ABT Building Products Corp. is molding itself into a major player in plastic building products for the home. The company will buy Emco Ltd.'s vinyl siding division for about $33 million, doubling ABT's plastics-related sales to more than $110 million this year. The companies have signed an agreement, and expect the deal to close around May 31, according to an ABT news release. Emco's BPCO Vinyl Siding Division of Acton, Ontario, estimated sales last year at $39.3 million. The unit has been up for sale since Feb. 6.
With this buy, ABT has hit its target ofbuilding a plastics business with sales of more than $100 million, said Michael Lupo, executive vice president and chief financial officer.
``We've gotten to where we want to be and now we want to grow it,'' he said.
The acquisition also fits ABT's strategy of becoming less dependent on the new housing markets, George T. Brophy, ABT chairman and chief executive officer, said in the release.
ABT, based in Neenah, Wis., primarily makes exterior hardboard siding and interior sheeting, such as paneling and tile board for kitchens and bathrooms. Its plant in Middlebury, Ind., extrudes foamed polystyrene and PVC moldings that resemble wood. Earlier this year, ABT acquired KenTech Plastics Inc. of Hopkinsville, Ky., an injection molder of plastic shutters. With BPCO, the total package gives ABT annual sales of about $266 million, Lupo said.
ABT will acquire BPCO's 148,000-square-foot plant with 10 coextrusion lines and one twin-screw extruder. The operation makes vinyl siding and accessories, said BPCO President Michael Campbell, who will remain with Emco. But most of the 155 employees, including six or seven salespeople in the United States, will go with ABT, Lupo said. The company will continue to lease an 88,000-square-foot facility, in nearby Milton, Ontario, for warehousing and shipping.
Also in the deal is a new Coronado compounding system, installed in January. The gravity-fed compounder is four stories high, fully computerized and closed-loop, with strain-gauge measure, Campbell said, and cost more than $2.5 million.
``It's probably the most up-to-date compounder for PVC resin in North America,'' he said.
The compounder can process about 250,000 pounds of PVC a day, he said. BPCO had been buying those compounds.
Richard Grogan, Emco's CFO, said in February that the vinyl siding unit had not been profitable for more than a year because rising PVC resin prices had squeezed margins. But Lupo said the firm was ``marginally profitable'' in 1994, and he expects profit to grow this year.
``A lot of things had been done to straighten it out,'' Lupo said. ``Just the in-house compounding will save you money.''
The scrap rate, once 13-15 percent, is now ``way below 10 percent,'' he said.
He called BPCO a ``well-thought-out plant'' that is running at only 50 percent of its capacity. ABT will step up production on existing equipment and double the plant's business, he said. For now the Canadian market generates 65 percent of its sales, the United States the rest, according to Campbell. But ABT plans to make the U.S. share its largest piece, gathering its customers from a broader base of distributors and home sellers, Lupo said.
The BPCO sale is in line with the recent shuffling of U.S. and Canadian vinyl siding operations. Emco unloaded the unit because it could not commit to being a major force in the siding market, Campbell said.
``In the next five years, if you're not in the top four or five in North America, there's not a lot of sense being in it,'' he said. ``ABT is putting together a package of goods for the home ... a fairly comprehensive basket.''
Emco garners about C$700 million to C$800 million (US$516 million to US$590 million) annually from the plumbing and industrial wholesale business, aimed at the housing market in Canada, Campbell said. It also makes roofing - Campbell claims the firm is the second-largest supplier of shingles and rolled felt in Canada - and low-density, wood-fiber sheeting. Its total sales were C$1.1 billion (US$787 million) last year.
ABT and Emco serve home improvement, remodeling and construction markets. New construction is sluggish, he said, and remodeling is ``nothing to write home to mother about.''