Shares of TriMas Corporation (TRS) gained as much as 1.2% and eventually closed at $31.86 on Dec 5, a day after the company provided an update on its key growth and margin expansion initiatives of its Lamons energy business.
TriMas’ Lamons business is one of the largest gasket and bolt suppliers to the global energy market. Over the past several years, Lamons has expanded its global footprint by adding branches in the U.S. and around the world to enhance its service to global customers.
Lamons has intensified its target on margin expansion through increased focus on cost reductions to achieve higher-standard product margins and increased sales of higher-margin, specialized products. Lamons will also be able to attain the objective through further opportunities comprising ongoing manufacturing, overhead and administrative productivity initiatives, global sourcing and selectively shifting manufacturing capabilities to countries with lower costs.
Lamons has its own advanced manufacturing facilities and sourcing capabilities in China and India. Multi-country manufacturing capabilities provide Lamons with the flexibility to move specific manufacturing requirements and serve its customers better. The company is focusing on vertical integration of the production of previously outsourced sheet materials into Lamons’ plant in India to leverage lower cost opportunities.
TriMas Energy has added specialty bolts and gaskets in Brazil. The segment’s net sales increased 5.5% year over year in the third quarter of 2014, primarily as a result of increased demand from North American refining and petrochemical customers.
The company is focused on improving margins and has recently closed a less profitable branch in China and restructured its Brazilian energy business to better reflect the current market demand. Right-sizing the operations in Brazil through plant consolidation will aid the initiatives.
Further, increasing development and sales of highly-engineered gasket and bolts products, continuous lean and productivity projects including yield improvement programs, decreasing the cost structure of standard products by reducing material costs, scrap and labor costs, and implementation of improved sales inventory and operations planning (SIOP) processes to ensure cycle time and inventory reductions, will also drive growth.
Going forward, TriMas has approved a preliminary recommendation to move a portion of the gasket and fastener operations from its Lamons Houston facility which manufactures gaskets and fasteners for the petroleum refining, petrochemical, power generation, and pulp and paper industries to a new Lamons facility in Mexico.
The company will be evaluating the recommendation over the next several weeks and plans to take a final decision on or before January 2, 2015. If a decision is made to move some of this production, the transition would not occur immediately. Rather, it would extend over 2015.
In 2013, TriMas accelerated its growth initiatives focused on product innovation, market penetration and geographic expansion. The company supplemented these organic growth strategies with 10 bolt-on acquisitions, with more than 125 growth programs across its diverse businesses. These are focused on providing highly engineered products and solutions to customers in growing end markets.
TriMas continues to grow and expand in geographies, and execute on cost savings and productivity initiatives through reducing cycle times. Growing revenue via new products and expanding its presence in non-U.S. markets will also drive growth. However, continued choppy demand in the energy end markets is currently the most significant challenge that will hurt the performance of its Lamons and Arrow Engine businesses.
Headquartered in Bloomfield Hills, MI, TriMas Corporation provides engineered and applied products for growing markets worldwide. TriMas is organized into six reportable segments: Packaging, Energy, Aerospace, Engineered Components, Cequent APEA and Cequent Americas.
TriMas currently carries a Zacks Rank #2 (Buy). Other well-ranked stocks worth a look include Century Aluminum Co. (CENX), Norsk Hydro ASA (NHYDY) and ACCO Brands Corp. (ACCO). All these stocks carry a Zacks Rank #2.
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