Low & Bonar plc, which is replacing its chief executive officer, has long-term plans to sell its plastics division.
Finance director Jon Kempster said the London company plans to withdraw capital investment from its low-margin rotational molding operations in favor of what the company considers more lucrative flooring, yarn and fabrics businesses. Rotomolding represents a little more than a third of L&B's annual sales, and includes plants in North America and Europe.
After a review this autumn, when new CEO Paul Forman arrives, the company is likely to seek nonplastics acquisition opportunities.
Though L&B does not intend to sell the plastics business immediately, Kempster said, it is planning to make the unit profitable and ready for eventual disposal.
L&B saw its rotomolding business dive into the red in the first six months of this year. The unit lost $155,000 on sales of $48 million, compared to a profit of $1.5 million in the same period of 2001.
``We are not about to sell it. But we will cut back [in the plastics division] ... there is no reason to review plastics and do anything drastic.
``Plastics is a sound business and there is nothing wrong with rotomolding or the businesses we have bought, but it is better to get [it] profitable first before selling. We have a good management team [there], but not an environment that helps us in getting it more efficient,'' Kempster said.
L&B's North American subsidiary, Bonar Plastics Inc., laid off about 36 workers in the past 12 months from its four rotomolding plants and temporarily shut down several machines.
According to Kempster, the Chicago plant was worst hit, although the layoffs took place across the board. L&B since has made ``substantial cost savings and operational improvements'' in the United States to achieve a small profit there, the firm said.
In fact, sales are beginning to improve despite some lost contracts. The rotomolding plants, including the former PDM Molding business, are starting to hire key engineering and technical staff, Kempster said.
In Europe, production has been affected in the aftermath of L&B's recent closure of its United Kingdom rotomolding business, Bonar Rotaform Ltd. in Sheffield, England. Work from there was shuffled chiefly to the company's Franca Rotomoulage SA plant in Bethune, France.
But the integration of the work and a corresponding passing of Bethune work to another plant, Sonabat Chantal SA in Saint- Nazaire, France, did not run smoothly.
Kempster attributed the situation to the sudden loss of the French business's long-serving managing director, who fell sick and died earlier this year.
Kempster said the problems are being resolved by the appointment of new senior and production management in France. The plants there are molding chemical tanks and other materials-handling products, and off-road-vehicle fuel tanks.
Commenting on the future of the plastics division, Kempster said if L&B had a chance to start again ``with a clean sheet of paper,'' it would have chosen to focus on the flooring business rather than plastics. The company makes Flotex vinyl flooring in France and the United Kingdom.
The sudden departure of L&B's former CEO, Phil Reeder, follows pressure from some board members to recover former glory. When L&B sold its packaging division, annual sales shrunk from around £600 million ($930 million) to around £160 million ($248 million), Kempster said.
He said Reeder was forced out over a question of the ``pace of change'' at L&B.