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Keys to the castle: after a difficult period of restructuring and renewal, A.M. Castle & Co. is poised for recovery along with the surging economy.

Article Excerpt
In its 114 year history, A.M. Castle & Co. has weathered many business cycles, though probably none more challenging than the recent manufacturing recession. Today, after fundamental restructuring, the company has returned to profitability and positioned itself for strong growth.

Based in Chicago, Castle is a leading supplier of bar, plate, tubular products, aluminum, stainless and nickel steels. Ranked 18th on MCN's Service Center Top 50, the company reported a sales increase of 24 percent in its most recent quarterly report, and its stock price is nearly double the level of six months ago.

But like many service centers in the business of supplying the durable goods manufacturing sector, Castle was hard hit by the four-year downturn in the U.S. economy. The company reported losses of $1.6 million in 2000, $5 million in 2001, $10 million in 2002 and $19 million in 2003.

Looking back, the 1990s represented a period of rapid market share growth for Castle. "Strong relationships with major OEMs really came into vogue and Castle got deeper and deeper into value-added processing," Chairman and CEO G. Thomas McKane says. "We had rapid asset growth--more inventory, a wide variety of products, and we were buying more and more capital equipment to perform the processing."

The company also made five acquisitions and launched five joint ventures, increasing its debt load just before the economy began to stall.

"As we came into 2000, the economy was slowing and we began to see OEMs relocating--from Cleveland and Chicago to Texas or Arkansas, and later into Mexico and China. We were managing inventory the same way we had in the 1970s when we didn't have all these OEM relationships. We had a highly leveraged balance sheet," McKane says.

As profits dwindled, Castle's leaders clearly grasped the need to restructure, "although we didn't know we were going to have to do it through the worst manufacturing recession since the 1930s," he adds.

SHOULD IT STAY OR SHOULD IT GO?

Castle's board and management team realized the key to regaining profitability was to sort out the rich investments from the poor...

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