Fabricating case study: Investing for Growth
- May 15, 2017
Ontario shop grows with timely, wise capital investments
As the economy goes through its ebbs and flows, smart companies need to keep an eye on their financial well-being–investing in their business when the time is ripe and playing it close to the chest at other times. Nelson Industrial Inc. is such a company. Last year, with business picking up, the company invested in Amada fabricating equipment, including a press brake with automatic tool changing capability, a fiber laser cutting cell with an automated load/unload material handling system, and a EMK turret punch press.
Jeff Nelson, president of the company, says it was a significant investment and the choice of supplier was an easy one to make. “For many years, we were Amada users of turrets, shears, and brakes. Amada makes a quality machine and that hasn’t changed over the years. We were quite impressed with the sales support, the attention we received and the company is pretty competitive. We looked at a number of manufacturers,” but ultimately decided on the Amada equipment.
Located in Pickering, ON, just east of Toronto, the company was started in 1973 by Paul Nelson in a classic entrepreneurial fashion. “He was working for a metal fabrication company and figured to move ahead or up, he would have to start his own business,” says Jeff Nelson, Paul’s son and now president of the company. “He learned all he could. And as the story goes, he was the general manager and was promised ownership and equity. This never came to fruition and he said ‘enough is enough. I can’t do this. I’m going to go start on my own.’ He cobbled together enough funds to open up a small metal fabricationg shop and got credit from a few suppliers. We still deal with some of those suppliers to this day.”
In 1988, Paul Nelson purchased land in Pickering and built the current 9,290 sq m (100,000 sq ft) factory.
“Down the road, we own an additional facility which is about 40,000 sq ft and that’s geared toward sales and distribution of one of our subsidiary companies called Acudor Products Ltd.,” says Nelson.
For many years, Nelson Industrial Inc. was a job shop like so many others in Canada, sourcing contract manufacturing and working on special projects. “About 40 years ago, in the late ‘70s, someone came to my dad with the idea of making access doors,” says Nelson.
Access doors are the metal panels used in the construction industry. All commercial buildings have wall and ceiling access panels and you don’t usually notice. They come in different shapes, sizes, materials, and applications. Acudor is a brand name and a proprietary product line owned by Nelson. It was initially used as filler business, but it developed momentum. Nelson senior set up distributors across Canada. He found a major distributor in the US, but when that distributor dropped the line, Nelson started a US subsidiary that has grown significantly.
“It started out pretty simply making the one access door to the extent now where we have probably over 30 different models of access doors and hundreds of sizes. We’re one of North America’s leaders in that product category. That’s half our business.”
Contract manufacturing, however, is still a big part of the business.
“We produce metal products for other companies or other brands. We either build to their print or we assist in the design and the development of their products,” says Nelson. “Then we have architectural metal work, which is project based custom work that’s used in commercial facilities and transit facilities. That’s ceiling and wall systems and other custom architectural accents. It’s a capability that we market so we do a little work with the architect as well as the general contractor or the installing contractor. We have done installations throughout North America. The installation most everyone can associate with can be seen at Pearson International Airport in Toronto and you look up at the ceiling. That’s a perforated acoustical ceiling. We did that ceiling. That’s just one example.”
Another notable example of Nelson Industries stepping out of its contract manufacturing bounds is the NEOS line of high end shop furniture. “NEOS is a proprietary line of shop furniture that’s sold into automotive dealerships. Many dealerships these days are conscious about the image they project because customers can now see into the service area where in the past you never could see into the service area,” says Jeff. “In such cases, they like to have a bench and storage system that’s quite visually pleasing as well as functional. And that’s what our NEOS product provides to such dealerships.”
Growth and Investing
In 44 years, Nelson Industrial Inc. has enjoyed steady growth. From a small shop in the east end of Toronto, the company now employs about 100 people at the main plant in Pickering, about 26 at its subsidiary Acudor in Canada and the US, and another 20 or so people in a newly opened plant in Saltillo, Mexico. Nelson says a big part of the success of the business stems from his dad, Paul, who constantly reinvested in his business. “He started with basic used equipment,” he says. “Once Paul got some financial momentum and started making money, he’d reinvest in the business. Although he had a good eye for used equipment, he would also buy new modern equipment. So back in the 1980s, he bought his first Amada COMA turret press, which was progressive at the time. Then over the years we invested in new equipment, be it turrets, brakes, bending machines or laser cutting.”
Investment in the business and new equipment tailed off when the economy took a nosedive. “After many years of investing in new equipment, around 2006-08, we went through a period of not investing in equipment. We had a period of probably close to ten years where we didn’t make any significant equipment investment. You had a high Canadian dollar and as an exporter that hurt. You had continual movement of outsourcing to Asia, which affected us, although we do outsource to Asia ourselves. And then you had the economic crisis. You had a confluence of factors in around ’07, ’08, ’09. That made it very challenging for us. We kept our head above water, but during that period we didn’t invest in new equipment and we really didn’t have too because the equipment we had was fine, but last year we said okay because we had the financial means. Let’s upgrade our facility now while we can afford too.”
Jeff Nelson is bullish on the future. “We continually expand our Acudor line with new access doors or enhancements to existing ones. We continually enhance our NEOS product line. And there are other product lines in development. The benefit of the product lines is we can make it when we want to, depending on the production situation. We can lose contract manufacturing business, so, the proprietary products give us a lot of stability. Architectural metal is great work, but it’s project based so it is very volatile.” SMT