TORONTO-Royal Plastics Group Ltd. has begun building multistory vinyl houses after developing a 6-inch-thick, extruded hollow vinyl panel that provides extra rigidity to its modular housing system. The Toronto firm announced the program at its Feb. 20 annual meeting where it reported its sales are outpacing overall activity in housing construction.
Royal President and Chairman Vic De Zen said his firm's joint venture in China plans to build a six-story apartment building by September. It has erected three multistory houses in Antigua.
Multistory capability increases the market potential of Royal's modular system, which it has been marketing globally for several years. So far, most units it built have been single-story constructions in developing countries.
An analyst said Royal watchers are banking on the housing system to help sustain the firm's sales and earnings growth.
``I look forward to a pickup in backlog orders,'' said Brad Smith of Midland Walwyn Capital Inc. of Toronto. The backlog, currently about 1,000 housing units, is about a third of what analysts had hoped for at this time.
Royal expects its recently completed housing components plant north of Toronto will boost sales growth this year. It opened a 300,000-square-foot extrusion plant in Woodbridge, Ontario, this month that at capacity will be able to make 12,500 housing units a year.
Later this year it also plans to open extrusion plants for the housing components in Argentina and China.
Royal's total sales for three months ended Dec. 31 were up 15 percent to C$130.4 million (US$94.5 million), despite sluggish housing markets in the United States and Canada. Key growth areas were custom profiles, the new housing system and results from its recently acquired window blind producer Novo Industries Inc. of Houston.
De Zen said at the annual meeting that Royal probably will seek listing on a U.S. stock exchange in April. One analyst said he expects Royal will then offer a new U.S. share issue to help fund its housing systems growth, which so far has been slower than expected.
The housing system's promise has been key to Royal's share price rise to about C$22 (US$15.95), said the analyst who requested anonymity. Its first share issue in late 1994 had a price of C$11.25 (US$8.16). The firm has not declared a dividend for shareholders.
Royal officials heavily promoted their housing system at the company's first annual meeting, which it held in downtown Toronto. Its distributor in Antigua gave a testimonial on how well the homes withstood Hurricane Luis last year. Following him at the microphone was the first Canadian couple to live in a Royal house. Brian and Leslie Bender said their home in Guelph, Ontario, is surprisingly energy-efficient during harsh winter weather.
Royal's sales for its year ended Sept. 30 increased by 15 percent to C$535.1 million (US$387.9 million). Profit for the first fiscal 1996 quarter was C$10.9 million (US$7.9 million) and for the 1995 fiscal year, C$52 million (US$37.7 million).
De Zen said Royal has shaved operating costs by integrating Novo's raw material needs with Royal's in-house compounding capacity, which it increased by 40 percent. He said Royal has considered buying a resin producer to become fully integrated, but has no plan to do so. It is receptive to extrusion-related acquisitions if ``they are good deals.''
Custom profiles, mainly windows, have been one of Royal's fastest-growing segments. Custom profile sales in the first quarter were up 15 percent, partly because of new window products introduced last summer. It expanded capacity at three of its window plants and opened a new custom profile plant in Nevada in late 1994.
It expects ``significant'' sales for its modular storage sheds this year after it and partner Rubbermaid Inc. expanded their distribution network to more than 300 retail locations in North America. The sheds are offered in four sizes, from eight by ten feet and smaller.
Royal was scheduled to move to new corporate headquarters in Woodbridge on Feb. 26.