A major PVC resin buyer has restructured financially, preparing itself to deal with economic uncertainty should 2002 prove as volatile as 2001.
Minneapolis-based pipe and tubing extruder PW Eagle Inc. signed a refinancing deal March 1 that eliminated all the defaults under its previous loan agreements and reduced its fixed charges.
The company also sold and leased back four plants, and sold a plant in Hillsboro, Ore., that it closed last year.
``We've endured,'' Chief Executive Officer Bill Spell said in a March 6 conference call to analysts. ``We believe the economy has turned in the manufacturing sector. We've noticed in the last couple months our business has improved.''
The PVC pipe market had a rocky 2001, struggling under the weakening economy and declining resin prices.
``We're taking noncash inventory write-downs, inventory losses, manufacturing product that we're selling later at lower prices,'' Spell said, adding that he believes prices have bottomed out.
PVC prices increased 2 cents per pound in February, and he expects the same in March and April.
PW sold the Hillsboro facility and some equipment for $1.3 million. Subsequently, the firm raised $13.7 million by selling and leasing back facilities in West Jordan, Utah; Perris, Calif.; and Tacoma, Wash.; and an office building in Eugene, Ore.
The company's Phoenix facility remains closed temporarily, a move the company made last year to boost efficiency.
But things have stopped getting worse, said Lee Schafer, managing director with Minneapolis-based Blue Fire Research, who predicted good profitability and cash flow this year for PW.
``We upgraded them prior to their conference call,'' Schafer said in a March 7 telephone interview. ``We're reasonably optimistic. They came through the downturn with restructured financials and operations. We still project them losing money in the first quarter, but it's going to get better. In the second and third quarters, they'll make quite a bit of money, according to our forecast.
``I think they've done a good job, both operating the business in a tough environment and keeping it funded and keeping agreements with credit sources very much alive.''
PW Eagle serves three segments: irrigation, waterworks and electrical. Officials said there was surprisingly good demand in irrigation during the fourth quarter. Waterworks and electrical are tied to seasonal construction, which is typically slower from November through February. A milder-than-usual winter across the country also has contributed to stronger sales growth, officials said.
PW Eagle reported $246 million in 2001 sales, down from $343 million in 2000.