Imperial PlasTech Inc. will exit the hose business by returning the underperforming division to its original owner.
The move means Toronto-based Imperial will hand over inventory and equipment to pipe maker A.G. Petzetakis SA of Athens, Greece. Under the agreement, A.G. Petzetakis will forgive nearly C$2 million (US$1.3 million) in debt. Imperial announced the move Dec. 4. Officials expect to finalize the deal by the end of the month.
``We are selling them some production lines as part of the transaction,'' said Victor D'Souza, Imperial's president and chief executive officer. He would not reveal details. The firm produced hose under Imperial Pipe Corp. and Petzetakis Inc., both wholly owned subsidiaries. Imperial operates manufacturing facilities in Edmonton, Alberta; Peterborough, Ontario; and Atlanta.
``We announced in our third-quarter report that the company had undertaken a review of the business segments that it operates in, with a view to exit businesses that are underperforming and that are not core components of our business strategy moving forward,'' D'Souza said.
``Based on our review, we have concluded this sale will not only serve to reduce operating losses of the company, but will also improve its working capital position.''
Imperial acquired the business from A.G. Petzetakis in early 2001 for C$5.4 million (US$3.5 million). The unit had sales of C$2.6 million (US$1.6 million) in 2001 but posted a loss of C$680,000 (US$428,000). For the nine months ended Aug. 31, the unit had sales of C$3.1 million (US$2 million) and a loss of C$470,000 (US$302,000).
Imperial is making other changes: By the end of the month it will relocate its U.S. facility within Atlanta proper in order to have rail access, D'Souza said in a Dec. 5 telephone interview. Imperial produces conduit at that plant under Ameriplast Inc., another wholly owned subsidiary.
The firm is diversifying that business to make up for weaker markets such as telecommunications, officials said. It now also serves the plumbing market.
``The impetus is to bring cost structure down because the facility will have rail siting on it, so it will allow us to reduce our material cost,'' he said.
Imperial will lease that facility. D'Souza would not disclose the size of either facility or production capacity.
Earlier this year Imperial acquired Pultronex Corp. to add to its wood-fiber/plastic composite business. On Dec. 5, its stock was trading at C$0.19 (US$0.12) per share on the Toronto Stock Exchange. Its 52-week high was C$1.06 (US$0.68).