Reporting disappointing first-quarter results, Royal Group Technologies Ltd. is implementing broad changes to improve capacity utilization rates that hovered in the low 60 percent range through 2002.
The plan means Royal's Marley Mouldings Inc. of Marion, Va., will not expand its existing facility in Bristol, Tenn., as previously announced. Instead, Marley will expand cellular foam extrusion operations to Royal's window-covering extrusion plant in Florida.
Meantime, a ``substantial portion'' of the Florida plant's current equipment will be moved to window-covering production facilities in Houston and Montreal, officials said. Woodbridge, Ontario-based Royal acquired Marley in 2001.
Officials did not return calls, but Royal President Douglas Dunsmuir told shareholders Feb. 12 that Marley will expand to Florida in response to ``rapidly rising demand for cellular foam moldings in the Southeast, especially Florida.''
Royal's injection molding operations also will begin quoting custom jobs, officials said.
``Our goal is to return to 80-plus percent utilization,'' Dunsmuir said. ``Our infrastructure is capable of producing C$3 billion (US$1.98 billion) in sales annually, with only relatively small investments required in new machinery, tooling and equipment.''
Royal reported 2002 sales of C$1.9 billion (US$1.2 billion).
There are other changes, too, as officials seek to improve margins in the face of escalating resin prices, its lagging window-coverings division and uncertain consumer demand.
Operations from a custom profile plant in Woodbridge have been shifted to various plants in Royal's industrial complex headquarters just outside Toronto.
``This consolidation commenced in early January and has now been completed,'' Dunsmuir said.
Soon, that custom profile plant will be used to warehouse Gracious Living consumer products, replacing a 220,000-square-foot rented facility.
Royal reported lackluster results for its fiscal 2003 first quarter, ended Dec. 31, with profit of C$15.9 million (US$10.1 million) on sales of C$421 million (US$267 million). That's down from C$24.9 million (US$15.7 million) for the year-ago period, when Royal recorded sales of C$384 million (US$241 million).
Its stock price has suffered, too. As of Feb. 14, it was trading at C$10.08 (US$6.62) per share, a new 52-week low, on the Toronto Stock Exchange. Its 52-week high was US$21.25 in June.
``We do not believe the first-quarter results show Royal's potential,'' Vic De Zen, chief executive officer, said during the firm's conference call. ``Royal is still a unique company. We are fully integrated. Not one of our competitors comes close to us.
``Yes, we have a problem with window coverings, but we will fix it. Better days are ahead.''
Royal's struggling U.S. window-coverings operation lost C$22 million (US$14 million) in fiscal 2002.
In its fourth-quarter call, officials announced a new management team for window coverings, with a plan to conduct a formal review of that business by March. Sales in its consumer products segment declined 6 percent. Officials hope a new product mix will help save that segment.
``We now foresee that division returning to a break-even performance on a monthly basis by the end of this fiscal year,'' Dunsmuir said, acknowledging that the time frame is extended now, but is ``reflective of a new level of reality embraced by our turnaround operating team.''
In other activity, the firm has formed two board committees to address corporate governance issues.
According to a company news release, Royal has formed a compensation committee and a nomination and corporate governance committee.
Shareholders had recently raised concerns about De Zen and Dunsmuir's compensation in fiscal 2002.
According to Royal's proxy statement, De Zen received a salary of C$500,000 (US$329,000) and a bonus of C$5.6 million (US$3.7 million); Dunsmuir received a salary of C$358,000 (US$236,000) and a bonus of C$3.2 million (US$2.1 million). De Zen owns 80 percent of Royal's voting rights.