisture barrier, is used in both the commercial market and the artificial turf market.

From there, the firm came out with EnviroCel for the hospitality and mainstreet markets, with increased soy polyol content and other enhancements. Both BioCel and EnviroCel are promoted by the U.S. Soybean Board and are listed as environmentally preferred GSA products. EnviroCel Laminate Plus and EnviroCel Cushion Plus make up the bulk of the firm’s commercial EnviroCel business.

Now the firm has taken its bio-based technology to the residential market with EnviroCel Home, which the Soybean Board is also promoting, and it’s already available on residential carpet through 5,000 U.S. flooring retailers. The product uses 100% soy based polyols in its chemistry, replacing petroleum based polyurethane.

UTT’s products are in high demand in the wool carpet industry. Since wool face fiber is a bio-based rapidly renewable product, the addition of a soy-based polyurethane backing enables wool carpet mills to market broadloom that is almost entirely bio-based for a truly remarkable green story.

Next up for UTT is a version of EnviroCel Home for residential tile. It’s in beta testing now and will likely be released this year.

Dow Flooring serves the market with its latex, polyolefin and polyurethane businesses. However, last July the firm packaged its latex, rubber and plastics divisions into a business unit called Styron, which is up for sale—the latex business is the only part that relates to flooring. Styron is a massive business, made up of about 1,500 employees with annual revenues in the neighborhood of $5 billion. The firm anticipates the sale of the division in the first half of this year.

Over the last couple of years, Dow has received a lot of accolades for its Lomax Technology, which uses methane piped from the Dalton landfill to create its latex offering, making for a product with a very low environmental footprint. A number of firms use the technology, including Masland, J+J/Invision, Blueridge, Atlas and Mohawk Residential. New this year is Bigelow, one of Mohawk’s commercial divisions. So far there are 200 million square yards of carpet in the market using Lomax.

Lomax latex recently received third-party certification of its lifecycle analysis by the University of Stuttgart, confirming a 25% reduction in its carbon footprint.

The firm’s Foundations technology, a high performance acrylic latex targeting the education and healthcare markets, has been robust this year due to the strength of those two commercial sectors. And the firm’s polyolefin carpet tile program has also been making strides, though the commercial slowdown has had an impact on that program’s traction.

In recent years, Omnova, a leading producer of latex products for carpet backing, has been coming out with a range of specialty latex products. One of the most recent is GenCal 7555, a high wet-strength binder for both the commercial and residential markets. The product has gained a lot of traction since it was introduced just over a year ago. Also new is NovaGreen 7510, which offers the same performance characteristics as GenCal but with higher solids for base latex (a minimum of 56% compared to GenCal’s 53%), which means that it uses less water and can be run faster—so it also lowers environmental costs.

The firm has also been developing a latex binder with significant bio-based content, but the program is temporarily on hold, largely because the drop in crude oil prices, and consequently latex prices (latex is made from styrene and butadiene) has made it less competitive. However, as the economy strengthens and oil prices rise—which is inevitable—that greener latex will be introduced to the market.

THE MILL PRODUCERS
Shaw Industries offers a range of fairly sustainable carpet backings. On the carpet tile side, its offering is either EcoWorx for hard-backed tile or EcoLogix for cushioned tile, and two years ago EcoWorx was also extended to broadloom in two systems—EcoWorx Broadloom and EcoWorx Performance broadloom, which features a moisture barrier. All the products have strong green characteristics. EcoWorx is fully recyclable.

Assuming a 20 ounce face weight, EcoWorx tile has by total weight a 36% recycled content, with 28% post industrial and 8% post consumer; and EcoLogix cushion tile has 44% total recycled content, with 28% post industrial and 16% post consumer. EcoWorx Performance Broadloom, assuming a 28 ounce face weight, features 10% post consumer content, all from the backing. As the firm continues to reclaim carpet, recycled content in both face fiber and backing will steadily rise.

While the carpet industry in general has seen a steady slide of share from broadloom to carpet tile, Shaw’s slide has been slowed by the EcoWorx offering on the broadloom side, which has helped shore up the green story. However, most of the firm’s broadloom products still feature latex backings.

On the residential side, the firm’s Triple Touch carpet cushion continues to gain traction. The backing is a hybrid frothed urethane that features polyols made from organic oils including sunflower oil.

Mohawk Industries has been busy fine-tuning its commercial carpet tile backing, and it looks like it has settled on a polyethylene construction that will be recyclable, rather than the EVA (ethylene vinyl acetate) that fell short in terms of performance. However, it will be a while before that backing is widely released.

The firm also offers high performance PVC backings on all its commercial tiles in the Lees, Karastan, Bigelow and Durkan brands, and they’re available with recycled content. On the broadloom side, the firm offers a range of backings, including polyurethane cushioned tile from UTT and Textile Rubber. The firm makes its own cushioned backing for its tile offerings.

Tandus, a commercial specialist that produces carpet tile, six foot goods and broadloom, came out with a non-PVC backing for its Powerbond six foot goods in 2004 called ethos, which is derived from the polyvinyl butyral in automotive safety glass. The program has been a huge success from the very beginning, and over the last couple of years the firm has invested millions to adjust the chemistry to increase the dimensional stability of ethos for use with carpet tile.

Last year the firm began introducing ethos to carpet tile but the program will really begin in earnest this quarter.

Another recent development is Conserve, a PVC backing that uses 25% less material than the firm’s ER3 workhorse backing. While ER3 is made of recycled PVC along with other reclaimed carpet material, Conserve uses virgin material. The firm is also working to reduce the weight of its ER3 backing.

In 2008, Tandus started working with Cargill to add bio content to its ErgoStep broadloom backing, and it has made it to 8.6%, though more progress is expected. Tandus is also working with Cargill for bio content in its face fiber.

In November, Beaulieu came out with an antimicrobial option for its commercial carpet called Prevent-x, which features a similar chemistry to its patented residential Silver Release treatment. The product can go on the backing or the face fiber and works with both broadloom and carpet tile.

J+J/Invision offers three backings for its broadloom: PremierBac Plus, TitanBac Plus and Endure Plus. PremierBac Plus is a standard polypropylene primary and secondary bound with latex, and the latex features post consumer recycled glass as filler—PremierBac Plus broadloom is certified NSF 140 Gold.

TitanBac Plus is a high performance system with a moisture barrier in the latex, and it also features post consumer content. It is also NSF 140 Gold certified. Endure Plus replaces latex with polyurethane.

On the carpet tile side, the firm offers a PVC backing called Nexus, and earlier this year the firm came out with a PVC free system called eKo, made of polyethylene. Carpet tile with eKo is NSF 140 Platinum certified. The eKo backing weighs 40% less than Nexus, so it also has a strong green dematerialization story.

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