As part of a larger expansion, blown film producer Ampac Packaging LLC plans to open a facility in China next year, becoming one of the only U.S. companies to make retail bags there.
The company also is enlarging manufacturing space at its Cincinnati headquarters, an $8.5 million project expected to take about three years. That move will increase capacity for Ampac's security and food-packaging products.
The growth comes on the heels of several other changes for Ampac that led to its aggressive strategy. In September 2001, company executives and Greenwich, Conn.-based equity firm Key Principal Partners purchased a controlling interest in the company and changed its name from Amko Packaging Corp.
The China expansion takes the company outside the United States for the first time. Ampac is opening a 20,000-square-foot facility in Nanjing, China, about 200 miles west of Shanghai, said Chief Financial Officer Jon Dill. The company will start making plastic shopping bags at the plant by the end of next year, but plans further expansion in that industrial-park site, Dill said.
Driving the move to Asia is a major gap in polyethylene resin prices between what processors pay in North America and in China, Dill said. In many cases, Asian producers pay 15-20 percent less for the same resin, said Dill, whose company has researched the situation for three years.
``When resin prices out of Asia are 15-20 percent cheaper, [products] can come back and displace business in the states,'' Dill said. ``It comes back in the form of bags sold here. We have to protect our turf.''
The issue has raised concern at several recent film and bag meetings. Industry consultant Howard Rappaport, polyolefins director with Chemical Market Associates Inc. in Houston, said at one recent event that film and bag imports to the United States have tripled within five years.
``There's a definite competitive situation that U.S. bag producers are facing from Asia,'' Rappaport said in a Dec. 12 telephone interview.
An executive with another film producer, who did not want his name used, said imports from Asia have grown at an alarming rate, especially for commodity items such as plastic bags.
``The polyethylene prices and cheap labor plays right into their strategy for growth,'' the executive said.
Ampac plans to ship virtually all the shopping bags it makes in China back to North America, Dill said. Nanjing is a port city that feeds into the Yellow Sea.
The company will start the facility with 30-40 employees, four pouch-making machines and one printing press, Dill said. Ampac plans to add extrusion and printing equipment over the next several years.
The China expansion is unusual for a company Ampac's size. Other flexible packaging producers in China include Tredegar Film Products Corp., Pechiney SA and DuPont Teijin Films. But none of those companies makes shopping bags.
A U.S. company can avoid some of the pitfalls of Chinese film producers who ship to North America, said Tom Geyer, Ampac vice president of manufacturing.
``We've had to bail several customers out this year, when containers [from China] were stuck in ports, they couldn't get products fast enough or communications became an issue,'' Geyer said. ``We won't have those problems working from both locations.''
The company also plans to boost production at its 215,000-square-foot plant in Cincinnati. During the next year Ampac will invest more than $3.5 million in new equipment, part of a larger, $8.5 million capital equipment outlay for the next three years, Dill said.
Ampac will add a three-layer coextrusion line early next year, its third in Cincinnati, Geyer said. The company also has an option on a seven-layer coextrusion line that it plans to install sometime in the next two years, Geyer said.
Also coming to the facility are three more bag-making machines, bringing the total to 27, and a six-color flexographic printing press, Geyer said. About 230 people work in the Cincinnati plant, the company's primary plastics processing facility.
Dill said Ampac has experienced 20 percent sales growth in security and food packaging in the past year. On the security side, the company is boosting capacity to make tamper-evident bags for cash transfers used by financial institutions and the federal government, Geyer said.
Some of those products will be shipped to Ampac subsidiary Audit Security Bags Inc., a distributor of bags and other cash-management products based in Lebanon, N.H.
The company also has grown its share of the consumer market, making barrier PE film for meat and produce trays. Those trays are used with case-ready meats in supermarkets and for packaged shredded lettuce and other produce, Geyer said.
The company received an eight-year, 60 percent tax credit from the Ohio Tax Credit Authority to expand the facility, according to state officials in Columbus, Ohio. The tax credit calls for the creation of 27 new jobs at the company during the next three years
The company will rearrange plant and office space and move some bag-making equipment to clear room for the new machinery, Geyer said.
Ampac, also a maker of paper packaging, expects sales to rise above $100 million this year, more than a 10 percent increase over 2001, Dill said.
