Finding the right chemistry is key to firm’s future growth

It has been some years since chemical giant ICI packed up and left Runcorn for good, but the iconic British company’s influence on the local sector remains strong.

Like many now in senior positions in the industry, Allan Laing cut his teeth there, working for the industrial behemoth for 13 years.

Laing is now chief executive of his own firm – Pentagon Chemicals – which employs 200 people at Halebank, in Widnes, and Workington, in Cumbria, manufacturing organic intermediates for use in the life science, petrochemical and speciality chemicals markets.

More specifically, it supplies chemical ingredients that are used for agro-chemicals to assist crop growth in developing countries, molecules used in the manufacture of pharmaceuticals and for additives in products such as paints and coatings.

“The agro-chemicals side of the business is becoming the largest of the three divisions,” said Laing.

“This is because, over the past five years, the sector has enjoyed a period of unparalleled growth due to the increasing demand for food products in developing countries.

“We are manufacturers and 75% of the products that we make goes to European markets, 20% to the US and the rest here in the UK, where we actually buy and sell very little.”

Laing has been at the helm of Pentagon since he led a management buyout of the business in 2002, and it currently turns over around ￡40m a year.

The Halebank site, where Laing himself is based, concentrates mainly on the agro-chemical and pharmaceutical markets, while Workington makes fuel additives, and it is the latter that is being hit the worst by the current downturn.

“Because of the recession, people are not buying as many cars and those who do drive are not driving as much as they did – this means demand for fuel additives has fallen,” he added.

Halebank is doing much better, but as recently as 2006 the site was in serious trouble and Laing and his team had to implement a turnaround strategy.

He explained: “In 2005 and 2006, Halebank was fighting for its survival. One of the major problems was that we got sloppy and we found we were keeping far too much stock.

“Now we make to order and that helps to keep the stock levels much lower. We have worked hard to turn it around and now I think we are quite a lean organisation.

“We tend to look about three years ahead, and we think the crop science markets will lead our growth supported by the eventual recovery in the industrial markets.

“We think the pharmaceutical sector will bring up the rear as that is still going through its own period of rationalisation.”

Historically, the chemical industry has a poor reputation in terms of the environment and safety. Laing insists the sector has really cleaned up its act in recent years, but admits not enough has been done to communicate this to the public.

He is proud of Pentagon’s record both in terms of the health and safety of its own employees and of its efforts to reduce its energy consumption. This is no mean feat as the manufacture of chemicals is an extremely energy intensive process.

He said: “Back in 2005-06, Halebank alone was getting through around ￡120,000 of electricity. Since then, we have spent a lot of time working with our energy supplier to get that figure down.

“Over the past couple of years, we have now cut our energy usage per tonne of product by around 30%.

“We have also worked with the Health & Safety executive to stay on top of regulation and safety issues. Last year, at Workington, we reached a milestone of six years of working time without any accidents. Halebank is now in its fourth year.”

Laing, 54, was born and brought up in Glasgow and in 1975 graduated from the University of Strathclyde with a degree in chemical engineering.

He then joined ICI as a production engineer, staying with the company for 13 years. Initially he was based in Middlesbrough but worked elsewhere, including a two-year stint in the US.

The married father-of-two enjoyed working for the company, then run by legendary industrialist Sir John Harvey-Jones. But he later became disillusioned with the direction of the group and left to join a North West-based fine chemicals manufacturer, MTM. He said: “ICI was a great company to start my career with, but I think they lost their way a bit when Sir John Harvey-Jones retired.

“The company was just not changing enough for me, so I decided to leave and join MTM. The firm had three sites – Kirkby, Warrington and Sandbach – and I joined as production director.”

MTM was later acquired by another firm, DTP, and in 1995 Laing accepted an offer to become the managing director of Pentagon. In 2001, the company was taken over by US giant Dow Chemicals and he was made redundant.

He added: “A few weeks later, I was offered the chance to lead a management buyout of the company and I thought ‘why not?’. The big challenge was raising the finance, because long-term forecasting in this business is very difficult. What we have tried to do more and more over the years is secure long-term contracts.”

Recently, Pentagon was named the winner in the manufacturing category at the 2008 Chemical Industries Association Awards for Excellence, and Laing himself is actively involved in promoting the sector in the region.

He has also been asked to join the North West board of the National Skills Academy, but has no intention of taking his foot off the pedal at Pentagon.

He and his management team are now eyeing potential acquisitions.

“We think there are a handful of opportunities,” he said. “And we are assessing a couple of possible acquisitions with the aim of achieving a critical mass.

“We also make sure we communicate the state of the business to all our workers on a weekly basis.

“We try to make sure we have a pretty open and honest culture.”

Backgroud:
ALLAN LAING, chief executive of Pentagon Chemicals