Robroy Industries: 100+ Years And Growing Strong

June 14, 2006
CEO Peter McIlroy's secrets to long-term success.

Peter McIlroy, an immigrant from Scotland, founded Robroy Industries in 1905 under the name of Enameled Metals Co. "It's one of those All-American stories," says Robroy Industries' CEO Peter McIlroy. "My grandfather got fired from his job at a steel mill, got someone to loan him some money and started a little manufacturing operation. We're still operating a manufacturing business today and doing very well."

Peter McIlroy senior had founded his business on the basis of providing an enclosure to protect a fragile commodity. Specifically, he found a way to serve the nascent electrical industry by coating steel conduit in black enamel that could protect wiring from corrosion.

In its first year of business, Enameled Metals moved only $35,000 in sales and absorbed a loss of $16,000, but the company turned a $14,000 profit the following year on more than six-times the sales volume and launched itself on an upward trajectory that has led to its current state of enviable finances. In 2005, Robroy achieved $91.7 million in sales that translated to over $20 million in profits. The company, which is based in Verona, Pa., has no debt and is sitting on $12 million in cash, an amount that is expected to grow this year.

Business success has always been hard enough to achieve. Lasting success over a century of operations is an even more elusive and impressive achievement. Over 25 years at the helm of Robroy, CEO McIlroy has found guidance in two pieces of advice from his father, Robert McIlroy, who led the company from 1953 to 1980.

"My father said, 'Stay with your knitting,' to use an old expression," says CEO McIlroy. "One reason that we are still here is that we have not tried to be a conglomerate and go in all directions at once. We are still making a product similar to the one my grandfather started in 1905. Every time I've gone too far afield, we have not done as well. So the lesson I learned from my father was to stay in our general expertise."

As McIlroy says, Robroy still makes enclosures, products that protect sensitive objects from the elements, though the company had abandoned the commodified field of galvanized conduit nearly two decades earlier to focus on high-margin niche products that performed well in extreme situations.

This shift occurred in 1977, when Robroy acquired Stahlin, a company that put plastic coating on conduit for use in highly corrosive environments like chemical plants. Since no one else served that niche market, Robroy could command a good profit margin for Stahlin's fiberglass and other non-metallic enclosures.

McIlroy calls 1977 a watershed year for Robroy. Although galvanized steel conduit sales still accounted for a third of its business back then, Robroy made the painful decision to shut down those production lines to focus on plastic conduit. It turned out to be the right move. "We built up the plastic conduit business and turned the company around," says McIlroy. "Had we not made that decision, I think we would have eventually perished."

This change in course illustrated what McIlroy calls the second great business lesson his father taught him -- you cannot stand still. If you stand still, you eventually start moving backward.

McIlroy acknowledges the fine line a company must walk in reconciling this need to evolve with the opposing warning against straying too far from a company's proven strengths. "While you want to stay with your core competencies, you have to move into new products and new markets," says McIlroy. "You can do this through new product development, but many times also through acquisition. We've learned to be cautious, but also to take risks and keep growing."

In this balancing-act between staying true to the essence of a company while simultaneously seeking the next high-margin growth market, there are bound to be missteps. Today, Robroy has three divisions: Electrical Enclosures, Electrical Products-Conduit and Oil Field Products. The company had attempted to enter the computer enclosure division in the mid-90s, but it turned out to be a risk that led Robroy away from its core competency and returned only heartache and heavy losses.

For a decade, McIlroy struggled to turn the division around, before eventually jettisoning it. "I made a bad decision and worked to try to salvage it for 10 years," he admits. "Meanwhile we were hemorrhaging cash and suffering terrible losses that distracted us from our other two businesses that were quite profitable." He calls his eventual decision to extricate Robroy from the computer enclosure business the best decision he made over that 10-year period.

Robroy has had many ups and downs over its long lifetime. The company has survived fires, floods, wars and depressions. Today, profitable and debt-free, Robroy enjoys margins of more than 20%. Though McIlroy's father took the company public in 1959 to raise capital, the current CEO McIlroy purchased all the shares and took the company private again a couple of years ago. He says that Robroy didn't need the capital -- or the high legal and accounting costs that come with public company status. He also enjoys being able to take a longer view and make strategic decisions without worrying about what investors will think of the next quarter's results.

That longer view includes the succession plans for McIlroy's two sons -- both in their mid-to-late 30s, both in upper-middle management and members of the corporation's Board of Directors. In the meantime, staying with his knitting, but always keeping an eye out for opportunities to evolve into areas with brighter futures and better margins, Peter McIlroy continues to lead Robroy into what he says will be its next hundred years.

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