CLEVELAND — Ferro Corp. remains committed to its plastics compounding business in spite of slowing sales and a recent half-billion-dollar investment in its nonplastic units.
"Plastics is not going to benefit from the acquisition, but we're still very interested in retaining our plastics business," Hector Ortino, Ferro chairman and chief executive officer, said at the firm's annual meeting April 27 in Cleveland.
In the acquisition, announced April 24, Ferro paid $540 million for the electronic materials, pigments, glass and ceramics businesses of OM Group of Cleveland.
"The [plastics] business is going through a hard time, but we're pleased and proud to be doing better than our competitors are doing," Ortino added. "We did our homework."
Cleveland-based Ferro was able to avoid pitfalls by reducing the size of its plastics business in the mid-1990s, closing several large facilities in favor of more-efficient, smaller compounding plants, officials said. Ferro ran 31 plastics sites in 1990 but has only 14 today.
The firm's plastics unit faces challenges on several fronts in 2001, according to senior Vice President Jay Finch, who leads the division. Overall plastics sales in 2000 were up less than 1 percent at $256 million, while profit fell more than 40 percent to $15 million.
By comparison, sales and profit in Ferro's coatings and chemicals units each were up at least 5 percent. Plastics accounted for about 18 percent of Ferro's 2000 sales, but its share could drop as low as 13 percent after the OM deal closes, based on 2000 sales figures.
In the first quarter, Ferro's plastics sales were flat to slightly down, while profit was down but still in positive margin territory, Finch said.
Ferro, which ranks as one of the largest polypropylene compounders in the United States, no longer is separating its plastics results from its performance chemicals unit. Based on 2000 totals, plastics would make up about 44 percent of that unit.
Ongoing challenges for 2001 include reduced demand and high raw material costs, Finch explained.
"All four of the main petroleum-based raw materials that we purchase — polypropylene, polystyrene, polyethylene and titanium dioxide — have had rapid run-ups in price since late 1999," he said.
Finch said Ferro's compound sales into the automotive market took the brunt of the damage in the first quarter. Appliance-based sales also were down, but not to the same degree as automotive sales. Ferro has no plans to add compounding capacity this year. In 2000, the firm added a new twin-screw extruder and streamlined existing lines in Evansville, Ind., its largest production site for its flagship Gapex-brand PP compounds.
The firm also opened a small compounding plant in Jakarta, Indonesia, last year.
In the stock market, Ferro's per-share price has bounced between $18 and $24 per share in the past year and was trading May 10 for about $20.
