Wellman Inc. has restarted 200 million pounds of amorphous PET capacity in Palmetto, S.C.
As part of a 2002 agreement, Wellman competitor Eastman Chemical Co. will convert the APET into bottle-grade material and split that output with Shrewsbury, N.J.-based Wellman. The Palmetto site had been idled since early 2002, when Wellman closed polyester fiber operations in Fayetteville, N.C., and Marion, S.C.
Wellman had planned to add almost 300 million pounds of PET capacity this year via fiber conversion at its plant in Bay St. Louis, Miss., but put those plans on hold in late 2002 because of poor economic conditions.
The first half of 2003 was an improvement over the prior year for Wellman, as sales jumped more than 12 percent to $571 million. The firm also posted a $6 million profit in the first half, after losing $202 million in the first half of 2002. In full-year 2002, Wellman posted a loss of $194 million as sales remained flat at just over $1 billion.
In the second quarter alone, sales in Wellman's packaging products group - which represented 58 percent of total sales and includes PET bottle resin - were up more than 20 percent, while sales in its fibers and recycled products group were up more than 8 percent. Wellman is one of the world's largest PET recyclers and ranks fourth in North American PET bottle resin capacity with a market share of about 15 percent.
In spite of the improvement, officials said in a second-quarter financial news release that the firm was ``immediately implementing significant cost-reduction programs.'' Chairman and Chief Executive Officer Tom Duff said in the release that the reductions ``will have a meaningful impact'' in the remainder of 2003. A company spokesman said by telephone that no further details were available.
It's been an up-and-down year for Wellman on other financial fronts as well. The firm received a bit of a boost in February when private equity firm Warburg Pincus of New York invested $126 million in preferred shares of Wellman stock, most of which can be converted into common stock. The investment gave Warburg Pincus a 26 percent stake in Wellman.
Proceeds from the investment primarily were used to pay down debt, Wellman officials said. Warburg Pincus partner David Barr also was named a Wellman director. Wellman also entered into a new, three-year, $275 million revolving credit facility with a group of four banks in late June.
But in late July, credit rating service Standard & Poor's downgraded Wellman's outlook from stable to negative, citing lower-than-expected profitability for PET and capacity additions in the North American PET market that ``occurred ahead of market expectations.''
A number of PET industry executives have described 2003 PET demand as disappointing, primarily because cooler summer weather softened sales of carbonated soft drinks and bottled water.
