In the drive to be No. 1 and to protect proprietary information, manufacturers typically resist collaborating with each other. But Lone Star Technologies Inc. -- an IndustryWeek IW 50 Best Manufacturer for 2006 -- has embraced partnerships as an opportunity to expand into new markets.
Most recently, the Dallas-based producer of such oilfield products as tubing, line pipe and flat-rolled steel formed a joint venture with the Welspun Group, an Indian manufacturer of tubular products and textiles, to build a plant in the Southwest U.S. that will be capable of producing 300,000 net tons annually of spiral welded tubulars in the 24-inch to 60-inch outside diameter range. The newly formed company will be named Welspun-Lone Star Tubulars LLC.
Through the partnership, Lone Star is trying to gain entry into the large diameter line pipe market, which is experiencing strong demand because of recently announced natural gas projects, according to the company.
Under the agreement, Lone Star will hold a 40% stake in the newly formed company with the remaining 60% going to Welspun Pipe Inc., a subsidiary of Welspun Gujarat Stahl Rohren Ltd. Lone Star is investing up to $26.4 million in the $66 million project. The two companies will share profits based on their ownership stakes.
Lone Star is building on a relationship with Welspun that began about seven years ago, according to Lone Star Chairman and Rhys J. Best.
"Welspun has been a valued alliance partner of Lone Star since 2000, and we are delighted to strengthen our relationship with them through this transaction," said Best in a Dec. 20, 2006, statement. "Our two companies share complementary strategies and business profiles. The quality and technology that Welspun incorporates into its range of pipes is unmatched, and we are excited to partner with them in this well-timed greenfield project. We are excited about the opportunity this joint venture creates for us in the spiral welded line pipe market, and we look forward to expanding our product line and continuing our strategy of providing our customers the broadest array of high-quality products worldwide."
Lone Star Technologies Inc.At A GlanceLone Star Technologies Inc.Dallas, TexasPrimary Industry: Primary metalsNumber of employees: 2,6992005 In ReviewRevenue: $1.285 billionProfit Margin: 17.40%Sales Turnover: 1.31Inventory Turnover: 5.34Revenue Growth: 32.92%Return On Assets: 34.58%Return On Equity: 63.07%
In another attempt to reach a new market, Lone Star in November 2006 closed a $42 million joint venture agreement with Brazil's Grupo Peixoto de Castro (GPC) to produce finished welded oilfield tubular products.
Under the agreement, Lone Star has acquired a 50% stake in Apolo Mecanica e Estruturas LTDA, an oilfield tubular products facility in southeastern Brazil that is operated by Apolo. GPC owns the remaining stake, and the profits will be shared equally between the two partners.
The investment will allow Lone Star to meet the growing demand for oil tubular goods and line pipe in Brazil and other South American markets, according to Best.
"Together, we can offer our customers practical commercial solutions utilizing profitable, efficient and safe manufacturing as well as state-of-the-art supply chain management," said Best after a definitive agreement was reached in October 2006.
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