Chemicals giant DuPont is exiting the PET bottle resin market by selling its business and other related assets to Alpek, the petrochemicals unit of Mexican conglomerate Alfa SA de CV.
DuPont Chief Financial Officer Gary Pfeiffer described the move as ``the next step in our strategy to reshape our overall investment in polyester.''
Monterrey, Mexico-based Alpek will buy DuPont's 300 million pound capacity PET plant in Fayetteville, N.C., as well as a facility that makes terephthalic acid - which is used to produce purified terephthalic acid, a PET feedstock - in Wilmington, N.C. DuPont also agreed to exit a polyester staple fiber joint venture with Alpek by 2002, thereby turning over a fiber plant in Charleston, S.C., to Alpek as well.
The combined PET, terephthalic acid and staple fiber operations employ 700.
Alpek officials said they will operate the new business under the name DAK Americas, which will be based in Charlotte, N.C. Hector Camberos will serve as president of the new firm.
Terms of the sale were not disclosed. DuPont officials estimated the PET/terephthalic acid businesses combined for sales of between $250 million and $300 million last year.
The sale does not include DuPont's lineup of specialty polyester resins, such as copolyesters, polybutylene terephthalates and polytrimethyl terephthalates, that are produced in Charleston.
Wilmington, Del.-based DuPont acquired the PET/terephthalic acid business as well as polyester film and titanium dioxide holdings from ICI plc in 1997. That deal made DuPont the sixth-largest PET maker in North America with a market share of about 5 percent.
PET/terephthalic acid accounted for about 13 percent of sales for DuPont's polyester unit last year. That unit has been up and down for DuPont in recent years, earning a $69 million profit in 2000 after posting a loss the previous year. But the unit reversed itself in the first quarter of 2001, losing $8 million and contributing to a 35 percent drop in DuPont's total first quarter profit.
Given this pattern, industry watchers were not surprised that DuPont chose to exit the cyclical PET market.
``Basically, you've got two companies with different outlooks on PET,'' said Chase Willett, a consultant with Chemical Market Associates Inc. in Houston. ``One is finishing its run, and the other is saying they like the commodity end of the business.''
As part of a privately held company, Alpek will not have pressures from shareholders and will have more freedom to invest in the bottom of a business cycle, Willett added. DuPont had added 100 million pounds of PET capacity in Fayetteville earlier this year but was unlikely to make a major capital investment in the business unless its cash flow improved, he said.
When the sale is completed next month, almost 40 percent of North American PET capacity will have changed hands in less than four years. Previously, Hoechst Celanese sold its Trevira unit - and its 20 percent market share - to the KoSa partnership, while Shell Chemical Co. sold its PET holdings - and 13 percent share - to Gruppo Mossi & Ghisolfi.
With annual sales of almost $1.8 billion, Alpek is the largest unit of Alfa, a conglomerate that is involved in markets ranging from meat and dairy products to steel to telecommunications. Alpek represents about one-third of Alfa's total sales and ranks as one of Latin America's largest petrochemical firms, producing raw materials used to produce nylon and polyester resins and fibers.
The DuPont deal represents Alpek's first foray into the PET bottle resin market.