NEW YORK - The market for oriented polypropylene film ``is in disarray,'' with two manufacturers for sale and two more suffering through the Mexican peso devaluation, according to a leading supplier. Amin J. Khoury, chairman of Applied Extrusion Technologies Inc., said both Quantum Performance Films of Streamwood, Ill., and Borden Inc.'s OPP films unit in North Andover, Mass., are for sale.
``Our competition is in disarray. We have an extraordinary window of opportunity,'' Khoury said May 16 at the PaineWebber Packaging Wrap-Up in New York.
Borden and Quantum officials acknowledged that their companies have been in a state of flux. But Glenn Galecki, general manager of Quantum Performance Films, denied that the company was for sale and protested that Khoury was spreading rumors about competitors.
A Borden official did not confirm or deny that the businesses were for sale.
AET is responding to the confusion in the OPP market by expanding capacity - the firm announced in September that it is spending $45 million to build a 40 million-pound-per-year, 8-meter OPP film line in Terre Haute, Ind. If the market remains strong, Khoury estimates the new line will generate $55 million in revenue next year.
With the addition, Khoury predicts AET will have nearly the same capacity as the market leader, Mobil Chemical Co.'s Films Division in Pittsford, N.Y.
``AET is increasing capacityand gaining market share,'' Khoury said.
The OPP industry historically has grown about 6 percent per year, but currently is humming at a 12 percent clip - and thehigh-end packaging and label markets are growing about 15 percent annually, he said. That is the result of three trends: the switch from rigid to flexible packaging; movement from glass to plastic bottles; and strong snack sales.
AET has a hefty share of some of those markets. The Peabody,
Mass., company makes 85 percent of the film used for 2-liter PET bottle labels and 100 percent of the outer wrap for compact discs, and is the primary source of film for Frito-Lay's snack packaging, Khoury said.
Another growth market is shrink labels for metal cans and powdered drink containers - an application that saw sales jump from zero to $4 million in one year, Khoury said.
AET is not the only OPP company undertaking a significant expansion. Inteplast Group, a unit of Formosa Plastics Corp. USA of Livingston, N.J., jumped into the market last year by installing four 8-meter OPP lines at its Lolita, Texas, plant, and plans to add two more by mid-1996.
But Thomas E. Williams, AET's president and chief executive officer, said Inteplast was selling mostly to export and packaging tape customers, and would have to make a significant investment to compete with Mobil and AET in the high end of the market.
``They really compete with totally different folks in a different part of the market,'' Khoury said.
Khoury also said AET doesn't expect competition from Simpro Inc. and Cydsa SA, two firms that manufacture in Mexico, because of the peso devaluation.
Williams said AET would not be interested in acquiring either the Borden or Quantum businesses unless they could find customer synergies that would sweeten the deals.
Galecki, however, said there is ``no activity to divest Quantum Performance Films,'' adding that its new parent company expects it to be a growing business.
Quantum Performance Films was one of 34 businesses spun off last week from Hanson plc -and former parent Quantum Chemical Corp. - into a new company, U.S. Industries Inc.
Galecki said the rumor may have been generated by Quantum's efforts to sell film equipment in its idle Salisbury, N.C., plant.
Borden spokesman Nicholas Iammartino said Borden's policy is to not comment on rumors of acquisitions, divestments or mergers. But he added that Borden officials last fall considered selling its entire plastics business, but backed off the plan when it was purchased by New York deal makers Kohlberg Kravis Roberts & Co.
Iammartino added that on May 15, C. Robert Kidder, Borden's president and chief executive officer, told employees that Borden was looking for places to ``build scale'' and technical improvements into the existing OPP business.
