Chem-Trend Finds Success in U.S., Abroad

Imagine for a moment, you’ve got what you think is a breakthrough idea. You have a technical background, so there’s some brainpower and basic skills at hand.

But this is an idea that requires some experimentation and, as you begin to explain to your spouse (or perhaps you’ve already gone ahead and started tinkering), your kitchen is simply the best place available to do what needs to be done.

Oh, and the basement. Possibly even the garage.

CoverStoryIt’s 1960 and your name is Peer Lorentzen, a Danish-born chemical engineer and thankfully your wife, Birgit, herself a chemist, shares the technical genes in the family.

That idea of yours—possibly Birgit’s as well—is a better way, a “spray on” replacement for the traditional way manufacturers of polyurethane separate the product from molds, which is to hand-wipe floor wax, an obviously laborious and cost-adding way of manufacturing a material that’s taking the world by storm.

The kitchen tinkering leads to samples that are produced and sent out. And customers start ordering, so much so that their home, in Howell, Mich., gives way to a factory.

It’s now 2016 and Peer Lorentzen, who was just 33 when he and Birgit founded Chem-Trend in 1960, has long retired (he died in 1993).

Today’s Chem-Trend, while at its core staying true to the “we can do better” spirit of Lorentzen, is a global powerhouse when it comes to the design and manufacture of release agents, a category that has a critical role in dozens of products made around the world, even if not top of mind to consumers.

One example is the spray that the tire industry—Chem-Trend’s biggest single market—uses to pop a new tire out of its mold.

Or the spray that’s applied to a mold that makers of turbines use to make the giant blades that turn wind into electricity.

Chem-Trend is now led by Devanir Moraes, a Brazilian born chemical engineer who began his career with General Motors in his native country, working there for four years before being recruited by Chem-Trend, a supplier to the automaker.

It was a big move for Moraes, who at the time had gone from one of the world’s biggest companies to a firm that was then still in its infancy.

His responsibilities also began to grow with the firm’s reach in a business that had some obvious benefits to manufacturers who could benefit from improved cycle times (from not having to scrape out bits of polyurethane foam from a mold before using it again).

By the early 1990s Moraes had become more of a sales manager, although he was jumping into recruitment mode for Chem-Trend, a natural progression for a company that was growing, with an extended manufacturing footprint. He also found himself managing a geographic region that included all of Brazil and South America, with a good part of his time spent lining up distributors and agents.

It was also the early days of Chem-Trend being an acquired company, having been bought in 1988 by Burmah Castrol, the specialty business that was looking to build up an inventory of companies like Chem-Trend.

“They were strategically trying to diversify beyond their motor oil core business while trying to avoid being acquired by a larger company,” explains Moraes of the rationale behind the purchase of Chem-Trend.

In 1994, Moraes was sent north to Howell, then and now the company’s headquarters, where he took on the task of building the infrastructure designed to service Chem-Trend customers in “the rest of the world,” a reference to how the company was organized (North America and Europe being the first two geographic regions).

And he was spending a good amount of time in an airline seat, flying to Brazil three times a year and also establishing a Chem-Trend presence in Asia, where he set up representative offices, legal entities and appointing distributors, the kind of work a burgeoning international business requires if it’s going to be sustainable.

It was a time when Chem-Trend was “starting to evolve pretty well,” to quote Moraes, referring to a period in the company’s growth trajectory that led to a restructuring, the two regions and “rest of the world” giving way to four regional headquarters, including one in Asia Pacific.

In 1997, Moraes, just 33 at the time, became the region’s vice president and general manager, he and his wife moving to Singapore. It was the start of a period (about three-and-a-half years) that he still recalls as being the source of some of his most fond memories, both professionally and personally.

“I was out of Singapore probably 70 percent of the time,” he recalls. “But we had some very strong friendships there and we created a lot of memories.”

Chem-Trend’s founder, Peer Lorentzen, was a Danish-born chemical engineer who began the firm from his home in Howell, Mich.
Chem-Trend’s founder, Peer Lorentzen, was a Danish-born chemical engineer who began the firm from his home in Howell, Mich.

Continuing to build out Chem-Trend’s global footprint in the area included trips to Japan and Australia, as well as China, which was becoming an increasingly important customer base.

Moraes describes his time in Asia as “heavy,” a reference to the economic crisis that began in 1997, although Chem-Trend, he says, did well throughout the challenges.

Perhaps independently from that, although the company remains as close-lipped about specific financial numbers as any privately held firm has a right to be, Chem-Trend again reorganized its business, creating a global service group that included marketing and technology, with Moraes moving back to Howell as its vice president.

“It wasn’t really moving out of North America—we were still there—but the organization was moved out of the management group for North America to one that served the world,” Moraes explains.

Investments in marketing and, even more so, research and development continued to drive Chem-Trend’s growth.

In 2000, Burmah Castrol’s fears of being acquired by that “larger” oil company ended up coming true when BP—as BP Amoco—scooped it up, almost immediately putting Chem-Trend and the other specialty businesses that Burmah had assembled on the auction block.

They wanted it done quickly and perhaps not with the kind of thought and foresight Moraes and his colleagues might have preferred.

“We had a good 12-year ride with Burmah Castrol,” he says today. “An outstanding period really. They were very strategic with us and as we were successful, they invested more and more in our growth.”

It was that cycle of investment that fueled Chem-Trend’s growth, which might very well have petered out had BP’s “fire sale” not attracted the attention of Cinven, an Irish venture capital firm that saw what Chem-Trend’s oil-centric (temporary) parent did not—a strategic opportunity that would pay off dividends in the form of a buyer who understood its true value.

In 2004 that buyer would materialize in the form of Freudenberg, a German-based family business that has its roots in the leather business. Its founder, Carl Johann Freudenberg, the son of a wine merchant, having taken over a tannery in 1849.

Perhaps coincidentally, or perhaps one of those strategically aligned moments that students of business see as naturally harmonic happenstances, Freudenberg had itself assembled a core of specialty chemical units, including Kluber Lubrication and OKS.

Now Chem-Trend would become not so much an irritant in the corporate fold (as it clearly was in the brief period it had been swallowed by BP) but a welcome part of a growing business that in 2015 generated total sales of 7.5 billion euros and profit of 522 million euros, as reported in privately held Freudenberg’s annual report.

How much of that comes from Chem-Trend Moraes won’t say (again, one of the advantages that comes from being privately held), but he did say the company remains relatively modest in size (less than 250 million euros in sales) even as its global footprint makes it one of the world’s leading makers of release agents.

What is clear is that the last 12 years have been among the most harmonious for the Chem-Trend family, perhaps rivaling the dozen it was part of Burmah Castrol.

Leveraging itself as part of the Freudenberg Group of companies, Chem-Trend, lead by Devanir Moraes (pictured), continues to look for opportunities to grow even further.
Leveraging itself as part of the Freudenberg Group of companies, Chem-Trend, led by Devanir Moraes (pictured), continues to look for opportunities to grow even further.

“There is an attention to numbers on the short term,” Moraes notes. “But there’s also a long-term focus, which is one of Freudenberg’s guiding principles. They’ve taken the time to develop longer term strategic plans, but not just the current year but the long term and that’s been a nice mix.”

The news of Freudenberg’s acquisition was welcome to the general Chem-Trend workforce.

“Again, being part of a family owned organization, one where there were guiding principles that were consistent with our roots, was part of it,” says Moraes. “The values, of innovation, leadership, long-term orientation, all of these were so in sync with what we have always considered part of our premium culture.”

Moraes says those cultural strengths continue to drive Chem-Trend’s future.

“Our premium culture gets even more premium now as it’s strengthened by those guiding principles. The relationship with Freudenberg and Chem-Trend was really ‘love at first sight’ from that perspective,” he adds.

Granted, as is the case with many long-lasting relationships (corporate or personal), attention to what matters most takes time, as it did with Freudenberg and Chem-Trend.

“In the very beginning, there was time invested in developing trust from both ends,” says Moraes. “From our standpoint, we were coming from a position where the interaction with our headquarters [in the Burmah Castrol years] was not so involved as it is now with Freudenberg, but that’s part of the adjustment that we’ve come to understand. It’s not a lack of trust, but more of a growing adjustment.”

Moraes sees the fruit of the relationship with Freudenberg as being proof of what an acquisition could deliver.

“I’m pretty sure that Freudenberg would hold out Chem-Trend as a classic example of a business well integrated,” he says. “It’s not something that was necessarily done in record time, but it was done in a way that was methodical and pragmatic and it was the kind of thing that you naturally have to integrate properly if you’re going to do it right.”

Since that acquisition, Moraes has seen evidence of Freudenberg, through its specialty chemicals business, of which Chem-Trend is a part, continuing to flourish.

“Like Burmah Castrol was, Freudenberg has shown it is keen to develop a portfolio of chemical specialties,” he says.

There has also been a steady increase in the flow of opportunities from other Freudenberg subsidiaries, likely from everyday conversations that occur with customers who have the kind of problems a specialty company like Chem-Trend may help solve.

“It’s those synergies that are very likely to be a benefit from an acquisition like ours,” says Moraes.

Even so, the strength that comes from being part of a larger corporate family includes referrals, perhaps even manifesting itself in joint sales calls involving other Freudenberg entities, of which there are many.

There are also a number of synergies that flow from being part of the Freudenberg family, says Moraes.

Indeed, Chem-Trend has been able to take advantage of additional growth opportunities in China, India and Brazil, spurts that might not otherwise be possible without partnering with other companies in the Freudenberg fold.

“We would have to comply with minimum requirements in order to participate in some of those growth areas, where speed of investment would have been difficult to achieve if we were on our own,” adds Moraes. “Because we’re part of a larger organization, our cost of overhead as a percentage is lower.”

In China, for example, Chem-Trend, while largely independent of some of its Freudenberg “cousins,” is able to share space on the same industrial site.

But growth is not the only aspect of Chem-Trend’s business that gets someone like Devanir Moraes excited.

When it comes to creating a diverse workforce, one that is increasingly inclusive in a world that’s defined as such, Moraes believes Chem-Trend holds a unique strength that drives growth.

Founded in Howell, Mich., and still located there, Chem-Trend is nonetheless global in its scope.
Founded in Howell, Mich., and still located there, Chem-Trend is nonetheless global in its scope.

In other words, Chem-Trend is stronger because of that diversity.

“When we interview people, we make it clear that we’re looking for people that demonstrate a good attitude and behavior as well as the skills we value,” says Moraes.

He also says having a workforce that embraces difference—”all types of differences”—ultimately helps drive better decision-making.

“We also believe that a company that is more diverse can be more efficiently run.”

It also helps, he adds, that when a company like Chem-Trend embraces diversity in its talent search, there is a greater opportunity to attract a broad spectrum of people, which has a compounding effect.

“I’m not saying we’re in a perfect position as far as diversity is concerned, but I think we’re doing better than some others,” says Moraes.

Indeed, in at least one respect, that of having gender diversity, Moraes acknowledges that the lack of women on the company’s top management team is an area Chem-Trend can improve.

“We recognize that as an area where we would like to be,” he says.

One way that Moraes sees those improvements taking hold is through education.

“It has a lot to do with educating recruiters, not only the people that work directly on attracting candidates, but also our managers who ultimately make the decisions about who gets hired,” he says. “We need to be more emphatic, more deliberate, about having a diverse pool of candidates, especially if we’re targeting management positions. We need to make sure there are females participating in the process.”

Even when the issue of fairness is raised, Moraes is clear that the way forward is one where real opportunity is defined.

“Being unfair is not hiring the best,” he says. “You’re not being fair to the company.”

Another subject that evokes a sense of passion in Moraes is that of innovation, a quality that has its very roots in the history of Chem-Trend and which even now drives both its culture and leadership position in its industry.

“Everything revolves around how innovative we’re able to be, through our relationships with customers and the solutions we’re able to provide as we grow those relationships,” he says.

To be clear, Chem-Trend may not be the market leader in every industry that requires the use of release agents in its manufacturing process.

But, he argues, it does hold about 30 percent market share in the areas where it chooses to compete.

Those segments, seven in total, include die casting, polyurethane, rubber, composites, tire, thermoplastics, and wood composites.

And why those?

Moraes says they’re the areas where Chem-Trend can add value for its customers, the other sectors being ones for which the value proposition is elusive.

In other words, don’t look for Chem-Trend to be scrambling for business in an area where release agents have become commoditized.

“We tend to be picky,” notes Moraes. “We make sure that there’s a good fit and that we’re able to release the value in becoming a player, not just through our differentiated service, but in the way we deploy that service to our customers.”

Which isn’t to say Chem-Trend is not a market leader.

“Our competition is extremely fragmented,” says Moraes. “Most of them are significantly smaller companies that are not truly global. They may have a country or regional presence or they may be strong in only a specific market but not in others.”

Where Chem-Trend excels, he says, is in sectors where what it has learned in one market can be leveraged in another, an example of this being its industry knowledge related to polyurethane transferring to composites, both areas where better release agents can deliver better value.

Another, Chem-Trend’s largest it turns out, is the tire business, which Chem-Trend entered in 1990 with the introduction of a new line of paints. In 1997, it acquired portions of Dow Corning’s release agent business.

What makes that market of particular interest, especially as it relates to the natural economic cycle, is that only a third to a quarter of tires produced worldwide go into new vehicles, the balance fueling replacement markets.

“If you have a situation where a country is in a recession and people aren’t buying as many cars, they’re still buying replacement tires,” says Moraes.

And a company like Chem-Trend wins either way.

The company, globally, counts about 35 percent of its business from North America, with 10 percent coming from South America, 30 percent from Asia Pacific and the balance (25 percent) from Europe.

“We are proportionately very close to the size of the market around the world,” adds Moraes. “While the size of our market in each industry segment may be quite different, our market share position is not dramatically different from that.”

Which is, certainly from the perspective of a business that seemingly defines what it means to be part of a global family, a very nice place to be.