Pannon Aldra Plastics Ltd. of Budapest, Hungary, will halt production before year's end, eliminating 130 jobs.
The film extruder and producer of calendered PVC sheet formed in 1999 as a 50-50 venture between Pannonplast plc and Alkor Draka SA, a flexible foils subsidiary of Solvay SA.
Despite repeated restructuring and modernization, Pannon Aldra will continue only as a trading company, serving central Europe.
In an effort to raise Pannon Aldra's product quality and production efficiency to meet Western European standards, the partners said they invested about 1 billion Hungarian forints ($4 million) in plant improvements - primarily to upgrade its machinery and diversify its product lines.
The company pulled out of consumer products and the PVC flooring market, and now manufactures plastic foils for stationery, small leather goods, and adhesive and waterproofing applications.
In a bid to streamline the business, Pannon Aldra upgraded its two calendering lines, cut its work force by 50, or more than 20 percent, and appointed Zsold Fekete managing director.
Pannonplast said in February that it expected Pannon Aldra to reach 2002 sales of about HuF 3.7 billion ($14.5 million), with exports reaching 75 percent of output.
But the subsidiary was hurt badly by the sour German construction industry and rapidly rising raw material costs.
``The major and persistent imbalance between supply of its products and market demand prevents Pannon Aldra from achieving profitability in either the short or medium term,'' Budapest-based Pannonplast said in a news release.
Pannon Aldra recorded 2001 sales of about HuF 3 billion ($12 million), a 25 percent increase over 2000.
That effort was boosted by an increase in exports representing 52 percent of total sales.
The firm saw a strong rise in its insulating tape foils business in 2001.