Defence and security: Pacific Safety Products sets new targets

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When Terry Vaudry became CEO of Arnprior’s Pacific Safety Products in 2012, the soft-armour maker was coming off a shaky few years. 

Arnprior's Pacific Safety Products produces soft-armour products for clients such as the Department of National Defence.

By Elizabeth Howell

The company went through several attempts to restructure and sell the business as it struggled to remain profitable.

Things are different now, he told OBJ, because his focus is managing existing assets: no big mergers or acquisitions, and a shift away from looking for “big-win” contracts that can destabilize finances over time.

The company’s last quarterly results, released in May, showed $3.7 million in revenues, a 9.1 per cent increase over the year before. Adjusted earnings came in at $210,000, up from about $30,000 last year.

“We just started to change the company to run the business, to get at the products, serve the customers and get rid of the distractions,” Mr. Vaudry said.

Shortly before he arrived, the company sold off APS Distributors, a Nova Scotia-based firm that offered various law enforcement products, in 2011. That allowed PSP to focus on its core business: providing soft-armour products for customers such as the Department of National Defence and Canadian police and security forces.

One major initiative since Mr. Vaudry’s arrival – it’s 75 per cent finished, he said – has been to make some armour products lighter. This makes them more comfortable to wear, and the reduced material cuts the company’s production costs, improving margins. Money is being saved through cost containment in other areas as PSP wins new contracts with the Mexican presidential guard and police forces in Canada, Mr. Vaudry said.

Additionally, the company plans to repurpose its expertise in soft armour for related products, such as outfitting vehicles, although these initiatives are still in the early stages.

PSP’s tangled history of layoffs, product selloffs and company restructuring attempts added up to “sizable” severance and downsizing costs between 2009 and 2012, Mr. Vaudry said, declining to discuss specific figures.

One lingering effect of the troubled period is a lease PSP has with its landlord, Arnprior Bay Property Ltd., a part of the Huntington Properties group. PSP said that after a review in October 2012, it alleged it was “overcharged by the landlord” by between $110,000 and $550,000. Formal arbitration began in April 2013. A settlement is expected this summer, Mr. Vaudry said.

PSP’s overall head count decreased from 239 in 2009 to 136 in 2014, including 13 casual hires from this year. The company maintains a substantial casual workforce since projects can ramp up or down quickly, so this allows PSP to stay flexible as contracts come in, Mr. Vaudry said. While offering only casual work can lead to high turnover, Mr. Vaudry said PSP is able to retain its staff by offering competitive wages as well as medical and dental benefits.

Orders come virtually every day from police and other security forces, which is shifting the company away from relying on big contracts from DND. Canada’s pullout from Afghanistan, for example, will have little effect since those armour contracts mostly wrapped up in 2007.

Mr. Vaudry also foresees “pent-up” demand as some customers put forward delayed orders for replacing the armour, which has a finite lifespan. The reasons vary with every client, sometimes being attributed to the recession and sometimes for other reasons.

“Our industry is very cyclical ... Some years, some quarters, you get spending that was sort of pent-up demand. Sometimes it’s missed because most of our customers are government agencies (that delay procurements).”

Looking to the rest of 2014, DND has several non-armoured base bids that will be coming up for bids, and PSP has the delayed orders from several customers that it expects to come through. PSP also continues to grow its business in the United States, where it has had an office in Dover, Tenn., since 2007.

One advantage for PSP came when competitor ArmorWorks declared Chapter 11 bankruptcy in the United States; subsequently, PSP won a contract that was previously with ArmorWorks Canada, Mr. Vaudry said.

Recent currency fluctuations have also worked in PSP’s favour.

“We’re finally seeing now the U.S. dollar is getting a bit stronger, so the Americans have a hard time competing with us now,” he added. “It’s harder for them to have products land in Canada and to compete against us financially.”

Organizations: Department of National Defence, APS Distributors, Arnprior Bay Property Huntington Properties ArmorWorks Canada

Geographic location: Canada, United States, Afghanistan Dover

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  • Michel Toledano
    June 03, 2014 - 08:48

    Time to send Arnprior to SC