It would not be unkind to say that precision engineering company Doncasters is one of the less glamorous aerospace companies acquired in a wave of investment by Middle Eastern finance houses since the turn of the decade. Unlike innovative aircraft makers Cirrus, Liberty and Piaggio, the UK-based company's reputation lies in solid engineering of engine and other components down the supply chain.
After a spell of consolidation and steady organic growth, the $1.6 billion-turnover manufacturer is in acquisitive mood, backed by an owner, Dubai International Capital, that says its £700 million ($1.4 billion) 2006 takeover represents "the best investment we have made so far". And that from a company that is a major shareholder in Dubai Aerospace Enterprise and EADS. In a sector "going from strength to strength", DIC is fully behind its ambitions to grow, the investment house's chief executive Sameer Al Ansari told Flight International: "We are out there looking for opportunities and keen to make it happen for them."
Doncasters chief executive Eric Lewis, who joined the company in 2001 when it was bought by former owner RBS Equity Finance, is delighted with the mood in the DIC boardroom. After about $17 million capital expenditure in each of the past four years under an owner focused on organic growth, he expects to spend around $50 million annually in the next four. "They are very hungry for acquisition and highly supportive of our bids for capital expenditure," he says. "That's not to say we will get it just because we ask for it. They are very much hands-off when it comes to day-to-day management, but very interrogative at board meetings."
Doncasters' bullishness is underwritten by an orders book that reached a record £346 million last year and, says Lewis, has continued to expand for 13 months. Doncasters is growing organically, too. Even without acquisitions, Lewis says it will soon become a $2 billion turnover business. "We have a multiplicity of new products being developed," he adds.
Non-core sell-off
Lewis's strategy has been to make Doncasters a more vertically integrated systems integrator. This has involved selling at least eight non-core businesses from a total of 34. The company retains a broad range of capabilities, including precision casting, forging, fabrication, machining and production of superalloys. Its products range from turbine airfoils and structural castings to combustion components and fasteners, and customers include all the big engine manufacturers.
Last year it acquired FastenTech, a manufacturer of precision components and fastenings for the aerospace and industrial gas turbine sectors, from CVC Capital for $492 million. The business will add $430 million to turnover. "We want to be a first-tier supplier into OEMs," says Lewis, previously with Meggitt and Lucas Industries. "We can do this by being relatively vertically integrated, manufacturing the superalloy, then supplying our castings business or forgings business. Then there's an element of machining and fabricating, and we supply as a systems integrator."
Although Doncasters is already a major player in North America with six businesses (plus one in Monterrey, Mexico), FastenTech has strengthened its hand there, adding six more production plants. Doncasters' 7,000 employees are split roughly equally between Europe and the Americas, with its sales also split more or less down the middle, with 52% to customers outside Europe.
As with many Europe-headquartered companies, moving as much production as possible out of Britain and the eurozone to hedge strong currencies is a priority for Lewis. As well as the plant in Monterrey - which will be upgraded from providing machining services to offer engine-ready parts - Doncasters inherited a Chinese operation with the FastenTech acquisition, and will develop a technology "campus" there. Given the weakness of the dollar, Lewis also views the USA as a "lower-cost" economy (LCE). Concentrating investment into lower-cost regions is vital for a company competing for global business, says Lewis: "If we don't move into LCEs ourselves, our customers will do it for us."
Source: Flight International
