Citing the weak economy, pipe manufacturer PW Eagle Inc. is permanently shuttering one facility and temporarily halting production at another.
The move is a signal that the construction market, which previously had been resistant to the economic downturn, is beginning to slow down.
The restructuring plan, which Eagle announced July 26, will close the company's Hillsboro, Ore., location. Eagle's recently acquired PVC pipe plant in Phoenix will reopen once demand picks up, officials said.
The move affects 113 employees, or 14 percent of Eagle's work force, and will produce annual savings of more than $7 million, according to company officials.
``Restructuring became essential in this weak economy, which has reduced the demand for plastic pipe and has lowered industry margins,'' Bill Spell, chief executive officer, said in a news release. ``While these economic times and this restructuring present a significant challenge for the company and especially for employees affected by this strategically necessary move, we believe that our company will emerge from this transition better able to support our customers, more efficient and better prepared to enjoy the growth and profitability in our industry when the economic conditions improve.''
The company, based in Minneapolis, operates 10 plants throughout the United States and does not anticipate any further closings, said Dobson West, Eagle's chief administrative officer and general counsel. Although he could not disclose sizes of either facility, he said the Hillsboro facility is on the smaller side.
``Clearly, our position is that we will monitor the situation as the economy improves,'' he said of the Phoenix location. As for relocating machinery from Hillsboro to other locations, he said those decisions have not been finalized.
In June, Eagle had revised its second-quarter forecast, lowering anticipated net sales to a range of $76 million to $80 million from $82 million to $90 million. The firm expects to release second-quarter results within a month, said Patrick Donohue, an analyst with Minneapolis-based Bluefire Research.
``It's nothing unusual,'' Donohue said of the restructuring. ``The entire industry has seen demand skid. PVC is in an area that's very cyclical. The great thing about PW Eagle is that they've got solid management. These guys know what to do when things get rough. Management has indicated they're comfortable with their inventory levels. They still see demand out there, they just see it as soft.''
Donohue sees the market picking up in the third quarter and remaining strong through 2002.
``It will come back,'' he said. ``Overall, we're pretty bullish on this company.''
PW Eagle ranked sixth in Plastics News' 2001 ranking, reporting $343.9 million in pipe, profile and tubing sales for 2000.
