Exco Technologies to Make Large Investment in Captive Heat Treat Dept.-Find Out Why

Last Friday we posted a rumor about a Canadian company placing orders for what would appear to be a brand new, state of the art heat treatment department. The rumor is indeed true and we can now share some public details.

Exco Technologies is an international company headquartered in Canada-all the details of the firm can be found at Exco Technologies Limited – innovation, efficiency and quality (excocorp.com). Friday the company had a conference call to discuss earnings, a transcript of which can be found at Exco Technologies Limited (EXCOF) CEO Darren Kirk on Q2 2021 Results – Earnings Call Transcript | Seeking Alpha. The transcript made for fascinating reading and showed what is obviously a forward looking, very successful company. Included in the transcript were some details about the heat treating investment and why the decision was made to move ahead with this project-basically a faster turn around time for heat treating which is almost always the #1 reason to bring heat treating in house (further down is a short extract from the conversation).

The company also provided this time line; • Construction begins Sept 2021 • Equipment arrives December 2021 • Operation starting January 2022. Incidentally the company is certainly not new to heat treating, as an example in 2013 they purchased a brand new 10 bar vacuum furnace for their facility in Brazil. As mentioned Friday we would expect that this is the largest new furnace order to be placed in North America in 2021 so far.

“Darren Kirk, CEO; Yes. Well, the tool steel that we use for both extrusion and die-cast needs to be heat-treated to enhance the hardness properties of the steel through the manufacturing process. And so all of our steel goes through heat treat at some part of the process. And for our extrusion business, we have in-house heat treat capabilities, and we’ve long had that. And we have needed that in order to keep the lead times short. The lead time in that part of the business is seven to nine days. And if you outsource it and you lose control over that aspect, you won’t meet the objective of the lead time turnaround.

In Castool’s part of the business, they’ve grown significantly over the years, and they have relied on third-party heat treat providers. And as the complexity and these products increases and the scale of their business increases, we have determined that it is advantageous to bring that heat treat in-house. And so we’re doing that and we’re making significant investments to do so. And so, I guess with respect to extrusion, again, we are adding new heat treat equipment that is much more energy efficient, and that will have positive impacts for our operating costs as well. So there’s a few heat treat programs going on, but they’re all to upgrade our internal capabilities and reduce our costs.”

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