In a move that could portend stormy weather in the vinyl siding industry, Jannock Ltd. announced it will suspend production at its Missassauga, Ontario, plant by Oct. 30.
``The decision reflects current vinyl market conditions of excess industry capacity,'' Jannock said in an Aug. 15 news release.
``There's a lot of vinyl [siding] out there,'' agreed one industry source, who spoke on the condition of anonymity. He cited numerous new plants and internal plant capacity expansions in the industry as reasons for a possible glut.
About 135 workers will be laid off until the market can bear the brunt of the plant's capacity, a company official said.
Jannock could reopen the plant when conditions are right, but that probably will not happen ``before the end of next year,'' Brian Jamieson, Jannock's vice president for finance said in a telephone interview from Toronto.
Jannock will take a C$4 million (US$2.86 million) charge to cover employee severance and other costs associated with the suspension.
In addition to macro-economic issues, some specific events led Jannock to stop its Mississauga operations.
``A major customer of our siding and windows went out of business,'' Jamieson said. ``Another of our customers was acquired by Amerimark, which subsequently was acquired by Owens Corning.''
With the latest Owens Corning deal, which was announced July 29, many industry watchers agree the vinyl siding business is in for some changes.
One source at securities dealer Dillon Read & Co. of New York said excess capacity and recent acquisitions and consolidations in the industry are going to mean hard times for smaller players.
``It's going to become a different playing field,'' he said, predicting a shakeout where three or four big players will battle over distribution channels.
``As they do this there are going to be pricing pressures'' that will take deep pockets to overcome, the source said.
Dillon Read recently downgraded its ratings for both Owens Corning of Toledo, Ohio, and ABT Building Products Corp. of Neenah, Wis., based on its analysis of the vinyl siding industry, the source said.
Jannock, a publicly held company based in Toronto, hinted at problems with its vinyl operations in its report for the second quarter.
``The vinyl siding industry is experiencing a higher level of competition as industry capacity currently exceeds demand,'' Jannock Chief Executive Officer R.J. Atkinson said in the report.
``This industrywide situation has resulted in pricing pressures and prevented increases that normally would have been implemented to offset higher resin costs.''
PVC resin prices as tracked by Plastics News show a general 7 cent-per-pound increase since the beginning of 1997.
That has hurt earnings, Jannock reported.
While first-half sales in Jannock's metal and brick group rose by 17.6 and 15.2 percent, respectively, vinyl product sales were up 2.5 percent to C$102 million (US$73 million) in the first six months of 1996.
Plastics News ranked Jannock as the sixth-largest North American extruder, with US$261 million in related sales for 1996.
The company's other siding plants are located in Sardis and Booneville, Miss.; Bardstown, Ky.; Weatherford, Texas; and Vandergrift, Pa. The Ontario plant was its only siding operation in Canada. Besides siding, Jannock extrudes vinyl windows, fences and decking.