Fraser, Mich.-based plastics processor Venture Holdings Co. LLC lost $14.5 million last year, prompting Standard & Poor's Corp. to reduce its outlook on the company's credit from "positive" to "stable." The change in outlook determines which direction a credit agency is likely to go next time a company's rating is up for review. Venture's actual credit ratings remained unchanged. Its corporate rating is B+.
In May 1999, Venture purchased Peguform GmbH, a leading German supplier of complete interior modules and structural plastic body parts, for $554.9 million.
While the merger greatly expanded Venture's customer base and geographic diversification, the debt-financed acquisition also contributed to deterioration in the giant plastics supplier's financial profile, S&P said.
"At the time, Peguform's financial performance was significantly weaker than that of Venture. However, Venture stated it expected to achieve significant savings in the near to intermediate term," said Lisa Jenkins, director of corporate ratings in S&P's New York office. To date, Jenkins noted, any such savings have been more than offset by margin declines in Venture's U.S. operations.
The holding company is owned by Larry Winget, who established sole control in 1987.
The company's annual 10K disclosure, filed March 30 with the U.S. Securities and Exchange Commission, reported net sales for 1999 including Peguform were $1.3 billion — more than double the $645.1 million sales it had in 1998. However profit shrank from $13.6 million in 1998 to a net loss of $14.5 million last year.
The losses are noteworthy, but not alarming, said Jeffrey F. Mengel, a partner with accounting and management consulting company Plante & Moran LLP in Southfield, Mich.
"Fourteen million [dollars] in a company that size is pretty much break even," he said.
The losses equal a little more than 1 percent of total sales, he noted. The question is how Venture comes back from last year's results and how it handles the long-term debt.
The company had other problems last year, which stemmed from hazardous-waste generation and disposal.
The Michigan Department of Environmental Quality cited Venture for emissions at its Grand Blanc paint operation, according to the 10K. In October 1999 the parties agreed to settle. The terms included more than $5.5 million in pollution-control costs plus penalties of more than $1.1 million. The same agency also cited the company's Grand Rapids plant for emissions violations.
The company listed three other causes for its 1999 losses in its annual report:
A 6.1 percent decrease in tooling sales, adding up to a $39.5 million drop.
A $6.4 million retroactive sales price reduction negotiated with a major customer.
More than $40 million worth of capital improvements to prepare for a new contract. However, that program is worth $100 million annually for an unspecified customer, with production expected to begin in late 2001.
Winget, also the chairman and chief executive officer, was out of the country and not available for comment last week. James E. Butler Jr., Venture's chief financial officer, did not return telephone messages left at his office.
It was not all bad news in 1999; the acquisition gave Venture access to European automakers and substantially decreased its dependence on North American customers.
Venture had no business in Europe in 1997 or 1998, but with the addition of Peguform it posted 53 percent of its annual sales in Europe.
Venture's 10K said the company would continue to focus on integrating part design with tool design to create an efficient "design for manufacture" process.
Plastics News estimated Venture's North American injection molding sales at $550 million.