Laclede Steel Company
Laclede Steel Company
One Metropolitan Square
St. Louis, Missouri 63102
Fax: (314) 425-1561
Incorporated: 1911 as Laclede Steel Company
Sales: $341.2 million (1994)
Stock Exchanges: NASDAQ
SICs: 3312 Blast Furnaces & Steel Mills; 6748 Business Consulting Services, Not Elsewhere Classified
A leading scrap steel manufacturer, Laclede Steel Company manufactures carbon and alloy steel products, including pipe and tubular products, wire products, and welded chain. During the mid-1990s, Laclede’s facilities included a steel-making plant in Alton, Illinois, a pipe finishing plant in Vandalia, Illinois, a chain manufacturing plant in Maryville, Missouri, a wire mill in Memphis, Tennessee, a wire oil tempering facility in Fremont, Indiana, and an electric resistance weld tubing mill in Benwood, West Virginia.
Organized in 1911, Laclede spent its formative decades recording only modest growth, at least compared to the pace of growth achieved by the company in its later years. For a scrap steel company, prosaic growth during the first half of the 20th century was common; Laclede was not alone in beginning its rise slowly within the steel industry. Though the steel industry as a whole represented one of the chief industries in the United States during the first half of the 20th century, its magnitude reflected the strength and enormous revenue volumes of the nation’s primary steel manufacturers, the massive conglomerate corporations that dwarfed scrap steel companies like Laclede. It was not until roughly three decades after Laclede’s formation that the demand for steel in the United States reached sufficient levels to transform scrap companies from anonymity to prominence, a phenomenon that provided the necessary impetus to atlast propel Laclede’s growth at a robust pace. Once through this period of maturation, Laclede blossomed, sharing in the explosive years of steel consumption following the Second World War.
Beginning with its first public sale of stock in 1911, an initial public offering that raised $100,000, Laclede embarked on the slow trek toward the prominence it would later achieve, operating as a small scrap metal manufacturer in Missouri. By turning scrap steel into finished products, the company established itself during its inaugural year as a regional manufacturing concern, small in size and scope yet resilient enough to withstand the pernicious pressures every fledgling business venture faces. The conclusion of the company’s second year of business brought investors their first dividend payment, marking the beginning of one of the best dividend records in the steel industry. From 1912, through the economically cataclysmic 1930s and into the 1960s, Laclede maintained sufficient profitability to pay dividends to its investors each year, demonstrating a consistency within the notoriously cyclical steel industry that firmly established the company as a solid competitor. Annual sales, however, were held in check by the subsidiary position occupied by scrap steel manufacturers within the steel industry.
From Laclede’s founding year in 1911 to the outbreak of the Second World War, annual sales rose only modestly, falling short of $10 million by the time the company concluded its thirtieth year of business. The less-than-prolific growth of the company’s annual sales would not have been worthy of note without the resolute rise in sales recorded after the conclusion of the Second World War, the two periods dividing Laclede’s development into two chapters; one being the steady but slow growth of the company during its first 30 years of business and the second comprising a 15-year period of contrastingly different, energetic sales growth.
Annual sales by 1944 reached the $10 million mark as hostilities overseas neared their conclusion. In the next six years, Laclede quadrupled its revenue volume during the incipient stages of America’s economic rebirth. Crippled during the decade-long Great Depression, then artificially bolstered by the country’s involvement in the Second World War, the U.S. economy demonstrated vibrancy during the postwar years. buoyed and invigorated by pervasive manufacturing activity in nearly every U.S. industry. Infused with business by the soaring demand for steel and steel products, Laclede rode the crest of the wave, more than doubling its annual sales volume as the steel industry in general enjoyed a decade of vast growth. The $40 million generated in sales by 1950 had grown to nearly $90 million by the end of the decade, enlarged by the growing prominence of and dependency on scrap steel companies.
Entering the 1960s, Laclede served the Mississippi Valley and the Southwest with a range of products that included semifinished and finished steel strip, wire, pipe, tubing, slabs, blooms, wire rods, and fabricated reinforcing bars. These products, among others, were manufactured at the company’s two steel works at Alton, Illinois, and Madison, Illinois, and its five fabricating plants in Beaumont and Dallas, Texas, New Orleans, Louisiana, Tampa, Florida, and Memphis, Tennessee. Employing more than 4,000 workers, the company had benefited from the steel boom years during the 1950s, expanding its ingot capacity 50 percent during the decade. As it faced the decade ahead, Laclede was focusing on the continued modernization of its plants to reduce costs and to expand finishing capacity where market conditions warranted.
By the mid-1960s. Laclede’s investment in its facilities had earned it a reputation as one of the nation’s most modern and efficient steel producers, traits that would define success for scrap steel companies of Laclede’s ilk in the decades ahead. Part of this ongoing program to modernize its manufacturing capabilities included the replacement of its four open-hearth furnaces with two 225-ton electric arc furnaces in late 1965. Within one year, the two modern furnaces enabled Laclede to reduce production costs by $2 per ton. yielding the company appreciable results for the $16 million it spent on capital expenditures between 1963 and 1966.
Despite the gains realized through extensive capital expenditure programs, the 1960s were frustrating years for Laclede and the steel industry as a whole, marking the end of the prosperous years following the conclusion of the Second World War. During the prolific growth of the U.S. steel industry in the 1950s, the steel industries in Europe and Japan were on the mend, struggling mightily to recover from the deleterious years of war that had laid waste to their manufacturing facilities. Their absence represented a boon to U.S. steel companies, which flourished without the pressures of any substantial competition, but after more than a decade of reconstructive work and government subsidization, European and Japanese steel companies were reemerging during the 1960s as formidable competitors, invigorated and intent on establishing themselves as leaders in the global steel market.
Foreign competition plagued U.S. steel companies in the 1960s and 1970s, leading to charges by many domestic steel concerns that foreign steel manufacturers, particularly Japanese steel manufacturers, were selling steel in the United States at prices below the cost of production in the U.S. market. Against the backdrop of this rancorous debate and against the backdrop of lobbying efforts by the U.S. steel industry to restrict the flow of foreign made steel crossing U.S. borders, Laclede did what it could to remain profitable. Profitability, however, had a price, and the price was an unflagging commitment to facility modernization. In order to remain profitable, Laclede invested heavily in revamping its production techniques and equipment, as the push toward higher efficiency became the only means of survival for scrap steel companies of Laclede’s size.
Aside from the mounting pressures engendered by the rebirth of European and Japanese steel companies, Laclede also faced other challenges as it moved forward from the 1960s, most notably the cyclical nature of the steel market, which could fluctuate wildly, sending small steel manufacturers like Laclede quickly into ruin. In this respect, Laclede stood wellpositioned to withstand the vagaries of its business. By the early 1970s, no other steel producer as small as Laclede could claim a more diversified distribution of product lines or a more diversified mix within its product lines. The wide variety of steel products produced on its rolling mills and in its finishing facilities fit the requirements of nearly every steel-consuming market, insulating the company from market fluctuations exhibited by one market segment.
Laclede, by this point, was serving nearly 4,000 customers ranging in size from the country’s largest corporations to small, local job shops. Shipments were made throughout a geographical area that stretched from the Gulf of Mexico to Canada and from the Appalachians to the Rockies. In total, 24 states were included within Laclede’s territory, an area serviced by the company’s 13 sales offices.
By the mid-1970s, the affects of foreign competition and a flagging U.S. steel market were wearing on Laclede, forcing the company during the latter half of the decade to narrow the scope of its operations. After the demand for fabricated reinforcing bars sagged, Laclede exited the business, then closed seven of its plants, a move that reduced its work force of 3,400 by 500 and left only its plant in Alton in operation. Announced in 1977 at the company’s annual meeting, the plant closings and the decision to withdraw from the fabricated reinforcing business cut Laclede’s sales volume by roughly 25 percent, stripping it of the majority of sales generated by its construction product group, and augured further changes that would be implemented in the coming years, as competitive pressures mounted.
By the beginning of the 1980s, the U.S. steel industry was occupying tenuous ground. The problems arising from the steady flow of foreign steel into the United States coupled with recessive economic conditions crippled the nation’s steel companies. Over a two-year period, large U.S. steel companies lost nearly $6 billion, their position weakened by outdated facilities and inefficient production processes. For years, the upper tier companies within the steel industry had looked toward raising prices rather than improving their productivity as a means to ameliorate their profits, but such an approach no longer worked. Smaller companies like Laclede had invested enormously in improving their facilities and their production efficiency for decades, compensating for their diminutive size by conducting business more efficiently than the industry stalwarts. Nevertheless, Laclede stumbled during the early 1980s, losing $8.1 million in 1982. On the heels of this severe loss, Laclede effected sweeping changes throughout its operations, changes that positioned the company for a quick recovery and left it strengthened for the future ahead.
After 1982’s debilitating loss, Laclede installed a computerbased financial system for corporate planning, operating, and marketing analysis, then over the next three years, trimmed overhead by nearly 25 percent, eliminating 380 of the company’s 750 salaried positions. Increases in production efficiency were recorded as well, enabling the company to quickly climb out of the red and into the black. Laclede earned $5 million in 1983, then between 1983 and 1984 achieved a 22 percent improvement in revenues and an astounding 130 percent gain in net income. Equally as encouraging as the robust financial statistics were the signs of flourishing business activity. Laclede, by 1984, was operating its facilities at 90 percent capacity compared to 70 percent averaged by the rest of the steel industry, instilling confidence that the early 1980s downturn was a temporary lapse and not the beginning of a long-term retrogressive slide.
In 1985, after cost-cutting measures first implemented three years earlier had saved Laclede $30 million, the company paid its first dividend in eight years, having racked up 14 profitable quarters in a row while many of the country’s larger steel companies continued to record staggering losses. The return to prosperity put Laclede in a position to bolster its operations, which the company did in mid-1984 when it acquired the chain manufacturing division of Nixdorf-Krein Industries Inc. The assets acquired were then organized as Laclede Chain Manufacturing Company, one of the primary subsidiaries that would support Laclede for the remainder of the decade and into the 1990s, providing the company with a major vehicle of growth for the future.
With the acquisition of Nixdorf-Krien’s chain manufacturing operations and the addition of Presidents Island Steel & Wire Company in late 1985, Laclede entered the late 1980s occupying a solid position within the steel industry. Its products were sold to a wide variety of end-users, including automobile manufacturers, rail car manufacturers, heavy construction equipment manufacturers, bedding and furniture manufacturers, and metal-building manufacturers, with no single customer accounting for more than three percent of the company’s total sales.
The early 1990s witnessed another economic recession in the United States, the severity of which caused the demand for steel to plunge precipitously. Hobbled by burdensome inventories that caused steel prices to tumble below selling prices of a decade before, steel companies, Laclede included, were hit hard, their business once again devastated by the vagaries of the steel market. In response to the adverse economic climate, Laclede shrank its work force and reduced costs wherever possible, striving to persevere through the downturn. By the mid-1990s, recovery was on its way, restoring the company’s financial health as it prepared to enter the 21st century.
Annual sales by 1994 amounted to $341 million, up from $287 million at the beginning of the decade, while net earnings had emerged from the red, rising to $4.4 million. With the economy moving forward, Laclede was moving forward as well, its management confident that the future prospects for the company would remain strong provided the national economy continued its steady growth. Given Laclede’s long tradition of survival and profitability within the capricious steel industry and its focus on production efficiency, such optimism appeared justified, infusing hope that Laclede’s long-established resiliency would continue to characterize the company in the future.
Laclede Chain Manufacturing Company; Laclede Pipe Company; Laclede Mid America, Inc.; Laclede Consulting Services, Ltd.
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—Jeffrey L. Covell