WINCHESTER, VA. — For executives at Trex Co., the decision between paper and plastic is an easy one — plastic, hands down.
After all, Trex, a spinoff from Mobil Corp., recycles plastic grocery bags and sawdust scraps into waterproof, weather-resistant boards for building decks.
Today, Trex cannot keep up with demand for its decking — its Virginia plant operates three shifts per day, but the company still has a tremendous backlog. Sales last year were $46.8 million, up 40 percent from 1997. And sales for the first quarter of 1999 were up 49 percent from the first quarter of 1998.
``We expected growth in the 20-25 percent range, not 40 percent,'' said Chief Financial Officer Anthony Cavanna. ``That growth has led us to some interesting problems.''
Such as sourcing. The company purchases 80 million pounds of polyethylene scrap annually. Trex goes to grocery and department store chains to buy the bags customers return. In addition, Trex buys scrap linear low density PE pallet wrap.
Trex estimates it takes back half of the available grocery bags and 20 percent of the available pallet wrap on the recycling market.
Trex buys its sawdust scraps from furniture factories and cabinet makers. The sawdust is mixed with the plastic, then extruded into 2-by-6 deck boards. The planks are not strong enough for structural use but are plenty strong enough — and comparably priced — for decking.
Although a deck built with Trex lumber costs about 20 percent more than one built with treated lumber, the Trex deck needs no sealing or staining.
The Trex deck began in the early 1990s when Mobil's Specialty Chemical Group was emphasizing environmental concerns. The company charged business manager Andrew Ferrari with finding a recycling business to work with its existing projects.
At the same time, Roger Wittenberg was running his own company, which recycled plastic and ground-up pallets into lumber.
Mobil bought Wittenberg's company, hired Wittenberg as technical manager, and began refining the process under General Manager Robert Matheny. Cavanna was assigned to monitor financial aspects of the division.
By 1996 the division was making a profit, but Mobil's long-term plans had shifted and Trex no longer fit. The four men went to Mobil management and offered to buy Trex.
``It was difficult in the initial buyout to get the financing, yet still retain majority ownership in the company,'' Cavanna said. ``But we were able to do that, which is highly unusual.''
Each man put up $500,000 to buy Trex from Mobil. They received $29 million in financing from Cigna, and Mobil kept a $3 million stake in the company.
``We were able to keep 90 percent of the equity for ourselves,'' Cavanna said.
The company changed hands Aug. 29, 1996, and all plans were for slow, steady growth. But demand was so strong that the company decided to go public to raise capital for a second plant, in Fernley, Nev.
Trex's April 8 initial public offering fetched $10 per share, and the stock has risen faster than many Internet stocks, selling for more than $19 per share by mid-May.
The 150,000-square-foot Nevada plant is scheduled to begin operating by fall, and will increase production capacity initially by 25 percent. Together with recent expansions at the Winchester facility, Trex expects to have December 1999 capacity of double its December 1998 capacity.
To meet that need, materials director Mike Vatuna and his staff of six continuously seek out new sources for plastic bags and sawdust.
``We haven't really targeted the West Coast for suppliers, so we will do that to feed the Nevada facility,'' Cavanna said.