2018 CORPORATE RESPONSIBILITY REPORT
prosperity

Business Growth and Diversification

103-2
The management approach and its components

103-3
Evaluation of the management approach

GRI
103-2
103-3

Our geographic, product, and end-market diversity aid in creating a stable business with opportunities for growth, and our diverse product mix allows us to adapt to shifting market demand. Our Industrial business segment offers a resilient, profitable base and a stable cash flow through fluctuating Energy cycles. Thus, our Industrial business complements our more dynamic but well-positioned Energy segment. We are always evaluating strategic investments to plan for the future, and we expect to continue building strong customer relationships as we strive to be the supplier of choice. 

Governance

Covia is actively managing our business growth and diversification through two key programs: operational excellence and commercial excellence. These programs include deployment of several tools that will help us capture both growth and diversification of our revenue streams. Regarding commercial excellence, we are using the Salesforce platform for customer relationship management to manage our customer segmentation and value proposition. This allows us to assess customer needs based on what is most important to them, rather than classifying customers based on size, volume, or industry. And, it helps us Deliver on Promise to provide our customers efficient and effective solutions. Regarding operational excellence, Covia is utilizing a new Enterprise Resource Planning (ERP) system that consolidates various systems into a new Information Systems Solutions (ISS) platform, which helps us optimize our production in our origin-destination pairings.

When we develop products to go to market, we ensure that we are developing with the goal of understanding the customer’s perspective. Covia treats customer relationships as partnerships, working collaboratively to advance innovation and develop solutions that are tailored to our customers’ specific issues and needs.

The combination of our two companies in 2018 provided Covia with a wider geographic and materials footprint, allowing us to leverage new cross-selling opportunities. Overall, we aim to be a solutions provider to our customers across their markets and geographies.

Covia also pursues growth through value-added products, which include DST™ (Dust Suppression Technology). Our DST™ treated frac and industrial sands are developed to help customers comply with the new OSHA respirable silica standard. This innovative sand product has a transparent coating that can reduce worker exposure to respirable crystalline silica when used properly. Our nepheline syenite product is used in a variety of applications in our ceramics, coatings, construction, and polymers markets.

Performance

Covia built two plants in the Permian Basin in 2018—one in Kermit, Texas, and the other in Crane, Texas. The plants are still ramping up, and should be at full production capacity in 2019. We also made an investment in Seiling, Oklahoma, targeting full capacity in 2019. Overall, Covia commissioned plants that added up to eight million tons of nameplate capacity; six million in West Texas and two million in Oklahoma. Covia is supporting the further expansion of our Canoitas, Mexico, plant and its glass container manufacturing operations. This expansion is expected to come online in late 2019.

When it comes to our Energy business, one key challenge is ensuring that our products are where our customers need them. Our Energy customers physically move about every three months as they progress through the production process, which differs from our Industrial customers. To better serve our customers who want last-mile services from their proppant provider, in 2018 we started offering this solution, and the first system will be operational in Q1 2019. This enables us to deliver directly to a well or blender from our terminals, and provides us an opportunity to have closer partnerships with our customers. We plan to connect our logistics software to this process to improve logistics efficiency.

Volume of Industrial and Energy Products (three-year trend)

  2016 2017 2018
Energy Volumes (millions of tons) 13,250 21,494 20,689
Energy Revenue (millions) $765 $1,491 $1,536
Industrial Volumes (millions of tons) 14,592 14,548 14,527
Industrial Revenue (millions) $745 $764 $784
HIGHLIGHT STORY
Nepheline Syenite a Leading Alternative to Silica Sand
Covia continues to gain market share by providing Nepheline Syenite as one of the leading fillers in architectural coatings, as an alternative to silica sand. This growth is projected to continue, driven by ever-tighter regulations, performance improvement vs. calcium carbonate, customer consolidation, and innovation. The current Polymers business is highly concentrated in Nepheline Syenite sales as an anti-blocking for plastic film, and further growth is expected to come from market share gains and geographical expansion. 

 

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Opportunity

Covia has several overarching goals for 2019 that should contribute to a strong future, including integrating our businesses, decreasing debt, diversifying and growing our Industrial portfolio, positioning our last-mile solutions in our Energy business, and advancing our technical leadership through our operational excellence and commercial excellence programs. Additionally, we aim to embed our Clearly Covia values and behaviors throughout the organization and invite employees to join SD Teams. Logistically, we expect to house all our legacy ERP systems into one system.