Powell Duffryn Plc.

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Powell Duffryn Plc.

Powell Duffryn House
London Road
Bracknell, Berkshire
RG12 2AQ
United Kingdom
Telephone: (44) 134-466-6800
Fax: (44) 134-466-6801
Web site:http://www.powellduffryn.co.uk

Public Company
Incorporated: 1864 as Powell Duffryn Steam Coal Company Employees: 5,000
Sales: £409.1 million ($1.2 billion) (1998) Stock Exchanges: London Ticker Symbol: PDUF.L NAIC: 48831 Port and Harbor Operations; 49311 General Warehousing and Storage; 33391 Pump and Compressor Manufacturing

Once nearly synonymous with the Welsh coal mining industry, Powell Duffryn plc has transformed itself into a two-pronged industrial manufacturing and services group. The company’s main activities are in port operations and related cargo and shipping services, as well as in specialized engineering and manufacturing of marine equipment, including pump room and engine room equipment, industrial compressors, combustion systems, and waste disposal containers and systems. Powell Duffryn’s Port Operations division includes Tees and Hartlepool port, in the northeast of England, the country’s fourth largest port with annual output of 50 million tons; Humberside Sea & Land Services, offering stevedoring, warehousing, and other port services; shipping services through the company’s Cory Brothers Shipping subsidiary; and more than 650,000 square feet of warehousing and wharf facilities. On the engineering side, Powell Duffryn’s primary subsidiaries include Hamworthy KSE, a leading manufacturer of ship equipment, such as pump room systems and other liquid cargo systems, equipment for the roll-on roll-off market, and compressors, waste management, sewage treatment, high performance rudders, and other systems for offshore and marine-based vessels and platforms. After a thorough restructuring in the 1990s, which saw the shedding of some 16 subsidiaries in just four years, Powell Duffryn has begun to look for acquisitions to boost its core activities. After paying Kvaerner ASA pounds 34 million for its Kvaerner Ships Equipment (KSE) in December 1998, Powell Duffryn indicated that it hoped to acquire new port operations to expand that side of its business as well.

Coal Tyrant of the 19th Century?

The death of his father left Thomas Powell, when he was less than 14 years old, in charge of running the family’s modest Newport, Monmouthshire timber yard. That business, however, barely provided for Powell and his mother, and Powell began looking for other sources of income. Born in 1779, Powell was quick to realize that the introduction of new steam-driven engines and machinery would bring a rising demand for a more efficient and powerful fuel source. Although scarcely in use at the time, coal was to become the power source of the Industrial Revolution. Powell recognized that the coal-rich Welsh valleys offered an opportunity for a vast fortune. Over the decade, Powell, and the company he founded, profoundly transformed the South Wales area from, for the most part, rural, agricultural, and pasture lands, into what one source described as a countryside where “ravaged valleys were bestrode by giant bridges, great waterways and railways, and roaring towns with brutalised and degraded inhabitants.”

In 1810, Powell purchased a small piece of land at Llan-hilleth from which he meant to dig coal. He hired a couple of helpers, but Powell himself worked alongside them to dig out what became Powell’s first colliery. In this way Powell gained firsthand mining experience, which, however, provided little comfort to workers in the later Powell coal empire.

Between 1810 and 1830, Powell expanded his holdings, opening collieries in Blackwood, Gelligaer, and other locations. Yet Powell was still ahead of his time. Although gaining, use of coal remained limited in the early years of the 19th century. Lack of demand for his coal nearly forced Powell into bankruptcy. But Powell persevered and continued to bring more and more coal seams in the Newport area and surrounding valleys under his control.

By 1825, Powell’s efforts began to pay off. The use of steam-drive engines was becoming more commonplace and with the rapid development of industry came the explosive growth in coal demand. Welsh coal quickly earned a reputation for its excellent quality; in addition, the region’s midwestern location gave it access to a large swath of the United Kingdom. Located near the River Severn and with access to the canal system linking much of England, Powell’s coal found easy shipment. Increases in canal traffic, as coal-driven barges became commonplace, added to the drive in coal demand. The construction of the United Kingdom’s railway system and the developing importance of the steam-driven locomotive also contributed to the development of Powell’s business.

By 1830, Powell was considered a successful businessman. But he was soon to become more than this. By the end of that decade, Powell joined the ranks of an exclusive few. The Industrial Revolution had brought a new breed of men to the forefront of society. Known to some as tycoons and to others as tyrants, these men controlled the fuel and materials that served as the backbone of the Industrial Revolution. Some, like Powell, became infamous for their unscrupulous pursuit of wealth and power.

In 1834, Powell’s business was aided by the repeal of the export tax that had been in place on shipments of coal west of the River Holmes. The repeal of this tax—which had protected the northern England coal owners—opened this area to Welsh coal, and to Powell. By undercutting prices and vaunting the quality of Welsh coal, Powell succeeded in winning a strong share of the northern market, sending his coal to Liverpool, which, in turn, provided the launch site for entering the international coal trade.

Moving his coal now took on a greater importance for Powell, and in the 1830s and 1840s Powell began building his own fleet of barges and other vessels. The next step was to join in the building of a railway line linking Newport with the rest of the United Kingdom. Powell contributed some BP 20,000 to what was to become the Taft Vale Railway. Yet Powell, in a dispute for control of the railway (and for better pricing for his own shipments), nearly caused the young railway to fold. By then, Powell was more than 60 years old and a member of what became known as the Industrial Aristocracy. But Powell’s greatest success was still to come. In 1842, Powell opened a vast new mine in Tirffounder, in the Aberdere Valley; the following year, he opened a four-foot seam in Mountain Ash. These new mines, joined by a number of others in the Aberdere and nearby valleys, boosted Powell to the status of the world’s largest coal producer.

By the late 1840s, Powell’s empire consisted of a number of companies, including Powell & Son, Thos Powell & Sons, Powell and Prothero, Thomas Powell Bank Merchant and Powell’s Duffryn (which means “valley” in Welsh) Company, reflecting the company’s various mining, transportation, and financial interests. Powell also was entering a period of social upheaval, brought on in part by Powell’s treatment of his workers and the often unsafe working environments of his mining operations. By the mid-19th century, the coal mining industry saw the first workers’ strikes—and Powell was at the forefront in devising strike-breaking methods.

The strike movement took on greater influence, while industrialists countered with still more hardened employment policies. A series of explosions rocked Powell’s operations in the 1850s, due in part to a lack of safety measures. Then, in 1858, the coal owners, with Powell at the lead, decided to cut back miners’ wages by 15 percent. The workers went on strike, bringing the industry to a near standstill. Powell introduced scab labor, bringing in English labor to replace the striking Welsh miners. At last, the miners had no choice but to return to work, if they did not want to lose their jobs entirely. For their efforts, their wages were cut back an additional five percent.

Coal Leader for the 20th Century

By the 1860s, the elderly Powell recognized that the coal industry was changing to a corporate, rather than personality-driven business; shortly before his death in 1863, Powell negotiated a merger of his coal holdings with those of Sir George Elliot. The merged operations, completed by Powell’s sons after their father’s death, were formed under the name Powell Duffryn Steam Coal Company. The new company’s first year of operations, with an initial capitalization of BP 500,000, produced 400,000 tons from its eight collieries.

Powell Duffryn prepared to enter into its period of greatest growth. The next 50 years also were to prove the most turbulent, with several devastating strikes, economic depressions, many mining disasters, and a world war providing frequent interruptions. Yet, Powell Duffryn was often as not able to profit from the adversity affecting the coal industry in general. During the period leading to the First World War, Powell Duffryn made a number of acquisitions—both of existing collieries and of land in which the company sank new coal pits—from other financially troubled coal mining operations, extending the company’s annual coal output to four million tons. Part of the increase in coal production also came from the company’s constant incorporation of new mining technologies, such as coal-cutting machinery, which was especially useful in older mines, and electrical power, which the company began incorporating—and producing—in 1904.

Company Perspectives:

Powell Duffryn is an industrial group engaged in Ports and Engineering. We aim to provide high quality services and products for our customers, challenging opportunities for employees and sustained growth for shareholders.

The outbreak of the First World War saw the loss of many of Powell Duffryn’s export markets. The period also was marked by an extreme labor shortage and growing government control over an industry that was vital to the country’s economic and military efforts. Nonetheless, Powell Duffryn was able to continue its expansion, opening a French subsidiary shortly before the war and, following the war, forming a shipping partnership with Stephenson Clarke and Company, in 1920, called Maris Export & Trading Company Ltd. Powell Duffryn’s entry into output. At the same time, the company’s resources, estimated at more than 1.7 billion tons, gave the company reason to look forward to the postwar period. During the war, the company’s engineering resources, under the Rhymney Iron Company subsidiary, expanded to fulfill military orders, including aircraft bomber doors and hulls. The acquisition of Cory Bros & Co. Ltd. in 1942 not only gave the company 12 additional collieries, but also 53 coaling stations located worldwide. This acquisition launched the company into a new market, that of fuel storage and distribution.

By the end of the Second World War, Powell Duffryn had achieved the number one ranking among the world’s largest coal producers. Yet, at the beginning of 1947, the company ran headlong into the Coal Industry Nationalisation Act. Overnight, Powell Duffryn saw the loss of its core business. The compensation agreement with the government took nearly ten years to work out; in 1955, the government paid a little less than BP 16 million to the company for its loss of assets.

the shipping industry—consolidated in 1928 with its acquisition of Stephenson Clarke itself—was to serve it in good stead in coming years.

In the meantime, as the United Kingdom suffered through economic hardships in the postwar years, Powell Duffryn continued to grow—leading the way to a consolidation of the Welsh coal industry. During the 1920s, Powell Duffryn made several significant acquisitions, including that of the Rhymney Iron Company, with seven collieries; the 1925 acquisition of the money-losing Windsor Colliery (restored to profitability two years after the acquisition by Powell Duffryn); and the 1928 purchases of ten collieries and related equipment and properties from Lewis Morthyr, the Great Western Colliery Company, and the Nantgawr Colliery. At the same time, the company continued sinking its own collieries, including the partnership mine Taff Morthyr, with an annual output reaching one million tons, and the sinking of three new Powell Duffryn pits with a combined output of more than two million tons. The Stephenson Clarke acquisition, made in 1928, placed Powell Duffryn as the United Kingdom’s largest coal distributor, with not only its own fleet of barges and other vessels, but also the country’s largest private fleet of railroad wagons.

Powell Duffryn’s biggest expansion came in the 1930s. In 1935, Powell Duffryn merged its operations with those of Welsh Associated Collieries Ltd.; formed in 1930, Welsh Associated combined the coal output and distribution activities of 34 collieries. The merger with Powell Duffryn, forming P.D. Associated Collieries Ltd., gave the company an annual output of more than 20 million tons. It also gave the company another subsidiary interest, that of Cambrian Wagon Works Ltd., a wagon-building and repairs business that provided the basis for a third Powell Duffryn interest, after mining and shipping—later to be known as Powell Duffryn Engineering Ltd.

Powell Duffryn continued to make acquisitions in the years leading up to the outbreak of the Second World War. By then, the company’s output had topped 21 million tons per year, representing more than a third of the total South Wales coal

Regrouping for the 21st Century

Powell Duffryn was forced back on its former side-businesses. The company developed a multi-pronged approach, boosting its engineering, fuel storage and distribution, and shipping divisions by a series of acquisitions. Among these was the acquisition of Hamworthy Engineering Ltd., in 1962, which brought the company a major position as a maker of fuel, combustion, and pumping systems. Powell Duffryn also expanded its Stephenson Clarke shipping and railroad subsidiary.

The new Powell Duffryn had regained some of its footing lost to the coal industry nationalization (which, with the dwindling importance of coal as a fuel source, might have been a blessing in disguise). By the 1970s, while still on a far smaller scale than its prewar position, the company had achieved a strong share in each of its new markets, and strong profits. This made the company an attractive takeover target during the 1980s. The company was able to shake off a takeover attempt by the Hansen Trust in 1984, retaining its independence.

Yet the economic crisis of the late 1980s and the growing burden of environmental regulations led the company to restructure its operations for the 1990s. Faced with the increasing cost of upgrading its shipping and railroad fleet and of refitting its bulk liquid storage facilities to meet stricter environmental standards, Powell Duffryn decided to exit these businesses and restructure around a new core of shipping services, engineering, and, with the acquisition of the Tees and Hartlepool port in 1992, port operations.

Key Dates:

1810:: Thomas Powell digs his first mine.
1864:: Powell Duffryn Steam Coal Company formed.
1913:: Launch of French coal distribution subsidiary.
1928:: Acquisition of Stephenson and Clarke.
1935:: Merger with Welsh Associated Collieries Ltd. to form Powell Duffryn Associated Collieries Ltd.
1946:: Nationalization of U.K. coal industry.
1962:: Acquisition of Hamworthy Engineering Ltd.
1988:: Rationalization of business; sale of shipping division.
1992:: Purchase of Tees and Hartlepool port.
1996:: Restructuring and sale of fuel and chemical storage subsidiaries.
1998:: Sale of UK Petroleum Products subsidiary and exit from fuel industry; acquisition of Kvaerner Ships Engineering.

After selling off the Stephenson Clarke shipping subsidiary, the company began paring away its other divisions, shutting down its money-losing railroad engineering arm in 1993 and 1994 and then turning to its fuel and chemical storage division in the second half of the decade. Between 1996 and 1998, Powell Duffryn sold or closed some 14 subsidiaries and related operations, including its Savannah, Georgia and Bayonne, New Jersey chemical storage terminals in 1996; its Eurogas liquefied heating fuel distribution subsidiary in 1997; and its National Pump subsidiary in 1998. The sale of its UK Petroleum Products subsidiary in that same year ended nearly 200 years of involvement in the United Kingdom’s fuel market.

The purchase of Tees and Hartlepool gave the company operating control of the nation’s fourth busiest port, a strong base around which Powell Duffryn began to expand its port, storage, and shipping services efforts. By 1998, the company acknowledged its interest in adding to its port holdings, as the primarily government-owned British ports prepared to undergo a privatization effort at the beginning of the next century. Powell Duffryn also significantly expanded its engineering division—focused mainly on marine products—with the BP 34 million purchase of Kvaerner Ships Equipment from the Swedish shipping giant in December 1998.

Principal Subsidiaries

Air Compressor Products Inc. (USA); Belliss & Morcom Ltd. (UK); Eagle Compressors Inc. (USA); Geesink BV (The Netherlands); Hamworthy Combustion Engineering Ltd. (UK); Hamworthy Heating Ltd. (UK); Hamworthy Compressor Group (UK); Hamworthy Canada Ltd.; Hamworthy Compressor Systems Ltd. (UK); Hamworthy Marine Ltd. (UK); Hamworthy Marine Technology Ltd. (UK); Hamworthy Pumps and Compressors Ltd. (UK); Humberside Holdings Ltd. (UK); H&L Garages Ltd. (UK); Humberside Sea & Land Services Ltd. (UK); IIP Kugleventiler (Denmark); Peabody Engineering Corporation (USA); Powell Duffryn Shipping Ltd. (UK); Powell Duffryn Storage Ltd. (UK); Svanehoj International A/S (Denmark); Tees and Hartlepool Port Authority Ltd. (UK).