Ameron Shakes Off Rust Under New CEO Marlen

It's probably safe to assume that James S. Marlen didn't become chief executive of Ameron Inc. for the glamour and romance.

A self-described "world leader in pipe technology," Pasadena-based Ameron makes more than 30 kinds of giant fiberglass, concrete and steel pipes that carry oil, water or anything else that needs to get from Point A to Point B in quantity.

The firm also makes protective epoxy and polyurethane coatings used on large structures like office towers, ships and bridges. And in Hawaii, Ameron produces cement and crushed stone.

What Ameron didn't produce from 1989 until 1993 was many happy shareholders. For most of that period, Ameron was the stereotypical old-line industrial company, its sales stagnant and its earnings and stock price rusting away.

Enter Marlen in mid-1993. The Chilean-born executive was managing the successful industrial and consumer plastics arm of Ohio-based GenCorp when Ameron's board found him. Offered Ameron's helm, Marlen says the chance to run his own show naturally had great appeal. But he also remembers a Wall Street analyst telling him at the time: "Somebody needs to shake this company."

When Marlen presides over Ameron's annual meeting on Monday at the Pasadena Hilton, he'll be able to demonstrate that some serious shaking has been going on. Despite lower sales in the fiscal year ended last Nov. 30, Ameron earned $10.79 million, its best profit since 1990. Operating earnings were $2.29 a share, up 22% from 1993.


More important, the return on shareholders' equity was 9% last year, the best since 1989.

"I think the progress at Ameron has been pretty phenomenal," says J. Michael Hagan, CEO of Laguna Niguel-based Furon Co. and a new director whom Marlen lured to Ameron's board last year. Marlen, Hagan says, "has really reconstituted and redeployed the company."

Like many CEOs brought in to fix ailing companies, the 53-year-old Marlen took a machete to Ameron's corporate structure. In 1994 he consolidated plants, cut 23% of the salaried work force worldwide and realigned the chain of command. In three of Ameron's four divisions, he installed new general and marketing managers.

Marlen also introduced a new pay plan, a major step toward his goal of creating a meritocracy where fresh thinking is rewarded. Perhaps not coincidentally, Ameron last year applied for more patents than in any year in its 88-year history. (Marlen's own reward for Ameron's turnaround: a 119% pay raise in '94, to $741,154 including bonus.)

Still, Marlen knows he's running a company that's in historically cyclical businesses, often dependent on big government projects. "It's tough to make a great long-term growth story out of a company that makes the things that Ameron makes," concedes analyst Michael Maloney at Chicago-based Mesirow Financial, a shareholder.

Challenged to produce consistent growth, however, Marlen professes no dearth of ideas. His coatings business, he says, "has an excellent technological base" that can be leveraged via new products. Corrosion-resistant fiberglass piping could be a much bigger product with oil companies if Ameron can sell it correctly, he says.

And while Wall Street may yawn at the highly competitive concrete and steel pipe business, Ameron's backlog there is the highest in history.

In all divisions, Marlen sees a fresh worldwide push for sales. "We're going to put tremendous emphasis on global marketing," he says.

Helped by cost cutting and a strong balance sheet, Marlen thinks he can produce perhaps another 20% earnings gain in 1995. Longer-term, he hopes to consistently boost Ameron's profit 5% to 10% a year--or better if the economy holds up.

That won't make Ameron the next Coca-Cola Co. But it could give Wall Street a new reason to look at the stock, after years of mostly ignoring it.

For now, at $34.50 a share on the New York Stock Exchange, the stock sells for little more than its asset value of about $30 a share (which should limit its downside) and pays a $1.28-a-share annual dividend, yielding 3.7%. It trades thinly, making it too volatile for many investors. But for "value" players who are willing to be patient, Marlen has at least injected the potential for long-term growth back into the pipeline.


Remaking the Company

Ameron Inc. Chief Executive James Marlen has so far wrung higher earnings out of lower sales. Now his challenge is to spur growth in Ameron's diverse heavy-industry businesses.


In millions:

1994: $418


Earnings per share: $2.29

* Excludes one-time items

Source: Ameron Inc.

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