By: Catherine Kavanaugh
November 8, 2013
Advanced Environmental Recycling Technologies, Inc. will be out with its first capstock products early next year as the Springdale, Ark.-based company rebounds from a deadly fire that caused an estimated $7 million of damage.
The July 17 blaze at AERT’s Springdale facility killed one worker, injured two others, and took four of the five extrusion lines out of commission for the manufacturer of wood-plastic composite (WPC) building products.
Lost production contributed to a $3.1 million drop in quarterly sales compared to the same period a year ago, according to earnings results released Nov. 8. AERT reported sales of $14.7 million for the quarter that ended Sept. 30.
“What is not reflected in the financials is the impact on the individuals hurt in the incident, their friends and families, our neighbors and all of our associates. We keep all of the affected in our thoughts every day,” AERT CEO Tim Morrison told investors in a conference call.
Production at the plant was halted for about a month and all the lines still have not been restored to full capacity. Final adjustments and repairs continue.
AERT also has installed a new production line for capstock products, which have durable, lower-maintenance outer layers.
“We have undertaken research for the past few years to develop capstock technologies that we believe will be unique in the industry,” Morrison said.
The CEO said he believes it’s important the industry learn from its mistakes and not rush untested product to the market.
“In the past, competitors’ efforts to reduce the cost of WPCs left poor-quality boards, failed product and a poor reputation for WPC in general,” he said.
Although competitors have been abandoning their WPC offerings for capstock, Morrison said he believes both have a place in the market. AERT will continue to make WPC into the foreseeable future.
“It’s important to remember that a capstock will only be as good as the core WPC structure,” Morrison said.
AERT has been using recycled polyethylene and wood fiber waste to make outdoor decks, fences and door and window components since 1989. The company is the exclusive manufacturer of the colorful ChoiceDeck line of products sold by Lowe’s.
“We are excited to continue to partner with Lowes and believe that new approaches to that channel will facilitate growth in sales,” Morrison said, noting the home improvement retailer has 1,700 stores.
The CEO said he has a positive outlook for AERT as the company recovers physically, emotionally and fiscally from the July fire.
AERT’s insurer advanced the company $2.5 million in early October but a settlement has not been reached. The full financial impact of the fire is estimated to be $7 million.
Operating income fell $4 million in the quarter ending Sept. 30 — compared to the same period in 2012 —primarily due to lost production and sales. The insurance advance, which was recorded as other income, helped reduce the net loss to $1.1 million. AERT had posted net income of $500,000 in the third quarter of 2012.
Although the fire kept AERT from meeting its financial goals for the quarter, Morrison said, “Our business, however, is quite healthy and we anticipate getting back on the constant-improvement track in the fourth quarter.”