CHICAGO (June 27, 11:10 a.m. EDT) — Polypropylene maker Epsilon Products Co. is splitting into two separate companies, each operating its own PP plant.
The first company will retain the Epsilon name and be a 50-50 joint venture between compounder Washington Penn Plastics Co. Inc. of Washington, Pa., and Sunoco Inc. of Philadelphia, the firm that has been Epsilon's primary propylene supplier.
Company officials disclosed the news in an interview at NPE 2000, although the companies did not exhibit at the Chicago show.
Epsilon still will be based in Marcus Hook, Pa., where its assets will include a 750 million-pound-per-year PP plant, three Sunoco propylene splitters, office facilities, a storage cavern and tank-car-loading facilities.
The second company will be Pinnacle Polymers Co., a Dalton, Ga.-based firm that will operate an 800 million-pound-per-year PP plant that the original Epsilon built last year in Garyville, La. Marathon Oil will continue the long-term propylene supply agreement it had with Epsilon at the Garyville site, which is adjacent to a Marathon refinery.
Pinnacle will be wholly owned by the Bouckaert family, which also owns Beaulieu of America, a Dalton firm that ranks as the world's third-largest carpet and rug company.
The Bouckaerts formed Epsilon in 1990 in a 50-50 partnership with Washington Penn. Each owner used a portion of Epsilon's PP output — at most, 10 percent of overall capacity — and sold the remainder on the open market.
Robert Ockun, Epsilon president and chief executive officer, said the split is the result of "the different philosophies of the current owners."
"This decision makes sense because it allows each owner to maximize their strengths," Ockun said. "When Epsilon was smaller and had one plant, things were OK, but when it got bigger and added the second plant, the owners' philosopies began to affect the way they ran the business."
Ockun will remain president and CEO of Epsilon, while Scott Edgecombe, Epsilon's sales manager, will lead Pinnacle.
Epsilon's strategy will be to serve the consumer-products, packaging, automotive and spun-bond-fiber markets, while Pinnacle will focus on 10-15 core customers and products in the fiber and injection molding markets.
"At Pinnacle, we'll try to maximize our facility and drive costs down," Edgecombe said.
Washington Penn will continue to consume 5-10 percent of the new Epsilon's PP output, while Beaulieu will use 15-30 percent of Pinnacle's PP supply.
Even though many in the PP industry have been calling for consolidation because of overcapacity and low profit margins, Ockun said adding another producer in the form of Pinnacle won't worsen the situation.
"Capacity issues are what's caused low margins and operating rates in polypropylene," he said. "And (splitting Epsilon) isn't going to change the industry's capacity at all."
Privately held Epsilon doesn't release sales figures. The original Epsilon ranked fifth among North American PP producers, with about 8 percent of total capacity.