When businesses spend money to improve a product or service, it’s usually because they’re looking to boost sales. At CSL Silicones Inc. in Guelph, Ont., the development of a more efficient silicone spray gun could lead to customers buying less silicone from the family-owned business.
That’s just fine with Faisal Huda, president and chief executive officer of CSL, a 29-year-old company with about 40 employees and annual sales of about $10-million. Mr. Huda was, in fact, anticipating this outcome when his company first set out to design a spray gun that would allow end-users to apply silicone coatings to electrical transmission-line insulators with greater precision and less wasted product.
With the new technology, the amount of waste has fallen to 3 per cent to 7 per cent, from an industry average of 25 per cent to 30 per cent, explains Mr. Huda, whose company’s primary business is selling silicone coatings for use on high-voltage insulators to prevent electrical discharges.
“Some people have said to me, ‘But doesn’t this mean that in the long term you’ll sell less coating?’ Maybe so, but it’s the right thing to do,” he says.
It certainly sounds right for the environment and for CSL’s customers, who could reduce the amount of silicone purchased by as much as 20 per cent. But how can it make business sense for CSL to invest in R&D that could result in customers using less of its product?
The answer lies in Mr. Huda’s vision for the company that his father acquired in 1984 and transformed from a packaging operation to one that focused initially on sealants and adhesives before moving into the coatings market.
Mr. Huda, who joined CSL in 1999 and took on the top role in 2008 after his father died, is driving a long-term business strategy that would see his company become the dominant player in its industry.
CSL has already grabbed between 70 per cent and 75 per cent market share globally and supplanted Michigan-based Dow Corning Corp. as the world’s top high-voltage insulator coatings supplier outside of China, Mr. Huda says.
It’s a remarkable achievement considering CSL’s relatively small size. Mr. Huda attributes this success to a number of factors, including his company’s focus on developing high-performance insulator coatings.
“When my father introduced an R&D function many years ago, he also introduced polymer manufacturing, which is totally unique for a company of our size and scope,” says Mr. Huda, who studied chemical engineering at the University of Waterloo in Ontario before earning an MBA at HEC Paris in France. “Usually companies of our size buy raw material and use it to make ‘cookie dough,’ but we are able to craft and engineer the flour on a molecular level to enable our cookie dough to do unique things.”
Among these unique products is a proprietary formulation for insulator coatings created by Mr. Huda’s late father, who was a mechanical engineer. In the company’s early years, the elder Mr. Huda was asked by players in Ontario’s electrical industry to come up with an alternative to a transmission insulator silicone coating they had seen in the United States.
The problem with that product, recalls Mr. Huda, was that it was hard to apply and it didn’t stick. “My father came up with a solution, and that’s how we got into the coatings business.”
But even with this new and improved silicone coating, CSL faced an uphill battle. The electrical industry had been moving toward solid silicone insulators – essentially composite insulators with a fibreglass core and silicone outer layer.
Mr. Huda says his father saw “fatal flaws” in this technology – after a few years, water seeps in and degrades the insulator – and decided to stay the course with the company’s silicone coating.
Last month Mr. Huda learned that in certain parts of the world, including the United States, solid silicone insulators are being banned for use at certain voltages.
“That gave me goosebumps to learn that those fatal flaws my father saw have come out,” Mr. Huda says. “And here we are, very positioned and poised to take advantage of what this means to the market.”
Today, about four per cent of the world’s insulators are coated with silicone supplied by CSL and its competitors, according to Mr. Huda.
He is determined to push that number considerably higher and believes he can do this by lowering his customers’ costs. His company’s new spray gun will reduce waste and, hence, the cost of coating insulators. At the same time, CSL Silicones gets to maintain its profit margins because it doesn’t have to reduce its unit costs.
“Our customers are concerned about cost, so we figured that the major way to accelerate the growth of this business is to bring down the cost of coating insulators while increasing our profitability,” Mr. Huda says.
When Mr. Huda took over from his father, the company’s business was mainly in Europe. Today, CSL sells its products in the Middle East, South America, Southeast Asia and Europe. In the past five years, the company doubled its revenue from $5-million, and Mr. Huda says the $20-million mark is “just around the corner.”
The company recently expanded its product lines to include anti-graffiti coating – clear or pigmented silicone that makes cleaning up graffiti as easy as power spraying with water. The product was recently applied and tested on highway tunnels in Montreal.
“There’s much more to silicone coatings – it’s not a one-trick pony,” Mr. Huda says. “We’ve got other fascinating technology up our sleeve and we’re looking to quickly expand our offerings.”
For Mr. Huda, success means building CSL into the “single most profitable silicone company in the world.”
“I don’t want to be the biggest or necessarily No. 1 in various categories,” he says. “We want to be engaged in the most profitable silicone business possible.”