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Company Break Down

Kadant – Outgrowing an Industry

Kadant Inc is an industrial machinery company which operates within the paper industry. The company generates revenues through Papermaking systems, Wood processing systems and Fiber-based products. Based in Westford Massachusetts Kadant is a global leader in fiber processing, fluid handling, doctoring, cleaning, and filtration and wood processing systems. They design the machinery and other products used in a variety of industries including paper. Taking into consideration subsidiaries and reformation Kadant has been operating for over 100 years.

Product

Kadant’s primary product offerings include:

  • Fiber processing systems for recovering recycled fibers and processing virgin fibers
  • Fluid handling systems that transfer fluid, power, and data between fixed piping and rotating components
  • Roll doctoring and scraping products that clean roll surfaces
  • Cleaning and filtration systems that clean fabrics and filter and recycle process water
  • Wood processing systems to debark and cut logs into strands used in the production of OSB, lumber, and other wood-based products
  • Baling equipment and systems to process recyclable waste and other materials for transport and storage
  • Fiber-based granules made from papermaking byproducts for agricultural and professional turf application
    (source: Kadant Company)

Kadant, currently trading at $85 with a market cap of 947.45m, has recently experienced strong growth with a 5-yr revenue CAGR of 8% with 2017 showing growth of 24.4% and estimated 2018 growth at 22.4%. Compared to Bloomberg’s peers, Kadant is either at the median range or outperforming it’s peers in terms of financials. They are currently trading a 18.37x P/E and 12.37x EV/EBITDA, the median range of Bloomberg peers.

Syntron Acquisition

Kadant recently acquired Syntron Material Handling, a leading manufacturer of conveying and vibratory equipment for industrial use. The all cash deal is valued at 179 million which Kadant financed by drawing from their credit revolver. Interestingly this represents the bulk of the companies 198 million in long term debt. This acquisition shows an expansion into from their core business to a wider variety of industrial equipment. Helping to diversify their revenue sources.

Opportunity

Given the paper industry is one well into maturity, Kadant is forced to shift its focus from exclusively paper machinery to products which other industries can employ. As mentioned their acquisition of Syntron represents a positive shift for the company. If Kadant can successfully manage this acquisition this could become a trend for the company. By acquiring similar industrial companies Kadant should be able to outpace the paper industry and become a global leader means of production manufacturing.