13 May 07. Focusing on the niche market of recycling valuable superalloys for the aerospace industry has allowed a Scottish start-up company to build an international business. The Caledonian Alloys Group was established 11 years ago at Livingston in West Lothian with just five employees. Now it has nearly 300 and has 10 processing plants across five countries, covering Europe, the US and Asia. Hugh Stewart, Caledonian’s executive chairman, founded the company with Ron McNab and Douglas Sked, two other executives with a background in the metals business. Mr Stewart said: “I had been involved in a failed management buy-out with another company and had been sacked – that is one of the things they don’t tell you when you contemplate an MBO.” The trio, backed by Bank of Scotland and 3i, the venture capital group, decided to focus on recycling and processing superalloys of nickel, cobalt and titanium that are used in the manufacture of aircraft engines and, increasingly, in the fuselages and undercarriages of aircraft because of their lightness and strength. Caledonian works with aircraft engine manufacturers such as Rolls-Royce and Pratt & Whitney to ensure any waste material from machining processes is carefully segregated, processed and recycled to the melting companies that produce the superalloys. Mr Stewart said: “These materials are inherently expensive, so we don’t ever use the term ‘scrap’, which denotes high volume but low value and low margin. Our business is low volume but high value and high margin, based on quality, integrity and service standards to our customers.” Caledonian more than doubled pre-tax profits last year to £7.9m, up from £3.1m in 2005, while sales jumped from £34.6m to £53.6m. The group is still finalising its accounts for the 12 months to March but expects both pre-tax profits and sales to have risen about 60 per cent. Caledonian is jointly owned by its three founders, who bought out 3i five years ago, when the venture capital group was retrenching in Scotland and selling off various industrial investments. The trio’s pay and pensions came to a combined total of £699,000 last year, though they also shared dividend payments of £1.8m. Asked whether they would consider floating the company, Mr Stewart said: “We are keeping all our options open.” Caledonian suffered from the downturn in the airline industry that followed the terrorist attacks of September 11 2001, but has benefited recently from the surge in metals prices and the recovery in demand from aircraft manufacturers such as Boeing and Airbus. (Source: FT.com)