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Pipe makers are grooving to success with Corma

Pipe makers are grooving to success with Corma

Driven by the pioneering spirit of founder Manfred Lupke, Corma has contributed to advancing Canadian technology in corrugated plastic pipe machinery. Through its proprietary machinery and solutions, Corma enables clients in the plastic pipe manufacturing industry to optimise their manufacturing processes.

“Up to 90 per cent of piping system costs are attributed to raw materials,” says Stefan Lupke, executive vice-president of Corma. “Corrugated plastic pipes can reduce material cost by more than 20 per cent, so our machinery helps our customers reduce costs significantly in the long run.”

The world’s leading companies in the sewage, drainage, cable ducting, vehicle, agriculture and medical industries use Corma’s corrugated pipes, which offer lightweight alternatives to solid pipes.

Being a niche player, Corma has successfully outlasted international competition by developing cutting-edge technology to address global market demands.

Corma’s patented corrugated plastic pipe machines utilise air-cooling systems. While eliminating the need for large water chillers, its machines also remove maintenance and condensation problems. The company’s innovations include eco-friendly technologies such as machines that use recycled material.

“We are able to service customers looking for quality and performance of equipment,” Lupke says.

With customers in more than 90 countries, Corma serves its Chinese and regional Asian clients through its Shanghai plant. “As our clients increase their presence in countries such as China, we are able to procure and service them locally and provide machinery to address their needs,” Lupke says.

With the increasing need for sewage and draining infrastructure in emerging countries, Corma’s technology will also be able to provide a sustainable solution in areas such as Southeast Asia and Africa. “We will continue to build capabilities for lighter but stronger pipes and find ways to make our technology accessible to more people,” Lupke says.

How to hatch a sale

Foreign buyers are pretty import­ant customers for Concord, Ont.- based Corma Inc. In fact, with­out them, Corma wouldn’t have many customers at all.

Family-owned Corma has been manu­facturing custom machinery for the pro­duction of corrugated plastic pipe and tub­ing since 1973. Executive vice-president Stefan Lupke says more than 95% of Corma’s revenue comes from export mar­kets, including the U.S., Mexico, India and China. “We ship to 92 countries,” says Lupke. “Our business is basically depend­ent on exporting.”

Due to the nature of his business, Lupke has become somewhat of an expert on the subject of foreign-buyer financing, a program available to all Canadian export­ers through Export Development Corp. (EDC), Although EDC is probably best known for insuring the foreign receivables of Canadian companies, the crown cor­poration is growing (and trying to pro­mote) its still nascent foreign-buyer finan­cing service, through which foreign companies are provided with loans, lines of credit or bank guarantees to help them buy from Canadian suppliers.

“At some point, we will ask clients if they require financing to do the deal,” Lupke explains. “If the answer is yes, we contact the EDC, then they contact the client and inform them about the procedure. We are not involved in the financing after that.”

The EDC can provide direct financing for the foreign buyer for up to 85% of the value of the deal. Alternatively, the foreign company can arrange financing for the transaction through a bank in its home country or through another foreign bank, with the EDC providing the loan guaran­tee. In either scenario, the Canadian exporter gets paid directly by the EDC, which assumes all of the risk of the foreign buyer defaulting.

Although there is no limit on the size of deals eligible for foreign-buyer financing, most deals involving small and medium-sized exporters fall in the $500,000 to $5-million range, says Tom Sloan, EDC’s vice-president of small business and com­mercial markets. In most cases, the trans­actions involve the sale of machinery or hard goods. “We deal mostly with com­panies involved in light manufacturing, resource extraction and some infrastruc­ture—cases in which you have an asset that can secure the financing,” says Sloan.

The foreign buyer undergoes a rigorous due-diligence process to determine its ability to handle the financing terms, with most deals structured over a two- to five-year term with bimonthly payments set at rates competitive with other OECD countries.

Like Corma, Jamesway Incubator Company Inc. depends upon foreign markets for upwards of 95% of its business. The Cambridge, Ont.-based company manufactures poultry incubators and associated automation and ventilation systems that it ships to custom­ers in about 60 countries. Company president Ian McKinnon says Jamesway uses the EDC’s foreign-buyer financing program to complete three or four deals a year out of about 50 in any given year. “It isn’t necessary on most deals, but it helps when  it is a tricky situation and we feel we need more assurances,” says McKinnon.

Jamesway has used foreign-buyer finan­cing to secure deals in markets as disparate as Ireland and Uganda. Depending on the market, says McKinnon, the foreign buyer may not have easy access to financing sources or may simply be looking for a better rate through their vendor.

To qualify for financing, prospective borrowers must provide at least three years of audited financial statements, a bank reference and other key information vetting the borrower. EDC does not exclude any countries from the for eign-buyer financing program, but the speed at which the deal gets done (if it can be done at all) depends, to a large extent, on the risk profile of the foreign market involved. If the borrower is in the U.S. or a strong European Union country, the financing can be put in place in a matter of weeks, says Sloan. If, however, the for eign buyer is based in a more unstable region, such as Central America or Africa, it could take several months to put the deal in place. “It doesn’t take days,” says Sloan.

“We really have to look at each deal on a case-by-case basis.”

Regardless of how long the process may take, Corma sometimes has no option other than foreign-buyer financing to make a deal happen. Because so many of Corma’s customers are based in markets that would normally be classified as medium- to high-risk, traditional Canadian banks don’t want to get involved. In fact, Lupke sees the EDC as an essential tool for any small company hoping to do business foreign markets. “At the very least,” he says, “it keeps us on an even playing field with companies from other countries, such as Germany and Italy, that can also offer their customers government-sponsored buyer-financing programs.”

McKinnon adds that the EDC’s due-diligence process also helps his company avoid making mistakes with some foreign buyers. “We have had deals in which the EDC has come to us early in the process and said, ‘Maybe you should just walk away from this one.’” –FRANK CONDRON