CLEVELAND — Lamson & Sessions Co. may sell its Vylon large-diameter pipe unit, along with the rest of its rigid pipe and electrical conduit businesses.
Shareholders of the Beachwood, Ohio-based company met April 24 in nearby Cleveland for their annual meeting.
``Last November we engaged an investment banking firm to help us explore the possible sale of the rigid pipe and electrical conduit segment of the company,'' said Chief Executive Officer John Shulze. ``We targeted a select group of multinational chemical companies with economic synergies in the [United States] as potential joint venture partners or buyers.''
Other commodity pipe makers long have complained they cannot compete against companies that integrate resin making and pipe extrusion.
Lamson seems to be taking an if-you-can't-beat-'em-join-'em approach.
``Several of the candidates selected already have forward-integrated into the pipe fabrication business though a series of acquisitions,'' he said. ``These companies hold leading market-share positions in the water and sewer pipe segments of the domestic plastic pipe industry. In addition, several have smaller market-share positions in the electrical conduit business.''
Shulze would not identify any of the possible candidates, but he did say in a later telephone interview that Lamson's Vylon large-diameter pipe business is part of the negotiations with some of the interested parties, even though the product does not fit most definitions of a commodity.
``Pricing certainly would be different'' if Vylon were included in any deal, Shulze said.
Vylon pipe is a novel product that converts flat PVC extrusions into pipe by winding them around mandrels. The resulting sewer pipe can be made in diameters as large as 54 inches.
Shulze singled out the Vylon group as having avoided the supply problems of other divisions last year, and also noted that several West Coast sewer projects have written Vylon into their specifications. The division also plans to go after the sewer rehabilitation market with a slip-liner product, sidestepping projected stagnation in the new-construction sewer segment, he said.
Lamson & Sessions Co. shareholders are staying the course with the company's current management and strategies despite a ``particularly difficult'' 1997, he said.
Lamson, which struggled in the early 1990s, had achieved profitability in 1995 and 1996 — only to lose it again last year. The firm reported a 1997 loss of $9.7 million on sales of $271.8 million.
Shulze reiterated earlier company announcements that problems with a new computer system caused delays in shipping products last year. Those delays forced customers to look elsewhere for products — and many still are looking elsewhere despite solutions to the computer problems.
``The customer base we have found most difficult to win back are the telecommunication and power companies,'' Shulze told shareholders. ``In many cases, they had Carlon [a business unit of Lamson] written into their specifications as a sole-source supplier of telephone duct and other underground construction products. When we failed to perform in a timely manner on many of their projects ... they were forced to seek additional suppliers.''
Another drag on Lamson's profit afflicts the entire PVC pipe and conduit industry.
``Continued volatility of raw material costs and excess capacity of electrical conduit and telecommunications duct kept severe pressure on margins,'' Shulze said. ``Economic problems in the Far East have caused a weakening of demand and uncertainty in the pricing'' of PVC resin.
In an effort to reduce the impact of PVC volatility on its profit, Lamson has been looking to get out of the low-margin end of its business — mainly commodity conduit and pipe products.
The firm also is recovering from an April 1997 fire at a plant in Brighton, Mich., that destroyed its Dimango Products operation. Dimango produces wireless doorbells and security systems.
``We have not been successful in recapturing the business ... from our competitors,'' Shulze said of Dimango.
With or without an exit from the commodity pipe and conduit business, Lamson will continue to focus efforts on its best-selling line of PVC electrical boxes.
Shulze, citing studies projecting increased home-improvement expenditures and a strong new-home market, predicted strong results in Lamson's Home Products segment.
``There is a lot of enthusiasm building in this business unit now that our operating problems have been resolved,'' he said. ``We are all looking for a good year.''
Shulze assured stockholders that Lamson's current strategy will lead to sustained growth and profit, ``something we have not been good at in the past,'' he said.