by Maureen Flanagan
Chromas Technologies Canada, Inc., a manufacturer of printing presses for the packaging and labeling industry, is known for having a leading position in its markets with new products and innovative technologies. The company's presses offer the speed, versatility and economic requirements needed by customers who range from small print shops to large companies operating in worldwide markets. Several years ago, the company established a consortium of industry leaders to engineer a revolutionary line of products based on cutting-edge digital technology. The first of these products are now in the initial phase of commercial introduction. They are expected to give both Chromas and its customers a huge competitive advantage and even broader presence in their respective markets. The base of the core press business plus the significant growth potential in the digital press is what led American Capital to aggressively pursue this investment.
To enable the company to focus on its core strengths and continue its growth and development, American Capital Strategies (Nasdaq: ACAS) acquired Chromas from the Didde Corporation, a manufacturer of offset printing presses with operations in Kansas, Florida, and Montreal, Canada. In the September 1, 2000 buyout, American Capital purchased Didde's Chromas Technologies Canada division in addition to its interest in the new consortium, the Digital Label Alliance, for $18 million, which included an investment in working capital. The total ACAS commitment is $21 million.
"American Capital's investment permits Chromas to focus on its core strengths while building capacity," said new Chromas President Neil Calhoun, who joined the company as part of the American Capital buyout. "We look forward to a productive relationship."
Chromas' flexographic, mid- and narrow web-presses are used to print tags and labels, flexible packaging such as snack food bags, and folding cartons. The company makes several lines of conventional "analog" printers, which use a physical image carrier, such as a plate, to print images. Its products provide customers with the flexibility and fast setup necessary for their printing operations. For example, the company's new flexographic in-line systems, which are sold to the folding carton industry, use a simplified process that significantly reduces waste and setup time. Chromas' Instaflex and InstaPrep product lines for the label and flexible packaging markets combine the fastest available changeover technology (reducing downtime during job changeovers) with the highest operational flexibility. Also on the cutting edge of technology are the company's recently introduced Presstige line for the flexible packaging market and its new Producer products for the folding carton market.
The company has also pioneered the newly emerging digital technology, which allows the printer to bypass the production of a plate and print images directly from a data file. Bringing together 18 printers and industry leaders from around the world, Chromas formed the Digital Label Alliance (DLA) in 1996 and led production of the first digital web printing system product in partnership with Spectra Corporation. The Argio 75SS, a revolutionary digital head that can be retrofitted to any existing press, is the culmination of creative minds at work and industry experience, promising increased flexibility and significant cost savings.
Chromas' customers represent a wide spectrum of printing businesses in many different industries, including food and beverage, health and beauty care, pharmaceutical, retail, electronic, automotive and textiles. To maximize production, these customers need versatile presses that require minimal changeover time. Chromas has designed and developed its products to meet changing industry needs, enabling its customers to combine on-demand, variable information printing with shorter runs and just-in-time delivery. Added to this, many of the company's larger customers serve global markets and Chromas products facilitate their ability to maintain uniform packaging and labeling for products sold all over the world.
"American Capital is investing in a company with strong market share in a growing industry and significant competitive advantages," said American Capital Principal John Freal. "Chromas products are flexible, allowing quick set up and integration of multiple printing needs, and the company has positioned itself on the cutting edge of new printing technology with the digital-based line of equipment it has developed. In addition, the company's new management is well suited to bringing Chromas' rigorous manufacturing standards to its relationships with vendors and customers."
American Capital invests in middle market companies in a wide range of industries. American Capital seeks to team with companies such as Chromas that have successfully developed new technologies on a solid manufacturing platform and with an extensive base of industry relationships.
"With its steady base business, a well-established analog line of equipment, plus the high-growth prospects of the new digital products, Chromas is an ideal portfolio company for American Capital," Freal added.
Although sales of equipment for commercial print media are a struggling segment of the industry, packaging and labeling is strong and growing. The world packaging industry is an estimated $100 billion market. According to industry sources, printing companies within its three segments (tag and label, flexible packaging and folding carton) purchased $725 million in printing equipment in 1998 and $790 million in 1999. These sources expect continued growth of 8-10% in equipment sales through 2004. This growth is expected in all three areas, with particularly strong growth in flexible packaging, the industry's largest market segment.
Chromas' digital products, used for ink jet printing or electrography, have great potential for current and future industry applications. As shorter runtimes are demanded to support just-in-time inventory practices, digital printing is the most profitable way to operate in many fast growing market segments. Also, as the Argio 75SS is retrofitted to analog presses, it has the potential to stimulate new press sales for the analog business and facilitate a controlled transition between the two technologies. Although not a replacement to analog printing, digital equipment has advantages for certain types of printing jobs and is viewed as a key technology for the future of the printing industry.
As part of the DLA that introduced the Argio 75SS, Chromas is well positioned to become the industry leader in this emergent technology. The company is also on the way to launching a fully digital press, Argio, which will be the world's only multicolor UV fully digital ink jet press. Years ahead of the competition, Chromas expects to further strengthen its analog position and become the dominant provider in the digital printing press market. Chromas also plans to continue to invest in its research and development infrastructure and foster strategic alliances with customers and technology and suppliers of original equipment manufacturers (OEMs).
Other opportunities for the company include an entry into the sales parts and accessories business. The company also has opportunities to sell ink for its digital and analog presses. Along with developing potential new businesses, Chromas has plans to enhance customer service and production efficiencies, and continue to increase market penetration through development of new products.
"Chromas is well positioned to lead the market, with products designed to provide the most advanced, user-friendly printing processes available in the industry today and new technologies that promise to set the industry standard of the future," said Calhoun.
