High resin prices and weak housewares markets are behind the planned closure of Home Products International Inc.'s plant in Eagan, Minn.
HPI said that to cut costs, it will close the Eagan manufacturing and warehouse operation when the facility's lease expires in January. The plant employs 130 and makes kitchen and plastic storage items. HPI will move some production to its other plants and outsource other work. Officials were not available to elaborate on the plan.
The housewares major lost $3.3 million in its second quarter, ended June 28, and lost a total of $6.5 million for the first six months, compared with profit of $5.2 million for the six-month period a year earlier. Sales in the second quarter slipped 9.4 percent to $54 million, compared to the same period a year ago.
HPI said resin costs have been moving up all year and have hurt the firm's results. Further aggravating performance has been a soft retail sector made worse for HPI by consolidation among Kmart Corp. stores, a key account for Chicago-based HPI.
The Eagan closure will happen three years after HPI shuttered its Leominster, Mass., plastics plant. HPI said the Eagan shutdown will save it at least $2 million in the first year, although HPI will record a one-time charge of $4.5 million in the next six to nine months.
Standard & Poor's Rating Service lowered HPI's corporate credit rating to B from B+ and said the outlook is negative because of HPI's exposure to rising resin prices, vulnerability to price competitiveness, its concentrated customer list and high debt leverage. The price of polypropylene, its major raw material, increased by more than 30 percent during the past year, the rating agency noted.