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April 19, 1999 02:00 AM

INTEGRATION NOT FOR ALL PVC PIPE MAKERS

Frank Esposito
Senior Staff Reporter
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    HOUSTON — PVC pipe makers that attempt to acquire and run their own PVC resin operations may be biting off more than they can chew, according to a pipe executive who spoke at the CMAI World Petrochemical Conference.

    ``There's sort of like a frenzy right now for pipe companies to integrate back upstream to PVC,'' said Freedom Plastics Inc. President Steve Scaccia. ``If they have an opportunity to have resin in the chain, they think it will automatically increase their margins, but I don't really believe it.''

    The most recent example of such a move came in December when Eagle Pacific Industries Inc., a $72 million-a-year pipe maker in Minneapolis, obtained a PVC resin plant owned by Condea Vista Co. in return for a share in Eagle Pacific ownership.

    North America's two largest pipe and profile makers — Royal Group Technologies Ltd. of Woodbridge, Ontario, and CertainTeed Corp. of Valley Forge, Pa. — each produce their own PVC as well.

    The third- and fifth-largest pipe and profile makers, J-M Manufacturing Co. Inc. of Livingston, N.J., and North American Pipe Corp. of Houston, are owned, respectively, by PVC makers Formosa Plastics Corp. USA and Westlake PVC Corp., which supply much of their raw material.

    Pacific Western Extruded Plastics Co. of Eugene, Ore., a $202 million-a-year pipe maker, also operated a PVC plant in Pace, Fla., in the mid-1990s before exiting the business for logistical and profit reasons.

    ``I think some companies want to [integrate into PVC] to guarantee their supply in the midst of all the consolidations that are going on,'' said David DiPiero, Formosa's business director for vinyl resins and compounds. ``If you can go from fabrication back to the polymer, there's an economic advantage.''

    But there's more to PVC resin operation than simply making an acquisition, said Scaccia, whose Janesville, Wis., firm ranks 44th among North American pipe and profile extruders, with annual sales of $55.5 million. Freedom produces pipe at facilities in Janesville and Fort Pierce, Fla.

    ``There's not a whole lot of people who will be happy about [integrating into PVC] five years from now, especially about having to control all aspects of integration,'' Scaccia said.

    Scaccia said he'd like to see his company remain independent, where he believes it can grow in niche markets at a rate faster than that of the overall pipe industry.

    ``They say anything's for sale at the right price, but I hope the right price doesn't come along,'' Scaccia said. ``I want to work at growing our company.''

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