Start-up Works its Magic
佢 An employee inspects
finished custom-slit coils
at Magic Coil Products,
Butler, Ind.
It’s no illusion. Combining a good idea, experience, the right partners and
the golden rule can go a long way toward conjuring up success.
By Myra Pinkham, Contributing Editor
J
佣 The company processes 6,000 to 7,000 tons
of steel per month. Shown:
The 60-inch-wide slitter.
ust two years since its founding, Magic Coil Products LLC, Butler, Ind., is in an expansion mode.
After adding to its plant to make room for a second slitter, the service center/toll processor expects
to increase business by 50 percent in the next year,
says Tom Cullen, president and managing partner.
Reprinted from October 2004 — Metal Center News
Experience, especially the leadership variety, matters. Cullen was chief executive officer of Baldwin
Steel Co., Laurence Harbor, N.J., when it belonged to
Duferco Steel Inc. Cullen had worked for Duferco for
more than 20 years, heading the U.S. operations.
When the Switzerland-based international trading
company began diversifying through the purchase of
several steel mills and distributors, he championed
the idea of Duferco acquiring Baldwin Steel, which it
did in 1996.
Baldwin was profitable under Duferco, Cullen
says, but when the opportunity presented itself in
2002, Duferco sold the company to Macsteel Service
Centers USA Inc. (See May 2004 MCN case study.)
“Once I realized that Duferco was interested in
selling Baldwin, I had to decide what I was to do,”
says Cullen. “At the time, there were [Section] 201
tariffs on imported steel, so the trading business
didn’t really entice me.”
On deciding to start up a service center, he
recruited Scot Kalchbrenner, sales manager of Baldwin-Chicago, and Bill Cucculelli, an outside salesman. He chose Butler, Ind., not because it was con-
MCN Case Study: Magic Coil Products
venient, as his family lives in New Jersey, but because
it was close to potential customers and steel suppliers, particularly Steel Dynamics Inc., located virtually across the road.
Before pursuing this venture, Cullen had several
conversations with SDI’s top managers, who assured
him they would support the new metal center.
“There was no absolute guarantee on tonnage, no
absolute guarantee of pricing. My philosophy as to
our relationship with SDI is very simple: If we are the
very best customer that SDI has, then everything else
will take care of itself.”
Today, SDI supplies 55 to 60 percent of Magic
Coil’s steel with five other companies accounting for
the rest.
Cullen also bounced his idea off friend Bob Kelly,
general manager of Magic Steel Sales LLC in Grand
Rapids, Mich. Kelly not only endorsed the idea of a
new company, but asked Cullen if he would like a
partner.
“My initial reaction was that having a partner
could make life complicated,” he says, but after serious discussions, he decided the partnership could
work. Magic Coil is a 50-50 joint venture between
Cullen and Magic Steel Sales LLC.
“Magic Steel is an excellent company with a good
reputation and they brought a lot to the party. They
had a structure in place, they had background in
equipment and constructing buildings, and they had
the financing,” Cullen explains.
The JV was formed in October 2002. Cullen
became the managing partner who, along with his
team in Butler, oversees day-to-day operations.
Magic Steel Sales differs from Magic Coil in that
it handles more cold-rolled steel coils and does most
of its business in western Michigan, Cullen says. “By
contrast, 75 to 80 percent of our products are coated steel products—mainly galvanized and prepainted steel.” Magic Coil ships its finished steel to Indiana, Illinois, Iowa, Ohio, Nebraska, Pennsylvania
and, to a lesser degree, some of the mid-South states.
Despite the similar name, Magic Coil operates
quite independently from Magic Steel, making all of
its own day-to-day buying and selling decisions,
Cullen notes.
Startup challenges
As with most startups, the company had some
obstacles to overcome early on. Notably, its $5 million, 85,000-square-foot rail-served plant was not
operational until November 2003. So Magic Coil
essentially had no home for its first 13 months.
“We had steel in various processing facilities
throughout the country. Executing business using
outside processors in a start-up situation was a chal-
lenge,” Cullen recalls. “You can’t just tell them
[processors] that they have to do this or that, like we
can in our own plant. But it all worked out. We had
some very trying moments, but the bottom line is we
were successful.”
So successful that less than a year after the plant
was up and running, Magic Coil decided to expand
the new plant by 40,000 square feet and purchase a
second slitter.
“We have been very pleased with the results of the
“We were looking for a larger footprint
for Magic Steel Sales, and this joint venture
has been very effective for us.”
Todd Courts,
Magic Steel Sales
joint venture,” remarks Todd Courts, Magic Steel
Sales’ chief financial officer. “We were looking for a
larger footprint for Magic Steel Sales, and this joint
venture has been very effective for us.”
Magic Coil slits steel on a used 60-inch-wide
Braner slitter, which it purchased for $900,000 from
Magic Steel Sales. The slitter has the capacity to handle 0.012- to 0.12-inch-thick steel from coils up to
25 tons. The line included two 25-ton and two 35ton P&H cranes.
By March, Cullen realized his company’s pro-
QUICK FACTS
Magic Coil Products LLC
4143 County Road 61
Butler, IN 46721
Phone: 260-868-2645
Fax: 260-868-5462
Web site: www.magiccoilproducts.com
Founded: October 2002
Employees: 25
Facility: 85,000-square-foot plant, to be expanded to 125,000 square
feet in December
Key personnel: President and Managing Partner Tom Cullen, General Manager Scot Kalchbrenner, National Accounts Manager Bill Cucculelli, Marketing Director Tom Pasko
Products: Prepainted, galvanized, cold-rolled and pickled-and-oiled
coils and sheets.
Services: Slitting, vendor managed inventory programs, technical
consultations.
Processing equipment: 60-inch, 25-ton capacity, 10-gauge Braner
slitter; 72-inch, 30-ton capacity, 1/4-inch Braner slitter.
Reprinted from October 2004 — Metal Center News
MCN Case Study: Magic Coil Products
佣 A 72-inch-wide
Braner slitting line
with bridle tensioning
system will be ready
to process coils by
early October.
cessing activity had increased to a point that having
only one machine posed a risk of losing potential
sales. The company processes 6,000 to 7,000 tons a
month, about 80 percent of which is coated or prepainted steel. Of this, about 65 percent is Magic
Coil’s own steel and the balance is steel that it toll
processes.
the road, he would consider purchasing a cut-tolength line, as Magic Coil now outsources all its cutto-length orders. But that decision hinges on customer demand. Meanwhile, Magic Coil is running
one shift with some overtime.
“We have plenty of capacity, especially with the
new slitter,” he says, adding that his staff will continue to grow sales with its existing customers. Magic
Coil has two full-time salespeople and hopes to add
a third soon.
The company is looking to expand its presence in
the prepainted steel market—a sector that has been
growing for several years. “With our location and
SDI’s ability to paint on site at their Butler facility, we
have a minimal amount of freight expense, which
could give us a competitive edge,” Cullen notes.
High sales goals
Just how much Magic Coil can boost sales has a
lot to do with the economy, but Cullen believes the
company can increase its steel sales volume by 50
percent by third-quarter 2005 and could even double its toll processing sales. He forecasts Magic Coil
will end the year with $43 million in revenues.
In certain ways, Magic Coil is different from com-
佣 Magic Coil
Products holds master
coils of cold-rolled,
galvanized, coated
and prepainted steel
that gets processed to
customer specifications. At least half its
supply comes from
Steel Dynamics Inc.
across the road.
The company last month installed a new $2 million, 72-inch-wide Braner slitter with the capacity to
process 0.012- to 0.135-inch-thick steel from coils
weighing up to 30 tons. Work has begun on a $2 million addition to the plant—including two more
P&H cranes—which Cullen says should be completed by year’s end.
From there, he says, the company will spend its
time developing and managing its business. Down
Reprinted from October 2004 — Metal Center News
EQUIPMENT
VENDORS
Apple Felt & Wiping Systems Inc., Pittsburgh,
phone 412-373-8400, fax 412-373-8227,
Web site: www.applefelt.com, e-mail:
[email protected]
Braner USA/Loopco, Schiller Park, Ill.,
phone 847-671-6210, fax 847-671-0537,
Web site: www.braner.com, e-mail: [email protected]
Caraustar Industrial & Consumer Products , Atlanta,
phone 770-948-3101, Web site: www.caraustar.com,
E-mail: [email protected]
Class I Grinding Inc., Moline, Mich.,
phone 616-877-0225, fax 616-877-0883
GRETO, Lima, Ohio,
phone 419-221-0626, fax 419-221-1147
Jerry Tools, Cincinnati,
phone 513-242-3211, fax 513-242-4718
P&H Material Handling-Crane Group, Oak Creek, Wis.,
phone 414-764-8496, fax 414-764-8446.
Web site: www.ph-material-handling.com
Samuel Strapping Systems Inc., Cincinnati,
phone 800-222-1855, Web site:
www.samuelstrapping.com
Tork Products Inc., Fort Wayne, Ind.,
phone 260-482-7713, fax 260-484-1980
“With prices at an all-time high, we are not speculating. If we buy something
today—whether it is from SDI, another domestic mill or a foreign mill—
a specific customer has signed on to take every pound of that steel.”
Tom Cullen, president,
Magic Coil Products
petitors, such as in the way it inventories products.
“We get an allocation from our suppliers and then
we go to our customers and get commitments from
them before placing orders with the steel mills,”
Cullen explains, therefore minimizing the risk of
being caught with high-priced inventories if
demand slips.“With prices at an all-time high, we are
not speculating on steel whatsoever. If we buy something today—whether it is from SDI, another
domestic mill or a foreign mill—a specific customer
has signed on to take every pound of that steel.”
The golden rule
Cullen acknowledges that the markets Magic Coil
serves are very competitive, but he feels his business
philosophy provides an edge.
“We have no illusion of being the biggest service
center. That is not at all important to us. What we
want is to be the very best at what we do. We want to
treat each and every customer the way that we would
like to be treated—to service them, to take care of
them and, most importantly, to treat them fairly and
with integrity.”
This year, he notes, some metals companies have
taken advantage of the steel shortages. “We have
been extremely fair with all of our customers. We
haven’t taken advantage of the situation in order to
enhance our margins.”
Although Magic Coil has accomplished a lot in
the past two years, including its recent expansion,
“now we have to get our plant busier to justify the
expenditures we’ve made,” Cullen concludes. 䡲
Reprinted from October 2004 — Metal Center News