Applied Extrusion Technologies Inc. announced last week it will add another oriented polypropylene film line to meet growing demand for the packaging material. The Peabody, Mass., firm hopes to pass Mobil Chemical Co. as the largest OPP film producer in North America, but a Mobil official said debottlenecking programs will keep it in first place.
AET will add about 40 million pounds per year of OPP film capacity at an undetermined location by mid-1997 to boost its total to about 225 million pounds. AET already is adding a 40 million-pound, 8-meter line at its Terre Haute, Ind., plant, due to come on stream next year.
``We want to be a leader in OPP film,'' Tom Williams, AET's president and chief executive officer, said in a telephone interview.
AET will spend about $95 million on the two 8-meter lines.
Williams said his firm also is investing in a new pilot plant and productivity im-provements, and hiring technical and marketing talent to help expand the OPP business.
AET's expansions will put it in the same league as Mobil, whose Films Division is based in Pittsford, N.Y. Mobil's annual OPP capacity next year will reach 250 million pounds through debottlenecking programs at its four plants, according to Robert Dobies, vice president and general manager of Mobil's Films Division.
Dobies said debottlenecking will more than offset the closure last year of its older Macedon, N.Y., plant, which had 20 million pounds of annual capacity.
Mobil's capacity next year will rise about 10 percent from this year's nameplate. Dobies estimates Mobil is spending $40 million or more on debottlenecking.
Williams said North American market growth requires the equivalent of a new 8-meter line each year. He predicts demand will reach about 650 million pounds this year.
Dobies said OPP film producers will run their operations at 88-90 percent of capacity during the next several years. Supply gets tight at higher utilization rates.
``We're bullish on the market,'' Dobies said.
OPP continues to replace paper and cellulose films and is growing in traditional markets such as baked goods and confectioneries.
Taiwanese-owned Inteplast Group also plans to expand by adding two lines at its Lolita, Texas, plant next year.
AET plans to issue 3 million common shares to help fund its expansions. Williams said the Nasdaq-listed company expects to complete the issue by early August. AET could raise about $50 million through the issue, depending on share price during the issue. It now has about 6.3 million common shares outstanding, Williams said.
AET stock closed at $14 per share June 20, down $3 from the close on June 15, the day before the announcement.
Standard & Poor's Corp. reacted favorably to AET's planned share issue. S&P revised on June 20 the firm's ratings outlook to positive from stable. The agency estimated the share issue will reduce AET's debt as a percentage of capital to about 67 percent from 83 percent.
AET's current 8-meter line in Terre Haute began production in 1991. It includes a Mitsubishi Heavy Industries extruder and Bruckner stretching equipment. The second line under construc-tion there also includes a Mitsubishi extruder and Bruckner stretcher. Williams said AET still is evaluating potential suppliers of its third 8-meter line. The company's other OPP plants are in Covington, W.Va., and Varennes, Quebec.
The firm reported sales of $108.8 million and profit of $4.4 million for the six months ended March 31.
AET recently announced it no longer is under obligation to buy Hercules Inc.'s 49.7 percent interest in Polo, an OPP producer in Brazil, for $15 million.
AET entered the obligation when it bought Hercules' OPP film business in April 1994. Hercules recently sold Polo to a third party.
The expiration of the purchase obligation ``allows AET to focus more directly on its strategic North American markets,'' the firm said.