BEACHWOOD, OHIO — What may have seemed like a crisis a year ago may have been a blessing in disguise for Lamson & Sessions Co. Just as the company expected to rid itself of a foundering PVC pipe business last spring, buyer Eagle Pacific Corp., based in Minneapolis, terminated the $58 million deal at the last minute.
"As you go through a deal, there's certain things that have to happen along the way. It was clear we weren't going to agree," Eagle Chief Executive Officer William Spell said at that time, without offering any details.
Lamson was coming off a 1998 calendar year in which sales remained relatively flat at $271 million, and the Beachwood-based company feared its PVC pipe business could not keep up with Asian-owned competitors.
Lamson began seeking other buyers, but when that did not pan out, the company's only option was to ride out the storm.
One year later, the PVC pipe market is booming, thanks to an explosive contruction market, low interest rates and a good U.S. economy. Now Lamson has reported some of its best financial gains in years.
Lamson's overall sales reached $291 million last year, and profit after taxes and interest reached $18.8 million, nearly three times the 1998 figure of $6.6 million. The company was able to decrease its operating costs in 1999 by 6 percent as well.
Though the largest increase in sales was not achieved through Lamson's PVC pipe business, the firm did see a significant 8.1 percent rise in sales of PVC electrical and telecommunications conduit.
"There's been a product-mix shift. More and more of that product is going into telecommunications," said President John Schulze.
Bore-Gard, a trenchless PVC enclosure for telecommunications wiring, was introduced last year and Lamson will release a boreable, multichannel conduit this fall, said Jim Abel, Lamson's chief financial officer.
The company would not have been able to tap that market had it sold its extruders along with the PVC pipe deal, he added.
"[PVC pipe] is not as much of a commodity as it was one year ago. Some of that [pipe] is now being used for other products," Schulze said.
However, sales of PVC pipe for sewer applications already look promising this year, rising 32 percent in the first quarter over 1999's first-quarter sales, Schulze said.
He attributes most of that to market trends and the ability to pass on resin price increases.
In the past few years, Lamson faced vigorous competition because the industry's largest players were backward-integrated into PVC resin production, and they could afford to not pass along resin price hikes.
Lamson does not make PVC resin.
In the past year, however, PVC pipe prices have risen along with PVC resin prices. "The Asian chemical companies don't appear to be as aggressive as they have been," Schulze said.
Some Asian-owned firms also have downsized their PVC pipe businesses recently. In August, Tokyo-based Mitsubishi Chemical Corp. sold its Pacific Western Extruded Plastics Co. subsidiary of Eugene, Ore., to Eagle Pacific. That same month, Houston-based Westlake Group of Cos., a Taiwanese-owned chemical company, sold off some of its PVC pipe business.
Lamson now plans to keep its own PVC pipe business, which includes its Vylon pipe unit. Vylon converts flat PVC extrusions into sewer pipe by winding them around mandrels.
Though Schulze said Vylon has been a "disappointment," he has higher hopes for it in 2000 due to the increasing pipe-rehabilitation market.